Mary's Woods at Marylhurst, Inc

This Preliminary Official Statement and the information contained herein are subject to completion, amendment or other changes without any notice. The securities described herein may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. of theProject;(iii)fundadebtservicereservefund;and(iv)paycertaincostsissuanceBonds.See“ care retirementcommunitylocatedinLakeOswego,Oregon(collectively,the“Project”);(ii)payaportionofinterestonBondsduringconstruction of the construction, acquisition, development, improvement, renovation and equipping of an expansionproject with respect to the Corporation’s continuing the Authority and the Corporation. The Corporation will use the proceeds of the Bonds, together with certain other moneys, to (i) finance a portion of the costs Marylhurst, Inc., an Oregon nonprofit corporation (the “Corporation”),pursuanttoaLoanAgreementdatedasofMay1,2018(thebetween between theAuthorityandU.S.BankNationalAssociation,asbondtrustee(the“BondTrustee”).TheproceedsofBondswillbeloanedtoMary’sWoodsat Project) Series2018A,2018Band2018C(collectively,the“Bonds”)underanIndentureofTrust,datedasMay1,2018(theBondIndenture” ), other taxconsequencesrelatedtotheownershipordispositionof,amount,accrualreceiptofintereston,Bonds.See“ Counsel interestonalloftheBondsisexemptfromOregonpersonalincometaxunderexistinglaw.Bondexpressesnoopinionregardingany opinion ofBondCounsel,interestontheSeries2018CBondsisnotexcludablefromgrossincomeforfederaltaxpurposes.In the In tax. minimum alternative federal the of purposes for item preference specific a not is Bonds Tax‑Exempt the on interest Counsel, Bond of opinion Exempt BondsisexcludedfromgrossincomeforfederaltaxpurposesunderSection103oftheInternalRevenueCode1986.Infurther decisions, andassuming,amongothermatters,theaccuracyofcertainrepresentationscompliancewithcovenants,interestonTax- environment, andtheprovisionsofprincipaldocuments.Aprospective Bondholderisadvisedtoread“ † such paymentswillbetheresponsibilityofDTCanditsparticipants.See Bonds. As long as Cede & Co. is the registered owner as nominee of DTC, payments on the Bonds will be made to such registered owner, and disbursement of by the Bond Trustee to DTC, which in turn will remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds purchased. Ownership by the beneficial owners of the Bonds will be evidenced by book‑entry only. Principal of and interest on the Bonds will be paid New York(“DTC”). DTC will act as securities depository for the Bonds. Purchasers of the Bonds will not receive certificates representing their interest in the redemption underthecircumstancesdescribedherein. Bonds aremorefullydescribedinthisOfficialStatement. naming the Master Trustee as beneficiary to secure the payment of its obligations under the Master Indenture. The sources of payment of, and security for, the National Association,asmastertrustee(the“Master Trustee”). The Corporation has also executed and delivered a Leasehold Deed of Trust (as defined herein) a by supplemented as and supplemented previously Supplemental MasterTrustIndentureNo.2datedasofMay1,2018(assupplemented,the“”),eachbetweenCorporationandU.S.Bank as 2017, 1, April of as dated Indenture Trust Master a under Corporation the by issued herein) defined pledged thereto under the Bond Indenture, the payments to be made by the Corporation pursuant to the Loan Agreement, the Series 2018 Obligations (as B N SM * payment therefor,onorabout______, 2018. for theUnderwriterbyitscounsel,Chapman andCutlerLLP.ItisexpectedthattheBondswillbeavailablefor deliverythroughthefacilitiesofDTC,against and LLP; Janik Ball counsel, its by Corporation the for LLP; Wood & Delafield Hawkins counsel, special its by Authority the for upon passed be will matters Underwriter, B.C. Ziegler and Company, subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Portland, Oregon, Bond Counsel. Certain legal PRINCIPAL OFORINTERESTONTHEBONDS.AUTHORITYHAS NOTAXINGPOWER. AGENCY ORPUBLICINSTRUMENTALITYTHEREOFOFCLACKAMAS COUNTYORTHEAUTHORITYISPLEDGEDTOPAYMENTOF OR LAWSOFTHESTATEOREGON.NEITHERCREDITNOR TAXINGPOWEROFTHESTATEOREGONORANYPOLITICALSUBDIVISION, INSTRUMENTALITY THEREOFOROFCLACKAMASCOUNTYTHE AUTHORITY WITHINTHEMEANINGOFANYPROVISIONCONSTITUTION for adiscussionofcertainriskfactorsthatshouldbeconsideredinconnection withaninvestmentintheBonds. F

ook ew inal F for convenience ofreferenceand noneoftheAuthority, theCorporation ortheUnderwritertake responsibilityfor theaccuracyofsuch data. Association by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP numbers are provided A registeredtrademark ofTheAmericanBankersAssociation. CUSIPdataisprovidedbyGlobal Services(“CGS”)managedonbehalf oftheAmericanBankers TEMPS–85, TEMPS–70 andTEMPS–50areeachaservicemark ofB.C.ZieglerandCompany. Preliminary, subject to change. ixed I E The HospitalFacilityAuthorityofClackamasCounty,Oregon(the“”)isissuingitsSeniorLivingRevenueBonds(Mary’sWoodsatMarylhurst In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court An investmentintheBondsinvolvesacertaindegreeofriskrelatedto, amongotherthings,thenatureofCorporation’sbusiness,regulatory The Bonds when issued will be registered only in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, T The BondsandtheinterestpayablethereonarelimitedobligationsofAuthoritysolelyfromsecuredexclusivelyby funds The Bondsarebeingoffered,subjecttopriorsaleandwithdrawalofsuch offer withoutnotice,when,asandifissuedbytheAuthorityaccepted THE BONDSDONOTCONSTITUTEINDEBTEDNESSOFSTATE OFOREGON OR ANYPOLITICALSUBDIVISION,AGENCYPUBLIC Series 2018 $16,305,000* ssue T C he Bondsare subject to acceleration of maturity,optionalandmandatoryredemption, extraordinary redemptionandpurchaseinlieuof ntry ax US R I E O P: ______† ate Bonds xempt nly

A T Dates, InterestRates,PricesorYieldsandMaturitiesAreShownontheInsideofFrontCover F ax Paydown Securities inal Preliminary Official Statement Date Series 2018B-1 E ( TEM xempt $4,750,000* C US I PS–85 P: ______† M andatory S M ) ( H M ospital C ary’s Woodsat Senior lackamas Official Statementdated______,2018 T F ax Paydown Securities inal $41,405,000* F Series 2018B-2 L E ( TEM iving consisting of xempt $6,250,000* C acilty US A C ppendix I PS–70 P: ______† M ounty R evenue Bonds arylhurst Project) M A G andatory —“ S uthority M , O ) B ook regon ‑E ntry T

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THE SERIES 2018A BONDS

Interest Accrues from Date of Delivery Due: May 15, as shown below

The Series 2018A Bonds will be issuable in fully registered form without coupons in minimum denominations of $5,000 and any integral multiples of $5,000 in excess thereof. Interest on the Series 2018A Bonds will be payable on each May 15 and November 15 of each year, commencing on November 15, 2018. The Series 2018A Bonds will be subject to redemption prior to maturity, as more fully described herein.

$______SERIAL BONDS

MATURITY PRINCIPAL INTEREST RATE (MAY 15) AMOUNT PER ANNUM YIELD PRICE CUSIP†

$______TERM BONDS

$______% Term Bonds due May 15, ____; Priced at _____ to Yield _____%; CUSIP No. ______†

THE SERIES 2018B BONDS

Interest Accrues from Date of Delivery Due: As shown below

The Series 2018B Bonds will be issuable in fully registered form without coupons in minimum denominations of $5,000 and any integral multiples of $5,000 in excess thereof. Interest on the Series 2018B Bonds will be payable on each May 15 and November 15 of each year, commencing on November 15, 2018. The Series 2018B Bonds will be subject to redemption prior to maturity, as more fully described herein.

INTEREST MATURITY PRINCIPAL RATE PER AMOUNT ANNUM YIELD PRICE CUSIP† Series 2018B-1 May 15, 2025* Series 2018B-2 May 15, 2024* Series 2018B-3 November 15, 2023*

† A registered trademark of The American Bankers Association. CUSIP data is provided by CUSIP Global Services (“CGS”) managed on behalf of the American Bankers Association by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP numbers are provided for convenience of reference and none of the Authority, the Corporation or the Underwriter take responsibility for the accuracy of such data. * Preliminary, subject to change.

THE SERIES 2018C BONDS

Interest Accrues from Date of Delivery Due: November 15, as shown below

The Series 2018C Bonds will be issuable in fully registered form without coupons in minimum denominations of $5,000 and any integral multiples of $5,000 in excess thereof. Interest on the Series 2018C Bonds will be payable on each May 15 and November 15 of each year, commencing on November 15, 2018. The Series 2018C Bonds will be subject to redemption prior to maturity, as more fully described herein.

INTEREST MATURITY PRINCIPAL RATE PER (NOVEMBER 15) AMOUNT ANNUM YIELD PRICE CUSIP† 2022*

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The Village At Mary’s Woods Map

THE VILLAGE AT MARY’S WOODS EXPANSION

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MAIN ENTRY

Information Center at Palisades Marketplace • 1385 McVey Ave. • Lake Oswego, OR 97034 Exterior Renderings of The Village at Mary’s Woods Expansion Interior Renderings of The Village at Mary’s Woods Expansion Exterior Renderings of The Village at Mary’s Woods Expansion

REGARDING USE OF THIS OFFICIAL STATEMENT

No dealer, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and if given or made, such information or representations must not be relied upon as having been authorized by the Corporation, the Authority, or the Underwriter. The information set forth herein concerning the Corporation has been furnished by the Corporation and is believed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any state to any person to whom it is unlawful to make such offer in such state. The Bonds are not anticipated to be registered or qualified for sale in the states of Washington or New Hampshire.

Except where otherwise indicated, this Official Statement speaks as of the date hereof. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale hereunder will under any circumstances create any implication that there has been no change in the affairs of the Corporation since the date hereof.

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

The information contained in this Official Statement has been furnished by the Corporation, the Authority, DTC and other sources that are believed to be reliable, but such information is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Underwriter. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof.

Neither the Authority nor the Bond Trustee assumes any responsibility for this Official Statement and has not reviewed or undertaken to verify any information contained herein, except as specifically stated herein.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE BOND 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 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF LAWS OF THE STATES IN WHICH BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE COUNTY, THE AUTHORITY, THE STATE OF OREGON, NOR ANY POLITICAL SUBDIVISION THEREOF PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. ______

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT NOTICE. ______

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT

Certain statements included or incorporated by reference in this Official Statement constitute “forward looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,”

“expect,” “estimate,” “budget” or other similar words. Such forward looking statements include, but are not limited to, certain statements contained in “RISK FACTORS” and in APPENDIX A, APPENDIX C and APPENDIX D to this Official Statement. Additionally, the description of the Project is a description of what is currently planned to be developed in accordance with the existing plans and contracts and should be construed as forward looking statements.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. THE CORPORATION DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS IN EITHER BOUND OR PRINTED FORMAT (“ORIGINAL BOUND FORMAT”), OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: WWW.MUNIOS.COM. THIS OFFICIAL STATEMENT MAY BE RELIED ON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT, OR IF IT IS PRINTED OR SAVED IN FULL DIRECTLY FROM THE AFOREMENTIONED WEBSITE OR WWW.EMMA.MSRB.ORG.

TABLE OF CONTENTS

INTRODUCTION ...... 1 The Corporation ...... 1 The Authority ...... 2 Purpose of this Official Statement ...... 2 Purpose of the Bonds ...... 2 Security for the Bonds ...... 2 Debt Service Coverage Ratio; Liquidity Covenant ...... 4 Additional Bonds, Additional Obligations and Additional Indebtedness ...... 4 Bondholders’ Risks ...... 5 Continuing Disclosure ...... 5 Book-Entry System ...... 5 THE AUTHORITY ...... 5 THE CORPORATION, THE COMMUNITY AND THE GROUND LEASES ...... 6 PLAN OF FINANCE ...... 7 General ...... 7 The Project ...... 7 ESTIMATED SOURCES AND USES OF FUNDS ...... 8 ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS ...... 9 THE BONDS ...... 11 General ...... 11 The Series 2018A Bonds ...... 12 The Series 2018B Bonds ...... 14 The Series 2018C Bonds ...... 15 Extraordinary Optional Redemption ...... 16 Mandatory Redemption upon Completion or Termination of a Project ...... 16 Partial Redemption...... 16 Notice of Redemption and Conditional Notice ...... 17 Purchase in Lieu of Redemption ...... 17 Defeasance ...... 18 SECURITY FOR THE BONDS ...... 18 General ...... 18 Limited Obligations ...... 19 Reserve Fund ...... 19 The Loan Agreement ...... 21 The Master Indenture and the Leasehold Deed of Trust ...... 21 Certain Covenants of the Obligated Group ...... 24 Additional Bonds and Additional Indebtedness ...... 27 Approval of Consultants ...... 31 Entrance Fee Fund ...... 32 Working Capital Fund...... 34 RISK FACTORS ...... 35 General Risk Factors ...... 35 Impact of Disruptions in the Credit Markets and General Economic Factors ...... 35 Management’s Forecast ...... 36

Delay in Payment of Temporary Debt ...... 36 Additions to the Obligated Group ...... 36 State Budgetary Pressures ...... 37 Potential Changes to Tax Treatment of Bonds ...... 37 Property Taxes; State and Local Tax Exemption ...... 37 General Risks of Long Term Care Facilities ...... 38 Uncertainty of Revenues ...... 38 Failure to Maintain Occupancy and Turnover ...... 38 Licensing Delay ...... 39 Malpractice Claims, General Liability Insurance and Litigation ...... 39 Nature of the Income of Senior Citizens ...... 39 Sale of Personal Residences ...... 40 Utilization and Demand ...... 40 Construction Risks ...... 40 Uncertainty of Investment Income ...... 41 Rights of Residents ...... 42 Competition...... 42 Present and Prospective Federal and State Regulation ...... 42 Licensure and Other State Regulation ...... 46 Increases in Medical Costs ...... 48 Private Health Insurance ...... 48 Labor Costs and Relations ...... 48 Nursing or Other Staff Shortage ...... 49 Tax Exempt Status; Continuing Legal Requirements ...... 49 Certain Matters Relating to Enforceability of the Master Indenture ...... 51 Certain Matters Relating to Enforceability of Security Interest in Gross Revenues ...... 52 Title Insurance; Limitations of Remedies under the Leasehold Deed of Trust ...... 53 Existence of Lease of Real Property with Landlord may Impact Recovery in Event of Default ...... 53 Enforceability of Remedies; Prior Claims ...... 54 Rate Setting ...... 54 Factors that Could Affect the Validity or Value of the Lien Against the Obligated Group’s Gross Revenues and the Enforceability of the Loan Agreement and Legal Opinions ...... 54 Bankruptcy ...... 55 Environmental Matters...... 55 Possible Future Changes to Accounting Policies and Procedures ...... 56 Additional Debt ...... 56 Bond Ratings ...... 56 Lack of Marketability for the Bonds ...... 56 Amendments to Bond Documents ...... 57 Other Possible Risk Factors ...... 57 FINANCIAL REPORTING ...... 58 CONTINUING DISCLOSURE ...... 61 The Obligated Group ...... 61

No Continuing Disclosure from the Authority ...... 61 LITIGATION ...... 62 The Authority ...... 62 The Corporation ...... 62 LEGAL MATTERS ...... 62 TAX MATTERS ...... 63 Tax-Exempt Bonds ...... 63 Taxable Bonds ...... 65 State of Oregon Tax Exemption ...... 66 INDEPENDENT AUDITORS ...... 66 FINANCIAL FEASIBILITY STUDY ...... 66 RATING ...... 66 UNDERWRITING ...... 67 MISCELLANEOUS ...... 67

Appendix A — Certain Information Relating to Mary’s Woods at Marylhurst, Inc. Appendix B — Audited Financial Statements of Mary’s Woods at Marylhurst, Inc. Appendix C — Financial Feasibility Study Appendix D — Definitions of Certain Terms and Summary of Certain Provisions of Principal Documents Appendix E — Summary of Certain Provisions of the Ground Leases and the Leasehold Deed of Trust Appendix F — Form of Bond Counsel Opinion Appendix G — Book-Entry Only System Appendix H — Form of Continuing Disclosure Agreement

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SUMMARY STATEMENT The information set forth in this Summary Statement is subject in all respects to more complete information set forth elsewhere in this Official Statement, which should be read in its entirety. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this Summary Statement from this Official Statement or otherwise to use it without this entire Official Statement. For the definitions of certain words and terms used in this Summary Statement, see “DEFINITIONS OF CERTAIN TERMS” in APPENDIX D hereto.

THE AUTHORITY AND THE BONDS

The Hospital Facility Authority of Clackamas County, Oregon (the “Authority”), a public authority of the State of Oregon, is issuing its Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) Series 2018A, Series 2018B and Series 2018C (collectively, the “Bonds” or the “Series 2018 Bonds”) pursuant to Oregon Revised Statutes 441.525 to 441.595 inclusive, as amended (the “Act”), a resolution of the Authority adopted on March 28, 2018 and an Indenture of Trust, dated as of May 1, 2018 (the “Bond Indenture”), between the Authority and U.S. Bank National Association, as bond trustee (the “Bond Trustee”). The proceeds of the Bonds will be loaned to Mary’s Woods at Marylhurst, Inc., an Oregon nonprofit corporation (the “Corporation”), pursuant to a Loan Agreement dated as of May 1, 2018 (the “Loan Agreement”), between the Authority and the Corporation. The Corporation will use the proceeds of the Bonds, together with certain other moneys, to (i) finance a portion of the costs of the construction, acquisition, development, improvement, renovation and equipping of an expansion project with respect to the Corporation’s continuing care retirement community located in Lake Oswego, Oregon (collectively, the “Project” or “The Village at Mary’s Woods Stage 2 Expansion Project”); (ii) pay a portion of the interest on the Bonds during the construction of the Project; (iii) fund a debt service reserve fund; and (iv) pay certain costs of issuance of the Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein for additional information. The Bonds of each series and the interest thereon are limited obligations of the Authority, payable solely from and secured exclusively by certain payments to be made by the Corporation under the Loan Agreement and certain other funds held by the Bond Trustee under the Bond Indenture and not from any other fund or source of the Authority. THE BONDS DO NOT CONSTITUTE INDEBTEDNESS OF THE STATE OF OREGON OR ANY POLITICAL SUBDIVISION, AGENCY OR PUBLIC INSTRUMENTALITY THEREOF OR OF THE COUNTY OR THE AUTHORITY WITHIN THE MEANING OF ANY PROVISION OF THE CONSTITUTION OR LAWS OF THE STATE OF OREGON. NEITHER THE CREDIT NOR THE TAXING POWER OF THE STATE OF OREGON OR ANY POLITICAL SUBDIVISION, AGENCY OR PUBLIC INSTRUMENTALITY THEREOF OR OF THE COUNTY OR THE AUTHORITY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE AUTHORITY HAS NO TAXING POWER.

THE CORPORATION AND THE COMMUNITY The Corporation was founded and sponsored by the U.S.-Ontario Province of the Sisters of the Holy Names of Jesus and Mary for the purpose of constructing, owning and operating a continuing care retirement community known as Mary’s Woods (the “Community”) in Lake Oswego, Oregon. The Community currently consists of 233 independent living apartments, 50 independent living villas, 55 assisted living apartments, 23 memory support suites, 26 residential care suites and five licensed skilling nursing suites plus common areas and amenities for residents. The Public Finance Authority previously issued its $175,065,000 aggregate original principal amount Senior Living Revenue and Refunding Bonds (Mary’s Woods at Marylhurst Project) Series 2017A and Series 2017B (the “Series 2017A Bonds” and the “Series 2017B Bonds,” respectively, and, collectively, the “Series 2017 Bonds”) to, among other things, finance an expansion of the Community (“The Village at Mary’s Woods Expansion Project”). The Community is, and will be following the expansion financed with proceeds of the Series 2017 Bonds and the expansion to be financed with proceeds of the Bonds, located on real property owned by The Society of the Sisters of the Holy Names of Jesus and Mary, an Oregon not-for-profit corporation (the “Landlord”), and leased to the Corporation. For more information concerning the history, governance, organization, facilities, operations and financial performance of the Corporation, see APPENDIX A and APPENDIX B hereto. See APPENDIX A and APPENDIX C hereto for a

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description of the expansion to the Community that was financed with proceeds of the Series 2017 Bonds and the expansion to the Community that will be financed with proceeds of the Bonds. See APPENDIX E hereto for more information regarding the terms of the ground leases from the Landlord to the Corporation. The Corporation has been determined to be exempt from federal income taxation pursuant to Section 501(a) of the Code, as an organization described in Section 501(c)(3) of the Code.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General. The Bonds will be issued under and will be equally and ratably secured under the Bond Indenture, pursuant to which the Authority will assign and pledge to the Bond Trustee, (1) the hereinafter described Series 2018 Obligations relating to the Bonds, (2) certain rights (except Unassigned Rights) of the Authority under the hereinafter described Loan Agreement, (3) the funds and accounts (excluding the Rebate Fund), including the money and investments in them, which the Bond Trustee holds under the terms of the Bond Indenture, and (4) such other property as may from time to time be pledged to the Bond Trustee as additional security for such Bonds or which may come into possession of the Bond Trustee pursuant to the terms of the Loan Agreement or the Series 2018 Obligations. Loan Agreement. Pursuant to the Loan Agreement, the Corporation has agreed to make loan payments sufficient, among other things, to pay in full when due all principal of, premium, if any, and interest on the Bonds and the administrative fees of the Bond Trustee and to make payments as required to restore any deficiencies in the separate accounts of the debt service reserve fund with respect to each series of Bonds. See “SECURITY FOR THE BONDS — The Loan Agreement.” See also “THE LOAN AGREEMENT” in APPENDIX D hereto. Master Indenture and Leasehold Deed of Trust. The obligation of the Corporation to repay (i) the portion of the loan from the Authority relating to the Series 2018A Bonds will be evidenced by Obligation No. 3 (the “Series 2018A Obligation”), (ii) the portion of the loan from the Authority relating to the Series 2018B Bonds will be evidenced by Obligation No. 4 (the “Series 2018B Obligation”) and (iii) the portion of the loan from the Authority relating to the Series 2018C Bonds will be evidenced by Obligation No. 5 (the “Series 2018C Obligation” and, together with the Series 2018A Obligation and the Series 2018B Obligation, the “Series 2018 Obligations”), each issued under and entitled to the benefit and security of a Master Trust Indenture dated as of April 1, 2017, as previously supplemented and as supplemented by a Supplemental Master Trust Indenture No. 2 dated as of May 1, 2018 (as supplemented, the “Master Indenture”), each between U.S. Bank National Association, as master trustee (the “Master Trustee”), and the Corporation, as the sole Member of the Obligated Group created thereunder. The Corporation has also executed and delivered a Leasehold Line of Credit and Construction Deed of Trust, dated as of April 1, 2017, as supplemented and amended (the “Leasehold Deed of Trust”), naming the Master Trustee as beneficiary to secure the payment of its obligations under the Master Indenture. The Leasehold Deed of Trust creates a first mortgage lien on the Corporation’s leasehold interest in all of the real property leased by the Corporation from the Landlord, including the real property upon which the Project will be located, and the personal property located and to be located thereon, all subject to Permitted Encumbrances. See “THE CORPORATION, THE COMMUNITY AND THE GROUND LEASES” for a description of the lease arrangements with the Landlord and “SECURITY FOR THE BONDS — The Master Indenture and the Leasehold Deed of Trust” for further information. See also “THE MASTER INDENTURE” in APPENDIX D hereto and “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST” in APPENDIX E hereto. In connection with the issuance of the Series 2017 Bonds, the Corporation previously issued its Obligation No. 1 (the “Series 2017A Obligation”) and its Obligation No. 2 (the “Series 2017B Obligation” and, together with the Series 2017A Obligation, the “Prior Obligations”) pursuant to the Master Indenture as security for the Series 2017 Bonds. Each Series 2018 Obligation will constitute an unconditional promise by each Member of the Obligated Group to pay amounts sufficient to pay principal of (whether at maturity, by acceleration or call for redemption) and premium, if any, and interest on the related series of Bonds; and the Series 2018 Obligations will be secured on a parity basis with the Prior Obligations and any other Obligations hereafter issued under the Master Indenture by a lien on and security interest in the Gross Revenues (as herein defined) of the Obligated Group, the funds established under the Master Indenture and the security interest in the Corporation’s leasehold interest in the property mortgaged pursuant to the Leasehold Deed of Trust. Gross Revenues means all receipts, revenues, income and other money received by or on behalf of any Member of the Obligated Group from any source whatsoever, including, but not

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limited to, (a) revenues derived from the operation and possession of each Member’s facilities, including without limitation, all accounts, Entrance Fees (earned and unearned), monthly service fees and all other operating and nonoperating revenues, (b) gifts, bequests, grants, donations and contributions, exclusive of any gifts, bequests, grants, donations or contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of Required Payments (as defined in the Master Indenture) or for the payment of operating expenses, and (c) revenues derived from (1) condemnation proceeds, (2) any gain on the sale or other disposition of property by a Member, (3) inventory and other tangible and intangible property, (4) private and governmental health care reimbursement programs and agreements, (5) insurance proceeds, (6) contract rights and other rights now or hereafter owned by each Member, and (7) realized investment earnings; and all of the foregoing, whether now existing or hereafter coming into existence and whether now owned or led or hereafter acquired by a Member. Upon the issuance of the Bonds, the Prior Obligations and the Series 2018 Obligations will be the only Obligations outstanding under the Master Indenture. The Corporation is the only Member of the Obligated Group, and the Corporation has no current plans to add additional members to the Obligated Group. Reserve Fund. The Bond Indenture creates and establishes with the Bond Trustee a Reserve Fund (the “Reserve Fund”). Within the Reserve Fund, the Bond Trustee will create, and maintain an amount equal to the Reserve Fund Requirement in, four separate accounts to be known as the “Series 2018A Reserve Account,” “Series 2018B-1 Reserve Account,” “Series 2018B-2 Reserve Account” and “Series 2018B-3 Reserve Account.” Moneys on deposit in each account of the Reserve Fund shall be used to provide a debt service reserve for the payment of the principal of and interest on the series or subseries of Bonds corresponding to such account, but shall not be used to pay principal of or interest on any other series or subseries of Bonds. See “SECURITY FOR THE BONDS — Reserve Fund” herein and “THE BOND INDENTURE — The Reserve Fund” in APPENDIX D hereto.

CERTAIN COVENANTS OF THE OBLIGATED GROUP In addition to the covenants described below, the Master Indenture contains additional covenants relating to, among others, the maintenance of the Corporation’s property, the maintenance of the Corporation’s corporate existence, the maintenance of certain levels of insurance coverage, the sale or lease of certain property and permitted liens. For a full description of these and other covenants, see “THE MASTER INDENTURE” in APPENDIX D hereto. Rate Covenant. Each Obligated Group Member covenants in the Master Indenture to operate all of its Principal Property in the aggregate on a revenue-producing basis and to charge such fees and rates for its facilities and services as to provide income from its facilities, together with other available funds, so that the Obligated Group as a whole meets the standards set forth in the Master Indenture and summarized herein (the “Rate Covenant”). The Members covenant and agree that, within 120 days after the end of each Fiscal Year, the Obligated Group Representative shall compute Income Available for Debt Service, Annual Debt Service and Debt Service Coverage Ratio of the Obligated Group and promptly furnish to the Required Information Recipients a Certificate setting forth the results of such computation. If the Debt Service Coverage Ratio of the Obligated Group is less than 1.20:1, the Master Trustee shall require the Obligated Group to retain an Independent Consultant, within 30 days of furnishing such calculation, to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase such Debt Service Coverage Ratio to at least 1.20:1 for the following Fiscal Year. The foregoing notwithstanding, failure of the Obligated Group to achieve the required Debt Service Coverage Ratio of at least 1.20:1 for any Fiscal Year shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for retaining an Independent Consultant to prepare a report and adopting a plan and follows each recommendation contained in such report or plan to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law; provided, however, that it shall be an Event of Default under the Master Indenture if (i) the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00:1 for any Fiscal Year and the Days Cash on Hand of the Obligated Group as of the last day of such Fiscal Year is less than 250 days or (ii) the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00:1 for two consecutive Fiscal Years.

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Any other provision of the Master Indenture notwithstanding, during The Village at Mary’s Woods Expansion Project Start-Up Period (as defined in APPENDIX D hereto), the calculation of the Debt Service Coverage Ratio of the Obligated Group shall exclude all principal, interest and premium requirements in respect of the Series 2017 Bonds and all revenue and expense properly allocable to The Village at Mary’s Woods Expansion Project in accordance with generally accepted accounting principles. During The Village at Mary’s Woods Stage 2 Expansion Project Start-Up Period (as defined below), the calculation of the Debt Service Coverage Ratio of the Obligated Group shall exclude all principal, interest and premium requirements in respect of the Bonds and all revenue and expense properly allocable to The Village at Mary’s Woods Stage 2 Expansion Project in accordance with generally accepted accounting principles. “The Village at Mary’s Woods Stage 2 Expansion Project Start-Up Period” means the period commencing on the date of issuance of the Series 2018 Obligations and continuing until the earlier of the first full Fiscal Year after The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy (actual occupancy of not less than 93% of the living units to be constructed in connection with The Village at Mary’s Woods Stage 2 Expansion Project) or the Fiscal Year ended June 30, 2023.

See “SECURITY FOR THE BONDS — Certain Covenants of the Obligated Group — Rate Covenant” herein and “THE MASTER INDENTURE — Rates and Charges; Debt Coverage” in APPENDIX D. Liquidity Covenant. The Obligated Group covenants that it will calculate the Days Cash on Hand of the Obligated Group as of June 30 and December 31 of each Fiscal Year (each such date being a “Testing Date”). The Obligated Group shall include such calculations in the Officer’s Certificates delivered pursuant to the Master Indenture described under the heading “FINANCIAL REPORTING” herein. Each Obligated Group Member is required to conduct its business so that on each Testing Date the Obligated Group shall have not less than 180 Days Cash on Hand (the “Liquidity Covenant”). If the amount of Days Cash on Hand as of any Testing Date is less than 180, the Obligated Group Representative shall, within 30 days after receipt of the Officer’s Certificate disclosing such deficiency, deliver an Officer’s Certificate approved by a resolution of the Governing Body of the Obligated Group Representative to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to achieve the required level of Days Cash on Hand for future periods. If the Obligated Group has not achieved 180 Days Cash on Hand by the next Testing Date following delivery of the Officer’s Certificate required in the preceding paragraph, the Obligated Group Representative shall, within 30 days after receipt of the Officer’s Certificate disclosing such deficiency, select an Independent Consultant to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase the Days Cash on Hand to the required level for future periods. A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with each of the Required Information Recipients within 60 days of the date such Independent Consultant is retained. Each Member of the Obligated Group shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Member) and permitted by law. Notwithstanding any other provision of the Master Indenture, failure of the Obligated Group to achieve the required liquidity level for any Fiscal Year shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for retaining an Independent Consultant to prepare a report and adopting a plan and follows each recommendation contained in such report to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law.

See “SECURITY FOR THE BONDS — Certain Covenants of the Obligated Group — Liquidity Covenant” herein and “THE MASTER INDENTURE — Liquidity Covenant” in APPENDIX D. Occupancy Covenant for The Village at Mary’s Woods Stage 2 Expansion Project. The Obligated Group covenants that for each fiscal quarter (a) commencing with the first fiscal quarter which ends not less than 60 days following the issuance of the first certificate of occupancy for the first building containing Independent Living Units in The Village at Mary’s Woods Stage 2 Expansion Project, and (b) ending with the first full fiscal quarter following the fiscal quarter upon achieving The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy (each an “Occupancy Quarter”), the Obligated Group will use its best efforts to have Occupied the percentage of the total number of all Independent Living Units in The Village at Mary’s Woods Stage 2 Expansion Project (the “Percentage

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of Units Occupied”) at or above the Occupancy Requirements set forth below which levels shall be measured as of the last day of the applicable Occupancy Quarter (the “Occupancy Requirements”): Occupancy Occupancy Quarter Requirements (%)

1 24.0% 2 39.8% 3 50.9% 4 62.0% 5 73.1% 6 80.5% 7 84.2% 8 87.9% 9 90.7% 10 93.0%

For additional information regarding the occupancy covenant and remedies, see “SECURITY FOR THE BONDS — Certain Covenants of the Obligated Group — Occupancy Covenant for The Village at Mary’s Woods Stage 2 Expansion Project” herein and “SUPPLEMENTAL MASTER INDENTURE NO. 2 — Occupancy Covenant” in APPENDIX D. Approval of Consultants. If at any time the Obligated Group Representative is required to engage an Independent Consultant under the Master Indenture relating to the Rate Covenant, the Liquidity Covenant or the Occupancy Covenant, the Independent Consultant shall be engaged in the manner set forth in “SECURITY FOR THE BONDS — Approval of Consultants” herein and “THE MASTER INDENTURE — Approval of Consultants” in APPENDIX D.

Limitations on Additional Indebtedness. Each Member, respectively, agrees pursuant to the Master Indenture that it will not incur any Additional Indebtedness except as follows: (a) Long-Term Indebtedness, provided that: (1) the aggregate principal amount of such Long-Term Indebtedness and all other Outstanding Long-Term Indebtedness incurred pursuant to this clause (1) does not exceed 10% of the Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available immediately preceding the issuance of such Long-Term Indebtedness (provided that to the extent Long-Term Indebtedness initially incurred pursuant to this clause subsequently complies with any other incurrence requirement, such Long-Term Indebtedness shall, at the option of the Obligated Group Representative, thereafter not be deemed to be incurred pursuant to this clause); or (2) the Master Trustee receives an Officer’s Certificate certifying the Long-Term Debt Service Coverage Ratio, taking into account all Outstanding Long-Term Indebtedness and the Long-Term Indebtedness proposed to be incurred, for the most recent complete Fiscal Year for which audited financial statements are available, which Long-Term Debt Service Coverage Ratio is not less than 1.20:1; or (3) the Master Trustee receives: (i) an Officer’s Certificate certifying that, taking into account all Outstanding Long- Term Indebtedness but not the Long-Term Indebtedness proposed to be incurred, for the most recent Fiscal Year for which audited financial statements are available, the Long-Term Debt Service Coverage Ratio is not less than 1.20:1; and (ii) either (a) an Officer’s Certificate, accompanied by the written report of an Independent Consultant, stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (x) in the

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case of Long-Term Indebtedness to finance capital improvements, the Fiscal Year succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness issued for other purposes than are described in (x), the Fiscal Year succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.25:1, as shown by forecasted statements of revenues and expenses for such Fiscal Year, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based; or (b) an Officer’s Certificate stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (x) in the case of Long-Term Indebtedness to finance capital improvements, the two Fiscal Years succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness issued for other purposes than are described in (x), the two Fiscal Years succeeding the date on which the proposed Long- Term Indebtedness is to be incurred, is not less than 1.50:1, as shown by forecasted statements of revenues and expenses for such Fiscal Years, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based; or (4) the Master Trustee receives an Officer’s Certificate, accompanied by the written report of an Independent Consultant, stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (A) in the case of Long-Term Indebtedness to finance capital improvements, the Fiscal Year succeeding the date on which such capital improvements are expected to be in operation or (B) in the case of Long-Term Indebtedness issued for other purposes than are described in (A), the Fiscal Year succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.50:1, as shown by forecasted statements of revenues and expenses for such Fiscal Year, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based. (b) Completion Indebtedness in an amount up to 10% of the principal amount of the Long-Term Indebtedness incurred for the subject project, if there is delivered to the Master Trustee a Construction Consultant’s certificate to the effect that the Completion Indebtedness proposed to be incurred is (i) necessary to provide a completed and fully equipped facility of the type and scope contemplated at the time the original Long-Term Indebtedness was incurred, and (ii) necessary to complete the acquisition, construction and/or equipping in accordance with the general plans and specifications for such facility as originally prepared and approved in connection with the incurrence of the Long-Term Indebtedness, and (iii) in an amount estimated to be sufficient, together with other identified funds of the relevant Member, to complete the facility within the parameters described in clauses (i) and (ii) above. (c) Long-Term Indebtedness incurred for the purpose of refunding, refinancing or replacing any Outstanding Long-Term Indebtedness so as to render it no longer Outstanding if the Master Trustee receives an Officer’s Certificate to the effect that Maximum Annual Debt Service, taking into account the Long-Term Indebtedness proposed to be incurred, will not be increased by more than 15% as a result of such refunding, refinancing or replacement. (d) Short-Term Indebtedness provided that: (1) such Short-Term Indebtedness is incurred in compliance with the provisions of clause (a) above, treating such Short-Term Indebtedness for such purposes only as if it were Long-Term Indebtedness; or (2) (i) the total amount of such Short-Term Indebtedness does not exceed 15% of Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available; and (ii) in every Fiscal Year, there shall be at least a 30-day period when the balance of such Short-Term Indebtedness is reduced to an amount which shall not exceed 5% of Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements of the Obligated Group are available. (e) Subordinated Indebtedness without limitation.

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(f) Balloon Indebtedness or Interim Indebtedness provided that the conditions described in clause (a) above are satisfied with respect to the incurrence of such Balloon Indebtedness or Interim Indebtedness utilizing the assumptions specified in clause (c) of the definition of “Maximum Annual Debt Service” summarized in APPENDIX D hereto. (g) Extendable Indebtedness provided that the conditions described in clause (a) above are satisfied with respect to the incurrence of such Extendable Indebtedness utilizing the assumptions specified in clause (d) of the definition of “Maximum Annual Debt Service” summarized in APPENDIX D hereto. (h) Reimbursement and other obligations arising under reimbursement agreements relating to letters of credit or similar credit facilities used to secure Indebtedness otherwise permitted pursuant to the provisions of the Master Indenture summarized under this caption. (i) Indebtedness which is non-recourse to any Member of the Obligated Group. (j) Indebtedness to fund a Capital Addition if, prior to incurrence thereof, there is delivered to the Master Trustee (i) a written report of an Independent Consultant (prepared in accordance with industry standards) to the effect that the estimated projected Long-Term Debt Service Coverage Ratio of the Obligated Group will be not less 1.25:1 for the first full Fiscal Year following the later of (A) the estimated completion of the Capital Addition, or (B) the first full Fiscal Year following achievement of Stable Occupancy of the Capital Addition, provided that the achievement of Stable Occupancy is projected to occur no later than during the sixth full Fiscal Year following the incurrence of such Capital Addition Indebtedness; provided that such report shall include forecast balance sheets, statements of revenues and expenses and statements of changes in financial position for such Fiscal Years and a statement of the relevant assumptions upon which such forecasted statements are based, which financial statements must indicate that sufficient revenues and cash flow could be generated to pay the operating expenses of the Obligated Group’s proposed and existing Facilities and the debt service on the Obligated Group’s other existing Indebtedness during such Fiscal Year plus the proposed Long-Term Indebtedness, and (ii) an Officer’s Certificate of the Obligated Group Representative dated the date of the incurrence of the Capital Addition indebtedness to the effect that (A) the Obligated Group is then in compliance with all covenants in the Master Indenture and no Event of Default or event that with the passage of time could become an Event of Default then exists with respect to the Master Indenture, (B) the Obligor has executed and delivered a guaranteed maximum price construction contract, stipulated sum construction contract or such other construction contract that establishes the complete construction cost with respect to the Capital Addition, (C) a construction monitor having the skill and experience necessary to perform its duties with respect to the monitoring of the construction process and having a favorable reputation for such skill and experience has been engaged with respect to the Capital Addition, (D) all permits required to be obtained for the commencement of construction of the Capital Addition have been obtained or receipt of any such permit is perfunctory and will be received prior to such commencement; and (E) the Facilities constituting the Capital Addition will be constructed on the Principal Property.

See “SECURITY FOR THE BONDS — Additional Bonds and Additional Indebtedness” herein and “THE MASTER INDENTURE — Limitations on Additional Indebtedness” in APPENDIX D.

ENTRANCE FEE FUND Pursuant to the Master Indenture, the Master Trustee shall establish and maintain a separate account known as the Entrance Fee Fund — Series 2018 Bonds (the “Series 2018 Entrance Fee Fund”). All moneys received by the Master Trustee for deposit to the Series 2018 Entrance Fee Fund shall be held in trust by the Master Trustee, solely for the purposes described below, and pending application to such purposes, such moneys shall not be subject to Lien of or attachment by any other creditor of the Obligated Group. Unless an Event of Default that has not been cured or waived exists, for so long as any Series 2018B Bond or any Series 2018C Bond remains Outstanding, within five Business Days of receipt, the Corporation agrees in the Master Indenture to pay, or cause to be paid, to the Master Trustee, for deposit into the Series 2018 Entrance Fee Fund all of The Village at Mary’s Woods Stage 2 Entrance Fees (as defined in Appendix D hereto), including any partial payments of such The Village at Mary’s Woods Stage 2 Entrance Fees that are made by potential residents as a deposit against the full entrance fee due and payable upon occupancy of an independent living unit (subject to the provisions of the Corporation’s standard reservation and deposit agreement); provided that no The Village at Mary’s Woods Stage 2 Entrance Fees shall be subject to transfer by the Corporation so long as such The Village at Mary’s Woods

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Stage 2 Entrance Fees, if any, must be held in escrow pursuant to ORS Chapter 101, as amended from time to time. Upon the occurrence of an Event of Default and continuing until such Event of Default is cured or waived, The Village at Mary’s Woods Stage 2 Entrance Fees shall be retained in the Gross Revenue Fund until transferred or applied in accordance with the Master Indenture. Moneys deposited into the Series 2018 Entrance Fee Fund are pledged and shall be applied solely to the following, in order of priority:

FIRST, to the payment of refunds of The Village at Mary’s Woods Stage 2 Entrance Fees in accordance with the requirements of any Residency Agreement relating to The Village at Mary’s Woods Stage 2 Expansion Project and as certified by the Corporation to the Master Trustee.

SECOND, to the Series 2018 Working Capital Fund established under the Master Indenture, until the total principal amount deposited into the Series 2018 Working Capital Fund equals $720,000*. The Master Trustee will not replenish funds withdrawn from the Series 2018 Working Capital Fund.

THIRD, on the first Business Day of each month, provided the amount on deposit in the Series 2018 Entrance Fee Fund (after making provision for the payment of refunds in accordance with the paragraph “FIRST” above (the “Entrance Fee Refund Holdback”)), is equal to $100,000 or more, for transfer to the Bond Trustee, deposit to the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of Series 2018C Bonds then Outstanding, as soon as practicable following such deposit.

FOURTH, on the first Business Day of each month, provided all of the Series 2018C Bonds have been redeemed and the amount in the Series 2018 Entrance Fee Fund exceeds the Entrance Fee Refund Holdback by $100,000 or more, for transfer to the Bond Trustee, deposit into the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of Series 2018B-3 Bonds then Outstanding, as soon as practicable following such deposit.

FIFTH, on the first Business Day of each month, provided all of the Series 2018C Bonds and Series 2018B-3 Bonds have been redeemed and the amount in the Series 2018 Entrance Fee Fund exceeds the Entrance Fee Refund Holdback by $100,000 or more, for transfer to the Bond Trustee, deposit into the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of Series 2018B-2 Bonds then Outstanding, as soon as practicable following such deposit.

SIXTH, on the first Business Day of each month, provided all of the Series 2018C Bonds, Series 2018B-3 Bonds and Series 2018B-2 Bonds have been redeemed and the amount in the Series 2018 Entrance Fee Fund exceeds the Entrance Fee Refund Holdback by $100,000 or more, for transfer to the Bond Trustee, deposit into the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of Series 2018B-1 Bonds then Outstanding, as soon as practicable following such deposit.

SEVENTH, upon final redemption and payment of all of the Series 2018C Bonds, Series 2018B-3 Bonds, Series 2018B-2 Bonds and Series 2018B-1 Bonds, for remittance to the Corporation of all funds then remaining in the Series 2018 Entrance Fee Fund, at which time the Series 2018 Entrance Fee Fund shall be closed. If the amount remaining in the Series 2018 Entrance Fee Fund on the first Business Day of any month (after taking into account The Village at Mary’s Woods Stage 2 Entrance Fees refunds expected to become due in the next 15 days) is less than $100,000, the Master Trustee shall retain such amounts in the Series 2018 Entrance Fee Fund until the next month. If amounts on deposit in the Series 2018 Entrance Fee Fund are less than $100,000 and the Master Trustee has received a written certification from the Corporation that no further The Village at Mary’s Woods Stage 2 Entrance Fees are expected to be received, the Master Trustee shall transfer such remaining amounts in the Series 2018 Entrance Fee Fund to the Entrance Fee Redemption Account of the Bond Fund to redeem any Outstanding Series 2018C Bonds and Series 2018B Bonds, as described under the heading “THE BONDS — The Series 2018B Bonds — Mandatory

* Preliminary, subject to change.

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Optional Entrance Fee Redemption” and “THE BONDS — The Series 2018C Bonds — Mandatory Optional Entrance Fee Redemption,” or, if no Series 2018C Bonds or Series 2018B Bonds remain Outstanding, to the Corporation.

See “SECURITY FOR THE BONDS — Entrance Fee Funds” herein and “SUPPLEMENTAL MASTER INDENTURE NO. 2 — Entrance Fee Fund” in APPENDIX D.

WORKING CAPITAL FUND Pursuant to the Master Indenture, the Master Trustee shall establish and maintain a separate account to be known as the Working Capital Fund (the “Series 2018 Working Capital Fund”) for the benefit of the Bonds. All moneys received by the Master Trustee and held in the Series 2018 Working Capital Fund shall be trust funds under the terms of the Master Indenture for the benefit of the Series 2018 Obligations (except as otherwise provided) and shall not be subject to lien or attachment of any creditor of the Obligated Group. Such moneys shall be held in trust and applied in accordance with the provisions of the Master Indenture. Moneys in the Series 2018 Working Capital Fund shall be disbursed by the Master Trustee to or for the account of the Obligated Group within seven days after receipt by the Master Trustee of a Written Request to the Master Trustee certifying that (i) the withdrawal is made to pay (A) development and marketing fees and expenses related to The Village at Mary’s Woods Stage 2 Expansion Project, (B) operating expenses of the Obligated Group, (C) the costs of needed repairs to the Obligated Group’s Facilities, (D) routine capital expenditures of the Obligated Group, (E) judgments against the Obligated Group, (F) refunds of any Entrance Fees as required by residency agreements with respect to residential living apartments in The Village at Mary’s Woods Stage 2 Expansion Project, (G) amounts required to restore funds on deposit in the Reserve Fund to the required level, or (H) amounts due on any Series 2018 Obligations (other than optional prepayment or redemption), other than funds advanced by an Affiliate of the Obligated Group, (ii) such moneys have been expended or are anticipated to be expended in the calendar month following the month in which such Officer’s Certificate is submitted, together with a budget describing the uses for which such moneys are needed and the amount needed for each such use, and (iii) no other funds are available or will reasonably be available to make such payments. All amounts on deposit in the Series 2018 Working Capital Fund shall be released to the Obligated Group and the Series 2018 Working Capital Fund shall be closed when all the Series 2018B Bonds and Series 2018C Bonds have been redeemed and if no Event of Default has occurred and is continuing under the Master Indenture. Notwithstanding anything to the contrary contained in the Master Indenture, upon receipt of notice from the Bond Trustee stating that the Corporation has failed to make any required payment necessary to satisfy the Reserve Fund Requirement under the Bond Indenture for any series of Bonds, the Master Trustee shall disburse an amount sufficient to cure such failure from the amounts then on deposit in the Series 2018 Working Capital Fund within three (3) days of receipt of such notice.

See “SECURITY FOR THE BONDS — Working Capital Fund” herein and “SUPPLEMENTAL MASTER INDENTURE NO. 2 — Series 2018 Working Capital Fund” in APPENDIX D.

FINANCIAL FEASIBILITY STUDY Management’s financial forecast for the five years ending June 30, 2018 through 2022, included as part of the Financial Feasibility Study included in APPENDIX C hereto, has been examined by Moss Adams LLP, independent certified public accountants, as stated in their report dated April 2, 2018 appearing in APPENDIX C. As stated in the Financial Feasibility Study, there will usually be differences between the forecasted data and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. THE FINANCIAL FEASIBILITY STUDY SHOULD BE READ IN ITS ENTIRETY, INCLUDING MANAGEMENT’S NOTES AND ASSUMPTIONS SET FORTH THEREIN. See APPENDIX C hereto.

FORECASTED FINANCIAL INFORMATION OF THE CORPORATION The table on the following page reflects the forecasted funds available for debt service and other financial ratios for the five years ending June 30, 2018 through 2022 and has been extracted from the financial forecast included in the Financial Feasibility Study included as APPENDIX C hereto.

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All amounts, except the ratios, are expressed in thousands of dollars. No assurance can be given that the assumed interest rates described above and used in making the calculations in the following table will be achieved or maintained. Mary’s Woods at Marylhurst Forecasted Financial Ratios (In Thousands, Except for Ratios)

FORECASTED PERIOD FOR THE YEARS ENDED JUNE 30, 2018 2019 2020 2021 2022 DEBT SERVICE COVERAGE RATIO Change in net deficit $ (399) $ (3,554) $ (2,279) $ 1,246 $ 1,450 Adjustments Earned entrance fees (4,292) (5,278) (7,414) (9,325) (10,082) Amortization of prepaid land lease included in ground lease expense 31 35 34 35 35 Interest expense 2,069 3,380 5,339 6,340 6,690 Depreciation expense 3,781 4,635 6,407 8,402 9,225 Amortization expense (27) 94 785 607 523 Transfer to affiliate for Vision Fund - 1,000 - - - Entrance fees received - attrition (a) 12,256 13,598 14,641 14,858 21,303 Refunded entrance fees (a) (7,153) (7,598) (7,866) (8,158) (11,502) Annual base rent on ground leases 75 150 175 175 175 Additional rent on existing ground lease 940 968 998 1,027 1,058 Additional rent on expansion ground lease - - - 172 655 Other project-related net operating expense (income), 2019-2021 (b) - 1,046 (1,103) (5,481) -

Cash flow available for debt service $ 7,281 $ 8,476 $ 9,717 $ 9,898 $ 19,530

Forecasted annual debt service (c) $ 2,429 $ 2,428 $ 2,431 $ 2,428 $ 7,958 Annual base rent on ground leases 75 150 175 175 175

Total debt service and annual base rent on ground lease $ 2,504 $ 2,578 $ 2,606 $ 2,603 $ 8,133

Forecasted annual debt service coverage ratio 2.91 3.29 3.73 3.80 2.40

Forecasted annual debt service (c) $ 2,429 $ 2,428 $ 2,431 $ 2,428 $ 7,958 Annual base rent on ground leases 75 150 175 175 175 Additional rent on existing ground lease 940 968 998 1,027 1,058

Total debt service, annual base rent on ground leases, and subordinated existing ground lease payments $ 3,444 $ 3,546 $ 3,604 $ 3,630 $ 9,191

Forecasted annual debt service coverage ratio, including subordinated existing ground lease payments 2.11 2.39 2.70 2.73 2.12

Maximum annual debt service (d) $ 8,711

Maximum annual debt service coverage ratio (d) 2.24

Maximum annual debt service (d) $ 8,711 Additional rent on existing ground lease 1,058 Additional rent on expansion ground lease 655

Total of maximum annual debt service and subordinated ground lease payments (e) $ 10,424

Maximum annual debt service coverage ratio - including subordinated ground lease payments (e) 1.87 -x- Mary’s Woods at Marylhurst Forecasted Financial Ratios - Continued (In Thousands, Except for Ratios)

FORECASTED PERIOD FOR THE YEARS ENDED JUNE 30, 2018 2019 2020 2021 2022 DAYS CASH ON HAND Cash and cash equivalents $ 1,843 $ 2,075 $ 2,445 $ 2,682 $ 2,860 Investments - limited as to use Designated for capital improvements 24,216 27,336 30,500 36,209 52,861

Total $ 26,059 $ 29,411 $ 32,945 $ 38,891 $ 55,721

Operating expenses $ 28,241 $ 33,350 $ 42,280 $ 47,975 $ 51,230 Adjustments Depreciation (3,781) (4,635) (6,407) (8,402) (9,225) Amortization 27 (94) (785) (607) (523) Project-related operating expenses, 2018-2021 (f) - (3,079) (7,807) (10,052) -

Adjusted operating expenses $ 24,487 $ 25,542 $ 27,281 $ 28,914 $ 41,482

Daily cash expenses $ 67 $ 70 $ 75 $ 79 $ 114

Days cash on hand 388 420 441 491 490

CASH TO DEBT Cash and cash equivalents $ 1,843 $ 2,075 $ 2,445 $ 2,682 $ 2,860 Investments - limited as to use Designated for capital improvements 24,216 27,336 30,500 36,209 52,861 Debt service reserve fund 11,269 11,269 9,736 8,690 8,524

Total $ 37,328 $ 40,680 $ 42,681 $ 47,581 $ 64,245

Long-term debt $ 216,444 $ 196,750 $ 161,651 $ 132,339 $ 129,888

Cash to debt 17.2% 20.7% 26.4% 36.0% 49.5% (a) Entrance Fees received related to attrition and refunded Entrance Fees related to both Stage 1 and Stage 2 of the Project have been excluded through the year ending June 30, 2021.

(b) For purposes of computing the annual debt service coverage ratio, project-related net operating (income) expense for both Stage 1 and Stage 2 is excluded from income available for debt service through the year ending June 30, 2021. Interest, depreciation, and amortization expense are excluded in the applicable preceding line items. This line item represents all other operating revenues and expenses related to the Project.

(c) Forecasted annual debt service excludes all principal, interest, and premium requirements in respect of the Entrance Fee Bonds: Series 2017B-1, 2017B-2, 2017B-3, 2018B-1, 2018B-2, 2018B-3, and 2018C Bonds. Also excluded, for 2018-2021, are principal, interest, and premium requirements in respect of the Series 2017A and Series 2018A Bonds, other than the portion of Series 2017A Bonds that are related to the refunding of previous debt.

(d) Maximum annual debt service is equal to the forecasted maximum annual debt service on the Series 2017 and 2018 Bonds plus annual base rent on the ground lease, which are on parity with the Series 2017 and 2018 Bonds.

(e) This calculation includes additional rent on the ground lease, which is subordinated to the Series 2017 and 2018 Bonds.

(f) For purposes of computing the days cash on hand ratio, operating expenses related to Stage 1 of the Village Expansion Project, including interest expense on the new debt component of the Series 2017 Bonds, are excluded from operating expenses through the year ending June 30, 2021.

See Summary of Significant Forecast Assumptions and Accounting Policies C-9 -xi- and Examination Report of Independent Accountants FINANCIAL REPORTING AND DISCLOSURE Financial Reporting. The Master Indenture requires that the Obligated Group Representative provide to each Required Information Recipient certain financial information on a monthly, quarterly and annual basis. For a description of the financial information required to be provided, see “FINANCIAL REPORTING” herein. Continuing Disclosure. Inasmuch as the Bonds are limited obligations of the Authority, no financial or operating data concerning it is material to any decision to purchase, hold or sell the Bonds. The Authority has not, and will not, undertake any responsibilities to provide continuing disclosure with respect to the Bonds or the security therefor, and the Authority will have no liability to holders of the Bonds with respect to any such disclosure. The Corporation, however, has agreed to make certain financial information and operating data available to holders of the Bonds as described under “CONTINUING DISCLOSURE” herein. The Corporation is solely responsible for providing such disclosure, and the Authority shall have no responsibility or liability to the holders of the Bonds or any other person for the making, monitoring or content of such disclosures.

RISK FACTORS

AN INVESTMENT IN THE BONDS INVOLVES A CERTAIN DEGREE OF RISK INCLUDING THOSE RISKS SET FORTH UNDER THE HEADING “RISK FACTORS” HEREIN. A PROSPECTIVE BONDHOLDER IS ADVISED TO READ “SECURITY FOR THE BONDS” AND “RISK FACTORS” FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE BONDS. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement. Among other things, careful evaluation should be made of management’s assumptions and rationale described in the Financial Feasibility Study, and certain factors that may adversely affect the ability of the Corporation to generate sufficient revenues to pay expenses of operation, including the principal of, premium, if any, and interest on the Bonds.

THE PRINCIPAL DOCUMENTS

THE DESCRIPTIONS AND SUMMARIES OF VARIOUS DOCUMENTS SET FORTH IN THIS OFFICIAL STATEMENT, INCLUDING APPENDIX D, DO NOT PURPORT TO BE COMPREHENSIVE OR DEFINITIVE, AND REFERENCE IS MADE TO EACH DOCUMENT FOR COMPLETE DETAILS OF ALL TERMS AND CONDITIONS. ALL STATEMENTS HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY THE TERMS OF EACH SUCH DOCUMENT. DURING THE PERIOD OF THE OFFERING, COPIES OF DRAFTS OF THE BONDS, THE BOND INDENTURE, THE LOAN AGREEMENT, THE SERIES 2018 OBLIGATIONS, THE MASTER INDENTURE, THE LEASEHOLD DEED OF TRUST, THE GROUND LEASES AND THE CONTINUING DISCLOSURE AGREEMENT ARE AVAILABLE FROM THE UNDERWRITER, AND FOLLOWING DELIVERY OF THE BONDS, COPIES OF THE EXECUTED ORIGINALS THEREOF MAY BE EXAMINED AT THE PRINCIPAL CORPORATE TRUST OFFICE OF THE BOND TRUSTEE.

See Summary of Significant Forecast Assumptions and Accounting Policies C-10 -xii- and Examination Report of Independent Accountants

OFFICIAL STATEMENT relating to the $41,405,000* HOSPITAL FACILITY AUTHORITY OF CLACKAMAS COUNTY, OREGON SENIOR LIVING REVENUE BONDS (Mary’s Woods at Marylhurst Project) consisting of $16,305,000* $4,750,000* $6,250,000* $13,000,000* $1,100,000* Series 2018A Series 2018B-1 Series 2018B-2 Series 2018B-3 Series 2018C Tax Exempt Tax Exempt Tax Exempt Tax Exempt Taxable Fixed Rate Bonds Mandatory Mandatory Mandatory Mandatory Final CUSIP: Paydown Paydown Paydown Paydown ______† Securities Securities Securities Securities SM SM SM (TEMPS–85 ) (TEMPS–70 ) (TEMPS–50 ) Final CUSIP: † Final CUSIP: Final CUSIP: Final CUSIP: ______† † ______† ______

INTRODUCTION

This Introduction is intended only to serve as a brief description of this Official Statement and is expressly qualified by reference to the Official Statement as a whole, as well as the documents summarized or described herein. All capitalized terms used in this Official Statement and not otherwise defined herein are defined in “DEFINITIONS OF CERTAIN TERMS — Definitions of Certain Terms Used in the Master Indenture” and “DEFINITIONS OF CERTAIN TERMS — Definitions of Certain Terms Used in the Bond Indenture and Loan Agreement” in APPENDIX D. This Official Statement speaks only as of its date, and the information contained herein is subject to change. The descriptions and summaries of various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each document for the complete details of all terms and conditions. All statements herein regarding any such documents are qualified in their entirety by reference to such documents.

THE CORPORATION

Mary’s Woods at Marylhurst, Inc., an Oregon nonprofit corporation (the “Corporation”), has been determined to be exempt from federal income taxation pursuant to Section 501(a) of the Internal Revenue Code of 1986, as amended (the “Code”), as an organization described in Section 501(c)(3) of the Code. The Corporation owns and operates Mary’s Woods (the “Community”), a continuing care retirement community located in Lake Oswego, Oregon. The Community is, and will be following the expansion (“The Village at Mary’s Woods Expansion Project”) financed with proceeds of the Series 2017 Bonds (as herein defined) and the expansion (“The Village at Mary’s Woods Stage 2 Expansion Project”) to be financed with proceeds of the Bonds (as herein defined), located on real property owned by The Society of the Sisters of the

* Preliminary, subject to change. SM TEMPS–85, TEMPS–70 and TEMPS–50 are each a service mark of B.C. Ziegler and Company. † A registered trademark of The American Bankers Association. CUSIP data is provided by CUSIP Global Services (“CGS”) managed on behalf of the American Bankers Association by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP numbers are provided for convenience of reference and none of the Authority, the Corporation or the Underwriter take responsibility for the accuracy of such data.

Holy Names of Jesus and Mary, an Oregon non-profit corporation (the “Landlord”), and leased to the Corporation. See APPENDIX A, APPENDIX B and APPENDIX C for more information relating to the Corporation and the Community.

THE AUTHORITY

The Hospital Facility Authority of Clackamas County, Oregon (the “Authority”) is a public authority created and existing under and by virtue of the laws of the State of Oregon (the “State”) and is authorized to issue the Bonds (as herein defined) pursuant to Oregon Revised Statutes 441.525 to 441.595 inclusive, as amended (the “Act”). See “THE AUTHORITY” herein for more information.

PURPOSE OF THIS OFFICIAL STATEMENT

This Official Statement, including the cover page and Appendices hereto, is provided to furnish information with respect to the issuance, sale and delivery by the Authority of its Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) consisting of Series 2018A Tax Exempt (Fixed Rate Bonds) (the “Series 2018A Bonds”), Series 2018B-1 Tax Exempt Mandatory Paydown Securities (TEMPS–85SM) (the “Series 2018B-1 Bonds”), Series 2018B-2 Tax Exempt Mandatory Paydown Securities (TEMPS–70SM) (the “Series 2018B-2 Bonds”), Series 2018B-3 Tax Exempt Mandatory Paydown Securities (TEMPS–50SM) (the “Series 2018B-3 Bonds” and together with the Series 2018B-1 Bonds and the Series 2018B-2 Bonds, the “Series 2018B Bonds”) and Series 2018C Taxable Mandatory Paydown Securities (the “Series 2018C Bonds” or the “Taxable Bonds”). The Series 2018A Bonds and the Series 2018B Bonds are collectively referred to as the “Tax-Exempt Bonds.” The Series 2018A Bonds, the Series 2018B Bonds and the Series 2018C Bonds are collectively referred to as the “Bonds” or the “Series 2018 Bonds.”

The Bonds are being issued pursuant to the Act, in conformity with the provisions, restrictions and limitations thereof and pursuant to the Indenture of Trust dated as of May 1, 2018 (the “Bond Indenture”), between the Authority and U.S. Bank National Association, as bond trustee (the “Bond Trustee”).

PURPOSE OF THE BONDS

The proceeds of the Bonds will be loaned to the Corporation pursuant to a Loan Agreement dated as of May 1, 2018 (the “Loan Agreement”), between the Authority and the Corporation and will be used, together with other available moneys described herein, to (i) finance a portion of the costs of the construction, acquisition, development, improvement, renovation and equipping of The Village at Mary’s Woods Stage 2 Expansion Project; (ii) pay a portion of the interest on the Bonds during the construction of The Village at Mary’s Woods Stage 2 Expansion Project; (iii) fund a debt service reserve fund; and (iv) pay certain costs of issuance of the Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

SECURITY FOR THE BONDS

The Bonds will be issued under, and will be equally and ratably secured by, the Bond Indenture, pursuant to which the Authority will assign and pledge to the Bond Trustee, (1) the 2

hereinafter described Series 2018 Obligations relating to the Bonds, (2) certain rights of the Authority (except for the Unassigned Rights) under the hereinafter described Loan Agreement, (3) the funds and accounts (excluding the Rebate Fund), including the money and investments in them, which the Bond Trustee holds under the terms of the Bond Indenture, and (4) such other property as may from time to time be pledged to the Bond Trustee as additional security for such Bonds or which may come into possession of the Bond Trustee pursuant to the terms of the Loan Agreement or the Series 2018 Obligations.

Pursuant to the Loan Agreement, the Corporation has agreed to make loan payments sufficient, among other things, to pay in full when due all principal of, premium, if any, and interest on the Bonds and the administrative fees of the Bond Trustee and to make payments as required to restore any deficiencies in the separate accounts of the debt service reserve fund with respect to each series of Bonds. See “SECURITY FOR THE BONDS — The Loan Agreement.” See also “THE LOAN AGREEMENT” in APPENDIX D hereto.

The obligation of the Corporation to repay (i) the portion of the loan from the Authority relating to the Series 2018A Bonds will be evidenced by Obligation No. 3 (the “Series 2018A Obligation”), (ii) the portion of the loan from the Authority relating to the Series 2018B Bonds will be evidenced by Obligation No. 4 (the “Series 2018B Obligation”), and (iii) the portion of the loan from the Authority relating to the Series 2018C Bonds will be evidenced by Obligation No. 5 (the “Series 2018C Obligation” and, together with the Series 2018A Obligation and the Series 2018B Obligation, the “Series 2018 Obligations”), each issued under and entitled to the benefit and security of a Master Trust Indenture dated as of April 1, 2017, as previously supplemented and as supplemented by a Supplemental Master Trust Indenture No. 2 dated as of May 1, 2018 (as supplemented, the “Master Indenture”), each between U.S. Bank National Association, as master trustee (the “Master Trustee”), and the Corporation, as the sole Member of the Obligated Group created thereunder. The Corporation has also executed and delivered a Leasehold Line of Credit and Construction Deed of Trust, dated as of April 1, 2017, as supplemented and amended (the “Leasehold Deed of Trust”), naming the Master Trustee as beneficiary to secure the payment of its obligations under the Master Indenture. The Leasehold Deed of Trust creates a first mortgage lien on the Corporation’s leasehold interest in all of the real property leased by the Corporation from the Landlord, including the real property upon which The Village at Mary’s Woods Expansion Project financed with proceeds of the Series 2017 Bonds will be located and upon which The Village at Mary’s Woods Stage 2 Expansion Project to be financed with proceeds of the Bonds will be located, and the personal property located and to be located thereon, all subject to Permitted Encumbrances. See “THE CORPORATION, THE COMMUNITY AND THE GROUND LEASES” for a description of the lease arrangements with the Landlord and “SECURITY FOR THE BONDS — The Master Indenture and the Leasehold Deed of Trust” for further information. See also “THE MASTER INDENTURE” in APPENDIX D hereto and “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST” in APPENDIX E hereto.

The Public Finance Authority previously issued its $175,065,000 aggregate original principal amount Senior Living Revenue and Refunding Bonds (Mary’s Woods at Marylhurst Project) Series 2017A and Series 2017B (collectively, the “Series 2017 Bonds”) to, among other things, finance The Village at Mary’s Woods Expansion Project. In connection with the issuance of the Series 2017 Bonds, the Corporation previously issued its Obligation No. 1 (the “Series 2017A Obligation”) and its Obligation No. 2 (the “Series 2017B Obligation” and, together with

the Series 2017A Obligation, the “Prior Obligations”) pursuant to the Master Indenture as security for the Series 2017 Bonds.

Each Series 2018 Obligation will constitute an unconditional promise by each Member of the Obligated Group to pay amounts sufficient to pay principal of (whether at maturity, by acceleration or call for redemption) and premium, if any, and interest on the related series of Bonds; and the Series 2018 Obligations will be secured on a parity basis with the Prior Obligations and any other Obligations hereafter issued under the Master Indenture by a lien on and security interest in the Gross Revenues (as herein defined) of the Obligated Group, the Funds established under the Master Indenture and the security interest in the Corporation’s leasehold interest in the Mortgaged Property (as herein defined) pursuant to the Leasehold Deed of Trust. Upon the issuance of the Bonds, the Prior Obligations and the Series 2018 Obligations will be the only Obligations outstanding under the Master Indenture.

Pursuant to the Master Indenture, the Obligations of the Members of the Obligated Group issued under the Master Indenture will be secured by all of the Gross Revenues of the Obligated Group. Gross Revenues means all receipts, revenues, income and other money received by or on behalf of any Member of the Obligated Group from any source whatsoever, including, but not limited to, (a) revenues derived from the operation and possession of each Member’s facilities, including without limitation, all accounts, Entrance Fees (earned and unearned), monthly service fees and all other operating and non-operating revenues, (b) gifts, bequests, grants, donations and contributions, exclusive of any gifts, bequests, grants, donations or contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of Required Payments (as defined in the Master Indenture) or for the payment of operating expenses, and (c) revenues derived from (1) condemnation proceeds, (2) any gain on the sale or other disposition of property by a Member, (3) inventory and other tangible and intangible property, (4) private and governmental health care reimbursement programs and agreements, (5) insurance proceeds, (6) contract rights and other rights now or hereafter owned by each Member, and (7) realized investment earnings; and all of the foregoing, whether now existing or hereafter coming into existence and whether now owned or led or hereafter acquired by a Member.

The Corporation is currently the only Member of the Obligated Group, and the Corporation has no current plans to add members to the Obligated Group.

DEBT SERVICE COVERAGE RATIO; LIQUIDITY COVENANT

Pursuant to the Master Indenture, the Members of the Obligated Group will covenant to maintain a Debt Service Coverage Ratio of at least 1.20:1. In addition, the Obligated Group will covenant in the Master Indenture to maintain not less than 180 Days Cash on Hand, which will be tested as of June 30 and December 31 of each year. See “SECURITY FOR THE BONDS” below and “THE MASTER INDENTURE — Rates and Charges; Debt Coverage” and “— Liquidity Covenant” in APPENDIX D hereto.

ADDITIONAL BONDS, ADDITIONAL OBLIGATIONS AND ADDITIONAL INDEBTEDNESS

Additional Bonds on parity with the Bonds may be issued by the Authority for the purposes, upon the terms and subject to the conditions provided in the Bond Indenture.

In certain circumstances, the Corporation or any future Member of the Obligated Group may issue Additional Indebtedness (including Guaranties), which may, but need not, be evidenced or secured by an additional Obligation issued under the Master Indenture that will be equally and ratably secured with the Prior Obligations and the Series 2018 Obligations, or that may be entitled to the benefit of security in addition to that securing the Series 2018 Obligations, which security need not be extended to any other Obligations. The Master Indenture requires that the Obligated Group meet certain operating and financial tests prior to issuing new indebtedness or entering in certain other transactions. See “SECURITY FOR THE BONDS” below and “THE MASTER INDENTURE — Limitations on Additional Indebtedness” in APPENDIX D hereto.

BONDHOLDERS’ RISKS

An investment in the Bonds involves a certain degree of risk, including without limitation those risks described under the heading “RISK FACTORS” herein. A prospective Bondholder is advised to read “SECURITY FOR THE BONDS” and “RISK FACTORS” for a discussion of certain risk factors that should be considered in connection with an investment in the Bonds. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement. Among other things, careful evaluation should be made of certain factors that may adversely affect the ability of the Obligated Group to generate sufficient revenues to pay expenses of operations, including the principal of and interest on the Bonds.

CONTINUING DISCLOSURE

The Corporation will covenant on behalf of the Obligated Group to provide or cause to be provided each year the financial information and operating data relating to the Obligated Group, for the benefit of the holders and Beneficial Owners of the Bonds, pursuant to a Continuing Disclosure Agreement to be executed and delivered by the Corporation. See the information under the caption “CONTINUING DISCLOSURE.” See also APPENDIX H — “FORM OF CONTINUING DISCLOSURE AGREEMENT.”

BOOK-ENTRY SYSTEM

The Bonds, when issued, will be payable solely in book-entry form through The Depository Trust Company. See APPENDIX G — “BOOK-ENTRY ONLY SYSTEM.”

THE AUTHORITY

The Authority is a public authority organized on June 3, 1974, by the Board of Commissioners of Clackamas County, Oregon, pursuant to the Act. The Bonds will be issued by the Authority pursuant to the provisions of the Act and the Bond Indenture. The Authority, by virtue of the Constitution and laws of Oregon, particularly the Act, may acquire, construct, extend, furnish, improve, own, mortgage and lease, as lessee or lessor, hospital facilities and parts thereof. The Authority may issue notes and revenue bonds for the purpose of carrying out its powers. The Authority does not have the power or authority to levy taxes or to operate a hospital facility.

The Authority shall continue in existence so long as its revenue bonds or other obligations are outstanding and may be dissolved anytime thereafter according to law. It is governed by a seven-member Board of Directors, with members who are appointed and serve at the pleasure of 5

the Board of Commissioners of Clackamas County, Oregon (the “County”). One member of the Board of Directors is also a member of the County Board of Commissioners.

The Bonds of each series and the interest thereon are limited obligations of the Authority, payable solely from and secured exclusively by certain payments to be made by the Corporation under the Loan Agreement and certain other funds held by the Bond Trustee under the Bond Indenture and not from any other fund or source of the Authority.

THE BONDS DO NOT CONSTITUTE INDEBTEDNESS OF THE STATE OF OREGON OR ANY POLITICAL SUBDIVISION, AGENCY OR PUBLIC INSTRUMENTALITY THEREOF OR OF THE COUNTY OR THE AUTHORITY WITHIN THE MEANING OF ANY PROVISION OF THE CONSTITUTION OR LAWS OF THE STATE OF OREGON. NEITHER THE CREDIT NOR THE TAXING POWER OF THE STATE OF OREGON OR ANY POLITICAL SUBDIVISION, AGENCY OR PUBLIC INSTRUMENTALITY THEREOF OR OF THE COUNTY OR THE AUTHORITY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE AUTHORITY HAS NO TAXING POWER.

THE CORPORATION, THE COMMUNITY AND THE GROUND LEASES

The Corporation was founded and sponsored by the U.S.-Ontario Province of the Sisters of the Holy Names of Jesus and Mary for the purpose of constructing, owning and operating the Community in Lake Oswego, Oregon. For more information concerning the history, governance, organization, facilities, operations and financial performance of the Corporation, see APPENDIX A and APPENDIX B hereto.

The Corporation has been determined to be exempt from federal income taxation pursuant to Section 501(a) of the Code, as an organization described in Section 501(c)(3) of the Code.

The Community is located on approximately 24 acres owned by the Landlord and leased to the Corporation pursuant to a long-term ground lease agreement. The Community currently consists of 233 independent living apartments, 50 independent living villas, 55 assisted living apartments, 23 memory support suites, 26 residential care suites and five licensed skilling nursing suites plus common areas and amenities for residents. The Public Finance Authority previously issued the Series 2017 Bonds to, among other things, finance The Village at Mary’s Woods Expansion Project, which includes construction of 144 independent living apartment-style residences, 48 assisted living apartments and two independent living commons buildings, plus parking. The Village at Mary’s Woods Stage 2 Expansion Project includes the construction of 54 independent living apartment-style residences and suites and two service and amenity buildings. See APPENDIX A hereto for more information regarding the Community, The Village at Mary’s Woods Expansion Project and The Village at Mary’s Woods Stage 2 Expansion Project and for a description of the existing lease arrangement with the Landlord. See “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST” in APPENDIX E hereto for a summary of the provisions of the existing lease arrangement.

See “PLAN OF FINANCE — THE PROJECT” below and APPENDIX A and APPENDIX C hereto for a description of The Village at Mary’s Woods Expansion Project that was financed with the proceeds of the Series 2017 Bonds and for a description of The Village at Mary’s Woods Stage 2 Expansion Project that will be financed with proceeds of the Bonds (collectively referred to herein as the “Project”). Each expansion will be located on real property owned by the Landlord and

leased to the Corporation pursuant to a long-term ground lease agreement. See APPENDIX A hereto for a description of the lease arrangements with the Landlord. See “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST” in APPENDIX E hereto for a summary of the provisions of the lease arrangement relating to the Project.

The existing lease arrangement and the lease arrangement relating to the Project are collectively referred to herein as the “Ground Leases.”

Certain amounts, but not all amounts, due from the Corporation to the Landlord under the Ground Leases will be subordinate to payments due from the Corporation on the Prior Obligations, the Series 2018 Obligations and the Bonds. In addition, the payment of certain rental payments due to the Landlord from the Corporation are subject to the Corporation satisfying certain financial thresholds. To the extent the Corporation does not meet such thresholds, the Corporation’s obligation to make rental payments to the Landlord will be suspended but the rental payments will continue to accrue. See “THE GROUND LEASES AND RELATED TRANSACTIONS” in APPENDIX A hereto for a description of the terms of the Ground Leases, including the financial thresholds described in this paragraph. See also “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST” in APPENDIX E hereto.

PLAN OF FINANCE

GENERAL

The Corporation will use the proceeds from the sale of the Bonds and other available funds to (i) finance a portion of the costs of the construction, acquisition, development, improvement, renovation and equipping of The Village at Mary’s Woods Stage 2 Expansion Project; (ii) pay a portion of the interest on the Bonds during the construction of The Village at Mary’s Woods Stage 2 Expansion Project; (iii) fund a debt service reserve fund; and (iv) pay certain costs of issuance of the Bonds.

THE PROJECT

The Corporation will use a portion of the Bond proceeds to pay a portion of the costs of The Village at Mary’s Woods Stage 2 Expansion Project and to reimburse costs in connection with The Village at Mary’s Woods Stage 2 Expansion Project. The Village at Mary’s Woods Stage 2 Expansion Project consists of the construction of Stage 2 of The Village at Mary’s Woods, which stage will include 54 independent living apartment-style residences and suites and two service and amenity buildings. The Village at Mary’s Woods Expansion Project financed with proceeds of the Series 2017 Bonds consisted of the construction of Stage 1 of The Village at Mary’s Woods, which stage included 144 independent living apartments, 48 assisted living apartments and common area buildings. See APPENDIX A and APPENDIX C hereto for more information regarding the Project. See “RISK FACTORS — Construction Risks” herein for a discussion of factors potentially affecting timing and completion of the Project.

ESTIMATED SOURCES AND USES OF FUNDS(1)*

The estimated sources and uses of funds in connection with the issuance of the Bonds are as follows:

SOURCES OF FUNDS: Series 2018A Bonds $16,305,000 Series 2018B Bonds 24,000,000 Series 2018C Bonds 1,100,000 Construction Contingency Funds(2) 3,500,000 Original Issue Premium/Discount 673,543

Total Sources of Funds $45,578,543

USES OF FUNDS: Construction and Other Costs $39,712,576 Series 2018A Reserve Account(3) 1,063,000 Series 2018B Reserve Account(3) 759,375 Funded Interest(4) 2,506,186 Costs of Issuance(5) 1,537,405

Total Uses of Funds $45,578,543 ______* Preliminary, subject to change. (1) Totals may not add due to rounding. (2) Unused construction contingency funds relating to The Village at Mary’s Woods Expansion Project. (3) See “SECURITY FOR THE BONDS — Reserve Fund” (4) Proceeds of the Bonds will be used to pay interest on the Bonds for approximately 26 months after issuance of the Bonds. (5) Includes Underwriter’s discount, legal, accounting, financial feasibility study, administrative, additional proceeds and miscellaneous fees and expenses.

ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS* The following table sets forth the estimated amounts required for the payment of principal of the Series 2017 Bonds and the Bonds at maturity or by mandatory sinking fund redemption and for the anticipated payment of principal of the Series 2017B Bonds, the Series 2018B Bonds and the Series 2018C Bonds from anticipated entrance fees in compliance with the requirements of the Master Indenture and for the payment of interest on the Bonds for each Bond Year ending May 15. In addition, pursuant to the relevant provisions of the Master Indenture, the Obligated Group anticipates prepaying the Series 2018C Bonds, the Series 2018B-3 Bonds, the Series 2018B-2 Bonds and the Series 2018B-1 Bonds (in that order) as well as the Series 2017B Bonds from entrance fees prior to their stated maturity. The actual timing of the prepayment of the Series 2017B Bonds, the Series 2018C Bonds, the Series 2018B-3 Bonds, the Series 2018B-2 Bonds and the Series 2018B-1 Bonds may differ from the assumptions below because of timing differences in the actual receipt of entrance fees. See “THE BONDS — THE SERIES 2018B BONDS — Mandatory Optional Entrance Fee Redemption,” “THE BONDS — THE SERIES 2018C BONDS — Mandatory Optional Entrance Fee Redemption” and “SECURITY FOR THE BONDS — Entrance Fee Fund” herein.

2018 $325,000 $8,358,289 ------2019 7,205,000 7,902,308 ------2020 38,845,000 6,940,681 - - - $3,660,000 $1,100,000 -

2021 15,590,000 6,084,354 - $3,645,000 $6,250,000 9,340,000 - - 2022 1,260,000 5,882,775 - 1,105,000 - - - - 2023 1,645,000 5,819,775 $245,000 - - - - - 2024 1,735,000 5,737,525 260,000 - - - - - 2025 1,815,000 5,650,775 270,000 - - - - - 2026 1,910,000 5,560,025 285,000 - - - - - 2027 2,000,000 5,464,525 300,000 - - - - - 2028 2,105,000 5,364,525 315,000 - - - - - 2029 2,210,000 5,259,275 330,000 - - - - -

* Preliminary, subject to change. (1) The Series 2018B-1 Bonds will mature on May 15, 2025*, the Series 2018B-2 Bonds will mature on May 15, 2024*, the Series 2018B-3 Bonds will mature on November 15, 2023*, and the Series 2018C Bonds will mature on November 15, 2022*. These Bonds are not subject to mandatory sinking fund redemption; however, they are subject to mandatory entrance fee redemption, as described herein under the caption “THE BONDS — THE SERIES 2018B BONDS — Mandatory Optional Entrance Fee Redemption” and “THE BONDS — THE SERIES 2018C BONDS — Mandatory Optional Entrance Fee Redemption.” The Corporation anticipates receipt of The Village at Mary’s Woods Stage 2 Entrance Fees in amounts that will result in such redemption of the Series 2018B-1 Bonds, the Series 2018B-2 Bonds, the Series 2018B-3 Bonds and the Series 2018C Bonds as shown in the table above. For further information about expected presales and fill-up of The Village at Mary’s Woods Stage 2 Expansion Project, see APPENDIX A — “PROJECT MARKETING” and APPENDIX C — “FINANCIAL FEASIBILITY STUDY.” The actual timing of receipt of The Village at Mary’s Woods Stage 2 Entrance Fees and mandatory entrance fee redemption of the Series 2018B-1 Bonds, the Series 2018B-2 Bonds, the Series 2018B-3 Bonds and the Series 2018C Bonds may differ from such expectations. Also see “SECURITY FOR THE BONDS — Entrance Fee Fund” below.

BOND YEAR SERIES 2018B-1 SERIES 2018B-2 ENDING SERIES 2017 BONDS SERIES 2018A BONDS BONDS(1) BONDS(1) SERIES 2018B-3 BONDS(1) SERIES 2018C BONDS(1) TOTAL DEBT MAY 15 PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST SERVICE 2030 2,320,000 5,148,775 345,000 - - - - - 2031 2,435,000 5,032,775 365,000 - - - - - 2032 2,555,000 4,911,025 380,000 - - - - - 2033 2,685,000 4,783,275 400,000 - - - - - 2034 2,825,000 4,642,313 420,000 - - - - - 2035 2,970,000 4,494,000 440,000 - - - - - 2036 3,130,000 4,338,075 465,000 - - - - - 2037 3,295,000 4,173,750 485,000 - - - - - 2038 3,465,000 4,000,763 510,000 - - - - - 2039 3,645,000 3,818,850 535,000 - - - - - 2040 3,840,000 3,627,488 560,000 - - - - - 2041 4,045,000 3,425,888 590,000 - - - - - 2042 4,255,000 3,213,525 620,000 - - - - - 2043 4,475,000 2,990,138 650,000 - - - - - 2044 4,710,000 2,755,200 685,000 - - - - - 2045 4,960,000 2,507,925 720,000 - - - - - 2046 5,215,000 2,247,525 755,000 - - - - - 2047 5,490,000 1,973,738 790,000 - - - - - 2048 5,780,000 1,685,513 830,000 - - - - - 2049 6,085,000 1,382,063 870,000 - - - - - 2050 6,405,000 1,062,600 915,000 - - - - - 2051 6,740,000 726,338 960,000 - - - - - 2052 7,095,000 372,488 1,010,000 - - - - -

Total $175,065,000 $147,338,855 $16,305,000 $4,750,000 $6,250,000 $13,000,000 $1,100,000 -

(1) The Series 2018B-1 Bonds will mature on May 15, 2025*, the Series 2018B-2 Bonds will mature on May 15, 2024*, the Series 2018B-3 Bonds will mature on November 15, 2023*, and the Series 2018C Bonds will mature on November 15, 2022*. These Bonds are not subject to mandatory sinking fund redemption; however, they are subject to mandatory entrance fee redemption, as described herein under the caption “THE BONDS — THE SERIES 2018B BONDS — Mandatory Optional Entrance Fee Redemption” and “THE BONDS — THE SERIES 2018C BONDS — Mandatory Optional Entrance Fee Redemption.” The Corporation anticipates receipt of The Village at Mary’s Woods Stage 2 Entrance Fees in amounts that will result in such redemption of the Series 2018B-1 Bonds, the Series 2018B-2 Bonds, the Series 2018B-3 Bonds and the Series 2018C Bonds as shown in the table above. For further information about expected presales and fill-up of The Village at Mary’s Woods Stage 2 Expansion Project, see APPENDIX A — “PROJECT MARKETING” and APPENDIX C — “FINANCIAL FEASIBILITY STUDY.” The actual timing of receipt of The Village at Mary’s Woods Stage 2 Entrance Fees and mandatory entrance fee redemption of the Series 2018B-1 Bonds, the Series 2018B-2 Bonds, the Series 2018B-3 Bonds and the Series 2018C Bonds may differ from such expectations. Also see “SECURITY FOR THE BONDS — Entrance Fee Fund” below.

THE BONDS

GENERAL

Specific information about each series of Bonds, unique to that series, is contained in the applicable section below. Information about security for the Bonds is contained in “SECURITY FOR THE BONDS” herein.

The Bonds provide that no recourse under or upon any obligation, covenant, or agreement contained in the Bond Indenture, or in any Bond, or under any judgment obtained against the Authority or by the enforcement of any assessment or by any legal or equitable proceeding by virtue of any constitution or statute or otherwise or under any circumstances, under or independent of the Bond Indenture, will be had against any past, present or future director, incorporator, agent, representative, member, officer or employee of the Authority, either directly or through the Authority or otherwise, for the payment for or to the Authority or for or to the registered owner of any Bond issued thereunder or otherwise, of any sum that may be due and unpaid by the Authority upon any such Bond.

Neither the directors, incorporators, officers, agents, employees or representatives of the Authority past, present or future, nor any person executing the Bonds or the Bond Indenture, will be personally liable thereon or be subject to any personal liability by reason of the issuance thereof, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty, or otherwise, all such liability being expressly released and waived as a condition of and in consideration for the execution of the Bond Indenture and the issuance of the Bonds.

The Bonds will be issued only in fully registered form without coupons in minimum denominations of $5,000 and any integral multiples of $5,000 in excess thereof.

Payment of Principal and Interest. The principal of and premium, if any, on the Bonds shall be payable in lawful money of the United States of America at the designated payment office of the Bond Trustee, or at the designated corporate trust office of its successor, upon presentation and surrender of the Bonds. Payment of interest on any Bond will be made to the person who is the registered owner thereof at the close of business on the Regular Record Date for such Interest Payment Date by check or draft mailed by the Bond Trustee on such Interest Payment Date to such registered owner at his or her address as it appears on the registration records kept by the Bond Trustee or by electronic wire transfer of same day funds upon receipt by the Bond Trustee prior to the Regular Record Date of a written request by a registered owner of $1,000,000 or more in aggregate principal amount of Bonds. Any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner of such Bond at the close of business on the Regular Record Date and will be payable to the person who is the registered owner thereof at the close of business on a Special Record Date for the payment of any such defaulted interest. Such Special Record Date shall be fixed by the Bond Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the registered owners of the Bonds not less than ten days prior thereto by first class postage

prepaid mail to each such registered owner as shown on the registration records, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest.

Transfers and Exchanges; Persons Treated as Owners. The Bonds are exchangeable for an equal aggregate principal amount of fully registered Bonds of the same series and maturity of other authorized denominations at the designated office of the Bond Trustee but only in the manner and subject to the limitations and on payment of the charges provided in the Bond Indenture.

The Bonds are transferable, as described herein, by the registered owner in person or by his or her duly authorized attorney on the registration books kept at the principal office of the Bond Trustee upon surrender of the Bond together with a duly executed written instrument of transfer satisfactory to the Bond Trustee. Upon such transfer a new fully registered Bond of authorized denomination or denominations for the same aggregate principal amount and maturity will be issued to the transferee in exchange therefor, all upon payment of the charges and subject to the terms and conditions set forth in the Bond Indenture. See “— Limitations on Bondholders and Transferability of Bonds” below.

The Bond Trustee will not be required to transfer or exchange any Bond after the mailing of notice calling such Bond or any portion thereof for redemption has been given as provided in the Bond Indenture and summarized below, nor during the period beginning at the opening of business 15 days before the day of mailing by the Bond Trustee of a notice of prior redemption and ending at the close of business on the day of such mailing.

The Authority and the Bond Trustee may deem and treat the person in whose name the Bond is registered as the absolute owner thereof for the purpose of making payment (except to the extent otherwise provided hereinabove and in the Bond Indenture with respect to Regular and Special Record Dates for the payment of interest) and for all other purposes, and neither the Authority nor the Bond Trustee will be affected by any notice to the contrary.

So long as DTC acts as securities depository for the Bonds, as described in APPENDIX G hereto, all references herein to “Owner,” “owner,” “Holder” or “holder” of any Bonds or to “Bondowner,” “Bondholder,” “bondowner” or “bondholder” are deemed to refer to Cede & Co., as nominee for DTC, and not to Participants, Indirect Participants or Beneficial Owners (as defined herein).

So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, principal of, premium, if any, and interest on the Bonds will be paid as described in APPENDIX G hereto. The following information is subject in its entirety to the provisions described in APPENDIX G hereto.

THE SERIES 2018A BONDS*

The information in this section applies only to the Series 2018A Bonds.

* Preliminary, subject to change.

The Series 2018A Bonds will accrue interest from the date of delivery, except as otherwise provided in the Bond Indenture. The Series 2018A Bonds will bear interest (based on a 360 day year of twelve 30 day months) at the rates set forth on the inside cover hereof, payable semiannually on May 15 and November 15 of each year, commencing November 15, 2018 (each, an “Interest Payment Date”), and mature on the dates set forth on the inside cover page hereof.

Optional Redemption. The Series 2018A Bonds maturing on or after May 15, ____ are subject to optional redemption prior to maturity by the Authority at the direction of the Corporation on any day on or after May 15, _____. The Series 2018A Bonds may be redeemed in whole or in part upon not less than 30 days written notice to the Bond Trustee at the redemption prices (expressed as percentages of principal amount being redeemed) set forth in the following table, together with accrued interest to the date of redemption. The Series 2018A Bonds are also subject to purchase in lieu of redemption. See “THE BONDS — Purchase in Lieu of Redemption.”

REDEMPTION DATES REDEMPTION PRICES May 15, 20__ through May 14, 20__ 102% May 15, 20__ through May 14, 20__ 101% May 15, 20__ and thereafter 100%

Mandatory Sinking Fund Redemption. The Series 2018A Bonds maturing on May 15, _____ are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. As and for a sinking fund for the redemption of Series 2018A Bonds maturing on May 15, ____, the Authority shall cause to be deposited into the Principal Account of the Bond Fund a sum which is sufficient to redeem on May 15 of each of the following years (after credit as provided below) the following principal amounts of Series 2018A Bonds maturing on May 15, ____, plus accrued interest to the redemption date:

YEAR AMOUNT

$______H ______H Stated maturity

The Series 2018A Bonds maturing on May 15, ____ are subject to mandatory sinking fund redemption at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. As and for a sinking fund for the redemption of Series 2018A Bonds maturing on May 15, ____, the Authority shall cause to be deposited into the Principal Account of the Bond Fund a sum which is sufficient to redeem on May 15 of each of the following years (after credit as

provided below) the following principal amounts of Series 2018A Bonds maturing on May 15, ____, plus accrued interest to the redemption date:

YEAR AMOUNT

$______H ______H Stated maturity

Pursuant to the Bond Indenture, the Corporation may reduce the principal amount of the Series 2018A Bonds of the maturity so required to be redeemed on any such date by surrendering to the Bond Trustee for cancellation Series 2018A Bonds or redeeming, other than through sinking fund redemption, Series 2018A Bonds.

THE SERIES 2018B BONDS*

The information in this section applies only to the Series 2018B Bonds.

The Series 2018B Bonds will accrue interest from the date of delivery, except as otherwise provided in the Bond Indenture. The Series 2018B Bonds will bear interest (based on a 360 day year of twelve 30 day months) at the rate set forth on the inside cover hereof, payable semiannually on May 15 and November 15 of each year, commencing November 15, 2018 (each, an “Interest Payment Date”), and mature on the dates set forth on the inside cover page hereof.

Optional Redemption. The Series 2018B-1 Bonds are subject to optional redemption prior to maturity by the Authority at the direction of the Corporation on any day on or after May 15, ____; the Series 2018B-2 Bonds are subject to optional redemption prior to maturity on any day on or after November 15, ____; and the Series 2018B-3 Bonds are subject to optional redemption prior to maturity on any day on or after November 15, ____. The Series 2018B Bonds may be redeemed in whole or in part upon not less than 30 days written notice to the Bond Trustee at a redemption price equal to the principal amount of such Series 2018B Bonds to be redeemed, together with accrued interest to the date of redemption. The Series 2018B Bonds are also subject to purchase in lieu of redemption. See “THE BONDS — Purchase in Lieu of Redemption.”

No Mandatory Sinking Fund Redemption. The Series 2018B Bonds are not redeemable with sinking fund payments prior to their maturity. See “Mandatory Optional Entrance Fee Redemption” immediately below.

Mandatory Optional Entrance Fee Redemption. The Series 2018B-1 Bonds, the Series 2018B-2 Bonds and the Series 2018B-3 Bonds are also subject to mandatory optional redemption

* Preliminary, subject to change.

monthly at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, to the extent moneys are on deposit in the Entrance Fee Redemption Account of the Bond Fund as provided and further described in the Bond Indenture. The Series 2018B-3 Bonds shall be redeemed first, then, if no Series 2018B-3 Bonds remain outstanding, the Series 2018B-2 Bonds shall be redeemed, and then, if no Series 2018B-2 Bonds remain outstanding, the Series 2018B-1 Bonds shall be redeemed. See “SECURITY FOR THE BONDS — Entrance Fee Fund.”

The Series 2018C Bonds shall be redeemed with funds on deposit in the Entrance Fee Redemption Account prior to the redemption of any Series 2018B Bonds.

THE SERIES 2018C BONDS*

The information in this section applies only to the Series 2018C Bonds.

The Series 2018C Bonds will accrue interest from the date of delivery, except as otherwise provided in the Bond Indenture. The Series 2018C Bonds will bear interest (based on a 360-day year of twelve 30 day months) at the rate set forth on the inside cover hereof, payable semiannually on May 15 and November 15 of each year, commencing November 15, 2018 (each, an “Interest Payment Date”), and mature on the date set forth on the inside cover page hereof.

Optional Redemption. The Series 2018C Bonds are subject to optional redemption prior to maturity by the Authority at the direction of the Corporation on any day on or after November 15, ____. The Series 2018C Bonds may be redeemed in whole or in part upon not less than 30 days written notice to the Bond Trustee at a redemption price equal to the principal amount of such Series 2018C Bonds to be redeemed, together with accrued interest to the date of redemption. The Series 2018C Bonds are also subject to purchase in lieu of redemption. See “THE BONDS — Purchase in Lieu of Redemption.”

No Mandatory Sinking Fund Redemption. The Series 2018C Bonds are not redeemable with sinking fund payments prior to their maturity. See “Mandatory Optional Entrance Fee Redemption” immediately below.

Mandatory Optional Entrance Fee Redemption. The Series 2018C Bonds are also subject to mandatory optional redemption monthly at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, to the extent moneys are on deposit in the Entrance Fee Redemption Account of the Bond Fund as provided and further described in the Bond Indenture. See “SECURITY FOR THE BONDS — ENTRANCE FEE FUND.”

The Series 2018C Bonds shall be redeemed with funds on deposit in the Entrance Fee Redemption Account prior to the redemption of any Series 2018B Bonds.

* Preliminary, subject to change.

EXTRAORDINARY OPTIONAL REDEMPTION

The Bonds of each series will be subject to extraordinary optional redemption by the Authority at the direction of the Corporation prior to their scheduled maturities, in whole or in part at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date on any date following the occurrence of any of the following events:

(a) in case of damage or destruction to, or condemnation of, any property, plant, and equipment of any Obligated Group Member, to the extent that the net proceeds of insurance or condemnation award exceed $1,000,000, and the Corporation has determined not to use such net proceeds or award to repair, rebuild or replace such property, plant, and equipment; or

(b) as a result of any changes in the Constitution or laws of the State of Oregon or of the United States of America or of any legislative, executive, or administrative action (whether state or federal) or of any final decree, judgment, or order of any court or administrative body (whether state or federal), the obligations of the Corporation under the Loan Agreement have become, as established by an Opinion of Counsel, void or unenforceable in each case in any material respect in accordance with the intent and purpose of the parties as expressed in the Loan Agreement.

MANDATORY REDEMPTION UPON COMPLETION OR TERMINATION OF A PROJECT

The Bonds are subject to mandatory redemption in whole or in part on any date for which timely notice of redemption can be given by the Bond Trustee following a Completion Date at a redemption price equal to the aggregate principal amount of the Bonds to be redeemed plus accrued interest to the redemption date, without premium, to the extent Surplus Construction Fund Moneys are transferred to the Bond Fund.

PARTIAL REDEMPTION

In the event that less than all of the Bonds or portions thereof are to be redeemed, Bonds to be optionally redeemed will be selected first from any Outstanding Series 2018C Bonds, then from any Outstanding Series 2018B-3 Bonds, then from any Outstanding Series 2018B-2 Bonds, then from any Outstanding Series 2018B-1 Bonds and then from any Outstanding Series 2018A Bonds.

In the event that less than all of the Bonds or portions thereof are to be redeemed, the Corporation may select the particular maturities of such series to be redeemed. If less than all Bonds or portions thereof of a single maturity are to be redeemed, they will be selected by DTC or by lot in such manner as the Bond Trustee may determine.

If a Bond is of a denomination larger than the minimum Authorized Denomination, a portion of such Bond may be redeemed, but Bonds will be redeemed only in the principal amount of an Authorized Denomination and no Bond may be redeemed in part if the principal amount to be outstanding following such partial redemption is not an Authorized Denomination.

NOTICE OF REDEMPTION AND CONDITIONAL NOTICE

In case of every redemption, the Bond Trustee will cause notice of such redemption to be given by mailing by first class mail, postage prepaid, a copy of the redemption notice to the owners of the Bonds designated for redemption in whole or in part, at their addresses as the same will last appear upon the registration books, in each case not more than 60 nor less than 20 days prior to the redemption date. In addition, notice of redemption will be sent by first class or registered mail, return receipt requested, or by overnight delivery service (1) contemporaneously with such mailing: (A) to any owner of $1,000,000 or more in principal amount of the Bonds and (B) to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (EMMA) or such successor repository of national recognition that disseminates redemption information with respect to municipal bonds; and (2) contemporaneously with such mailing, to any securities depository registered as such pursuant to the Securities Exchange Act of 1934, as amended, that is an owner of the Bonds to be redeemed. An additional notice of redemption will be given by certified mail, postage prepaid, mailed not less than 60 nor more than 90 days after the redemption date to any owner of the Bonds selected for redemption that has not surrendered the Bonds called for redemption, at the address as the same will last appear upon the registration books.

If at the time of mailing of notice of any optional redemption of all or a portion of the Bonds of a series the Corporation shall not have deposited with the Bond Trustee moneys sufficient to redeem all of the Bonds of such series called for redemption, such notice may state that it is conditional in that it is subject to the deposit of moneys with the Bond Trustee not later than the redemption date, and such notice shall be of no effect unless such moneys are so deposited.

Failure to give any such notice, or any defect therein, will not affect the validity of any proceedings for the redemption of such Bonds.

PURCHASE IN LIEU OF REDEMPTION

If any Bond is called for optional redemption in whole or in part, the Corporation may elect to have such Bond purchased in lieu of redemption. Purchase in lieu of redemption shall be available with respect to all Bonds called for optional redemption or for such lesser portion of such Bonds as constitute Authorized Denominations. The Corporation may direct the Bond Trustee to purchase all or such lesser portion of the Bonds so called for redemption with funds provided by the Corporation.

Subject in all cases to operational or other restrictions or requirements of the Securities Depository, if so directed, the Bond Trustee shall purchase (solely with funds provided by the Corporation) such Bonds on the date which otherwise would be the redemption date of such Bonds. Any of the Bonds called for redemption that are not purchased in lieu of redemption shall be redeemed as otherwise required by the Bond Indenture on such redemption date. Subject in all cases to any operational or other restrictions or requirements of the Securities Depository, on or prior to the scheduled redemption date, any direction given to the Bond Trustee may be withdrawn by the Corporation by written notice to the Bond Trustee. Subject generally to the Bond Indenture, should a direction to purchase be withdrawn, the scheduled redemption of such Bonds shall occur.

On the date fixed for purchase of any Bond pursuant to the Bond Indenture, the Corporation shall pay the purchase price of such Bond to the Bond Trustee in immediately available funds and the Bond Trustee shall pay the same to the Bondholders being purchased against delivery thereof. The purchase shall be made for the account of the Corporation or its designee, and the Bond Trustee shall register the Bonds so purchased in accordance with the written instructions of the Corporation. No purchase of any Bond pursuant to the Bond Indenture shall operate to extinguish the indebtedness evidenced by such Bond. No Bondholder or Beneficial Owner may elect to retain a Bond purchased in lieu of redemption pursuant to provisions of the Bond Indenture described herein.

The purchase price of the Bonds shall be equal to the outstanding principal of, accrued and unpaid interest on and the redemption premium, if any, which would have been payable on such Bonds on the scheduled redemption date for such redemption. To pay the purchase price of such Bonds, the Bond Trustee shall use (A) funds deposited by the Corporation with the Bond Trustee for such purpose and (B) funds, if any, held under the Bond Indenture that the Bond Trustee would have used to pay the outstanding principal of, accrued and interest on and the redemption premium, if any, that would have been payable on the redemption of such Bonds on the scheduled redemption date. The Bond Trustee shall not purchase the Bonds pursuant to the above provisions if by no later than the redemption date, sufficient moneys have not been deposited with the Bond Trustee, or such moneys are deposited but are not available for such purpose.

No notice of the purchase in lieu of redemption shall be required to be given to the Bondholders (other than the notice of redemption otherwise required for such Bond).

DEFEASANCE

The Bond Indenture provides that the Bonds, or any portion thereof, may be defeased prior to maturity or redemption by the deposit of moneys or Government Obligations, or a combination thereof, sufficient to provide for the payment of all principal and interest on the Bonds through maturity or the date upon which the Bonds will be redeemed pursuant to the Bond Indenture. Bonds that are defeased will no longer be entitled to any security under the Bond Indenture, except for the right to payment from such moneys or Government Obligations. See “THE BOND INDENTURE — Defeasance” in APPENDIX D.

SECURITY FOR THE BONDS

GENERAL

Each series of Bonds will be issued under, and will be equally and ratably secured under, the Bond Indenture, pursuant to which the Authority will assign and pledge to the Bond Trustee, (1) the related Series 2018 Obligation, (2) certain rights (except Unassigned Rights) of the Authority under the Loan Agreement, (3) the funds and accounts (excluding the Rebate Fund), including the money and investments in such funds, which the Bond Trustee holds under the terms of the Bond Indenture, and (4) such other property as may from time to time be pledged to the

Bond Trustee as additional security for such Bonds or which may come into possession of the Bond Trustee pursuant to the terms of the Loan Agreement or the Series 2018 Obligations.

The proceeds of each series of the Bonds will be loaned to the Corporation, and the obligation of the Corporation to repay that loan will be evidenced by the related Series 2018 Obligation issued pursuant to, and entitled to the benefit and security of, the Master Indenture.

LIMITED OBLIGATIONS

RESERVE FUND

The Bond Indenture creates and establishes with the Bond Trustee a Reserve Fund (the “Reserve Fund”). Within the Reserve Fund, the Bond Trustee will create, and maintain an amount equal to the Reserve Fund Requirement in, four separate accounts to be known as the “Series 2018A Reserve Account,” “Series 2018B-1 Reserve Account,” “Series 2018B-2 Reserve Account” and “Series 2018B-3 Reserve Account.” Moneys on deposit in each account of the Reserve Fund shall be used to provide a debt service reserve for the payment of the principal of and interest on the series or subseries of Bonds corresponding to such account, but shall not be used to pay principal of or interest on any other series or subseries of Bonds. See “THE BOND INDENTURE — The Reserve Fund” in APPENDIX D hereto.

Payments into the Reserve Fund. Pursuant to the Bond Indenture and the Loan Agreement, the Series 2018A Reserve Account is required to be funded in an amount equal to the lesser of (i) 10% of the original principal amount of the Series 2018A Bonds, (ii) the Maximum Annual Debt Service on such Series 2018A Bonds then Outstanding, (iii) 125% of the average annual Debt Service for all such Series 2018A Bonds then Outstanding, and (iv) $______. Also, pursuant to the Bond Indenture and the Loan Agreement, the Series 2018B-1 Reserve Account is required to be funded in the amount of $______, the Series 2018B-2 Reserve Account is required to be funded in the amount of $______, and the Series 2018B-3 Reserve Account is required to be funded in the amount of $______. Upon issuance of the Bonds, $______will be deposited into Series 2018A Reserve Account, $______will be deposited into the Series 2018B-1 Reserve Account, $______will be deposited into the Series 2018B-2 Reserve

Account, and $______will be deposited into the Series 2018B-3 Reserve Account. Such deposits are equal to the initial Reserve Fund Requirement for each such account.

In addition to the deposits required by the Bond Indenture, there will be deposited into the appropriate Reserve Account of the Reserve Fund any Reserve Fund Obligations delivered by the Corporation to the Bond Trustee pursuant to the Loan Agreement. In addition, there will be deposited into the appropriate Reserve Account of the Reserve Fund all moneys required to be transferred thereto pursuant to the Bond Indenture, and all other moneys received by the Bond Trustee when accompanied by directions that such moneys are to be paid into such Reserve Account of the Reserve Fund. There will also be retained in each Reserve Account of the Reserve Fund all interest and other income received on investments of Reserve Fund moneys in such Reserve Account to the extent provided in the Bond Indenture.

Use of Moneys in the Reserve Fund. Except as provided in the Bond Indenture, moneys in each Reserve Account in the Reserve Fund will be used solely for the payment of the principal of and interest on Bonds of the related series or subseries, as applicable, in the event moneys in the Bond Fund are insufficient to make such payments when due, whether on an interest payment date, redemption date, maturity date, acceleration date or otherwise.

Deficiencies in the Reserve Fund. In the event any moneys in any Reserve Account of the Reserve Fund are transferred to the Bond Trustee to pay principal of and interest on Bonds of the related series or subseries, except if such moneys are transferred due to the redemption of all Bonds of the related series, the Corporation agrees in the Loan Agreement to deposit additional Reserve Fund Obligations in an amount sufficient to satisfy the Reserve Fund Requirement for such Reserve Account, such amount to be deposited in no more than 12 equal consecutive monthly installments, the first installment to be made within seven months of such transfer or receipt of written notice from the Bond Trustee of a deficiency. In the event the value of the Reserve Fund Obligations on deposit in any Reserve Account of the Reserve Fund is less than 90% of the Reserve Fund Requirement for such Reserve Account, the Corporation agrees in the Loan Agreement to deposit additional Reserve Fund Obligations in an amount sufficient to satisfy the Reserve Fund Requirement for such Reserve Account, such amount to be deposited within 120 days of receipt of written notice from the Bond Trustee of such deficiency.

Effect of Event of Default. Upon the occurrence of an Event of Default of which the Bond Trustee is deemed to have notice under the Bond Indenture and the election by the Bond Trustee of the remedy specified in the Bond Indenture, any Reserve Fund Obligations in the Reserve Fund will, subject to the provisions of the Bond Indenture, be transferred by the Bond Trustee to the Principal Account and applied in accordance with the provisions of the Bond Indenture. In the event of the redemption of any series of Bonds, any Reserve Fund Obligations on deposit in the applicable Reserve Account of the Reserve Fund in excess of the Reserve Fund Requirement on the Bonds of such series to be Outstanding immediately after such redemption may, subject to the provisions of the Bond Indenture, be transferred to the Principal Account and applied to the payment of the principal of the series of Bonds to be redeemed. In the event the value of any Reserve Fund Obligations on deposit in any Reserve Account of the Reserve Fund are in excess of the Reserve Fund Requirement for such Reserve Account (as determined pursuant to the statement of the Bond Trustee furnished pursuant to the Bond Indenture), then such excess shall

be immediately transferred during the construction period for the Project into the Construction Fund created in connection with the issuance of Bonds for the Project or, if after the completion of such construction period, into the Interest Account of the Bond Fund for payment of interest on the Bonds.

Remaining Funds. On the final maturity date or redemption date of any series of Bonds, any Reserve Fund Obligations in the related Reserve Account of the Reserve Fund relating to such series of Bonds may be used to pay the principal of, premium, if any, and interest on such series of Bonds on the final maturity date or redemption date of that series, or for the payment of Costs of the Project. See “THE BOND INDENTURE — The Reserve Fund” in APPENDIX D hereto.

Additional Bonds will not be entitled to the benefits and security of the Reserve Fund maintained under the Bond Indenture unless certain required deposits are made to a separate account in the Reserve Fund in connection with the issuance of such Additional Bonds.

THE LOAN AGREEMENT

Under the Loan Agreement, the Corporation is required duly and punctually to pay the principal of, premium, if any, and interest on the Bonds, and to make payments to the Bond Trustee to maintain the separate accounts in the Reserve Fund at the required amount and to make certain other payments. See “THE LOAN AGREEMENT” in APPENDIX D hereto.

THE MASTER INDENTURE AND THE LEASEHOLD DEED OF TRUST

The Master Indenture is intended to provide assurance for the repayment of Obligations entitled to its benefits by imposing financial and operating covenants that restrict the Corporation and any future Members of the Obligated Group and by the appointment of the Master Trustee to enforce such covenants for the benefit of the holders of such Obligations. The Prior Obligations and, upon their issuance, the Series 2018 Obligations will be the only Obligations entitled to the benefits of the Master Indenture. The holders of all Obligations entitled to the benefit of the Master Indenture will be on a parity with respect to the benefits of the Master Indenture.

Currently, only the Corporation and the Master Trustee are parties to the Master Indenture, and the Corporation is the only Obligated Group Member. The Corporation and each Obligated Group Member that may be admitted in the future will be jointly and severally liable for the payment for all Obligations entitled to the benefits of the Master Indenture and will be subject to the financial and operating covenants thereunder. See “THE MASTER INDENTURE — Membership in the Obligated Group” and “— Withdrawal from the Obligated Group” in APPENDIX D for a description of the limitations on admission and release of Obligated Group Members.

The Prior Obligations, the Series 2018 Obligations and all Obligations issued under the Master Indenture will be a general obligation of the Members of the Obligated Group and will be secured by (i) a security interest in the Gross Revenues of the Obligated Group granted pursuant to the Master Indenture and (ii) a security interest in the Corporation’s leasehold interest in the Mortgaged Property (as described below) pursuant to the Leasehold Deed of Trust.

“Gross Revenues” means all receipts, revenues, income and other money received by or on behalf of any Member of the Obligated Group from any source whatsoever, including, but not limited to, (a) revenues derived from the operation and possession of each Member’s facilities, including without limitation, all accounts, Entrance Fees (earned and unearned), monthly service fees and all other operating and non-operating revenues, (b) gifts, bequests, grants, donations and contributions, exclusive of any gifts, bequests, grants, donations or contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of Required Payments or for the payment of operating expenses, and (c) revenues derived from (1) condemnation proceeds, (2) any gain on the sale or other disposition of property by a Member, (3) inventory and other tangible and intangible property, (4) private and governmental health care reimbursement programs and agreements, (5) insurance proceeds, (6) contract rights and other rights now or hereafter owned by each Member, and (7) realized investment earnings; and all of the foregoing, whether now existing or hereafter coming into existence and whether now owned or hereafter acquired by a Member.

Each Member covenants and agrees in the Master Indenture that, so long as any Obligation remains Outstanding, all of the Gross Revenues of the Obligated Group shall be deposited as soon as practicable upon receipt in a fund (in one or more accounts at such banking institution or institutions as the Corporation shall from time to time designate in writing to the Master Trustee for such purpose (the “Depository Bank(s)”)) designated as the “Gross Revenue Fund” which the Members shall establish and maintain, subject to the provisions of the next paragraph. Subject only to the provisions of the Master Indenture, each Member has pledged, and, to the extent permitted by law has granted a security interest to the Master Trustee in, all of the Gross Revenues of the Obligated Group to secure the payment of Required Payments and the performance by the Members of their other obligations under the Master Indenture; provided however that each Member may create, assume or suffer to exist Permitted Encumbrances. Each Member has covenanted to execute, and the Corporation has previously executed, a depository account control agreement with each Depository Bank, and shall execute and deliver such other documents as may be necessary or reasonably requested by the Master Trustee in order to perfect or maintain as perfected such security interest or give public notice thereof.

Amounts in the Gross Revenue Fund may be used and withdrawn by any Member at any time for any lawful purpose, except as provided in this paragraph. If any Member is delinquent for more than one Business Day in the payment of any Required Payment with respect to any Obligation, the Master Trustee shall notify the Corporation and the Depository Bank(s) of such delinquency, and, unless such Required Payment is paid, or provision for payment is duly made in a manner satisfactory to the Master Trustee in its sole discretion, within five days after receipt of such notice, the Corporation or the appropriate Member shall cause the Depository Bank(s) to transfer the Gross Revenue Fund to the name and credit of the Master Trustee. The Master Trustee shall continue to hold the Gross Revenue Fund until amounts on deposit in said fund are sufficient to pay in full, or have been used to pay in full, all Required Payments in default and all other Events of Default actually known to a Responsible Officer of the Master Trustee shall have been made good or cured to the satisfaction of the Master Trustee in its sole discretion or provision deemed by the Master Trustee in its sole discretion to be adequate shall have been made therefor, whereupon the Gross Revenue Fund (except for the Gross Revenues required to make such payments or cure such defaults) shall be returned to the name and credit of the appropriate

Members. During any period that the Gross Revenue Fund is held in the name and to the credit of the Master Trustee, the Master Trustee shall use and withdraw amounts in said fund from time to time to make Required Payments as such payments become due (whether by maturity, redemption, acceleration or otherwise), and, if such amounts shall not be sufficient to pay in full all such payments due on any date, then to the payment of debt service on Obligations ratably, without any discrimination or preference, and to such other payments in the order which the Master Trustee, in its discretion, shall determine to be in the best interests of the Holders, without discrimination or preference. During any period that the Gross Revenue Fund is held in the name and to the credit of the Master Trustee, the Members shall not be entitled to use or withdraw any of the Gross Revenues of the Obligated Group unless and to the extent that the Master Trustee at its sole discretion so directs for the payment of current or past due operating expenses of the Members; provided, however, that the Members shall be entitled to use or withdraw any amounts in the Gross Revenue Fund which do not constitute Gross Revenues of the Obligated Group.

Notwithstanding such security interest in the Obligated Group’s Gross Revenues, the Members of the Obligated Group may sell or otherwise transfer Gross Revenues and create Permitted Encumbrances thereon, in accordance with the provisions of the Master Indenture. See “DEFINITIONS OF CERTAIN TERMS — Definitions of Certain Terms Used in the Master Indenture — Permitted Encumbrances” in APPENDIX D. Also see “RISK FACTORS — Certain Matters Relating to Enforceability of Security Interest in Gross Revenues.”

The “Property” mortgaged pursuant to the Leasehold Deed of Trust consists of the Corporation’s leasehold interest in the real property leased to the Corporation by the Landlord and all buildings, structures and improvements existing, erected or placed upon such real estate, and a security interest in all machinery, equipment, furniture and other personalty on such real estate, all judgments, awards of damages, settlements and other compensation heretofore or hereafter made resulting from condemnation proceeds or the taking of the real estate subject to the Leasehold Deed of Trust, the leases of the real estate and the rents arising therefrom and any and all other property of every kind and nature conveyed, pledged, assigned or transferred as additional security to the Master Trustee pursuant to the Leasehold Deed of Trust, subject to Permitted Encumbrances. The total Book Value (as defined in APPENDIX D) of the Mortgaged Property constitutes approximately 100 percent of the Book Value of all Property, Plant and Equipment of the Obligated Group as of February 28, 2018. There can be no assurance that the Book Value of the Mortgaged Property would be realized upon its disposition or at foreclosure. In the future, the value of the Mortgaged Property could be substantially less than the principal amount of Obligations outstanding under the Master Indenture. In connection with the issuance of the Bonds, the Corporation will deliver a lender’s title insurance policy for the real property, with the Master Trustee being the named insured. The title policy will be in an amount at least equal to the initial aggregate principal amount of the Bonds. See APPENDIX E — “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND LEASEHOLD DEED OF TRUST.” See also “RISK FACTORS — Title Insurance; Limitations of Remedies under the Leasehold Deed of Trust.” Also, see APPENDIX A hereto for more information relating to the Corporation’s lease of certain of the Mortgaged Property from the Landlord.

CERTAIN COVENANTS OF THE OBLIGATED GROUP

In addition to the covenants described below, the Master Indenture contains additional covenants relating to, among others, the maintenance of the Corporation’s property, the maintenance of the Corporation’s corporate existence, the maintenance of certain levels of insurance coverage, the sale or lease of certain property and permitted liens. For a full description of these and other covenants, see “THE MASTER INDENTURE” in APPENDIX D hereto.

Rate Covenant. Each Obligated Group Member covenants in the Master Indenture to operate all of its Principal Property in the aggregate on a revenue-producing basis and to charge such fees and rates for its facilities and services as to provide income from its facilities, together with other available funds, so that the Obligated Group as a whole meets the standards set forth in the Master Indenture and summarized herein (the “Rate Covenant”).

The Members covenant and agree that, within 120 days after the end of each Fiscal Year, the Obligated Group Representative shall compute Income Available for Debt Service, Annual Debt Service and Debt Service Coverage Ratio of the Obligated Group and promptly furnish to the Required Information Recipients a Certificate setting forth the results of such computation. If the Debt Service Coverage Ratio of the Obligated Group is less than 1.20:1, the Master Trustee shall require the Obligated Group to retain an Independent Consultant, within 30 days of furnishing such calculation, to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase such Debt Service Coverage Ratio to at least 1.20:1 for the following Fiscal Year.

A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with the Required Information Recipients within 60 days of retaining such Independent Consultant. Each Member shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Member) and permitted by law. This provision of the Master Indenture shall not be construed to prohibit any Member from serving indigent patients or residents to the extent required for such Member to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients or residents without charge or at reduced rates so long as such service does not prevent the Obligated Group from satisfying the requirements of the Master Indenture.

The foregoing notwithstanding, failure of the Obligated Group to achieve the required Debt Service Coverage Ratio to at least 1.20:1 for any Fiscal Year shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for retaining an Independent Consultant to prepare a report and adopting a plan and follows each recommendation contained in such report or plan to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law; provided, however, that it shall be an Event of Default under the Master Indenture if (i) the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00:1 for any Fiscal Year and the Days Cash on Hand of the Obligated Group as of the last day

of such Fiscal Year is less than 250 days or (ii) the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00:1 for two consecutive Fiscal Years.

Liquidity Covenant. The Obligated Group covenants that it will calculate the Days Cash on Hand of the Obligated Group as of June 30 and December 31 of each Fiscal Year (each such date being a “Testing Date”). The Obligated Group shall include such calculations in the Officer’s Certificates delivered pursuant to the Master Indenture described under the heading “FINANCIAL REPORTING” below.

Each Obligated Group Member is required to conduct its business so that on each Testing Date the Obligated Group shall have not less than 180 Days Cash on Hand (the “Liquidity Covenant”).

If the amount of Days Cash on Hand as of any Testing Date is less than 180, the Obligated Group Representative shall, within 30 days after receipt of the Officer’s Certificate disclosing such deficiency, deliver an Officer’s Certificate approved by a resolution of the Governing Body of the Obligated Group Representative to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to achieve the required level of Days Cash on Hand for future periods.

If the Obligated Group has not achieved 180 Days Cash on Hand by the next Testing Date following delivery of the Officer’s Certificate required in the preceding paragraph, the Obligated Group Representative shall, within 30 days after receipt of the Officer’s Certificate disclosing such deficiency, select an Independent Consultant to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase the Days Cash on Hand to the required level for future periods. A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with each of the Required Information Recipients within 60 days of the date such Independent Consultant is retained. Each Member of the Obligated Group shall follow each

recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Member) and permitted by law.

Notwithstanding any other provision of the Master Indenture, failure of the Obligated Group to achieve the required liquidity level for any Fiscal Year shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for retaining an Independent Consultant to prepare a report and adopting a plan and follows each recommendation contained in such report to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law.

Occupancy Covenant for The Village at Mary’s Woods Stage 2 Expansion Project. The Obligated Group covenants that for each fiscal quarter (a) commencing with the first fiscal quarter which ends not less than 60 days following the issuance of the first certificate of occupancy for the first building containing Independent Living Units in The Village at Mary’s Woods Stage 2 Expansion Project, and (b) ending with the first full fiscal quarter following the fiscal quarter upon achieving The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy (each an “Occupancy Quarter”), the Obligated Group will use its best efforts to have Occupied the percentage of the total number of all Independent Living Units in The Village at Mary’s Woods Stage 2 Expansion Project (the “Percentage of Units Occupied”) at or above the Occupancy Requirements set forth below which levels shall be measured as of the last day of the applicable Occupancy Quarter (the “Occupancy Requirements”):

Occupancy Occupancy Quarter Requirements (%) 1 24.0% 2 39.8% 3 50.9% 4 62.0% 5 73.1% 6 80.5% 7 84.2% 8 87.9% 9 90.7% 10 93.0%

If the Percentage of Units Occupied for any Occupancy Quarter is less than the Occupancy Requirement set forth above for that Occupancy Quarter, the Obligated Group Representative shall within 30 days thereafter submit an Officer’s Certificate to the Master Trustee (a “Corrective Occupancy Action Plan”) setting forth in detail the reasons therefor and the plan to increase the Percentage of Units Occupied to at least the Occupancy Requirement set forth above for future periods.

If the Percentage of Units Occupied for any two consecutive fiscal quarters is less than the Occupancy Requirement set forth above for those fiscal quarters, the Obligated Group Representative shall select an Independent Consultant in accordance with the Master Indenture within 30 days thereafter to prepare a report which addresses the information identified in the Corrective Occupancy Action Plan described above and to make recommendations regarding the actions to be taken to increase the Percentage of Units Occupied to at least the Occupancy Requirement set forth above for future periods. Within 60 days of the actual engagement of any such Independent Consultant, the Obligated Group Representative shall cause a copy of the Independent Consultant’s report and recommendations, if any, to be filed with each Member and each Required Information Recipient. Each Member shall follow each recommendation of the Independent Consultant to the extent feasible (as determined in the reasonable judgment of the Governing Board of such Member) and permitted by law. The Obligated Group shall not be required to obtain an Independent Consultant’s report for failing to meet an Occupancy Requirement if such failure occurs within three fiscal quarters of the failure that triggered the delivery of a prior Independent Consultant’s report addressing the information identified in the Corrective Occupancy Action Plan described above.

Notwithstanding any other provision of the Master Indenture, failure of the Obligated Group to achieve the Occupancy Requirement for any Occupancy Quarter shall not constitute an Event of Default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for preparing a Corrective Occupancy Action Plan and for obtaining an Independent Consultant’s report and adopting a plan and follows each recommendation contained in such Corrective Occupancy Action Plan or Independent Consultant’s report to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Member) and permitted by law.

Notwithstanding any other provision of the Master Indenture, upon achieving The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy, the Obligated Group need not comply with the provisions described under this subheading.

See “SUPPLEMENTAL MASTER INDENTURE NO. 2 — Occupancy Covenant” in APPENDIX D.

For specific information regarding the process under the Master Indenture for selection of Independent Consultants, see “SECURITY FOR THE BONDS — Approval of Consultants” herein and “THE MASTER INDENTURE — Approval of Consultants” in APPENDIX D.

ADDITIONAL BONDS AND ADDITIONAL INDEBTEDNESS

The Authority may issue Additional Bonds on a parity with the Bonds for the purposes, upon the terms and subject to the conditions specified in the Bond Indenture. Such Additional Bonds will rank on a parity with the Bonds, except that the Additional Bonds will not be entitled to the benefits and security of the Reserve Fund maintained under the Bond Indenture unless certain required deposits are made to a separate account of the Reserve Fund in connection with the issuance of such Additional Bonds. See “THE BOND INDENTURE — Issuance of Additional Bonds” in APPENDIX D hereto.

Each Member, respectively, agrees pursuant to the Master Indenture that it will not incur any Additional Indebtedness except as follows:

(a) Long-Term Indebtedness, provided that:

(1) the aggregate principal amount of such Long-Term Indebtedness and all other Outstanding Long-Term Indebtedness incurred pursuant to this clause (1) does not exceed 10% of the Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available immediately preceding the issuance of such Long-Term Indebtedness (provided that to the extent Long-Term Indebtedness initially incurred pursuant to this clause subsequently complies with any other incurrence requirement, such Long-Term Indebtedness shall, at the option of the Obligated Group Representative, thereafter not be deemed to be incurred pursuant to this clause); or

(2) the Master Trustee receives an Officer’s Certificate certifying the Long- Term Debt Service Coverage Ratio, taking into account all Outstanding Long-Term Indebtedness and the Long-Term Indebtedness proposed to be incurred, for the most recent complete Fiscal Year for which audited financial statements are available, which Long- Term Debt Service Coverage Ratio is not less than 1.20:1; or

(3) the Master Trustee receives:

(i) an Officer’s Certificate certifying that, taking into account all Outstanding Long-Term Indebtedness but not the Long-Term Indebtedness proposed to be incurred, for the most recent Fiscal Year for which audited financial statements are available, the Long-Term Debt Service Coverage Ratio is not less than 1.20:1; and

(ii) either

(a) an Officer’s Certificate, accompanied by the written report of an Independent Consultant, stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (x) in the case of Long-Term Indebtedness to finance capital improvements, the Fiscal Year succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness issued for other purposes than are described in (x), the Fiscal Year succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.25:1, as shown by

forecasted statements of revenues and expenses for such Fiscal Year, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based; or

(b) an Officer’s Certificate stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (x) in the case of Long-Term Indebtedness to finance capital improvements, the two Fiscal Years succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness issued for other purposes than are described in (x), the two Fiscal Years succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.50:1, as shown by forecasted statements of revenues and expenses for such Fiscal Years, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based; or

(4) the Master Trustee receives an Officer’s Certificate, accompanied by the written report of an Independent Consultant, stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (A) in the case of Long-Term Indebtedness to finance capital improvements, the Fiscal Year succeeding the date on which such capital improvements are expected to be in operation or (B) in the case of Long-Term Indebtedness issued for other purposes than are described in (A), the Fiscal Year succeeding the date on which the proposed Long- Term Indebtedness is to be incurred, is not less than 1.50:1, as shown by forecasted statements of revenues and expenses for such Fiscal Year, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based.

(b) Completion Indebtedness in an amount up to 10% of the principal amount of the Long-Term Indebtedness incurred for the subject project, if there is delivered to the Master Trustee a Construction Consultant’s certificate to the effect that the Completion Indebtedness proposed to be incurred is (i) necessary to provide a completed and fully equipped facility of the type and scope contemplated at the time the original Long-Term Indebtedness was incurred, and (ii) necessary to complete the acquisition, construction and/or equipping in accordance with the general plans and specifications for such facility as originally prepared and approved in connection with the incurrence of the Long-Term Indebtedness, and (iii) in an amount estimated to be sufficient, together with other identified funds of the relevant Member, to complete the facility within the parameters described in clauses (i) and (ii) above.

(c) Long-Term Indebtedness incurred for the purpose of refunding, refinancing or replacing any Outstanding Long-Term Indebtedness so as to render it no longer Outstanding if the Master Trustee receives an Officer’s Certificate to the effect that Maximum Annual Debt Service, taking into account the Long-Term Indebtedness proposed to be incurred, will not be increased by more than 15% as a result of such refunding, refinancing or replacement.

(d) Short-Term Indebtedness provided that:

(1) such Short-Term Indebtedness is incurred in compliance with the provisions of clause (a) above, treating such Short-Term Indebtedness for such purposes only as if it were Long-Term Indebtedness; or

(2) (i) the total amount of such Short-Term Indebtedness does not exceed 15% of Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available; and (ii) in every Fiscal Year, there shall be at least a 30-day period when the balance of such Short-Term Indebtedness is reduced to an amount which shall not exceed 5% of Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements of the Obligated Group are available.

(e) Subordinated Indebtedness without limitation.

(g) Extendable Indebtedness provided that the conditions described in clause (a) above are satisfied with respect to the incurrence of such Extendable Indebtedness utilizing the assumptions specified in clause (d) of the definition of “Maximum Annual Debt Service” summarized in APPENDIX D hereto.

(h) Reimbursement and other obligations arising under reimbursement agreements relating to letters of credit or similar credit facilities used to secure Indebtedness otherwise permitted pursuant to the provisions of the Master Indenture summarized under this caption.

(i) Indebtedness which is non-recourse to any Member of the Obligated Group.

in compliance with all covenants in the Master Indenture and no Event of Default or event that with the passage of time could become an Event of Default then exists with respect to the Master Indenture, (B) the Obligor has executed and delivered a guaranteed maximum price construction contract, stipulated sum construction contract or such other construction contract that establishes the complete construction cost with respect to the Capital Addition, (C) a construction monitor having the skill and experience necessary to perform its duties with respect to the monitoring of the construction process and having a favorable reputation for such skill and experience has been engaged with respect to the Capital Addition, (D) all permits required to be obtained for the commencement of construction of the Capital Addition have been obtained or receipt of any such permit is perfunctory and will be received prior to such commencement; and (E) the Facilities constituting the Capital Addition will be constructed on the Principal Property. See “THE MASTER INDENTURE — Limitations on Additional Indebtedness” in APPENDIX D.

APPROVAL OF CONSULTANTS

If at any time the Obligated Group Representative is required to engage an Independent Consultant under the Master Indenture relating to the Rate Covenant, the Liquidity Covenant or the Occupancy Covenant, the Independent Consultant shall be engaged in the manner set forth below.

Upon selecting an Independent Consultant as required under the Master Indenture, the Obligated Group Representative will notify the Master Trustee of the selection. The Master Trustee shall, as soon as practicable but in no case longer than five Business Days after receipt of notice, notify the holders of the Obligations Outstanding of such selection. Such notice shall (i) include the name and a brief description of the Independent Consultant, (ii) state the reason that the Independent Consultant is being engaged including a description of the covenant(s) of the Master Indenture that require the Independent Consultant to be engaged, and (iii) state that each holder of an Obligation will be deemed to have consented to the selection of the Independent Consultant named in such notice unless such holder submits an objection to the selected Independent Consultant in writing (in a manner acceptable to the Master Trustee) to the Master Trustee within 30 days of the date that the notice is sent to the holders. No later than two Business Days after the end of 30-day objection period, the Master Trustee shall notify the Obligated Group Representative of the number of objections. If two-thirds or more in aggregate principal amount of the holders of the Outstanding Obligations have been deemed to have consented to the selection of the Independent Consultant, the Obligated Group Representative shall engage the Independent Consultant within five days of receiving notice of that consent. If more than one-third in aggregate principal amount of the holders of the Obligations Outstanding have objected to the Independent Consultant selected, the Obligated Group Representative shall select another Independent Consultant within 14 days after receiving notice of such objection, which Independent Consultant may be engaged upon compliance with the procedures of the Master Indenture.

All Independent Consultant reports required under the Master Indenture shall be prepared in accordance with then-effective industry-appropriate standards. See “THE MASTER INDENTURE — Approval of Consultants” in APPENDIX D.

ENTRANCE FEE FUND

Pursuant to the Master Indenture, the Master Trustee shall establish and maintain a separate account known as the Entrance Fee Fund — Series 2018 Bonds (the “Series 2018 Entrance Fee Fund”). All moneys received by the Master Trustee for deposit to the Series 2018 Entrance Fee Fund shall be held in trust by the Master Trustee, solely for the purposes described below, and pending application to such purposes, such moneys shall not be subject to Lien of or attachment by any other creditor of the Obligated Group.

Unless an Event of Default that has not been cured or waived exists, for so long as any Series 2018B Bond or any Series 2018C Bond remains Outstanding, within five Business Days of receipt, the Corporation agrees in the Master Indenture to pay, or cause to be paid, to the Master Trustee, for deposit into the Series 2018 Entrance Fee Fund all of The Village at Mary’s Woods Stage 2 Entrance Fees (as defined in Appendix D hereto), including any partial payments of such The Village at Mary’s Woods Stage 2 Entrance Fees that are made by potential residents as a deposit against the full entrance fee due and payable upon occupancy of an Independent Living Unit (subject to the provisions of the Corporation’s standard reservation and deposit agreement); provided that no The Village at Mary’s Woods Stage 2 Entrance Fees shall be subject to transfer by the Corporation so long as such The Village at Mary’s Woods Stage 2 Entrance Fees, if any, must be held in escrow pursuant to ORS Chapter 101, as amended from time to time. Upon the occurrence of an Event of Default and continuing until such Event of Default is cured or waived, The Village at Mary’s Woods Stage 2 Entrance Fees shall be retained in the Gross Revenue Fund until transferred or applied in accordance with the Master Indenture.

Mary's Woods - Cash Waterfall of Entrance Fees The diagram below demonstrates the flow of funds anticipated from the collection of Initial Entrance Fees.

The Obligor receives Initial Entrance Fees Trustee Deposits Initial Entrance Fees and transfers them to the Trustee within 5 business days into the Entrance Fee Fund upon receipt from the Obligor. ($29.61 million total entrance fee pool at 100%) The Trustee will apply the Initial Entrance Fees as shown below. ($28.13 million total entrance fee pool at 95%)

To pay Refunds prior to Occupancy (As required by Residency Agreements)

Approximate Occupancy Not subject to replenishment. Working Capital Fund at funding $720,000 2%

Temporary Debt Redemption Debt Service Reserve Funds will be released at the final redemption date of each temporary debt component Par amounts to be redeemed are: Fund will automatically be swept. The temporary debt $ 1,100,000 Series 2018C Bonds; less Debt Service Reserve Fund $ - 6% series will be redeemed on a monthly basis, subject to the $ 13,000,000 Series 2018B-3 Bonds; less Debt Service Reserve Fund $ 390,000 49% limitations described herein in the order shown to the right. $ 6,250,000 Series 2018B-2 Bonds; less Debt Service Reserve Fund $ 203,125 69% $ 4,750,000 Series 2018B-1 Bonds; less Debt Service Reserve Fund $ 166,250 85%

Unrestricted Cash to Obligor Once the preceding items are satisfied, all future entrance fee Remaining proc eeds of Initial Entrance Fees proceeds can be used by the Obligor as unrestricted cash. $ 4,546,981 (at 100% occupancy) $ 3,066,601 (at 95% occupancy)

Moneys deposited into the Series 2018 Entrance Fee Fund are pledged and shall be applied solely to the following, in order of priority:

THIRD, on the first Business Day of each month, provided the amount on deposit in the Series 2018 Entrance Fee Fund (after making provision for the payment of refunds in accordance with the paragraph “First” above (the “Entrance Fee Refund Holdback”)) is equal to $100,000 or more, for transfer to the Bond Trustee, deposit to the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of Series 2018C Bonds then Outstanding, as soon as practicable following such deposit.

* Preliminary, subject to change.

If the amount remaining in the Series 2018 Entrance Fee Fund on the first Business Day of any month (after taking into account The Village at Mary’s Woods Stage 2 Entrance Fees refunds expected to become due in the next 15 days) is less than $100,000, the Master Trustee shall retain such amounts in the Series 2018 Entrance Fee Fund until the next month.

If amounts on deposit in the Series 2018 Entrance Fee Fund are less than $100,000 and the Master Trustee has received a written certification from the Corporation that no further The Village at Mary’s Woods Stage 2 Entrance Fees are expected to be received, the Master Trustee shall transfer such remaining amounts in the Series 2018 Entrance Fee Fund to the Entrance Fee Redemption Account of the Bond Fund to redeem any Outstanding Series 2018C Bonds and Series 2018B Bonds, as described under the heading “THE BONDS — The Series 2018B Bonds — Mandatory Optional Entrance Fee Redemption” and “THE BONDS — The Series 2018C Bonds — Mandatory Optional Entrance Fee Redemption,” or, if no Series 2018C Bonds or Series 2018B Bonds remain Outstanding, to the Corporation.

Also see APPENDIX D — “SUPPLEMENTAL MASTER INDENTURE NO. 2 — Entrance Fee Fund.”

WORKING CAPITAL FUND

Pursuant to the Master Indenture, the Master Trustee shall establish and maintain a separate account to be known as the Working Capital Fund (the “Series 2018 Working Capital Fund”) for the benefit of the Bonds. All moneys received by the Master Trustee and held in the Series 2018 Working Capital Fund shall be trust funds under the terms of the Master Indenture for the benefit of the Series 2018 Obligations (except as otherwise provided) and shall not be subject to lien or attachment of any creditor of the Obligated Group. Such moneys shall be held in trust and applied in accordance with the provisions of the Master Indenture.

Moneys in the Series 2018 Working Capital Fund shall be disbursed by the Master Trustee to or for the account of the Obligated Group within seven days after receipt by the Master Trustee of a Written Request to the Master Trustee certifying that (i) the withdrawal is made to pay (A) development and marketing fees and expenses related to The Village at Mary’s Woods Stage 2 Expansion Project, (B) operating expenses of the Obligated Group, (C) the costs of needed repairs to the Obligated Group’s Facilities, (D) routine capital expenditures of the Obligated Group, (E) judgments against the Obligated Group, (F) refunds of any Entrance Fees as required by residency agreements with respect to residential living apartments in The Village at Mary’s Woods Stage 2 Expansion Project, (G) amounts required to restore funds on deposit in the Reserve Fund to the required level, or (H) amounts due on any Series 2018 Obligations (other than optional prepayment or redemption), other than funds advanced by an Affiliate of the Obligated Group, (ii) such moneys have been expended or are anticipated to be expended in the calendar month following the month in which such Officer’s Certificate is submitted, together with a budget describing the uses for which such moneys are needed and the amount needed for each such use, and (iii) no other funds are available or will reasonably be available to make such payments.

All amounts on deposit in the Series 2018 Working Capital Fund shall be released to the Obligated Group and the Series 2018 Working Capital Fund shall be closed when all the Series

2018B Bonds and Series 2018C Bonds have been redeemed and if no Event of Default has occurred and is continuing under the Master Indenture.

Notwithstanding anything to the contrary contained in the Master Indenture, upon receipt of notice from the Bond Trustee stating that the Corporation has failed to make any required payment necessary to satisfy the Reserve Fund Requirement under the Bond Indenture for any series of Bonds, the Master Trustee shall disburse an amount sufficient to cure such failure from the amounts then on deposit in the Series 2018 Working Capital Fund within three (3) days of receipt of such notice.

Also see APPENDIX D — “SUPPLEMENTAL MASTER INDENTURE NO. 2 — Series 2018 Working Capital Fund.”

RISK FACTORS

GENERAL RISK FACTORS

The purchase and ownership of the Bonds involves investment risks that are discussed throughout this Official Statement. These risk factors should not be considered definitive or exhaustive. Prospective purchasers of the Bonds should evaluate all of the information presented in this Official Statement. This section on bondholders’ risks focuses primarily on the general risks associated with the healthcare industry and the operations of senior living facilities, whereas APPENDIX A describes the Obligated Group and the Community specifically. These should be read together.

As described herein under the captions, “INTRODUCTION — SECURITY FOR THE BONDS” and “SECURITY FOR THE BONDS” the principal of and interest on the Bonds, except to the extent that the Bonds will be payable from the proceeds thereof or investment income thereon, are payable solely from amounts payable by the Corporation under the Loan Agreement and from amounts payable by the Members of the Obligated Group on the Series 2018 Obligations. The bondholders’ risks discussed below should be considered in evaluating the ability of the Members of the Obligated Group to make payments in amounts sufficient to provide for the payment of the principal of and interest on the Bonds. This discussion of risk factors is not, and is not intended to be, exhaustive.

IMPACT OF DISRUPTIONS IN THE CREDIT MARKETS AND GENERAL ECONOMIC FACTORS

A financial market disruption such as the economic recession that began in 2008 may have negative repercussions upon the national and global economies, including a scarcity of credit, lack of confidence in the financial sector, extreme volatility in the financial markets, increase in interest rates, reduced business activity, increased consumer bankruptcies and increased business failures and bankruptcies. The healthcare and senior care sectors were materially adversely affected by the 2008 recession and would likely be materially adversely affected by any future economic recession or financial market disruption. Consequences of the 2008 recession generally included realized and unrealized investment portfolio losses, reduced investment income, limitations on access to

the credit markets, difficulties in extending existing or obtaining new liquidity facilities, difficulties in remarketing revenue bonds subject to tender, requiring the expenditure of internal liquidity to fund tenders of revenue bonds, and increased borrowing costs. Future financial market disruptions cannot be predicted and there can be no assurance that future financial disruptions will not materially or adversely affect the operations and financial condition of the Members of the Obligated Group.

MANAGEMENT’S FORECAST

Management’s financial forecast contained in the Financial Feasibility Study included in APPENDIX C hereto is based upon assumptions made by the management of the Corporation. As stated in such financial forecast, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. In addition, the financial forecast is only for the five years ending June 30, 2018 through 2022, and consequently does not cover the whole period during which the Bonds may be outstanding. The Financial Feasibility Study should be read in its entirety, including management’s notes and assumptions set forth therein. See APPENDIX C hereto.

BECAUSE THERE IS NO ASSURANCE THAT ACTUAL EVENTS WILL CORRESPOND WITH THE ASSUMPTIONS MADE, NO GUARANTEE CAN BE MADE THAT MANAGEMENT’S FINANCIAL FORECAST IN THE FINANCIAL FEASIBILITY STUDY WILL CORRESPOND WITH THE RESULTS ACTUALLY ACHIEVED IN THE FUTURE. ACTUAL OPERATING RESULTS MAY BE AFFECTED BY MANY UNCONTROLLABLE FACTORS, INCLUDING BUT NOT LIMITED TO INCREASED COSTS, LOWER THAN ANTICIPATED REVENUES, EMPLOYEE RELATIONS, TAXES, GOVERNMENTAL CONTROLS, CHANGES IN APPLICABLE GOVERNMENTAL REGULATION, CHANGES IN DEMOGRAPHIC TRENDS, CHANGES IN THE RETIREMENT LIVING AND HEALTH CARE INDUSTRIES, HEALTH INSURANCE, AND GENERAL ECONOMIC CONDITIONS.

DELAY IN PAYMENT OF TEMPORARY DEBT

Management’s financial forecast contained in the Financial Feasibility Study included in APPENDIX C hereto currently anticipates that the Series 2018C Bonds, the Series 2018B-3 Bonds, the Series 2018B-2 Bonds and the Series 2018B-1 Bonds will be subject to mandatory redemption from funds held in the Entrance Fee Redemption Account upon achieving occupancy of 10%, 50%, 70% and 85%, respectively, of the Project. There can be no guarantee, however, that there will be sufficient funds in the Entrance Fee Redemption Account in order to so redeem such Bonds. See “SECURITY FOR THE BONDS — Entrance Fee Fund.” The Entrance Fee Redemption Account will be funded from The Village at Mary’s Woods Stage 2 Entrance Fees in accordance with the Master Indenture as described herein.

ADDITIONS TO THE OBLIGATED GROUP

Currently, the Corporation is the only Member of the Obligated Group. Upon satisfaction of certain conditions in the Master Indenture, other entities can become Members of the Obligated Group. See “THE MASTER INDENTURE — Membership in the Obligated Group” in APPENDIX D. Management of the Corporation currently has no plans to add additional Members to the Obligated

Group. However, if and when new Members are added, the Obligated Group’s financial situation and operations will likely be altered from that of the Corporation alone.

STATE BUDGETARY PRESSURES

Many states, including Oregon, face financial challenges such as the erosion of tax revenues, which may cause a shortfall between state revenue and state spending demands. These state budget challenges may negatively affect the healthcare industry and facility residents in a number of ways, including, but not limited to, reductions or delays in Medicaid reimbursement or pension benefit cuts. Additionally, Congressional proposals to cap the federal share of Medicaid expenditures or “block grant” the Medicaid program could further shift rising costs to the states, resulting in additional state budget challenges. Management of the Obligated Group is unable to determine what impact, if any, future state budget challenges may have on the operations and financial condition of the Obligated Group.

POTENTIAL CHANGES TO TAX TREATMENT OF BONDS

Proposals to alter or eliminate the exclusion of interest on tax-exempt bonds from gross income for some or all taxpayers have been made in the past and may be made again in the future. Such legislative proposals, if enacted, could alter the federal and/or state tax treatment described under the heading “TAX MATTERS” herein, and certain of which, whether or not enacted, could adversely affect the market value or marketability of the Tax-Exempt Bonds. Certain legislative proposals, if enacted, could tax all or a portion of the interest on tax exempt bonds, including the Tax-Exempt Bonds, for certain taxpayers under the regular income tax, the alternative minimum tax or otherwise, and could apply to bonds issued before, on, or after the date of enactment.

It is unclear whether any legislation will be enacted affecting the tax treatment of interest on the Tax-Exempt Bonds. If any such legislation is retroactive and applies to tax-exempt bonds, including the Tax-Exempt Bonds, previously issued for the benefit of the Obligated Group, the adoption of any such legislation could adversely affect the market value or marketability of the Tax-Exempt Bonds and the financial condition of the Obligated Group. In addition, the adoption of any such legislation could increase the cost to the Obligated Group of financing future capital needs.

PROPERTY TAXES; STATE AND LOCAL TAX EXEMPTION

Local property tax assessors take differing positions as to whether or not facilities such as those owned by the Obligated Group are exempt from property taxation. A portion of the Corporation’s facilities are currently exempt from property taxation. Budgetary pressures on local government may lead to increasing pressures for state legislation to amend the property tax statutes to subject to taxation, or higher taxation, various properties owned by nonprofit organizations or to condition exemption from taxation upon the performance of specific types or level of charitable activity.

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 or adversely affect the operations and financial condition of the Obligated Group by requiring the Obligated Group to pay income or higher local property taxes.

GENERAL RISKS OF LONG TERM CARE FACILITIES

There are many diverse factors not within the Obligated Group’s control that have a substantial bearing on the risks generally incident to the operation of its facilities. These factors include adverse use of adjacent or neighboring real estate, community acceptance of the Community, changes in demand for the Community, changes in the number of competing facilities, changes in the costs of operation of the Community, changes in state laws affecting long term care programs, potential federal law changes, the limited income of senior citizens, general changes in the long term care and health care industries (including those imposed by health care reform), difficulties in or restrictions on the Obligated Group’s ability to raise rates charged, access to financial capital and general economic conditions. In recent years, a significant number of long term care facilities throughout the United States have defaulted on various financing obligations or otherwise have failed to perform as originally expected. There can be no assurance the Obligated Group will not experience one or more of the adverse factors that caused other facilities to fail. Many other factors may adversely affect the operation of facilities like the Obligated Group’s and cannot be determined at this time.

UNCERTAINTY OF REVENUES

As noted elsewhere, except to the extent that the holders of the Bonds are secured, under certain circumstances, by the proceeds of insurance, sale or condemnation awards or net amounts by recourse to the Leasehold Deed of Trust, the Bonds will be payable solely from payments or prepayments to be made by the Corporation under the Loan Agreement, from payments to be made by the Members of the Obligated Group on the Series 2018 Obligations and from certain funds held under the Bond Indenture. The ability of the Corporation to make payments under the Loan Agreement and of the Members of the Obligated Group to make payments on the Series 2018 Obligations is dependent upon the generation by the Obligated Group of revenues in the amounts necessary for the Obligated Group to pay the principal of and interest on the Bonds, as well as other operating and capital expenses. The realization of future revenues and expenses are subject to, among other things, the capabilities of the management of the Obligated Group, government regulation and future economic and other conditions that are unpredictable and that may affect revenues and payment of principal of and interest on the Bonds. No representation or assurance can be made that revenues will be realized by the Obligated Group in amounts sufficient to make the required payments with respect to debt service on the Bonds. Neither the Underwriter nor the Authority has made any independent investigation of the extent to which any such factors may have an adverse effect on the revenues of the Obligated Group.

FAILURE TO MAINTAIN OCCUPANCY AND TURNOVER

The economic feasibility of the Obligated Group’s operations depends in large part upon the ability of the Obligated Group to maintain substantial occupancy of the Community, including the Project, throughout the term of the Bonds and to charge and collect entrance fees and monthly

service fees sufficient to pay operating expenses and debt service. This depends to some extent on factors outside management’s control, such as the residents’ right to terminate their residency agreements, the residents’ financial conditions and the investment environment. Additionally, because the Obligated Group’s facilities are senior-oriented facilities, the Obligated Group’s facilities can experience (i) increased turnover and occupancy fluctuations due to occupant age, economic well-being, and health, and (ii) in some cases, occupancy delay or decline because of a prospective occupant’s need, hesitancy or inability to dispose of owner-occupied residences. If the Obligated Group fails to maintain occupancy levels, release, in a timely manner, independent living units and assisted living units as they become available, or if there is a reduction in the amount of entrance fees or monthly service fees received, there may be insufficient funds to pay the debt service on the Bonds.

LICENSING DELAY

The timeline to achieve licensure for the Project may be longer than expected and negatively impact occupancy levels and revenues of the Corporation. Any delay in the licensing and full operation of the Project would result in losses in excess of those projected in the Financial Feasibility Study in APPENDIX C to this Official Statement. The Financial Feasibility Study should be read in its entirety, including management’s notes and assumptions set forth therein. See APPENDIX C hereto.

MALPRACTICE CLAIMS, GENERAL LIABILITY INSURANCE AND LITIGATION

The operations of the Obligated Group may be affected by increases in the incidence of malpractice lawsuits against physicians, nurses, elder care facilities and care providers in general and by increases in the dollar amount of damage recoveries. These may result in increased insurance premiums and an increased difficulty in obtaining malpractice insurance. Insurance does not provide coverage for judgments for punitive damages. The Obligated Group insures against malpractice claims. No assurance can be given that present levels of coverage can be maintained in ensuing years or that the price of such future coverage will not increase substantially over prior periods.

Litigation may also arise from the corporate and business activities of the Obligated Group, including from its status as an employer, restrictions on the age of the occupants, restrictions on marital status or ADA violations. Many of these risks should be covered by insurance, but some might not be. For example, certain antitrust claims, claims arising from wrongful termination, claims arising from physical harm or assault, including sexual molestation, business disputes and workers’ compensation claims may not be covered by insurance or other sources and may, in whole or in part, be a liability of the Obligated Group if determined or settled adversely.

NATURE OF THE INCOME OF SENIOR CITIZENS

A large percentage of the monthly income of the residents of the Obligated Group’s facilities will be fixed income derived from pensions and Social Security. In addition, some residents will be liquidating assets in order to pay the entrance fees and monthly service and other fees. If, due to inflation or otherwise, substantial increases in fees are required to cover increases

in operating costs, including wages, benefits and other expenses, many residents may have difficulty paying or may be unable to pay such increased fees. Alternatively, any decrease in the amounts paid by such fixed income sources could affect the ability of residents to pay fees and additional restrictions imposed upon Social Security or other fixed income sources could affect the ability of future residents to pay entrance fees or to meet the financial obligations under the residency agreements. The Obligated Group’s inability to collect from residents the full amount of their payment obligations may jeopardize the ability of the Corporation to pay amounts due under the Loan Agreement and the ability of the Members of the Obligated Group to pay amounts due on the Series 2018 Obligations.

SALE OF PERSONAL RESIDENCES

Some prospective residents of the Obligated Group’s facilities are required to sell their current homes to pay the entrance fees prior to occupancy or to meet financial obligations under their residency agreements. If prospective residents encounter difficulties in selling their current homes due to local or national economic conditions affecting the sale of residential real estate, such prospective residents may not have sufficient funds to pay the entrance fees prior to occupancy or to meet the financial obligations under their residency agreements, thereby causing a delay in scheduled occupancy of the Obligated Group’s facilities or the remarketing of vacated units, or a reduction in the amount of entrance fees or monthly service fees payable, all of which would have an adverse impact on the revenues of the Obligated Group.

UTILIZATION AND DEMAND

Several factors could, if implemented, affect demand for services of the Obligated Group’s facilities including: (i) efforts by insurers and governmental agencies to reduce nursing home and long-term care communities utilization through the use of preventive medicine, care coordination and home health care programs; (ii) a decline in the population or a change in the age composition of the population, (iii) a decline in the economic conditions of the service area for the Obligated Group’s facilities; (iv) advances in scientific and medical technology; (v) increased or more effective competition from nursing homes, assisted living communities and long-term care communities now or hereafter located in the service area of the Obligated Group’s facilities; (vi) to the extent any residents use long-term care insurance to help pay for their care, an increase in long-term care insurance premiums or other disruptions in the long-term care insurance market; and (vii) general disruptions in the health care, long-term care or insurance markets resulting from health care reform efforts, including the potential repeal and replacement of the Affordable Care Act. See “PRESENT AND PROSPECTIVE FEDERAL AND STATE LEGISLATION — Health Care Reform” below for additional information. See also the Financial Feasibility Study in APPENDIX C hereto. The Financial Feasibility Study should be read in its entirety, including management’s notes and assumptions set forth therein.

CONSTRUCTION RISKS

There can be no assurances given that the Project will be completed or that it can be completed for the cost and within the time as set forth in this Official Statement. Failure to complete the Project, or to complete it in a timely fashion at the estimated cost, could adversely

affect the ability of the Corporation to generate sufficient revenues to continue its planned operations and to make payments with respect to the Bonds. For example, the plan of finance assumes that entrance fees payable on or before initial occupancy of the Project by individual residents will be used to refund the Series 2018C Bonds and the Series 2018B Bonds. See “THE BONDS — The Series 2018B Bonds — Mandatory Optional Entrance Fee Redemption” and “THE BONDS — The Series 2018C Bonds — Mandatory Optional Entrance Fee Redemption.” If the completion of the Project is delayed, the receipt of entrance fees necessary for such purpose, as well as the receipt of monthly service fees necessary to fund operations, may be adversely impacted.

Whether or not the Project will be completed on schedule depends upon a large number of factors, many of which may be beyond the control of the Corporation. These include, but are not limited to, adverse weather, strikes, delays in the delivery of or shortages of materials, delays in the issuance of required building permits, environmental restrictions or similar unknown or unforeseeable contingencies. Further, there can be no assurance that the Project will conform to construction specifications or state or local regulations. The occurrence of any of the foregoing could result in increases in construction costs or considerable delays in, or complete impossibility of, completion of the Project, resulting in a failure to achieve anticipated operating results. Construction costs could exceed the amounts originally forecast due to a number of factors.

Construction of the Project is subject to the usual risks associated with construction projects, including, but not limited to, delays in issuance of required building permits or other necessary approvals or permits, strikes, shortages of materials and adverse weather conditions. Such events could result in delaying occupancy of the Project and thus the entrance fees and other revenue flow therefrom. It is anticipated that the proceeds from the sale of the Bonds, together with anticipated investment earnings thereon and certain funds of the Corporation, will be sufficient to complete the construction and equipping of the Project. However, cost overruns for projects of this magnitude may occur due to change orders and other factors. In addition, the date of substantial completion may be extended by reason of changes authorized by the Corporation, delays due to acts or neglect of the Corporation or by independent contractors employed by the Corporation or by labor disputes, fire, unusual delay in transportation, adverse conditions not reasonably anticipated, unavoidable casualties or any causes beyond the control of the contractors. Cost overruns could also result in the Corporation not having sufficient moneys to complete construction of the Project, thereby materially affecting the receipt of revenues needed to pay debt service on the Bonds.

UNCERTAINTY OF INVESTMENT INCOME

The investment earnings of, and accumulations in, certain funds established pursuant to the Bond Indenture have been estimated and are based on assumed interest rates as indicated. While these assumptions are believed to be reasonable in view of the rates of return presently and previously available on the types of securities in which the Bond Trustee is permitted to invest, there can be no assurance that similar interest rates will be available on such securities in the future, nor can there be any assurance that the estimated earnings will actually be realized. Guaranteed investment contracts may be entered into with respect to certain of the funds.

RIGHTS OF RESIDENTS

The Members of the Obligated Group enter into residency agreements with their residents. Although these agreements give to each resident a contractual right to use space and do not grant any ownership rights in the facilities of the Obligated Group, in the event that either the Bond Trustee or the holders of the Bonds seek to enforce any of the remedies provided by the Bond Indenture upon the occurrence of a default or the Master Trustee seeks to enforce remedies under the Master Indenture, management is unable to predict the resolution that a court might make of competing claims between the Bond Trustee, the Master Trustee, the Authority or the holders of the Bonds and a resident of the facilities of the Obligated Group who has fully complied with all the terms and conditions of his or her residency agreement.

The Obligated Group may, from time to time, be subject to pressure from organized groups of residents seeking, among other things, to raise the level of services or to maintain the level of monthly service fees with respect to the Obligated Group’s facilities or other charges without increase. Moreover, the Obligated Group may be subject to conflicting pressures from different groups of residents, some of whom may seek an increase in the level of services while others wish to hold down monthly service fees and other charges. No assurance can be given that the Obligated Group will be able satisfactorily to meet the needs of such resident groups.

COMPETITION

Competition from other life care communities, continuing care retirement communities, congregate housing, assisted living centers, home healthcare agencies, memory care facilities and other long-term care communities which offer independent living, assisted living or nursing care now or hereafter located in the Obligated Group’s service area could adversely affect its revenues. The Obligated Group may face additional competition in the future from other providers of new, expanded or renovated retirement living and nursing facilities servicing the housing and health care needs of seniors. See the Financial Feasibility Study in APPENDIX C to this Official Statement. The Financial Feasibility Study should be read in its entirety, including management’s notes and assumptions set forth therein.

PRESENT AND PROSPECTIVE FEDERAL AND STATE REGULATION

General. Health care providers are subject to federal, state and local laws and regulations, and sanctions imposed under or changes to such laws or regulations could adversely affect the operations or financial results of the Obligated Group. Further reductions in federal and state funding of health care below levels authorized by present law can be expected.

Nursing care facilities, including those owned by the Obligated Group, are subject to numerous licensing, permits, certifications, accreditation, and other governmental requirements. These include, but are not limited to, requirements relating to state licensing agencies, accreditation organizations and private payors. Renewal and continuance of certain of these licenses, permits, certifications and approvals are based upon inspections, surveys, audits, investigations or other review, some of which may require or include affirmative action or response by the Obligated Group. An adverse determination could result in a loss, fine or reduction in the

Obligated Group’s scope of licensure, certification or accreditation, could affect the ability to undertake certain expenditures or could reduce the payment received or require the repayment of the amounts previously remitted.

Federal and State Healthcare Program Reimbursement Cuts and Delays. The federal and state governments have in the past, and may in the future, make changes to their respective budgets, which budget reductions may include reductions to the Medicare or Medicaid programs. The reduction of Medicare or Medicaid spending may have a material adverse effect upon facilities that accept Medicare and Medicaid payments. Federal and state budget authorization delays or other challenges may cause Medicare and Medicaid reimbursements to be paid late. Such payment delays may have a material adverse effect upon facilities that accept Medicare and Medicaid payments.

Additionally, federal health care reform legislation has also resulted in significant reimbursement cuts. See “— Health Care Reform” below for additional information.

Federal Debt Limit Increase. Through legislation, the federal government has created a debt “ceiling” or limit on the amount of debt that may be issued by the United States Treasury. In past years, political disputes have arisen within the federal government related to debt ceiling increase authorization. Any failure by Congress to increase the federal debt ceiling may impact the federal government’s ability to incur additional debt, pay its existing debt, or to satisfy its obligations relating to the Medicare and Medicaid programs. Management of the Obligated Group is unable to determine what impact any failure to increase the federal debt ceiling may have on the operations and financial condition of the Obligated Group, although such impact may be material.

Health Care Reform. The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively referred to as the “Affordable Care Act”) has significantly changed the United States health care delivery system, addressing almost all aspects of healthcare facility and provider operations, including the delivery of health care services, the financing of health care costs, healthcare provider reimbursement and the legal obligations of healthcare providers, insurers, employers and consumers. Key changes include cost containment measures, including new payment models which may result in lower health care provider reimbursement and utilization changes; quality improvement and clinical integration initiatives; fraud and abuse enforcement enhancements; health insurance market reforms; and Medicaid expansion. Additionally, the Affordable Care Act includes a number of initiatives that impact skilled nursing facility reimbursement. Each of these Affordable Care Act initiatives have required health care providers to assess, and potentially alter, their business strategy and practices. While the Affordable Care Act may result in many providers receiving reduced payments for care, millions of previously uninsured Americans have obtained health insurance coverage as a result of the Affordable Care Act. There is no assurance that federal payments made as a result of reimbursement reform measures will be sufficient to cover the Obligated Group’s costs. While management of the Obligated Group is currently operating within the framework of the Affordable Care Act, management cannot predict with any reasonable degree of certainty or reliability any ultimate effects of the law and its accompanying regulations on the Obligated Group’s operations or financial condition.

Due to the controversial nature of health care reform generally, implementation of the Affordable Care Act has been, and remains politically controversial, making its future uncertain. The Affordable Care Act has continually faced legal and legislative challenges, including repeated repeal efforts, since its enactment. President Donald J. Trump and current Republican leaders of Congress have cited health care reform, and particularly, repeal and replacement of the Affordable Care Act, as a key goal. To that end, Congressional leaders have introduced various Affordable Care Act repeal bills. While no bills wholly repealing the Affordable Care Act have passed both chambers of Congress, a tax reform bill passed in late 2017 (the “Tax Cuts and Jobs Act of 2017”) effectively repeals a key provision of the Affordable Care Act, known as the “individual mandate” – a requirement that most Americans to maintain “minimum essential” health insurance coverage or pay a yearly tax penalty to the federal government. Management of the Obligated Group cannot predict the impact the individual mandate repeal, a full repeal or additional piecemeal repeal, or any health care reform replacement legislation would have on the Obligated Group’s operations or financial condition, though such effects could be material. In particular, any legal, legislative or executive action that substantially reduces the number of individuals with health insurance coverage, reduces government program (e.g. Medicare or Medicaid) reimbursement rates, or otherwise significantly alters the health care delivery system or health insurance markets could have a material adverse effect on the Obligated Group’s business or financial condition.

Medicare and Medicaid Programs. Medicare provides certain health care benefits to beneficiaries who are 65 years of age or older, blind, disabled, or qualify for the end stage renal disease program. Medicaid is a program of financial assistance, funded jointly by the federal government and each of the various states, primarily for medical assistance to certain needy individuals and their dependents. Due to health care reform as well as continuing political and financial pressures, the legal and regulatory environment surrounding the Medicaid and Medicare programs has been changing and is expected to continue to change. Future changes to Medicare and Medicaid may alter features including: (1) services eligible for payment; (2) rates of payment; (3) eligibility requirements to participate or qualify for different levels of payment/reimbursement; (4) consequences of violations; (5) rates and requirements relating to additional payments unrelated to services offered to patients; (6) guidelines relating to interactions between the participating healthcare providers, third party payors and the federal and state governments; and (7) payment methodologies. Past federal budgets have contained cuts to the Medicare program budget. While it is uncertain whether future federal budgets will propose additional cuts to these programs, any reduction in the level of Medicare spending or a reduction in the rate of increase of Medicare spending may have an adverse impact on the revenues of the Obligated Group derived from the Medicare program. For a description of the Obligated Group’s payor mix, including Medicare reimbursement, see “THE EXISTING COMMUNITY — Payor Source” in APPENDIX A hereto.

Medicare. Unless a specific waiver applies, skilled nursing facility (“SNF”) services are covered by the Medicare program only if the patient spends at least three consecutive days as a hospital inpatient for a related condition prior to admission to the SNF and if the patient was admitted to the SNF within 30 days of discharge from the hospital. Medicare reimburses for such post-hospital inpatient nursing services provided by the SNF for up to 100 days for each spell of illness, subject to coinsurance and deductible payments from the patient.

SNFs are paid pursuant to a prospective payment system (“PPS”). Pursuant to this PPS, SNFs are paid a case-mix adjusted federal per diem rate for Medicare-covered SNF services. The per diem rate is calculated to cover routine service costs, ancillary costs, and capital-related costs. The PPS rates are adjusted annually using a SNF market basket index. The rates are also adjusted by the hospital wage index to account for geographic variations in wages. There is no assurance that payments made by the federal government will be sufficient to cover the facility’s costs. In addition, any future Congressional action to decrease the SNF PPS per-diem rates or establishment of an alternative classification system could negatively affect the Obligated Group’s revenues.

For the fiscal years ended June 30, 2016 and 2017, Medicare payments represented approximately 3.7% and 4.0%, respectively, of the Obligated Group’s net revenues. See APPENDIX A — “THE EXISTING COMMUNITY — Payor Source.”

Medicaid. Federal budgetary pressures may reduce the total amount of federal government participation in paying for care for Medicaid recipients. Future health reform may involve a realignment of the Medicaid program, such as a cap on the federal share of Medicaid expenditures, or dissolution of the program. There is no way of predicting what form any future program of financing health care delivery to the economically disadvantaged will take or whether reimbursement levels will be adequate to cover the expenses incurred by any given provider rendering care.

Because a portion of the Medicaid program’s costs are paid by the State of Oregon, the absolute level of Medicaid revenues paid, as well as the timeliness of their receipt, may be affected by the financial condition of the budgetary factors facing the State. The actions the State could take to reduce Medicaid expenditures to accommodate any budgetary shortfalls include changes in the method of payment to health care providers, changes in eligibility requirements for Medicaid recipients, or reductions or delays in payments due to health care providers. Any such actions could adversely affect the financial condition of the Obligated Group. See also, “— State Budgetary Pressures” above.

For the fiscal years ended June 30, 2016 and 2017, Medicaid payments represented approximately 2.9% and 2.9%, respectively, of the Obligated Group’s net revenues. See APPENDIX A — “THE EXISTING COMMUNITY — Payor Source.”

Federal Privacy Laws. Specific state and federal laws govern the use and disclosure of confidential patient health information, as well as patients’ rights to access and amend their own health information. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations established national standards to facilitate the electronic exchange of Protected Health Information (“PHI”) and to maintain the privacy and security of the PHI. These standards have a major effect on health care providers which transmit PHI in electronic form in connection with HIPAA standard transactions (e.g., health care claims). In particular, HIPAA established standards governing: (1) electronic transactions and code sets; (2) privacy; (3) security; and (4) national identifiers.

In 2009, HIPAA was amended by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act to impose certain of the HIPAA privacy and security

requirements directly upon business associates of covered entities and significantly increase the monetary penalties for violations of HIPAA. Regulations that took effect in late 2009 also require business associates to notify covered entities, who in turn must notify affected individuals and government authorities, of data security breaches involving unsecured PHI. Since the passage of the HITECH Act, enforcement of HIPAA violations has increased.

The Members of the Obligated Group have developed policies, procedures and practices that they believe comply with HIPAA and HITECH Act standards and requirements, but, if it was determined that any Member of the Obligated Group was not in compliance, there could be criminal and civil penalties imposed.

Healthcare Fraud and Abuse Laws. Certain federal laws, including the laws commonly known as the Anti-Kickback Statute, the Stark Law and the False Claims Act, seek to protecting the federal health care programs from fraud and abuse (collectively, the “Federal Healthcare Fraud Laws”). The Federal Healthcare Fraud Laws are complex, heavily enforced and subject to frequent amendment. In addition, qui tam or “whistleblower” lawsuits under the False Claims Act allows private individuals to bring actions on behalf of the government. Violation of the Federal Healthcare Fraud Laws may result in significant financial penalties, fines, exclusion from the federal health care programs and/or criminal liability.

A number of states, including Oregon, have passed healthcare fraud and abuse laws similar in scope to the Federal Healthcare Fraud Laws, but have expanded the prohibitions to private insurers. Violation of state fraud and abuse laws may also result in significant financial penalties, fines, exclusion from the federal health care programs and/or criminal liability. To the extent management of Obligated Group accepts payment from private insurers, violation of state fraud and abuse laws could have a material adverse effect on the operations of Community. Obligated Group management currently has no plans to accept private insurance. However, management may change this plan in the future.

Although the Obligated Group has a compliance program designed to help ensure material compliance with laws, rules and regulations affecting the health care industry, including the Federal Healthcare Fraud Laws and similar state laws, these policies and procedures may not be wholly effective. If an Obligated Group Member is alleged or found to have violated such laws, rules or regulations or if government health care program payments are suspended due to an allegation of fraud, the Obligated Group’s operations and financial condition could be materially adversely affected.

At the present time, management of the Obligated Group is not aware of any pending or threatened claims, investigations or enforcement actions regarding any applicable federal or state statutes which, if determined adversely to a Member of the Obligated Group, would have a material adverse effect on the financial condition of the Obligated Group.

LICENSURE AND OTHER STATE REGULATION

State Registration of CCRCs and Statutory Reserve Requirements. A continuing care retirement community (“CCRC”) is subject to registration and regulation by the Senior and People

with Disabilities Division (the “Division”) of the Oregon Department of Human Services (the “Department”). Providers who operate a CCRC must register with the Division and file an annual disclosure statement that includes, among other things, a copy of the CCRCs audited financial statement; a copy of the residency agreement; copies of promotional materials; a full description of all contracts between the CCRC and any affiliated organization; a description of the services provided by the CCRC under its residency agreements; a description of the resident fees (including the entrance fee and regular periodic charges); a description of the terms under which the resident agreement may be canceled; and a description of the terms and conditions for resident transfer.

Department regulation also requires that a CCRC establish and maintain at all times (1) a debt service liquid reserve in an amount equal to or exceeding the total of all principal and interest payments due during the next 12 months on account of a mortgage loan or other long term financing of the CCRC, taking into consideration any anticipated refinancing, and (2) an operating liquid reserve in an amount equal to or exceeding the total of the CCRC’s projected operating expenses for three months. For the purpose of calculating the amount required for the operating liquid reserve, projected operating expenses include any anticipated expenses associated with providing housing or health related services included under all the residency agreements. If a CCRC does not meet the reserve requirements, the Division may require the CCRC to place the reserves in an escrow account. The Division may allow withdrawal or borrowing for the reserves in an amount not greater than 20% of the CCRC’s total required reserves (i) to make an emergency repair or replacement of equipment, (ii) to cover catastrophic loss not covered by insurance, or (iii) for debt service in a potential default situation. No withdrawal or borrowing may be made from the reserves with the approval of the Division except upon a court order and all borrowed funds must be repaid within 18 months with a payment plan approved by the Division.

A CCRC which fails to comply with applicable Department regulations may, after notice and hearing, be issued a cease and desist order by the Department. The Department may also bring an action to enjoin any violation or attempted violation of applicable regulations with or without prior administrative proceedings. A CCRC’s registration may be revoked, after notice and hearing, upon a finding that the CCRC has: willfully violated any applicable regulations; failed to file the required annual disclosure statement described above; failed to make the disclosure statement available to current and prospective residents; delivered a disclosure statement that makes an untrue statement of material fact or omits a material fact; and/or has failed to comply with the terms of a cease and desist order.

Failure to maintain CCRC registration would have material adverse effect on the operations of the Obligated Group. At the present time, management of the Obligated Group is not aware of any pending or threatened orders or investigations relating to its CCRC status.

State Licensure of Residential Care Facilities. Residential care facilities are subject to licensure by the Department and must satisfy requirements with respect to building standards; the residency agreement; the service plan; medication; management capability; and financial management. A residential care or assisted living facility’s license may be denied, suspended or revoked if the Department finds that there has been a substantial failure to comply with applicable regulations. In cases where an imminent danger to the health or safety of residents exist or where the facility is not in substantial compliance with applicable regulations, a facility’s license may be

suspended immediately. Non-compliance may also result in civil monetary penalties. The Department may enjoin the operation of a residential care or assisted living facility when the facility is operated without a valid license; or after notice of license revocation has been given and a reasonable time has been allowed for placement of residents in other facilities.

The Community maintains a Residential Care Facility license. Failure to maintain such license would have material adverse effect on the operations of the Obligated Group. At the present time, management of the Obligated Group is not aware of any pending or threatened suspensions or revocations of its Residential Care Facility license.

Memory Care Unit Endorsement. The Department requires that any residential care facility, assisted living facility or nursing facility that offers or provides care for patients with dementia in a memory care unit obtain a special endorsement on its facility license. The Community maintains a Memory Care Community endorsement on its Residential Care Facility license. Failure to maintain such endorsement could have material adverse effect on the operations of the Obligated Group. At the present time, management of the Obligated Group is not aware of any pending or threatened suspensions or revocations of its Memory Care Community endorsement.

INCREASES IN MEDICAL COSTS

A deviation from the anticipated medical care requirements of the resident population or substantial unanticipated increases in the cost of such care could have a negative impact on the operations of the facilities of the Obligated Group. In addition, the cost of providing healthcare services may increase due to increases in salaries paid to nurses and other healthcare personnel and due to shortages in such personnel which may require use of employment agencies. Increases in third party therapy services and other ancillary costs such as drugs and medical supplies may also increase costs.

PRIVATE HEALTH INSURANCE

The health care sector has been adversely affected by the volatility in the health insurance industry. Health insurance costs are rising while reimbursement for care is materially strained. Reduction in reimbursement from private insurance could have a material adverse effect on the operations of the Obligated Group. Additionally, to the extent any residents use long-term care insurance to help pay for their care, an increase in long-term care insurance premiums or other disruptions in the long-term care insurance market could reduce demand for the Obligated Group’s services. See “PRESENT AND PROSPECTIVE FEDERAL AND STATE LEGISLATION” above for a description of certain risks related to government health insurance programs (e.g. Medicare and Medicaid).

LABOR COSTS AND RELATIONS

Nonprofit health care providers and their employees are under the jurisdiction of the National Labor Relations Board. Unionization of employees or a shortage of qualified professional personnel could cause an increase in payroll costs beyond those projected. The

Obligated Group cannot control the prevailing wage rates in its service area and any increase in such rates will directly affect the costs of its operations. The Obligated Group’s employees are not currently unionized, and management of the Obligated Group is not aware of any employee attempts to unionize.

NURSING OR OTHER STAFF SHORTAGE

The health care industry occasionally experiences a scarcity of nursing personnel, respiratory therapists and other trained health care technicians. Currently, nursing shortages continue in certain geographic areas, including Oregon. These personnel shortages may result in increased costs and lost revenues from time to time due to the need to hire agency nursing personnel at higher rates, increased compensation levels, and the inability to use otherwise available beds as a result of staffing shortages. Such increased costs and lost revenues could adversely affect the operations or financial condition of the Obligated Group. Additionally, a lack of qualified nursing personnel may also result in reduced occupancy or require the Obligated Group to admit residents requiring a lower level of care, both of which could adversely affect operating results.

TAX EXEMPT STATUS; CONTINUING LEGAL REQUIREMENTS

The tax-exempt status of interest on the Tax-Exempt Bonds depends, among other things, upon maintenance by each Member of the Obligated Group of its status as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The maintenance of such status is contingent on compliance with general rules based on the Code, Treasury regulations and judicial decisions regarding the organization and operation of tax-exempt healthcare providers. The IRS’ interpretation of and position on these rules as they affect the organization and operation of health care organizations are constantly evolving. The IRS can, and in fact occasionally does, alter or reverse its positions concerning tax-exemption issues, even concerning long-held positions upon which tax-exempt health care organizations have relied.

Section 4958 of the Code imposes excise taxes on “excess benefit transactions” between “disqualified persons” and tax-exempt organizations such as the Members of the Obligated Group. According to the legislative history and regulations associated with Section 4958, these excise taxes may be imposed by the IRS either in lieu of or in addition to revocation of exemption. These intermediate sanctions may be imposed in situations in which a “disqualified person” (such as a voting member of the board, certain officers and others in a position to exercise substantial influence over the affairs of the exempt organization) engages in “excess benefit transactions” such as (i) a transaction with a tax-exempt organization on other than a fair market value basis, (ii) receipt of unreasonable compensation from a tax-exempt organization or (iii) receipt of payment in an arrangement that otherwise violates the prohibition against private inurement. A disqualified person who benefits from an excess benefit transaction will be subject to an excise tax equal to 25% of the amount of the excess benefit. Organization managers who participate in the excess benefit transaction knowing it to be improper are subject to an excise tax equal to 10% of the amount of the excess benefit, subject to a maximum penalty of $20,000 per transaction. A second penalty, in the amount of 200% of the excess benefit, may be imposed on the disqualified person (but not upon the organization manager) if the excess benefit is not corrected within a

specified period of time. Fair market value and reasonable compensation for tax purposes typically reflect a range rather than a specific dollar amount, and the IRS does not rule in advance on whether a transaction results in more than fair market value payment or more than reasonable compensation to a disqualified person. Although it is not possible to predict what enforcement action, if any, the IRS might take related to potential excess benefit transactions, the regulations indicate that not all excess benefit transactions jeopardize exempt status. Rather, the IRS will consider all relevant facts and circumstances including: the size and scope of the organization’s activities that further exempt purposes before and after the excess benefit transaction or transactions occurred; the size and scope, and frequency, of any excess benefit transactions; whether the organization has implemented appropriate safeguards reasonably calculated to prevent excess benefit transactions; and whether the organization has corrected, or made good faith efforts to correct, any excess benefit such as by obtaining repayment of the amount of any excess benefit.

Moreover, the legislation is potentially favorable to taxpayers because it provides the IRS with a punitive option short of revocation of exempt status to deal with incidents of private inurement. However, the standards for tax exemption have not been changed, including the requirement that no part of the net earnings of an exempt entity inure to the benefit of any private individual. Consequently, although the IRS has only infrequently revoked the tax exemption of nonprofit health care corporations in the past, the risk of revocation remains and there can be no assurance that the IRS will not direct enforcement activities against a Member of the Obligated Group.

The Tax Exempt and Governmental Entities Division of the IRS is responsible for the Team Examination Program (referred to as “TEP”) of the IRS, which conducts audits of exempt organizations using teams of revenue agents. The TEP audit teams consider a wide range of possible issues, including the community benefit standard, private inurement and private benefit, partnerships and joint ventures, retirement plans and employee benefits, employment taxes, tax-exempt bond financing, political contributions and unrelated business income. In addition, the IRS conducts compliance checks and correspondence audits that focus initially on limited issues, such as executive compensation, unrelated business income or community benefit. Such limited scope reviews can be expanded in certain circumstances to include a variety of other issues as in a TEP audit.

A Member of the Obligated Group could be audited by the IRS. Management of the Members of the Obligated Group believes that each has properly complied with the tax laws. Nevertheless, because of the complexity of the tax laws and the presence of issues about which reasonable persons can differ, a TEP or other audit could result in additional taxes, interest and penalties. A TEP or other audit also could potentially affect the tax-exempt status of the Members of the Obligated Group.

Loss of tax-exempt status by a Member of the Obligated Group could result in loss of the exclusion from gross income of the interest on the Tax-Exempt Bonds that, in turn, could result in a default under the Bond Indenture, potentially triggering an acceleration of the Bonds. Any such event would have material adverse consequences on the future financial condition and results of operations of the Members of the Obligated Group. Additionally, the loss of federal tax-exempt

status by a Member of the Obligated Group could adversely affect its access to future tax-exempt financing.

CERTAIN MATTERS RELATING TO ENFORCEABILITY OF THE MASTER INDENTURE

The obligation of Members of the Obligated Group under the Series 2018 Obligations will be limited to the same extent as the obligations of debtors typically are affected by bankruptcy, insolvency and the application of general principles of creditors’ rights and as additionally described below.

The accounts of the Members of the Obligated Group (including any future Members of the Obligated Group) will be combined for financial reporting purposes and will be used in determining whether various covenants and tests contained in the Master Indenture (including tests relating to the incurrence of Additional Indebtedness) are met, notwithstanding the uncertainties as to the enforceability of certain obligations of the Obligated Group contained in the Master Indenture which bear on the availability of the assets and revenues of the Obligated Group to pay debt service on Obligations, including the Series 2018 Obligations pledged under the Bond Indenture as security for the Bonds. The obligation described herein of the Obligated Group to make payments of debt service on Obligations issued under the Master Indenture (including transfers in connection with voluntary dissolution or liquidation) may not be enforceable to the extent (1) enforceability may be limited by applicable bankruptcy, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights and by general equitable principles and (2) such payments (i) are requested with respect to payments on any Obligations issued by a Member other than the Member from which such payment is requested, issued for a purpose which is not consistent with the charitable purposes of the Member of the Obligated Group from which such payment is requested or issued for the benefit of a Member of the Obligated Group which is not a Tax-Exempt Organization; (ii) are requested to be made from any moneys or assets which are donor-restricted or which are subject to a direct or express trust which does not permit the use of such moneys or assets for such a payment; (iii) would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by the Member of the Obligated Group from which such payment is requested; or (iv) are requested to be made pursuant to any loan violating applicable usury laws. The extent to which the assets of any future Member of the Obligated Group may fall within the categories (ii) and (iii) above with respect to the Series 2018 Obligations cannot now be determined. The amount of such assets which could fall within such categories could be substantial.

A Member of the Obligated Group may not be required to make any payment on any Obligation, or portion thereof, the proceeds of which were not loaned or otherwise disbursed to such Member of the Obligated Group to the extent that such payment would render such Member of the Obligated Group insolvent or which would conflict with or not be permitted by or which is subject to recovery for the benefit of other creditors of such Member of the Obligated Group under applicable laws. There is no clear precedent in the law as to whether such payments from a Member of the Obligated Group in order to pay debt service on the Series 2018 Obligations may be voided by a trustee in bankruptcy in the event of bankruptcy of a Member of the Obligated Group, or by third-party creditors in an action brought pursuant to state fraudulent conveyance statutes. Under the United States Bankruptcy Code, a trustee in bankruptcy and, under state

fraudulent conveyance statutes and common law, a creditor of a related guarantor, may avoid any obligation incurred by a related guarantor if, among other bases therefor, (1) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the United States Bankruptcy Code or state fraudulent conveyance statutes, or the guarantor is undercapitalized.

Application by courts of the tests of “insolvency,” “reasonably equivalent value” and “fair consideration” has resulted in a conflicting body of case law. It is possible that, in an action to force a Member of the Obligated Group to pay debt service on an Obligation for which it was not the direct beneficiary, a court might not enforce such a payment in the event it is determined that the Member of the Obligated Group is analogous to a guarantor of the debt of the Member of the Obligated Group who directly benefited from the borrowing and that sufficient consideration for the Member of the Obligated Group’s guaranty was not received and that the incurrence of such Obligation has rendered or will render the Member of the Obligated Group insolvent.

CERTAIN MATTERS RELATING TO ENFORCEABILITY OF SECURITY INTEREST IN GROSS REVENUES

The effectiveness of the security interest in the Gross Revenues granted in the Master Indenture may be limited by a number of factors, including: (i) the absence of an express provision permitting assignment of receivables owed to the Members of the Obligated Group under their contracts, and present or future prohibitions against assignment contained in any applicable statutes or regulations; (ii) certain judicial decisions which cast doubt upon the right of the Master Trustee, in the event of the bankruptcy of a Member of the Obligated Group, to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs; (iii) commingling of the proceeds of Gross Revenues with other moneys not subject to the security interest in the Gross Revenues; (iv) statutory liens; (v) rights arising in favor of the United States of America or any agency thereof; (vi) constructive trusts, equitable or other rights impressed or conferred by a federal or state court in the exercise of its equitable jurisdiction; (vii) federal bankruptcy laws or state insolvency laws which may affect the enforceability of the mortgage or the security interest in the Gross Revenues of the Members of the Obligated Group which are earned by the Members of the Obligated Group within 90 days, preceding or, in certain circumstances with respect to related corporations, within one year preceding and after any effectual institution of bankruptcy proceedings by or against a Member of the Obligated Group; (viii) rights of third parties in Gross Revenues converted to cash and not in the possession of the Master Trustee; and (x) claims that might arise if appropriate financing or continuation statements are not filed or other documents are not executed in accordance with the Uniform Commercial Code of the State as from time to time in effect.

Accounts receivable of the Members of the Obligated Group which constitute Gross Revenues and are pledged as security under the Master Indenture may be sold if such sale is in accordance with the provisions of the Master Indenture. Any lien created under the Master Indenture on such accounts receivable would terminate and be immediately released upon any such sale with respect to any such accounts receivable so sold.

TITLE INSURANCE; LIMITATIONS OF REMEDIES UNDER THE LEASEHOLD DEED OF TRUST

The Corporation will deliver, concurrently with the issuance of the Bonds, a lender’s title insurance policy, which runs to the Master Trustee. The face amount of the policy will be equal to at least the expected aggregate principal amount of the Bonds. The Corporation is not required to obtain an increase in the amount of the policy in connection with the issuance of any additional Obligations subsequent to the issuance of the Series 2018 Obligations, and the title insurance policy will not pay any claim which exceeds the aggregate face amount of the policy.

The practical realization of value from the real property subject to the Leasehold Deed of Trust upon any default will depend on the exercise of the remedies specified under the Leasehold Deed of Trust, principally, foreclosure. Statutory provisions (such as the federal bankruptcy laws) may have the effect of delaying enforcement of the lien and security interest under the Leasehold Deed of Trust upon the occurrence of a default under the Master Indenture. See “SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST” in APPENDIX E hereto.

The property subject to the Leasehold Deed of Trust consists primarily of a nursing facility, housing for seniors and related facilities having limited potential uses. If the Master Trustee were to take possession of the property subject to the Leasehold Deed of Trust pursuant to exercise of its remedies under the Leasehold Deed of Trust, the number of persons who would be interested in purchasing the property likely would be very limited. In addition, the Ground Leases provide that, so long as the owner of the real property upon which the Community is and will be located is the Landlord, any entity controlled by the Landlord or any successor to the Landlord by merger, consolidation or reorganization, the use of the Premises (as defined in APPENDIX E hereto) must either be (i) housing-related, hospitality-related or health care related or (ii) another use reasonably acceptable to the Landlord. For these reasons, the ability of the Master Trustee to realize value from such property would be limited. Accordingly, upon an Event of Default and foreclosure or similar remedy under the Leasehold Deed of Trust, the Master Trustee may not be able to realize an amount sufficient to satisfy all obligations secured by the Leasehold Deed of Trust.

EXISTENCE OF LEASE OF REAL PROPERTY WITH LANDLORD MAY IMPACT RECOVERY IN EVENT OF DEFAULT

As described under the heading “THE GROUND LEASES AND RELATED TRANSACTIONS” in APPENDIX A hereto, the real property upon which the Community, including the Project, is or will be located is owned by the Landlord. In the event of a default under the Bond Indenture or the Master Indenture, the fact that the Landlord owns the real property upon which the Community is or will be located may make it difficult for the Bond Trustee or the Master Trustee to realize the amount of the outstanding Bonds from the sale or lease of such facilities if it were necessary to proceed against such facilities, whether pursuant to a judgment against the Corporation or otherwise.

ENFORCEABILITY OF REMEDIES; PRIOR CLAIMS

The Bonds are secured by an assignment by the Authority to the Bond Trustee of certain rights under the Loan Agreement (except as provided therein). The practical realization of the value of the property on which the Obligated Group’s facilities are located upon any default will depend upon the exercise of various remedies specified by the Loan Agreement and the Bond Indenture. These and other remedies may require judicial actions, which are often subject to discretion and delay. Under existing law (including, without limitation, the Bankruptcy Code), the remedies specified by the Loan Agreement may not be readily available or may be limited. The various opinions to be delivered concurrently with the delivery of the Loan Agreement will be qualified as to the enforceability of the various legal instruments by, among others, limitations imposed by state and federal laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization or other laws affecting the enforcement of creditors’ rights generally.

RATE SETTING

Future legislative proposals granting full or partial rate fixing authority to a state or federal agency could prevent the Members of the Obligated Group from increasing rates adequately to cover potential increases in its operating costs or other expenses. In addition, proposed legislation, if enacted, would limit the frequency of rate increases imposed by long term care facilities and the ability to assess separate charges for items and services not authorized in the initial admission agreement.

FACTORS THAT COULD AFFECT THE VALIDITY OR VALUE OF THE LIEN AGAINST THE OBLIGATED GROUP’S GROSS REVENUES AND THE ENFORCEABILITY OF THE LOAN AGREEMENT AND LEGAL OPINIONS

The legal right and practical ability of the Bond Trustee to enforce the rights and remedies under the Loan Agreement and of the Master Trustee to enforce the rights and remedies under the Master Indenture may be limited by laws relating to bankruptcy (see “— BANKRUPTCY” directly following), insolvency, reorganization, fraudulent conveyance or moratorium and by other similar laws affecting creditors rights. The enforcement of such rights and remedies will also depend upon the exercise of various remedies specified by such documents which may in many instances require judicial actions that are often subject to discretion and delay or that otherwise may not be readily available or may be limited.

In addition, there exists common law authority and certain statutory authority for the ability of the courts to terminate the existence of a nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court’s own motion or pursuant to a petition of the state Attorney General or such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see the application of their funds to their intended charitable uses.

The various legal opinions to be delivered concurrently with the execution and delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations

imposed by State and federal laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors’ rights or the enforceability of certain remedies or document provisions.

BANKRUPTCY

If a Member of the Obligated Group were to file a petition for relief under Title 11 of the United States Code (the “Bankruptcy Code”), the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such Member and any interest it has in property. If the bankruptcy court so ordered, the Member’s property, including its accounts receivable and proceeds thereof, could be used, at least temporarily, for the benefit of the Member’s bankruptcy estate despite the claims of its creditors.

In a case under the current Bankruptcy Code, a Member of the Obligated Group could file a plan of reorganization. The plan is the vehicle for satisfying, and provides for the comprehensive treatment of, all claims against such Member and could result in the modification of rights of any class of creditors, secured or unsecured. To confirm a plan of reorganization, with one exception discussed below, it must be approved by the vote of each class of impaired creditors. A class approves a plan if, of those who vote, those holding more than one-half in number and at least two- thirds in amount vote in favor of a plan. Approval by classes of interests requires a vote in favor of the plan by two-thirds in amount. If these levels of votes are attained, those voting against the plan or not voting at all are nonetheless bound by the terms thereof. Other than as provided in the confirmed plan, all claims and interests are discharged and extinguished. If fewer than all of the impaired classes accept the plan, the plan may nevertheless be confirmed by the bankruptcy court and the dissenting claims and interests would be bound thereby. For this to occur, at least one of the impaired classes must vote to accept the plan and the bankruptcy court must determine that the plan does not “discriminate unfairly” and is “fair and equitable” with respect to the nonconsenting class or classes. The Bankruptcy Code establishes different fair and equitable tests for secured claims and interest holders. To be confirmed, the bankruptcy court must also determine that a plan, among other requirements, provides creditors with not less than would be received in the event of liquidation, is proposed in good faith, and that the debtor’s performance is feasible.

ENVIRONMENTAL MATTERS

Senior living facilities, such as the Obligated Group’s, are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations that address, among other things, operations of facilities and properties owned or operated by such facilities. Among the types of regulatory requirements faced by such facilities 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 such facility; requirements for training employees in the proper handling and management of hazardous materials and wastes; and other requirements. In their role as owners and operators of properties or facilities, such facilities may be subject to liability for investigating and remedying 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 operations of such

facilities include to some extent in various combinations, the handling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. For this reason, operations of such facilities are 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 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 Members of the Obligated Group will not encounter such risks in the future, and such risks may result in material adverse consequences to the operations or financial condition of the Obligated Group.

POSSIBLE FUTURE CHANGES TO ACCOUNTING POLICIES AND PROCEDURES

From time to time, accounting policies and procedures change as accounting principles that are generally accepted in the United States change. Such changes may cause a variation in the presentation of the financial information of the Obligated Group. There can be no assurance that any such changes would not have a material adverse impact on the Obligated Group’s compliance with certain covenants contained in the Master Indenture.

ADDITIONAL DEBT

The Master Indenture permits the Obligated Group to incur Additional Indebtedness that may be equally and ratably secured with the Series 2018 Obligations. Any such additional parity indebtedness would be entitled to share ratably in a security interest with the owners of the Series 2018 Obligations. Any moneys realized from the exercise of remedies in the event of a default by the Obligated Group could reduce the Debt Service Coverage Ratio and could impair the ability of the Obligated Group to maintain its compliance with certain covenants described in APPENDIX D under the caption “THE MASTER INDENTURE — Rates and Charges; Debt Coverage.” There is no assurance that, despite compliance with the conditions upon which Additional Indebtedness may be incurred at the time such debt is created, the ability of the Obligated Group to make the necessary payments to repay the Series 2018 Obligations may not be materially adversely affected upon the incurrence of Additional Indebtedness. See “SECURITY FOR THE BONDS” above.

BOND RATINGS

There can be no assurance that the rating assigned to the Bonds at the time of issuance will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for and marketability of the Bonds. See the information under the heading “RATING.”

LACK OF MARKETABILITY FOR THE BONDS

Although the Underwriter intends, but is not obligated, to make a market for the Bonds, there can be no assurance that there will be a secondary market for the Bonds, and the absence of such a market for the Bonds could result in investors not being able to resell the Bonds should they need to or wish to do so.

AMENDMENTS TO BOND DOCUMENTS

Certain amendments to the bond documents may be made without the consent of the owners of the Bonds and other amendments may be made with the consent of the owners of a majority in an aggregate principal amount of all outstanding Bonds (including the Additional Bonds). Such percentage may be composed wholly or partially of the owners of the Additional Bonds. Such amendments could affect the security for the Bonds. Certain amendments may be made without the consent of the owners of the Bonds if the amendment does not materially adversely affect the interest of the owners of the Bonds. See APPENDIX D hereto.

OTHER POSSIBLE RISK FACTORS

The occurrence of any of the following events, or other unanticipated events, could adversely affect the operations of the Obligated Group:

(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 Obligated Group;

(4) A decline in the population, a change in the age composition of the population or a decline in the economic conditions of the market areas of the Obligated Group;

(5) The cost and availability of energy which could, among other things, affect the cost of utilities of the Obligated Group’s facilities;

(6) Any increase in the quantity of indigent care provided which is mandated by law or required due to increased needs of the community in order to maintain the charitable status of the Members of the Obligated Group;

(7) Inflation or other adverse economic conditions;

(8) Reinstatement or establishment of mandatory governmental wage, rent or price controls;

(9) Changes in tax, pension, social security or other laws and regulations affecting the provisions of health care, retirement benefits and other services to senior citizens;

(10) Inability to control the diminution of residents’ assets or insurance coverage with the result that the residents’ charges are reimbursed from government reimbursement programs rather than private payments;

(11) The occurrence of natural disasters, including floods and earthquakes, which may damage the communities of the Obligated Group, interrupt utility service to the communities, or otherwise impair the operation and generation of revenues from said communities;

(12) Scientific and technological advances that could reduce demand for services offered by the Obligated Group; or

(13) Cost and availability of any insurance, such as malpractice, fire, earthquake, automobile and general comprehensive liability, that organizations such as the Members of the Obligated Group generally carry.

FINANCIAL REPORTING

The Master Indenture requires that the Obligated Group Representative provide to each Required Information Recipient the following:

(1) A monthly statement of the Obligated Group as soon as practicable after the information is available but in no event more than 45 days after the completion of such month, including (i) a calculation of the marketing levels for the Project as of the end of such month, including the number of independent living units that have been sold or cancelled during that month and on an aggregate basis; (ii) occupancy levels of the Project as of the end of such month including the number of independent living units, assisted living units and health care units that were Occupied and vacated during that month and on an aggregate basis; (iii) a summary statement on the status of construction since the prior month; (iv) unaudited financial reports on the development costs incurred during that month and on an aggregate quarterly basis; (v) an unaudited statement of revenues and expenses and statement of cash flows of the Obligated Group for such month compared to the approved budget for that month and an unaudited balance sheet of the Obligated Group as of the end of such month; and (vi) statements of the balances for each fund and account required to be established under the Master Indenture or under any Related Bond Indenture as of the end of such month (obtained from the applicable trustee), all in reasonable detail and certified by an officer of the Obligated Group Representative. The Obligated Group Representative does not need to deliver any monthly statement of the Obligated Group described in this subsection (1) after the occurrence of Stable Occupancy.

(2) Quarterly unaudited financial statements of the Obligated Group as soon as practicable after they are available but in no event more than 45 days after the completion of such fiscal quarter or 60 days after the completion of the fiscal quarter in the case of a fiscal quarter ending on June 30, including a combined or combining statement of revenues and expenses and statement of cash flows of the Obligated Group during such period, a combined or combining balance sheet as of the end of each such fiscal quarter, and a

calculation of the Days Cash on Hand for the second and last fiscal quarters of each year as required by the Master Indenture, a calculation of Debt Service Coverage Ratio for the last fiscal quarter as required by the Master Indenture and occupancy levels of all of the facilities operated by the Obligated Group by level of care as of the end of each such quarter, all prepared in reasonable detail and certified, subject to year-end adjustment, by an officer of the Obligated Group Representative, and an Officer’s Certificate of the Obligated Group Representative stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or if not, specify all such defaults and the nature thereof.

(3) Within 120 days of the end of each Fiscal Year, an annual audited financial report of the Obligated Group prepared by a firm of certified public accountants, including a combined balance sheet as of the end of such Fiscal Year and a combined statement of changes in fund balances for such Fiscal Year and a combined statement of revenues and expenses and statement of cash flows of the Obligated Group for such Fiscal Year, showing in each case in comparative form the financial figures for the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing calculations of the Obligated Group’s Debt Service Coverage Ratio for said Fiscal Year and of the Obligated Group’s Days Cash on Hand as of the last day of such Fiscal Year and a statement that such accountants have no knowledge of any default under the Master Indenture, insofar as such default relates to accounting matters, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof, insofar as such default or defaults relate to accounting matters.

(4) Summary of the board-approved annual budget.

(5) If the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.00:1 for any Testing Date as provided in the Master Indenture, the Obligated Group will deliver the financial information and the calculations described in paragraph (2) above on a monthly basis, with the Debt Service Coverage Ratio calculated on a year-to-date basis each month, within 45 days of the end of each month until the Debt Service Coverage Ratio of the Obligated Group is at least 1.00:1.

(6) A monthly statement of the Obligated Group Representative as soon as practicable after the information is available but in no event more than 45 days after the completion of such month, which shall include a marketing report on presales of, entrance fees received and refunds for, and occupancy levels of The Village at Mary’s Woods Expansion Project as of the last day of such month, an occupancy report, by type of unit, for all Facilities of the Obligated Group as of the last day of such month, a summary statement showing the status of construction of The Village at Mary’s Woods Expansion Project as of the last day of such month, and a copy of the statement of cash flows of the Obligated Group for such month (and on a Fiscal Year-to-date basis), all in reasonable detail and certified by an officer of the Obligated Group Representative. The reporting described in this paragraph (6) shall not be required after the achievement of The Village at Mary’s Woods Expansion Project Stable Occupancy.

(7) A monthly statement of the Obligated Group Representative as soon as practicable after the information is available but in no event more than 45 days after the completion of such month, which shall include a marketing report on presales of, entrance fees received and refunds for, and occupancy levels of The Village at Mary’s Woods Stage 2 Expansion Project as of the last day of such month, an occupancy report, by type of unit, for all Facilities of the Obligated Group as of the last day of such month, a summary statement showing the status of construction of The Village at Mary’s Woods Stage 2 Expansion Project as of the last day of such month, and a copy of the statement of cash flows of the Obligated Group for such month (and on a Fiscal Year-to-date basis), all in reasonable detail and certified by an officer of the Obligated Group Representative. The reporting described in this paragraph (7) shall not be required after the achievement of The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy.

The Obligated Group Representative shall furnish or cause to be furnished to the Master Trustee or any Related Bond Trustee, such additional information as the Master Trustee or any Related Bond Trustee may reasonably request concerning any Member in order to enable the Master Trustee or such Related Bond Trustee to determine whether the covenants, terms and provisions of the Master Indenture have been complied with by the Members and for that purpose all pertinent books, documents and vouchers relating to the business, affairs and Property (other than patient, donor and personnel records) of the Members shall, to the extent permitted by law, at all times during regular business hours be open to the inspection of such accountant or other agent (who may make copies of all or any part thereof) as shall from time to time be designated by the Master Trustee or such Related Bond Trustee.

The Members also agree that, within ten (10) days after its receipt thereof, the Obligated Group Representative will file with each Required Information Recipient a copy of each Independent Consultant’s report or counsel’s opinion required to be prepared under the terms of the Master Indenture.

The Obligated Group Representative shall give prompt written notice of a change of accountants by the Obligated Group to the Master Trustee and each Related Bond Trustee. The notice shall state (i) the effective date of such change; (ii) whether there were any unresolved disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which the accountants claimed would have caused them to refer to the disagreement in a report on the disputed matter, if it was not resolved to their satisfaction; and (iii) such additional information relating thereto as such Related Bond Trustee or the Master Trustee may reasonably request.

Without limiting the foregoing, each Member will permit, upon reasonable notice, the Master Trustee or any Related Bond Trustee (or such persons as they may designate) to visit and inspect, at the expense of such Person, its Property and to discuss the affairs, finances and accounts of the Obligated Group with its officers and independent accountants, all at such reasonable times and locations and as often as the Master Trustee or the Related Bond Trustee may reasonably desire, provided that the Master Trustee shall have no duty to visit or inspect.

The Obligated Group Representative may designate a different Fiscal Year for the Members of the Obligated Group by delivering a notice to the Master Trustee designating the first and last day of such new Fiscal Year and whether or not there will be any interim fiscal period (the “Interim Period”) of a duration of greater than or less than twelve (12) months preceding such new Fiscal Year. The Members covenant that they will furnish to the Required Information Recipients, as soon as practicable after they are available, but in no event more than 150 days after the last day of such Interim Period, a financial report for such Interim Period certified by a firm of independent certified public accountants selected by the Obligated Group Representative covering the operations of the Obligated Group for such Interim Period and containing a combined balance sheet as of the end of such Interim Period and a combined statement of changes in fund balances and changes in financial position for such Interim Period and a combined statement of revenues and expenses for such Interim Period, showing in each case in comparative form the financial figures for the comparable period in the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing a calculation of the Obligated Group’s Debt Service Coverage Ratio for the Interim Period and a statement that such accountants have obtained no knowledge of any default by any Member in the fulfillment of any of the terms, covenants, provisions or conditions of the Master Indenture, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof (but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any default).

CONTINUING DISCLOSURE

THE OBLIGATED GROUP

Offerings of most municipal securities are subject to Rule 15c2-12 (the “Rule”) under the Securities Exchange Act of 1934, as amended. The Corporation will covenant on behalf of the Obligated Group for the benefit of the holders and Beneficial Owners of the Bonds pursuant to a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”) to be executed and delivered by the Corporation to provide or cause to be provided certain financial information and operating data relating to the Obligated Group on a monthly, quarterly and annual basis and to provide notices of the occurrence of certain enumerated events. See APPENDIX H — “FORM OF CONTINUING DISCLOSURE AGREEMENT.”

NO CONTINUING DISCLOSURE FROM THE AUTHORITY

Inasmuch as the Bonds are limited obligations of the Authority, no financial or operating data concerning it is material to any decision to purchase, hold or sell the Bonds. The Authority has not, and will not, undertake any responsibilities to provide continuing disclosure with respect to the Bonds or the security therefor, and the Authority will have no liability to holders of the Bonds with respect to any such disclosure.

LITIGATION

THE AUTHORITY

There is not now pending or, to the Authority’s knowledge, threatened any litigation restraining or enjoining the issuance or delivery of the Bonds or the execution and delivery by the Authority of the Bond Indenture or the Loan Agreement or questioning or affecting the validity of the Bonds or the security therefor or the proceedings of the Authority under which they are or are to be issued, respectively.

THE CORPORATION

There is no controversy or litigation of any nature now pending against the Corporation, or, to the knowledge of its officers, threatened, which seeks to restrain or enjoin the sale, execution or delivery of the Bonds, or in any way contests or affects the validity of the Bonds or any proceedings of the Corporation taken with respect to the execution, sale and delivery thereof, the pledge or application of any moneys or security provided for the payment of the Bonds or the use of the Bond proceeds.

There is no litigation or proceedings pending or, to the knowledge of the Corporation, threatened except (a) litigation involving claims against the Corporation for professional, general or employment practices liability in which the probable recoveries and estimated costs and expenses of defense, in the opinion of the Corporation’s risk management staff and legal counsel, will be within applicable insurance policy limits, subject to deductibles (for claims covered by third party insurers) or insurance reserves (for claims that are self-insured), and (b) other litigation and proceedings, which if adversely determined, would not, in the judgment of the management of the Corporation, have a material adverse effect on the financial condition or operations of the Corporation. For information regarding the insurance coverage of the Corporation, please refer to “FINANCIAL INFORMATION OF THE CORPORATION — Insurance” in APPENDIX A hereto.

LEGAL MATTERS

The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority. A complete copy of the proposed form of Bond Counsel opinion is contained in APPENDIX F hereto. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.

Certain matters will be passed upon for the Authority by its special counsel, Hawkins Delafield & Wood LLP; for the Corporation by its counsel, Ball Janik LLP; and for the Underwriter by its counsel, Chapman and Cutler LLP.

The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the

future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

TAX MATTERS

TAX-EXEMPT BONDS

In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Tax-Exempt Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum tax. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX F hereto.

To the extent the issue price of any maturity of the Tax-Exempt Bonds is less than the amount to be paid at maturity of such Tax-Exempt Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Tax-Exempt Bonds which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Tax- Exempt Bonds is the first price at which a substantial amount of such maturity of the Tax-Exempt Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Tax-Exempt Bonds accrues daily over the term to maturity of such Tax-Exempt Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Tax-Exempt Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Tax-Exempt Bonds. Beneficial Owners of the Tax-Exempt Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Tax-Exempt Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Tax- Exempt Bonds in the original offering to the public at the first price at which a substantial amount of such Tax-Exempt Bonds is sold to the public.

Tax-Exempt Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Tax-Exempt Bonds. The Authority and the Corporation have made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Tax-Exempt Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Tax-Exempt Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Tax-Exempt Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. The opinion of Bond Counsel also assumes that actions of the Corporation, the Authority, and other persons taken subsequent to the date of issuance of the Tax-Exempt Bonds will not cause any of the Tax-Exempt Bonds to exceed the $150,000,000 limitation on qualified 501(c)(3) bonds that do not finance hospital facilities, as set forth in Section 145(b) of the Code. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Tax-Exempt Bonds may adversely affect the value of, or the tax status of interest on, the Tax-Exempt Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

In addition, Bond Counsel has relied, among other things, on the opinion of Ball Janik LLP, Counsel to the Corporation, regarding the current qualification of the Corporation as an organization described in Section 501(c)(3) of the Code. Such opinion is subject to a number of qualifications and limitations. Bond Counsel has also relied upon representations of the Corporation concerning the Corporation’s “unrelated trade or business” activities as defined in Section 513(a) of the Code. Neither Bond Counsel nor Counsel to the Corporation has given any opinion or assurance concerning Section 513(a) of the Code and neither Bond Counsel nor Counsel to the Corporation can give or has given any opinion or assurance about the future activities of the Corporation, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the resulting changes in enforcement thereof by the Internal Revenue Service. Failure of the Corporation to be organized and operated in accordance with the Internal Revenue Service’s requirements for the maintenance of its status as an organization described in Section 501(c)(3) of the Code, or to operate the facilities financed by the Tax-Exempt Bonds in a manner that is substantially related to the Corporation’s charitable purpose under Section 513(a) of the Code, may result in interest payable with respect to the Tax-Exempt Bonds being included in federal gross income, possibly from the date of the original issuance of the Tax-Exempt Bonds.

Although Bond Counsel is of the opinion that interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Tax-Exempt Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Tax-Exempt Bonds to be subject, directly or indirectly,

in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Tax-Exempt Bonds. Prospective purchasers of the Tax-Exempt Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Tax-Exempt Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority or the Corporation, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Authority and the Corporation have covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Tax-Exempt Bonds ends with the issuance of the Tax-Exempt Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority, the Corporation or the Beneficial Owners regarding the tax-exempt status of the Tax-Exempt Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Authority, the Corporation and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax- exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority or the Corporation legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Tax-Exempt Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Tax-Exempt Bonds, and may cause the Authority, the Corporation or the Beneficial Owners to incur significant expense.

TAXABLE BONDS

At the closing, Bond Counsel is expected to deliver its opinion, based upon an analysis of existing laws, regulations, rulings and court decisions, that, interest on the Taxable Bonds is not excluded from gross income for U.S. federal income tax purposes pursuant to Section 103 of the Code. Bond Counsel is expected to express no opinion regarding any other federal tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Taxable Bonds.

If the Authority defeases any Taxable Bond, such Taxable Bond may be deemed to be retired and “reissued” for U.S. federal income tax purposes as a result of the defeasance. In that event, the beneficial owner of the Taxable Bond will recognize taxable gain or loss equal to the difference between the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and the beneficial owner’s adjusted

U.S. federal income tax basis in the Taxable Bond. See “THE BOND INDENTURE—Defeasance” in APPENDIX D hereto.

STATE OF OREGON TAX EXEMPTION

In the opinion of Bond Counsel, interest on all of the Bonds is exempt from State of Oregon personal income tax under existing law.

INDEPENDENT AUDITORS

The audited financial statements of the Corporation as of and for the fiscal years ended June 30, 2015, 2016 and 2017 have been audited by KPMG LLP, independent auditors, as stated in its report appearing in APPENDIX B hereto.

FINANCIAL FEASIBILITY STUDY

Management’s financial forecast for the five years ending June 30, 2018 through 2022, included as part of the Financial Feasibility Study included in APPENDIX C hereto, has been examined by Moss Adams LLP, independent certified public accountants, as stated in their report dated April 2, 2018 appearing in APPENDIX C. As stated in the Financial Feasibility Study, there will usually be differences between the forecasted data and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. The Financial Feasibility Study should be read in its entirety, including Management’s notes and assumptions set forth therein.

RATING

Fitch, Inc. (“Fitch”) has assigned a rating of “BB” to the Bonds. Any explanation of the meaning of a rating can be obtained from the service providing the rating.

The Obligated Group has furnished Fitch with certain information and materials relating to the Bonds and the Obligated Group that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies, and assumptions by the rating agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. Neither the Authority nor the Underwriter has undertaken any responsibility to bring to the attention of the holders of the Bonds any proposed revision or withdrawal of the rating of the Bonds. None of the Authority, the Underwriter nor the Obligated Group has undertaken responsibility to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such rating could have an adverse effect on the market price and marketability of the Bonds.

UNDERWRITING

The Bonds are being purchased by B.C. Ziegler and Company, as Underwriter, for a purchase price of $______(representing the par amount of the Bonds plus original issue premium of $______and less an underwriting discount of $______) pursuant to a Bond Purchase Agreement entered into by and among the Authority, the Underwriter and the Corporation (the “Purchase Agreement”). The Corporation has agreed to indemnify the Underwriter and the Authority against certain liabilities. The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The obligations of the Underwriter to accept delivery of the Bonds are subject to various conditions contained in the Purchase Agreement. The Purchase Agreement provides that the Underwriter will purchase all of the Bonds if any Bonds are purchased.

MISCELLANEOUS

The references herein to the Act, the Bond Indenture, the Loan Agreement, the Master Indenture, the Leasehold Deed of Trust, the Ground Leases, the Continuing Disclosure Agreement 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 Bond 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 Bonds, but neither the failure to print such numbers on any Bond nor any error in the printing of such numbers will constitute cause for a failure or refusal by the purchaser thereof to accept delivery of or pay for any Bonds.

The information assembled in this Official Statement has been supplied by the Corporation and other sources believed to be reliable, and, except for the statements under the heading “THE AUTHORITY” herein and information relating to the Authority under the heading “LITIGATION— The Authority,” the Authority makes no representations with respect to nor warrants the accuracy of such information. The Corporation has agreed to indemnify the Authority and the Underwriter against certain liabilities relating to the Official Statement.

This Official Statement is not to be construed as a contract or agreement between the Authority or the Corporation and the holder of any of the Bonds.

MARY’S WOODS AT MARYLHURST, INC.

By: ______Its: ______

APPENDIX A

CERTAIN INFORMATION RELATING TO MARY’S WOODS AT MARYLHURST, INC.

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APPENDIX A

Mary’s Woods at Marylhurst, Inc.

The information in this Appendix has been provided by Mary’s Woods at Marylhurst, Inc. and other identified sources of information deemed to be reliable. Neither the Authority nor the Underwriter make any representation as to the accuracy of this information.

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TABLE OF CONTENTS

PAGE

THE CORPORATION ...... A-1

HISTORY AND MISSION ...... A-2 History and Background ...... A-2 Mission and Values ...... A-2

GOVERNANCE AND MANAGEMENT ...... A-3 Members; Reserved Powers ...... A-3 Board of Directors ...... A-3 Management Team ...... A-4

THE EXISTING COMMUNITY ...... A-4 General Description ...... A-4 Existing Independent Living Apartments and Villas ...... A-5 Common Areas ...... A-5 Marie Rose Health Care Center ...... A-6 Home Care Services ...... A-6 Existing Independent Living Apartment Pricing ...... A-6 Existing Health Care Center Pricing ...... A-8 Occupancy ...... A-9 Entrance Fee Turnover ...... A-9 Waitlist ...... A-9 Payor Source ...... A-10

THE GROUND LEASES AND RELATED TRANSACTIONS...... A-10 General ...... A-10 Term ...... A-11 Rent and Subordination ...... A-11 Use and Maintenance ...... A-13 Land Transfer/Condominium Units ...... A-13 Related Party Transactions ...... A-14

THE PROJECT ...... A-14 The Village at Mary’s Woods ...... A-14 Expansion Independent Living Apartments ...... A-16 Stage 1 Assisted Living Apartments and Suites ...... A-16 Pre-Finance Funding ...... A-17 Regulatory Permits and Approvals ...... A-17 Anticipated Project Timelines ...... A-18 Reservation Agreement ...... A-19 Resident Fee Structure ...... A-19 Expansion Independent Living Apartment Pricing ...... A-20 Pioneer and Explorer Benefits ...... A-21

PROJECT MARKETING ...... A-21 General ...... A-21 Marketing Program – Expansion Independent Living Apartments ...... A-21

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Reservation of Expansion Independent Living Apartments ...... A-22

PROJECT DEVELOPMENT ...... A-23 The Development Consultant – Greystone ...... A-23 Greystone Development Consulting Experience ...... A-25 Greystone Corporate Officers ...... A-26 Greystone Development Agreement ...... A-27 Summary of Stage 1 and Stage 2 Fees ...... A-29 The General Contractor ...... A-30 Construction Contract ...... A-31 Construction Schedule ...... A-31 The Architects ...... A-32 The Construction Monitor ...... A-33 Owner Representative ...... A-33

RESIDENCY AGREEMENTS ...... A-34 Financial Assistance ...... A-34 Services to Residents ...... A-34 Healthcare Benefit ...... A-35 Termination and Refunds ...... A-35

FINANCIAL INFORMATION OF THE CORPORATION ...... A-36 Summary Financial Information ...... A-36 Debt Service Coverage ...... A-39 Historical Days Cash on Hand ...... A-40 Management’s Discussion and Analysis ...... A-40 Contributions and Community Giving ...... A-44 Growth Opportunities ...... A-44 Insurance ...... A-45 Litigation ...... A-45

-ii- THE CORPORATION

Mary’s Woods at Marylhurst, Inc. (“Mary’s Woods” or the “Corporation”) is an Oregon not-for-profit corporation and an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The Corporation operates a life plan community (often referred to as a continuing care retirement community) (the “Community”) currently consisting of 233 independent living apartments, 50 independent living villas, 55 assisted living apartments, 23 memory support suites, 26 residential care suites and five licensed skilled nursing suites.

The founding and sponsoring organization of the Corporation is the U.S.-Ontario Province of the Sisters of the Holy Names of Jesus and Mary (“SNJM” or the “Sisters”).

The Community and the Project (described below) are located on approximately 37 acres of a 75-acre campus located in Lake Oswego, Oregon, approximately eight miles south of downtown Portland. The campus is owned by The Society of the Sisters of the Holy Names of Jesus and Mary (the “Landlord”), an Oregon not-for-profit corporation and an affiliate of the Sisters. The portion of the campus upon which the Community and the Project are located is leased by the Landlord to the Corporation.

Neither SNJM nor the Landlord has any obligation to make any payments of principal or interest on the Series 2018 Bonds. The Corporation is the only entity liable for such payments.

For a complete description of the Community, see “THE EXISTING COMMUNITY” herein.

As of the date of issuance of the Series 2018 Bonds, the Corporation will be the only member of an obligated group (the “Obligated Group”) established under the Master Trust Indenture dated as of April 1, 2017, as amended (the “Master Indenture”), by and between the Corporation and U.S. Bank National Association, as master trustee. As the only member of the Obligated Group, the Corporation is the only entity currently obligated to pay the principal of and interest on the Series 2018 Bonds, the Series 2018 Obligations and any other Obligations issued under the Master Indenture. For a description of the Master Indenture, see “SECURITY FOR THE BONDS” in the forepart of this Official Statement.

The Corporation will use the proceeds of the Series 2018 Bonds, together with certain other moneys, to (i) finance a portion of the costs of the construction, acquisition, development, improvement, renovation and equipping of fifty-four independent living apartments and two buildings containing services and amenities for residents of the Community (collectively, “Stage 2”); (ii) pay a portion of the interest on the Series 2018 Bonds during the construction of Stage 2; (iii) fund a debt service reserve fund for the benefit of the Series 2018 Bonds; and (iv) pay certain costs of issuance of the Series 2018 Bonds. See “PLAN OF FINANCE” in the forepart of this Official Statement for additional information.

Stage 2 is part of a larger ongoing expansion of the Community known as The Village at Mary’s Woods (the “Village”). Stage 1 consists of 144 independent living apartments, 48 assisted living apartments and common area buildings. The construction of Stage 1 of the Village (“Stage 1”) was financed primarily with the proceeds of the Series 2017 Bonds (as described in this Official Statement under the heading “INTRODUCTION – Security for the Bonds”). Stage 1 and Stage 2 of the Village are referred to herein collectively, as the “Project.” See “THE PROJECT” herein for a description of the Project.

This Appendix A is intended to provide information about the Corporation and the Project that is not presented elsewhere in this Official Statement. For additional information about the Corporation, potential investors should refer to the audited financial statements of the Corporation for the fiscal years ended June 30, 2015, 2016 and 2017, which are included in this Official Statement as Appendix B. Additional information about the Corporation and the Project can be found in the “FINANCIAL FEASIBILITY STUDY,” which is included in this Official Statement as Appendix C. The materials included in this Appendix A and the other appendices to this Official Statement should be read in their entirety.

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Capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in Appendix E—“DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS—Definitions of Certain Terms.”

HISTORY AND MISSION

HISTORY AND BACKGROUND

Mary’s Woods. Mary’s Woods was formed in 1997 for the purpose of constructing, owning, and operating the Community following a long exploration by SNJM of potential uses for their 75-acre site on the Willamette River. The first phase of the Community was financed in 1999 and opened in 2001.

SNJM. SNJM is an international religious congregation of women with its general administration located in Longueuil, Quebec, Canada. The Oregon Province of SNJM was founded in 1859 to promote the education of children and young women, with special concern for the poor and disadvantaged. Within a few years, they established a number of schools in northwest Oregon, including St. Mary’s Academy, an all-girls high school, which is still in operation. In 1893, a portion of St. Mary’s Academy officially became St. Mary’s Academy and College, the first liberal arts college for women in the Northwest. In 1930, the college moved from a downtown Portland site to a campus near Lake Oswego and became Marylhurst College, today known as Marylhurst University. The Community and the SNJM campus are located adjacent to the Marylhurst University campus. Marylhurst University operates independently from SNJM and Mary’s Woods. The high school remains in downtown Portland and also operates independently from SNJM and Mary’s Woods.

The Landlord, an affiliate of SNJM, owns the land on which the Community and the Project are located. The land is or will be leased to Mary’s Woods pursuant to long-term ground lease agreements. See “THE GROUND LEASES AND RELATED TRANSACTIONS” herein for a complete description of the ground leases.

MISSION AND VALUES

Mary’s Woods is a caring community inspired by the vision and values of the Sisters, providing a continuum of housing, health, and educational services. The Community responds to the Gospel’s vision of full development for every individual at each life stage. The Community seeks to ensure the dignity, independence, well-being, and security of older persons through the provision of a range of services and educational options. An array of services enriches the physical, emotional, and spiritual well-being of each resident, employee and all others affiliated with the Community. Rooted in Catholic, ethical values, the Community is characterized by a commitment to:

• An environment of beauty

• A celebration of life

• Hospitality and compassion

• Reverence and integrity

• A spirit of service

• The exploration of the journey of aging

Mary’s Woods lives out its core values of respect, compassion, excellence, stewardship and justice in a spirit of service by being a welcoming, caring and generous community.

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GOVERNANCE AND MANAGEMENT

MEMBERS; RESERVED POWERS

The Corporation’s sole members are certain designated members of SNJM (the “Member Tier”). According to the bylaws, certain powers are reserved to the members. The reserved powers of the members include the authority to approve or disapprove any action of the Board of Directors of the Corporation with regard to (i) the election and removal of directors serving on the Board of Directors of the Corporation; (ii) amendments to the articles of incorporation or bylaws; (iii) selection and removal of the Chief Executive Officer, the Director of Mission Integration or a management firm; (iv) the mission, philosophy, and goals of the Corporation; (v) the use, operation, acquisition, encumbrance, conveyance or disposal of any real property owned by the Corporation; (vi) capital and operating budgets; (vii) any contracts or business affairs affecting SNJM; (viii) merger, dissolution, the formation of subsidiaries or participation in joint ventures and (ix) borrowing money or constructing capital improvements in excess of $5,000,000.

The bylaws provide that the Board of Directors shall consist of not fewer than nine nor more than 17 persons. At least one director shall be one of the designated members of the Member Tier. In addition, at least two directors shall be sisters of SNJM or their designees and at least two directors shall be residents of the Community selected by the residents’ council. The Chief Executive Officer and Director of Mission Integration are non-voting ex-officio members of the Board of Directors. Except for the initial terms of the original Board members, each director shall serve for a term of three years and is eligible to serve an additional consecutive three-year term. There shall be a one-year interval before a director is eligible to serve an additional three-year term. The directors appointed by the residents’ council shall serve non-renewable two-year staggered terms. Directors that are sisters of SNJM may serve beyond term limits if approved by the Member Tier.

BOARD OF DIRECTORS

The following table identifies each director of the Corporation, his or her position on the Board, occupation description, and year of expiry of his or her term:

INITIAL TERM BOARD APPOINTMENT EXPIRES JUNE NAME POSITION OCCUPATION/INDUSTRY JULY Ms. Jacki Gallo Chair Financial Advisor 2014 2020 Mr. David Galt Past Chair Insurance 2009 2018 Sr. Lynda Thompson, SNJM Secretary Hospital Mission Integration 2001(2) 2020 Mr. Robert Tust Treasurer Accounting 2015 2018 Mr. James Arp Director Healthcare 2013 2020 Sr. Mary Breiling, SNJM Director Member Tier Designee 2001(2) Continual Ms. Gabriela Sanchez Director Attorney 2016 2019 Mr. John Erickson Director Hospitality 2016 2019 Ms. Carmen Nazario Director Information Technology 2016 2019 Ms. Carolyn Snow Director High School Administrator (Ret.), Mary’s 2017 2019 Woods Resident Mr. Dennis Finnigan Sr. Director Management Consulting (Ret.) 2013 2019 Sr. Judith Mayer, SNJM Director Healthcare Consultant 2013 2018 Mr. John Grammel Director Paper Industry (Ret.), Mary’s Woods Resident 2016 2018 Ms. Diane Hood Ex-Officio(1) President and Chief Executive Officer Continual Sr. Roswitha Frawley, SNJM Ex-Officio(1) Mission Director Continual ______Source: The Corporation. (1) Non-voting members of the Board of Directors. (2) Appointed, January 2001.

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MANAGEMENT TEAM

Diane Hood – Chief Executive Officer (57). Ms. Hood has been the President and Chief Executive Officer of the Corporation since November 2016. Ms. Hood is a Certified Public Accountant in the State of Oregon and served as the Chief Financial Officer for the Corporation since the Community opened in 2001. In 2011, Ms. Hood was named Chief Operating Officer/Chief Financial Officer where she was responsible for all financial and operational management functions and managed the internal team of Mary’s Woods organizational directors. She began work for the Sisters in 1993. Prior to 2001, as Chief Financial Officer for the Sisters, Ms. Hood helped the Sisters plan, develop, finance, and construct the Community. Prior to her work with the Sisters, Ms. Hood worked for KPMG with middle market and nonprofit clients. Ms. Hood has a Bachelor of Arts degree in Management from the University of Oregon and a Post Baccalaureate degree in Accounting from Portland State University. She serves on various nonprofit boards and finance committees in the nonprofit community, including Leading Age Oregon.

Kimberly Scott – Chief Financial Officer (50). Ms. Scott became Chief Financial Officer of the Corporation in January 2017 and has worked at Mary’s Woods since the Community opened in 2001. She earned a Bachelor of Science degree in Business Administration – Accounting from Portland State University and is a Certified Public Accountant in the State of Oregon with more than 20 years’ experience in both for profit and not for profit accounting and finance. Ms. Scott currently serves on the board of a sponsored ministry of the Sisters of the Holy Names.

Sister Roswitha Frawley – Mission Director (72). Sister Roswitha has a Master’s in Education and has been a teacher and principal in the Portland Archdiocese, adjunct professor at Lewis and Clark College, and school consultant. Currently, she is a member of the board of trustees at Marylhurst University. As part of this team, she strives to further the understanding and integration of the mission of the Sisters of the Holy Names and Mary’s Woods into every aspect of the Community.

Cheri Mussotto-Conyers – Director of Marketing & Client Relations (61). Ms. Mussotto-Conyers has been Director of Marketing and Client Relations since 2005. Ms. Mussotto-Conyers has more than 20 years of experience in real estate and property management, and extensive knowledge of marketing and selling in upscale, residential communities. In 2009, she was a fellow in the Leadership Alliance program through Leading Age Oregon and has served on the marketing committee for the City of Lake Oswego.

Kevin Haberman – Director of Environmental Services (61). Mr. Haberman has served as Director of Environmental Services for the Corporation since August 2003 and has worked at Mary’s Woods since 2000. Mr. Haberman has 24 years of experience in facility maintenance, including six years in the army with training in communications. He is a member of the Columbia Region of Hospital Engineers. He has experience with training individuals for the development of communications used in complex business settings. He is HVAC certified for heating, ventilation, and air conditioning and has had extensive training for disaster and emergency preparedness.

Lynn Hyde – Director of Health Care Services and Licensed Nursing Home Administrator (61). Ms. Hyde has been the Corporation’s Director of Health Care Services since September 2004 and has worked at Mary’s Woods since 2000. Prior to her employment with the Corporation, she served as the Director of Nursing for the Sisters for approximately 22 years. Ms. Hyde has over 36 years of experience in direct care and clinical management. She earned a Bachelor of Science degree in Nursing from the University of Portland in 1978 and a Graduate Certificate in Gerontology from Marylhurst University in 2004. Ms. Hyde is certified as an administrator of assisted living and residential care facilities in the State of Oregon.

THE EXISTING COMMUNITY

GENERAL DESCRIPTION

The Community and the Project are located on approximately 37 acres of the 75-acre SNJM campus in Lake Oswego, Oregon. Situated on the western bank of the Willamette River and adjacent to Marylhurst University, the Community is approximately eight miles south of downtown Portland. The existing Community (the “Existing Community”) includes 233 independent living apartments (the “Existing Independent Living Apartments”),

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50 independent living villas (the “Villas”), 55 assisted living apartments (“Friendship Place Assisted Living”), 23 memory support suites (“Caritas House Memory Support”), 26 residential care suites (“Villa Maria Residential Care”), five skilled nursing suites (“Villa Maria Nursing”), and common areas. The common areas include a library, dining room, social lounge and bistro, an arts and crafts room, a fitness and wellness center, a swimming pool, and a salon. Each Existing Independent Living Apartment is assigned a surface parking space, and covered parking spaces are available at an additional charge.

A portion of the Existing Community is housed within a renovated portion of the Sisters’ Provincial House (hereinafter defined) while the Sisters retain the remaining portion of the Provincial House for living quarters, chapel, and administrative offices. The Provincial House is apportioned into two condominium units. The condominium unit used by the Corporation is subject to the long-term ground lease agreement with the Landlord under which the Corporation leases the 24-acre portion of the campus upon which the Existing Community is located. This portion of the Provincial House includes 12 of the Existing Community’s apartments as well as the majority of common space. The other condominium unit owned by SNJM includes the Sisters’ administrative offices, chapel and 21 apartments for their use. Additionally, the Landlord also owns the land on which the Project is being constructed and has leased the land to Mary’s Woods pursuant to a second long-term ground lease agreement. See “THE GROUND LEASES AND RELATED TRANSACTIONS” in this Appendix A.

The Community is located adjacent to the campus of Marylhurst University, a not-for-profit, applied liberal arts and business university. It was founded in 1893 by SNJM but was separately incorporated and now operates independently. Marylhurst University is Oregon’s oldest Catholic university and was the first liberal arts college for women established in the Northwest. Mary’s Woods residents have the opportunity to audit classes at no charge. Residents also enjoy frequent presentations from visiting professors, lectures, and musical events creating opportunities for life-long learning.

See location map on the inside cover of this Official Statement.

EXISTING INDEPENDENT LIVING APARTMENTS AND VILLAS

The Existing Independent Living Apartments are contained in multi-story buildings, which are connected by enclosed walkways to the Provincial House. These apartments are accessed by elevators and contain a variety of one-bedroom and two-bedroom configurations. The Villas contain either two or three bedrooms and have attached garages. The Existing Independent Living Apartments and the Villas are referred to collectively as the “Existing Independent Living Apartments and Villas.” An expansion of 17 villa estates was added and became operational in July, 2015.

The Existing Independent Living Apartments and Villas include a living room, one to two full bathrooms, storage, carpeting, window treatments, washer/dryer, and a full kitchen with a stove, microwave, refrigerator, dishwasher and garbage disposal. All Existing Independent Living Apartments and Villas include individually controlled heat and air conditioning, fire safety and emergency call systems, and cable television and telephone hook-ups.

While residing in an Existing Independent Living Apartment or Villa, residents receive 20 meals per month or a dining dollars meal plan, utilities including basic telephone service, maintenance, bi-weekly housekeeping, reserved parking, recreational activities, basic cable television, security, basic Wi-Fi internet services, scheduled transportation, use of common areas, emergency call system and fire detection system, and priority admission to the Health Care Center (hereinafter defined), if needed. Other services available for an additional charge include additional housekeeping, personal laundry service, tray service, guest meals and guest accommodations.

COMMON AREAS

The common areas are located in the Provincial House. The Provincial House is a four-story structure built at two different times. The southern part of the Provincial House is a brick structure built in 1911. The northern part is a concrete structure completed in 1951.

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The 1911 building has two predominant sections – a west wing and a north/south wing. The Sisters retain the west wing with administration offices on the ground floor and chapel on the second floor. There are 21 apartments on the third and fourth floors for their use. The north/south wing is part of the Community. The first floor of the north/south wing houses a salon, convenience store, card rooms, craft room, meeting room and an outdoor courtyard. The second floor houses the library, a parlor, a resident computer and business center, and a gathering area in the central section with resident apartments in the south section of the second floor and all of the third floor. The fourth floor is the location of two large apartment units.

Each floor of the 1950’s building has a north, south, east, and west wing. The first floor north wing is the location of the laundry, the boiler, and the receiving service area. The first floor east wing contains the kitchen, the guest dining room, and an entry into the dining room. The first floor southern wing contains the social lounge, bar, and a second entry into the dining room. The first floor west wing houses a staff area and public restrooms. The main dining room was completed in 2001.

The second floor of the 1950’s building includes an auditorium in the north wing, a café bistro in the east wing, and administrative offices and meeting area in the west and south wings.

The common areas serve as the main gathering place for residents and contain community facilities, including the dining areas, a convenience store, an outdoor courtyard, an arts and crafts room, a library, a multi-purpose room/auditorium, a swimming pool, a fitness and wellness center and a salon. Additional activity rooms and resident storage are available throughout the residential areas.

MARIE ROSE HEALTH CARE CENTER

Friendship Place Assisted Living, Caritas House Memory Support, Villa Maria Residential Care, and Villa Maria Nursing are collectively referred to herein as the “Health Care Center.” The Health Care Center is located in a two-story building attached to the Provincial House through an enclosed walkway. Rehabilitation services are also provided within the Health Care Center under the direction of Infinity Rehab, and the Health Care Center serves as a clinical training site for several institutions and providers, including Oregon Health & Science University School of Nursing, Linfield College School of Nursing, University of Portland School of Nursing, Clackamas Community College, and Sumner College. An expansion to this building was added in 2011.

HOME CARE SERVICES

Mary’s Woods Home Care Services (“Home Care Services”) is a division of the Corporation that is licensed by the State of Oregon as an In-Home Care Agency. The comprehensive licensure allows for Home Care Services to offer companion care, personal care and nursing services. Examples of the range of services available include housekeeping, transportation, pet care, meal planning and preparation, medication reminding and assistance, and nursing assessments. In addition, Alzheimer’s care, hospice coordination, and memory care can be provided.

The Mary’s Woods Home Care Services team aims to make a positive difference in the lives of clients at home. The interdisciplinary team consists of registered and licensed nurses, care managers, and personal care attendants, all of whom are employees of the Corporation and must pass strict screening before joining the home care staff. Home Care Services is available to serve both residents on the Mary’s Woods campus, as well as anyone in the local community who does not reside at Mary’s Woods. Home Care Services gross revenues were $1,374,937 for the fiscal year ending June 30, 2017 and $1,384,884 for the fiscal year ending June 30, 2016.

EXISTING INDEPENDENT LIVING APARTMENT PRICING

Residents of the Existing Independent Living Apartments and Villas pay an entrance fee and a monthly service fee. The Corporation currently offers an 80% refundable contract for the Existing Independent Living Apartments and Villas (“Plan 1”) and a limited number of non-refundable contracts (“Plan 3”). Purchasers of the Plan 1 contract pay a lump sum, one-time entrance fee (“Entrance Fee”) based on the type of unit selected by the

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resident in order to occupy a residence. The monthly service fee (“Monthly Service Fee”) is also based on the type of residence.

The Entrance Fee for Plan 3 contracts for Existing Independent Living Apartments and Villas is discounted 40% from Plan 1 and amortizes 2% per month for 45 months from the date of occupancy plus an immediate 10% upon move-in, until the Entrance Fee is no longer refundable. The Monthly Service Fee for Plan 3 is the same as Plan 1.

An additional Monthly Service Fee is charged under both plans if a second person occupies an Independent Living Apartment.

As of February 28, 2018, the plan mix was approximately 95% Plan 1 and approximately 5% Plan 3.

For a description of the Residency and Care Agreements signed by residents of the Existing Independent Living Apartments and Villas, see “RESIDENCY AGREEMENTS” below.

Monthly Service Fees and Entrance Fees under the Plan 1 Residency and Care Agreement effective as of July 1, 2017 are shown below.

INDEPENDENT LIVING APARTMENT NUMBER SQUARE PLAN 1 ENTRANCE MONTHLY SERVICE CONFIGURATION OF UNITS FOOTAGE FEES FEES

APARTMENT RESIDENCES: One Bedroom 10 577 - 630 $209,900 - 219,900 $2,197 One Bedroom Enhanced 44 661 - 713 243,900 - 258,900 2,430 One Bedroom Den 74 825 - 889 318,900 - 333,900 3,032 Two Bedroom 47 1,023 - 1,047 374,900 - 389,900 3,398 Two Bedroom Den 46 1,143 439,900 - 459,900 3,790 PROVINCIAL HOUSE: One Bedroom Corner 2 663 - 690 295,900 - 300,900 2,197 One Bedroom Corner 2 740 - 770 330,900 - 335,900 2,430 One Bedroom Den 2 874 - 884 360,900 3,032 Two Bedroom 2 1,122 - 1,204 487,900 - 492,900 3,790 Two Bedroom Tower 2 1,289 - 1,347 546,900 - 556,900 4,763 Two Bedroom Den Tower 2 1,355 - 1,362 564,900 - 569,900 4,860 VILLAS(1): Two Bedroom 18 1,356 508,900 - 518,900 5,142 Three Bedroom 15 1,586 583,900 - 603,900 5,998 Two Bedroom Villa Estate 9 1,596 - 1,615 591,900 5,877 Three Bedroom Villa Estate 8 1,797 656,900 - 666,900 6,634 TOTAL UNITS/WEIGHTED AVERAGE 283 1,021 $388,677 $3,597 Second Person Fee $ 38,000 $ 665 ______Source: The Corporation. (1) Square Footage for Villas does not include the square footage of the garage.

Monthly Service Fee and Entrance Fee rate increases for the Existing Independent Living Apartments and Villas over the last three years and for fiscal year 2018 are shown below.

FISCAL YEAR ENDED JUNE 30, 2015 2016 2017 2018 Monthly Service Fees 3.00% 2.50% 3.50% 2.50% Entrance Fees 2.60 3.47 4.13 6.17 ______Source: The Corporation.

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EXISTING HEALTH CARE CENTER PRICING

Daily rates for Health Care Center services effective as of July 1, 2017 are shown below. Internal transfers from Mary’s Woods Independent Living Apartments and Villas receive a 20% discount from the market rate paid by persons other than residents of the Community (“Direct Admits”).

Daily Rates for Internal Transfers

HEALTH CARE CENTER STUDIO ONE BEDROOM TWO BEDROOM

NURSING CARE: Studio – Intermediate Care/Skilled $309.60 N/A N/A Studio – Residential Care 309.60 N/A N/A

ASSISTED LIVING: Level 0 $145.60 $206.40 $316.80 Level 1 168.80 227.20 338.40 Level 2 210.40 270.40 380.00 Level 3 240.80 300.00 404.80 Level 4 282.40 340.00 443.20 Level 5 334.40 392.00 495.20 Second Person Fee Level 0 N/A $20.80 $20.80 Level 1 N/A 43.20 43.20 Level 2 N/A 83.20 83.20 Level 3 N/A 120.00 120.00 Level 4 N/A 160.00 160.00 Level 5 N/A 212.00 212.00

MEMORY CARE: Studio $309.60 N/A N/A ______Source: The Corporation.

Daily rate increases over the last three years for the Health Care Center units are shown below.

FISCAL YEAR ENDED JUNE 30, 2015 2016 2017 2018 Intermediate Care 4.0% 3.5% 4.5% 3.0% Residential Care 4.0 3.5 4.5 3.0 Assisted Living 4.0 3.5 4.5 3.0 Memory Care 4.0 3.5 4.5 3.0 ______Source: The Corporation.

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OCCUPANCY

Occupancy of the Existing Community as of June 30 of each of the three most recent fiscal years and as of February 28, 2018 is shown in the following table.

AS OF JUNE 30, AS OF FEBRUARY 28, 2015 2016 2017 2018 Independent Living Apartments 97.37% 97.53% 97.88% 98.23% Assisted Living Apartments 94.54 92.73 100.00 100.00 Memory Care Suites 100.00 86.96 91.30 95.65 Residential Care Suites 100.00 100.00 96.15 88.46 Skilled Nursing Suites 20.00 80.00 60.00 40.00 ______Source: The Corporation.

ENTRANCE FEE TURNOVER

Entrance fee turnover analysis for the Existing Community for the three most recent fiscal years and the eight months ended February 28, 2018 is shown in the following table. The information in this chart excludes entrance fees from the Villa Estates received in Fiscal Year 2015.

EIGHT MONTHS ENDED FISCAL YEAR ENDED JUNE 30, FEBRUARY 28, 2015(1) 2016 2017 2018 Independent Living Apartments Beginning Units Occupied 259 259 276 277 Move-Ins 35 48 40 19 Transfers to Health Care Center (27) (21) (20) (19) Move-Outs and Deaths (14) (14) (20) (5) Held Units 6 4 1 6 Ending Units Occupied 259 276 277 278 Ending Occupancy Percentage 97.37% 97.53% 97.88% 98.23%

Entrance Fee Receipts $11,581,490 $11,296,370 $14,699,330 $7,699,440 Entrance Fee Refunds (6,597,739) (6,187,000) (11,017,370) (4,883,879) Net Entrance Fees $ 4,983,751 $ 5,109,370 $ 3,681,960 $ 2,815,561 ______Source: The Corporation. (1) Excludes $9,160,900 of initial Entrance Fees for the Villa Estates received in Fiscal Year 2015.

As of February 28, 2018, approximately 56% of the resident population is single and 44% of the resident population is couples. Additionally, the resident population is comprised of 29% males and 71% females as of February 28, 2018.

WAITLIST

A $1,000 partially refundable pre-residency deposit secures placement on a waiting list (the “waitlist”) for an Existing Independent Living Apartment. Apartment preference(s) is submitted with the waitlist deposit. The deposit is held in a non-interest bearing account, refundable at any time upon written request. An administrative fee of $300 is deducted from the waitlist refund. As of February 28, 2018, there were approximately 426 waitlist deposits.

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Upon Existing Independent Living Apartment availability and selection, prospective residents sign a Reservation Agreement, as defined herein, including a confidential data profile and full financial disclosure. When prospects are approved for residency, a move-in date is scheduled and the Entrance Fee balance is paid prior to move- in.

PAYOR SOURCE

Payor source for the existing units in the Health Care Center for the three most recent fiscal years and the eight months ended February 28, 2018 is shown in the following table.

EIGHT MONTHS ENDED FISCAL YEAR ENDED JUNE 30, FEBRUARY 28, 2015 2016 2017 2018 Assisted Living Private Pay - Direct Admits 0.00% 0.00% 0.00% 0.00% Private Pay - Internal Transfer 92.85 93.60 94.02 94.29 Medicaid 7.15 6.40 5.98 5.71 Total 100.00% 100.00% 100.00% 100.00%

Memory Care Private Pay - Direct Admits 6.10% 4.47% 4.70% 15.95% Private Pay - Internal Transfer 58.39 53.71 53.95 59.90 Medicaid 35.51 41.82 41.35 24.15 Total 100.00% 100.00% 100.00% 100.00%

Residential Care Private Pay - Direct Admits 0.00% 0.00% 0.00% 0.00% Private Pay - Internal Transfer 93.77 92.68 89.08 85.74 Medicaid 6.23 7.32 10.92 14.26 Total 100.00% 100.00% 100.00% 100.00%

Skilled Nursing Private Pay - Direct Admits 0.00% 0.00% 0.00% 0.00% Private Pay - Internal Transfer 41.27 25.27 15.54 24.80 Medicare 58.73 74.73 84.46 75.20 Medicaid 0.00 0.00 0.00 0.00 Total 100.00% 100.00% 100.00% 100.00% ______Source: The Corporation.

THE GROUND LEASES AND RELATED TRANSACTIONS

GENERAL

The Community is situated on real property, which is part of a 75-acre campus in Lake Oswego, Oregon and which is owned by the Landlord. The Community currently occupies approximately 24 acres of the campus and leases that land pursuant to a Ground Lease dated August 15, 1999 (the “Original Ground Lease”). Pursuant to the Original Ground Lease, the Landlord retains fee title ownership to the real estate upon which the Community is located, and the Corporation has an exclusive right (except with respect to the Provincial House) to operate the Community and control usage of all facilities and improvements.

Stage 1 of the Village will be located on an approximately 12-acre parcel of land contiguous to the existing Community. The Landlord also owns the real property on which The Village is being constructed. In connection with the issuance of the Series 2017 Bonds, the Corporation and the Landlord executed a Ground Lease Phase II (the

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“Village Ground Lease”) pursuant to which the Landlord retains fee title ownership to the real estate upon which The Village is being constructed, and the Corporation will have an exclusive right to operate The Village and control usage of all facilities and improvements.

The Stage 2 Project will be located on land within or adjacent to the site of Stage 1 of the Village. The Landlord owns the real property on which the Stage 2 Project will be constructed. In connection with the issuance of the Series 2018 Bonds, the Corporation and the Landlord will execute an amendment to the Village Ground Lease (the “Stage 2 Amendment”) pursuant to which the Landlord will retain fee title ownership to the real estate upon which the Stage 2 Project will be constructed, and the Corporation will have an exclusive right to operate the Stage 2 Project and control usage of all facilities and improvements.

The terms of the Original Ground Lease and the Village Ground Lease are substantially similar. Except for the specific economic terms described below and the terms dealing with the scope of the Stage 2 Project, the terms of the Village Ground Lease for Stage 1 will fully apply and govern the Stage 2 Project, so that Stage 1 and Stage 2 are fully integrated and administered uniformly. Set forth below is a description of certain terms of the Original Ground Lease and the Village Ground Lease. The Original Ground Lease and the Village Ground Lease, including the Stage 2 Amendment, are referred to herein collectively as the “Ground Leases.” For a complete summary of the Ground Leases, see Appendix E to this Official Statement.

TERM

The Original Ground Lease and the Stage 1 Village Ground Lease have terms of 50 years beginning April, 2017 and expiring April, 2067. The Stage 2 Village Ground Lease Amendment will have a term of 49 years beginning May, 2018 and expiring April, 2067. The Ground Leases grant the Corporation an option to extend the term of the Ground Leases for two additional 10 year terms. At the conclusion of the terms of the Ground Leases, all facilities and improvements developed on the real estate covered by the Ground Leases will become exclusive assets of the Landlord.

The Ground Leases grant the Corporation a right of first refusal in the event that the Landlord decides to sell the real estate subject to the Ground Leases. If the Corporation does not exercise its right of first refusal, any sale would be subject to the Ground Leases.

RENT AND SUBORDINATION

The initial rent of $1,500,000 and $750,000, respectively, due under the Original Ground Lease and the Village Ground Lease was previously paid by the Corporation.

Under the Stage 2 Amendment, the Corporation will make an initial rent payment of $250,000 upon the issuance of the Series 2018 Bonds.

After payment of the initial rent, the Corporation will pay the Landlord an annual Base Rent of (i) $75,000 for each year during the term of the Original Ground Lease, (ii) $75,000 for each year during the term of the Village Ground Lease with respect to Stage 1 of the Village and (iii) under the Stage 2 Amendment, $25,000 for each year during the term of the Village Ground Lease with respect to Stage 2 of the Village (collectively, the “Annual Base Rent”). The Annual Base Rent is payable in semi-annual installments. In the case of the Village Ground Lease, (a) the first payment of Annual Base Rent with respect to Stage 1 of the Village shall be paid within ten (10) days following the date on which a certificate of occupancy is issued by the City of Lake Oswego for Stage 1 of the Village and will be prorated for the number of calendar days prior to the next Annual Base Rent payment date, and (b) the first payment of Annual Base Rent with respect to Stage 2 of the Project shall be paid within ten (10) days following the date on which a certificate of occupancy is issued by the City of Lake Oswego for Stage 2 of the Village and will be prorated for the number of calendar days prior to the next Annual Base Rent payment date.

The Corporation will also pay “Additional Rent” (together with Annual Base Rent, the “Rent”) to the Landlord. Additional Rent under the Original Lease is equal to the product of $199.79 per month multiplied by the total number of independent living apartments and Health Care Center apartments and suites in the existing

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Community (392 units). Additional Rent under the Village Ground Lease is equal to the product of $220 per month multiplied by the total number of independent living apartments and assisted living apartments in The Village (192 units in Stage 1 and 54 units in Stage 2) that are, as of the first day of each calendar month throughout the Term, either occupied or in a physical condition such that they could be occupied and for which the City of Lake Oswego has issued an outstanding certificate of occupancy. Additional Rent is subject to annual adjustments based on the consumer price index.

The table below is a summary of the rent payments due under the Ground Lease.

Original Ground Lease: • One-Time Initial Base Rent: $1,500,000 (Paid upon Lease Effective Date of September 1, 1999)

• Annual Base Rent $75,000/year

• Subordinate Current Additional $939,812/year Rent*: (Based on 392 units at the rate of $199.79/month/unit

Village Ground Lease: • One-Time Initial Base Rent: $750,000 (Paid upon issuance of Series 2017 Bonds)

• Annual Base Rent: $75,000/year

• Subordinate Additional Rent*: $506,880/year (Based on 192 apartments at the rate of $220/month/apartment)

Stage 2 Amendment: • One-Time Initial Base Rent: $250,000 (Paid upon issuance of Series 2018 Bonds)

• Annual Base Rent: $25,000/year

• Subordinate Additional Rent*: $142,560/year Based on 54 apartments at the rate of $220/month/apartment) ______* Subject to successive annual adjustments.

Under the Original Ground Lease, Additional Rent is payable in annual installments if the following conditions have been satisfied: (i) no event of default has occurred or is continuing under the Bond Documents (as defined in Appendix E hereto), (ii) the Corporation has a Debt Service Coverage Ratio of 1.35 (calculated in accordance with the provisions of the Master Indenture) and (iii) the Corporation has 250 Days Cash on Hand (calculated in accordance with the provisions of the Master Indenture) after giving effect to payment of Rent. Whenever the conditions for the payment of Additional Rent have been satisfied as of the last day of the anniversary date of the Original Ground Lease, the Corporation is obligated to pay Landlord all Additional Rent within thirty-one (31) days.

Under the Village Ground Lease, Additional Rent relating to Stage 1 of The Village will begin to accrue upon satisfaction of the following conditions: (i) 85% of all of the Stage 1 Independent Living Apartments included within Stage 1 of The Village have been occupied under Residency and Care Agreements and (ii) the Series 2017B Bonds have been paid in full. In addition, the Village Ground Lease provides that such Additional Rent is payable in

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annual installments only after all of the following conditions have been satisfied: (i) one full Fiscal Year has elapsed since Stable Occupancy (as defined in the Master Indenture) for Stage 1 of the Project has been achieved, (ii) no event of default has occurred or is continuing under the bond documents relating to the Series 2017 Bonds, (iii) the Corporation has a Debt Service Coverage Ratio of 1.35 (calculated in accordance with the provisions of the Master Indenture), and (iv) the Corporation has 250 Days Cash on Hand (calculated in accordance with the provisions of the Master Indenture) after giving effect to payment of Rent. Whenever the conditions for the payment of Additional Rent have been satisfied as of the last day of the anniversary date of the Village Ground Lease, the Corporation is obligated to pay Landlord all Additional Rent within thirty-one (31) days.

Under the Stage 2 Amendment to the Village Ground Lease, Additional Rent relating to Stage 2 of The Village will begin to accrue upon satisfaction of the following conditions: (i) 85% of all of the Stage 2 Independent Living Apartments included within The Village have been occupied under Residency and Care Agreements and (ii) the Series 2018B Bonds have been paid in full. In addition, the Village Ground Lease provides that such Additional Rent is payable in annual installments only after all of the following conditions have been satisfied: (i) one full Fiscal Year has elapsed since the Stable Occupancy (as defined in the Master Indenture) for the Stage 2 of the Project has been achieved, (ii) no event of default has occurred or is continuing under the Bond Documents (as defined in Appendix E hereto), (iii) the Corporation has a Debt Service Coverage Ratio of 1.35 (calculated in accordance with the provisions of the Master Indenture), and (iv) the Corporation has 250 Days Cash on Hand (calculated in accordance with the provisions of the Master Indenture) after giving effect to payment of Rent. Whenever the conditions for the payment of Additional Rent have been satisfied as of the last day of the anniversary date of the Village Ground Lease, the Corporation is obligated to pay Landlord all Additional Rent within thirty-one (31) days.

Any Rent not paid when due will accrue and be subject to interest and late charges as described in the Ground Leases.

Additional Rent is subordinate to all payments owed by the Corporation with respect to the Series 2017 Bonds and the Series 2018 Bonds. The Base Rent is not subordinate to the Corporation’s payments with respect to the Series 2017 Bonds and the Series 2018 Bonds.

USE AND MAINTENANCE

The Ground Leases contain various remedies and provisions affecting the use and maintenance of the Community including the requirement that, if the Community ceases to be operated as a continuing care retirement community, any new use must be either housing, hospitality or health care related or be reasonably acceptable to the Landlord or its successors as the owner of the fee simple interest. The Landlord retains the right to approve alterations to remediate damage or destruction to or partial condemnation of the Community. The Ground Leases are subject to the Leasehold Mortgage.

LAND TRANSFER/CONDOMINIUM UNITS

The Sisters converted the Provincial House into a two-unit condominium pursuant to the Oregon Condominium statutes. The two condominium units are respectively defined using the Sisters’ and the Corporation’s respective areas of use and control. Essentially, the Sisters retained a portion of the Provincial House as their condominium unit for three major uses: (i) chapel (second floor); (ii) administrative offices and Oregon regional services office (first floor); and (iii) 21 apartments for SNJM purposes (third and fourth floors). Title to the Sisters’ condominium unit (sometimes referred to herein as “Unit B”) remains exclusively with the Sisters and is not part of the Community nor subject to the Original Ground Lease.

The balance of the Provincial House is included in the Corporation’s condominium unit (sometimes referred to herein as “Unit A”). Currently, Unit A is comprised of 64,163 square feet and Unit B is comprised of 39,612 square feet. After the dining room was constructed, the hereinafter described Condominium Declaration and plat was amended to reclassify certain square footage previously designated as general common elements to Unit A as additional space. Unit A is owned by the Sisters and is leased to the Corporation by the Sisters pursuant to the Original Ground Lease. Unit A includes 12 independent living apartments, café bistro, restaurant, meeting and recreation areas, library, resident computer and business center, mailroom, convenience retail services, as well as commercial

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laundry. The rent for Unit A is included as part of the Original Ground Lease rent described above. The condominium, itself, includes only the Provincial House and the real estate underneath the building. Although the two condominium units are separately controlled and administered, access to each unit (other than individual living spaces) is reciprocally provided to the Sisters and the Community’s residents, as provided in the Condominium Declaration (defined below).

Where required, costs and expenses for jointly utilized condominium components, e.g., air conditioning system, seismic upgrades, parking and other capital improvements, are allocated between the Sisters and the Corporation, and the Sisters are required to fund their allocated share of such items on a monthly basis.

The Bylaws of Mary’s Woods at Marylhurst Condominiums Owners’ Association (the “Condominium Bylaws”) and the Declaration of Mary’s Woods at Marylhurst Condominiums (the “Condominium Declaration”) are collectively referred to herein as the “Condominium Documents.” The Condominium Documents have been reviewed and approved by the Oregon Real Estate Agency. The condominium plat, specifying the description of the two condominium units, has been reviewed and approved by Clackamas County, Oregon and has been recorded in the real estate records of such County. The condominium association is governed and operated by a board of directors of four members, two appointed by the Corporation and two appointed by the Sisters, who make decisions on maintenance, repair, alterations and additions to the common elements, prepare the budget of common element expenses and assess the owners, hire personnel, borrow money, maintain hazard and liability insurance, make rules regarding use of the condominium, negotiate and settle claims with insurance carriers and condemning authorities and exercise other powers. In the event of damage, destruction, condemnation, or an agreement in lieu of condemnation, the use of any proceeds received by the condominium association is governed by the Condominium Documents.

RELATED PARTY TRANSACTIONS

As part of the development plan for the original Community and the execution of the Original Ground Lease, SNJM agreed that its Sisters receiving varying levels of health care services would be moved from the convent building to a health center that was constructed as part of the Community. The Health Care Center is available for specialized health care needs benefiting both Community residents and SNJM residents. By agreeing to transfer SNJM sisters from the convent building to the Health Care Center, SNJM enabled Mary’s Woods to refurbish and reconfigure the convent building consistent with Mary’s Woods’ approved development plan for that building. In return, Mary’s Woods created an agreement to ensure that Sisters would have access to the services at Mary’s Woods into the future (the “Bed Agreement”). Under this agreement, SNJM Sisters and/or their designees have access to healthcare services in up to 38 apartments and health care suites in the Health Care Center.

As part of the Bed Agreement, SNJM and Mary’s Woods agreed to use their best efforts to qualify, apply for and collect reimbursement for services rendered to individuals utilizing the apartments and suites designated for SNJM from any appropriate governmental agency. SNJM agreed to remit any funds received or collected for such purposes to Mary’s Woods to compensate Mary’s Woods for providing services to the SNJM Sisters and/or their designees pursuant to the Bed Agreement. Any beds not being utilized by SNJM are available for use by Mary’s Woods.

The Corporation entered into an agreement with SNJM to provide sponsorship on an annual basis for $75,000 per year. These services include the development, training, and oversight of the integration of mission into all aspects of the Community including strategic planning as well as holding land for expansion and future development.

THE PROJECT

THE VILLAGE AT MARY’S WOODS

The Village at Mary’s Woods (“The Village”) is being constructed in two stages. Construction of Stage 1 of The Village commenced in March 2017 and was funded primarily with the proceeds of the Series 2017 Bonds. Construction of Stage 1 is expected to be completed in May 2019. Stage 2 of the Village commenced in January 2018 and is being funded primarily with the proceeds of the Series 2018 Bonds. Construction of Stage 2 is expected to be completed in November 2019.

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The Village buildings will include approximately 519,400 square feet (includes all structured garage square footage), which will be developed on approximately 13 acres of land to be leased from the Sisters by the Corporation, located at the northeast side of Willamette Drive (Hwy. 43) between the Existing Community and Marylhurst University in the City of Lake Oswego.

Stage 1 consists of 144 independent living apartment-style residences (the “Stage 1 Independent Living Apartments”) in one-bedroom and two-bedroom configurations in three three-story buildings with underground parking, 48 assisted living apartments (the “Stage 1 Assisted Living Apartments”) in a three-story building, and two common area buildings (the “Stage 1 Commons”).

Stage 2 consists of 54 independent living apartment-style residences (the “Stage 2 Independent Living Apartments”) in one-bedroom and two-bedroom configurations in a three-story building with underground parking and two two-story buildings with services and amenities for residents (the “Stage 2 Commons”). The Stage 2 Commons are planned to include office space and amenity areas that may be operated by the Corporation or leased to third parties who will provide services to the Residents and potentially to the local community.

The Corporation’s Board of Directors approved the commencement of Stage 2 development activities prior to the completion of Stage 1 in order to take advantage of the economies created by Stage 1 of the Village. Stage 2 responds to unmet market demand evidenced by deposits received for Stage 1 Independent Living Apartments and the growing waitlists for the Existing Independent Living Apartments and Villas and Stage 1 Independent Living Apartments. Commencing Stage 2 in 2018 permits the Corporation to build seamlessly, with one period of construction ending in 2019 and reduces disruption to residents rather than starting a new construction project in the future. The overall project costs will be reduced by maintaining current entitlements, paying permit and system development charges prior to known rate increases and avoiding design and permit review under proposed new building code requirements and related redesign fees. In addition, commencement of Stage 2 in 2018 permits the Corporation to take advantage of resources already in place, including the sales office, the trained sales team, the general contractor and preferred subcontractors.

Stage 1 and Stage 2 are referred to together as the “Project.” The Stage 1 Independent Living Apartments and the Stage 2 Independent Living Apartments are referred to together as the “Expansion Independent Living Apartments.” The Existing Independent Living Apartments and Villas and Expansion Independent Living Apartments are collectively referred to herein as the “Independent Living Apartments.”

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EXPANSION INDEPENDENT LIVING APARTMENTS

Each Expansion Independent Living Apartment will be furnished with floor coverings, self-defrosting refrigerator and freezer with icemaker, range/oven, dishwasher, microwave oven, garbage disposal, washer/dryer, an emergency call system, fire sprinkler system, and a telephone/data communications port. Utilities including electricity, gas, sewer, water, basic telephone service, basic Wi-Fi internet services, and basic cable television services are included in the Monthly Service Fee (as hereinafter defined).

The common areas include central gathering space, main dining room, private dining room, bistro, bar/lounge, a 318-seat performance auditorium, art studio and gallery, theater, multi-purpose rooms, conference room, landscaped courtyards, salon, spa and residential storage. Each Expansion Independent Living Apartment will have reserved underground parking.

Summarized below is the Expansion Independent Living Apartment mix and square footage.

STAGE 1 INDEPENDENT LIVING NUMBER OF APPROXIMATE SQUARE APARTMENT TYPE UNITS FOOTAGE Deschutes 1 bedroom/1 bath 24 823 – 909 McKenzie 1 bedroom/1.5 bath/den 54 1,055 – 1,110 Willamette 2 bedroom/2 bath 38 1,225 – 1,254 Columbia 2 bedroom/2 bath/den 28 1,410 – 1,441 Total / Weighted Average 144 1,148 ______Source: The Corporation.

STAGE 2 INDEPENDENT LIVING NUMBER OF APPROXIMATE SQUARE APARTMENT TYPE UNITS FOOTAGE Deschutes 1 bedroom/1 bath 12 823-844 McKenzie 1 bedroom/1.5 bath/den 18 1,055 – 1,092 Willamette 2 bedroom/2 bath 12 1,225 Columbia 2 bedroom/2 bath/den 12 1,423 Total / Weighted Average 54 1,133 ______Source: The Corporation.

By entering into a Residency and Care Agreement (as hereinafter defined), a resident of the Expansion Independent Living Apartments (the “Resident”) will be entitled to certain healthcare benefit services (the “Healthcare Benefit”) including ten free non-cumulative healthcare days, a 20% discount on any additional healthcare days and priority admission to the Health Care Center. See “RESIDENCY AGREEMENTS” herein for a further description of the services provided to Residents and “Resident Fee Structure” below for a description of the types of fees paid by Residents.

STAGE 1 ASSISTED LIVING APARTMENTS AND SUITES

The Stage 1 Assisted Living Apartments have been designed to provide service and amenity options for Residents who require various levels of assistance with activities of daily living. The Stage 1 Assisted Living Apartments are private apartments with kitchenettes and full baths, and they are furnished with floor coverings, window coverings, self-defrosting refrigerator and freezer with icemaker, microwave oven, garbage disposal, an emergency call system, fire sprinkler system, and a telephone/data communications port. Basic telephone service, basic Wi-Fi internet services, and basic cable television services are included. Common areas include a dining room, bistro and coffee bar, lobby, lounge, wellness and fitness room, chapel and reflection space, arts and crafts area, multipurpose room, library, dining room, gardens, outdoor areas and administrative and support service areas.

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Stage 1 Assisted Living Apartments are available to Residents of the Community in accordance with the terms of the Residency and Care Agreement. The Stage 1 Assisted Living Apartments will also be available to persons other than Residents (“Direct Admits”). Direct Admits may move into a Stage 1 Assisted Living Apartment pursuant to the terms of a separate Residency and Care Agreement, on an as-available basis when units are not required to accommodate a Resident. Direct Admits pay a monthly service fee but do not pay an Entrance Fee (as hereinafter defined), and they do not receive the Healthcare Benefit.

The Stage 1 Assisted Living Apartment residents will have access to the Marie Rose Health Care Center through an Americans with Disabilities Act (“ADA”) handicap accessible walkway that will provide residents access to a salon and spa, main chapel, additional dining venues with outdoor seating, common areas and life enrichment programs. Residents may also access a secure courtyard with ample seating, landscaping, and a water feature. All Residents have access to all programs and activities throughout the Community.

Summarized below is the Stage 1 Assisted Living Apartment mix and square footage. For information on Stage 1 Assisted Living Apartment pricing for Residents refer to “Residency and Care Agreement – Healthcare Benefit” herein. Residents of Mary’s Woods Independent Living Apartments receive a 20% discount from market rates paid by Direct Admits. Monthly service fees will be similar to the existing assisted living apartments and suites. Fees are determined by size of apartment and level of services required by a resident.

STAGE 1 ASSISTED LIVING NUMBER OF APPROXIMATE SQUARE APARTMENT TYPE UNITS FOOTAGE

Standard Alcove suite/studio 17 360 Deluxe 1 bedroom/1 bath 31 520 Total / Weighted Average 48 467 ______Source: The Corporation.

PRE-FINANCE FUNDING

As of February 28, 2018, the Corporation has spent approximately $1,482,412 on pre-finance expenditures for Stage 2, $1,482,285 of which was paid from available contingency funded by the Series 2017 Bonds. Upon issuance of the Series 2018 Bonds, the Corporation will be reimbursed with Series 2018 bond proceeds for all pre-finance expenditures spent as of February 28, 2018, plus any additional expenditures between February 28, 2018 and the date of issuance of the Series 2018 Bonds, less any amount funded by the Series 2017 Bonds. Upon issuance of the Series 2018 Bonds, the project contingency, contractor-held construction contingency and owner-held construction contingency will be reset to appropriate levels to support the completion of both Stage 1 and Stage 2.

REGULATORY PERMITS AND APPROVALS

The various approvals and permits necessary in order for the Corporation to begin construction of the Project and commence operations are outlined below.

Development Approval. The Stage 1 and Stage 2 Expansion Independent Living Apartments, the Village Commons and Stage 1 Assisted Living Apartments sites are zoned to permit development as planned.

Building Permits. The City of Lake Oswego Building Division has issued full building permits for the Stage 1 and Stage 2 Expansion Independent Living Apartments, the Village Commons and Stage 1 Assisted Living Apartments as approved by the City of Lake Oswego Development Review Commission.

Environmental Study. In connection with the issuance of the Series 2017 Bonds, the Corporation obtained Phase I environmental site assessments for the property on which the existing Community and the Project are located. No evidence of recognized environmental conditions was revealed by the Phase I site assessments. Following the issuance of the Series 2017 Bonds, the Corporation completed demolition of a former residence in the center of the

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campus where the Stage 1 Assisted Living Apartments will be located. An asbestos abatement protocol plan was obtained and followed in connection with this portion of the site. During the construction of Stage 1, a small zone of contaminated soil was unearthed. Certified Environmental Consulting, Inc., the environmental consultant and author of the Phase I report, investigated the issue, wrote an action plan and oversaw the proper mitigation of the issue.

Geotechnical Study. The Corporation also obtained a geotechnical engineering report from Geotechnical Resources, Inc. (GRI), Beaverton, Oregon in connection with the Project.

Other Licenses and Permits. As with all major construction projects, the Corporation must obtain numerous licenses, permits, or approvals from various governmental agencies, both for construction work and to operate various portions of the Project after completion. Applications for certain approvals may not be made until certain site work and detailed plans have been prepared or construction is completed. In some cases, approvals may only involve an administrative review to ensure compliance with approvals already obtained or payment of a fee, and in other cases approvals involve the exercise of discretion by government authorities. See “RISK FACTORS—Construction Risks” in the forepart of this Official Statement.

ANTICIPATED PROJECT TIMELINES

Stage 1 construction commenced in March 2017. As of February 28, 2018, total direct construction for Stage 1 is approximately 35% complete. The Stage 1 site work is substantially complete. The foundations or underground parking garages for each of the six Stage 1 buildings are in place. Vertical construction of five of the six Stage 1 buildings is in process. Stage 2 preliminary construction commenced in January 2018. As of February 28, 2018, a substantial portion of the Stage 2 site work is complete. The foundations for two of the three Stage 2 buildings are underway, and geo-piers are complete below the residential building garage. In completing much of the site work, the construction of Stage 1 and Stage 2 has progressed through a primary risk issue associated with coming out of the ground. There have been some delays associated with weather and detailing of the roof of the commons buildings; however, the Stage 1 project remains on schedule.

Management’s timeline for the Project is summarized in the following table.

Anticipated Project Timeline for Stage 1 of The Village

DATE ITEM March 2017 Construction commences April 2017 Stage 1 Financing November 2018 Initial Stage 1 Independent Living Occupancy May 2019 Construction complete July 2019 Initial Stage 1 Assisted Living Occupancy

Anticipated Project Timeline for Stage 2 of The Village

DATE ITEM

January 2018 Construction commences May 2018 Stage 2 Financing November 2019 Initial Stage 2 Expansion Independent Living Occupancy November 2019 Construction complete ______Source: The Corporation.

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RESERVATION AGREEMENT

In order to reserve an Independent Living Apartment, a prospective Resident must execute a Reservation Agreement (“Reservation Agreement”), provide self-disclosure of health and finances, and place a deposit equal to at least 10% of the Entrance Fee on the selected Independent Living Apartment (a “Reservation Deposit”). To qualify to be a Resident at the Community, the prospective Resident must meet health and financial parameters as established by the Corporation. Under current financial parameters, the prospective Resident generally must have assets at least equal to 150% to 200% of the Entrance Fee as well as receive monthly income equal to 150% to 200% of the Monthly Service Fee for the specific Independent Living Apartment selected. To qualify based on health parameters, a prospective Resident must have the ability to live independently with reasonable support services and be at least 62 years old. See “PROJECT MARKETING – Reservation of Expansion Independent Living Apartments.” The Reservation Agreement reserves the right of the prospective Resident to choose the selected Independent Living Apartment and indicate his or her intent to execute a Residency and Care Agreement. The Reservation Agreement also provides Residents, upon payment of the full Entrance Fee due for such resident’s contracted Independent Living Apartment, priority direct admission to the Health Care Center should their health needs change prior to their occupancy of their reserved Independent Living Apartment. This priority direct admission will commence at the time of occupancy and may be in any Health Care Center location depending on availability and need of the Residents.

RESIDENT FEE STRUCTURE

There are two types of residency fees required of all Residents executing Residency and Care Agreements – an entrance fee and monthly service fee. The Entrance Fee is a lump sum, one-time payment based on the type of Independent Living Apartment to be occupied by the Resident and the type of Entrance Fee plan selected. The Monthly Service Fee is based on the type of Independent Living Apartment selected by the Resident. In addition to the first resident’s Monthly Service Fee, an additional Monthly Service Fee is payable for a second Resident living in an Independent Living Apartment.

The Corporation will offer a Plan 1, 80% refundable contract to the Residents of Expansion Independent Living Apartments similar to the Plan 1 contract offered for the Existing Independent Living Apartments and Villas. The Plan 1 contract provides for 80% of the Entrance Fee to be refunded upon the Resident’s termination of the Residency and Care Agreement and re-occupancy of the Resident’s Independent Living Apartment or re-occupancy of an Independent Living Apartment of the same type as the one occupied by the Resident. During the initial presales of the Expansion Independent Living Apartments, there were two additional alternative contracts available. A Plan 2, 50% refundable contract, and a Plan 3, fully amortizing contract. Under Plan 2, the Monthly Service Fee is discounted 20% per month from Plan 1 pricing. The Entrance Fee for Plan 2 is the same as Plan 1 and amortizes 2% per month for 20 months from the date of occupancy plus an immediate 10% upon move-in, but in no event will the Entrance Fee refund amortize below 50% of the Entrance Fee. Under Plan 3, the Monthly Service Fee is the same as Plan 1. The Entrance Fee for Plan 3 contracts is discounted from Plan 1 Entrance Fees by 40% for Existing Independent Living Apartments, 30% for Expansion Independent Living Apartments and amortizes 2% per month for 45 months from the date of occupancy plus an immediate 10% upon move-in, until the Entrance Fee is fully amortized.

The Corporation plans to offer a limited number of Plan 2 (26 maximum) and Plan 3 (13 maximum) contracts for the Expansion Independent Living Apartments.

See the information under the caption “RESIDENCY AGREEMENTS – Healthcare Benefit” for a detailed description of the Healthcare Benefit.

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EXPANSION INDEPENDENT LIVING APARTMENT PRICING

Monthly Service Fees and Entrance Fees for Stage 1 Independent Living Apartments are shown below in 2020 dollars for Fiscal Years 2019 and 2020.

PLAN 1 AND PLAN 2: 80%/50% PLAN 3: NON- NUMBER MONTHLY REFUNDABLE REFUNDABLE OF UNITS SERVICE FEE(1) ENTRANCE FEE(2) (3) ENTRANCE FEE(3)

Deschutes – Standard 1 Bedroom/1 Bath 18 $3,495 $360,789 $252,552 Deschutes – Option 2 1 Bedroom/1 Bath 6 3,545 385,233 269,663 McKenzie – Standard 1 Bedroom/2 Bath /Den 30 3,895 461,233 322,863 McKenzie – Option 4 1 Bedroom/2 Bath /Den 18 3,995 491,622 344,135 McKenzie – Option 5 1 Bedroom/2 Bath /Den 6 3,995 476,900 333,830 Willamette – Standard 2 Bedroom/2 Bath 20 4,575 530,650 371,455 Willamette – Option 1 2 Bedroom/2 Bath 6 4,575 545,233 381,663 Willamette – Option 2 2 Bedroom/2 Bath 6 4,575 535,233 374,663 Willamette – Option 3 2 Bedroom/2 Bath 6 4,575 525,233 367,663 Columbia – Standard 2 Bedroom/2 Bath /Den 14 4,995 612,971 429,080 Columbia – Option 1 2 Bedroom/2 Bath /Den 2 4,995 596,900 417,830 Columbia – Option 2 2 Bedroom/2 Bath /Den 6 4,995 607,733 425,413 Columbia – Option 3 2 Bedroom/2 Bath /Den 6 4,995 620,233 434,163

Total / Weighted Average 144 $4,240 $498,219 $348,753

Pioneer Second Person Fees $ 650 Second Person Fees $ 750 ______Source: The Corporation. (1) The monthly service fee is reduced by 20% for residents with Plan 2 Residency and Care Agreements. (2) The Entrance Fee is 80% refundable under Plan 1 and 50% refundable under Plan 2. (3) The Entrance Fees included in the table are rates established for Pioneer Members. Pioneer Members receive a 5% discount on the Entrance Fee from standard pricing.

Monthly Service Fees and Entrance Fees for Stage 2 Independent Living Apartments are shown below in 2020 dollars for Fiscal Year 2020.

PLAN 1 AND PLAN 2: 80%/50% PLAN 3: NON- NUMBER MONTHLY REFUNDABLE REFUNDABLE OF UNITS SERVICE FEE(1) ENTRANCE FEE(2) (3) ENTRANCE FEE(3)

Deschutes – Standard 1 Bedroom/1 Bath 9 $3,495 $411,678 $288,175 Deschutes – Option 1 1 Bedroom/1 Bath 3 3,495 410,567 287,397 McKenzie – Standard 1 Bedroom/1.5 Bath /Den 3 3,895 522,900 366,030 McKenzie – Option 1 1 Bedroom/1.5 Bath /Den 3 3,895 525,567 367,897 McKenzie – Option 2 1 Bedroom/1.5 Bath /Den 3 3,895 523,567 366,497 McKenzie – Option 3 1 Bedroom/1.5 Bath /Den 9 3,895 530,011 371,008 Willamette – Standard 2 Bedroom/2 Bath 12 4,575 585,983 410,188 Columbia – Standard 2 Bedroom/2 Bath /Den 12 4,995 679,400 475,580

Total / Weighted Average 54 $4,202 $548,289 $383,802

Second Person Fees $ 750(4) ______Source: The Corporation. (1) The monthly service fee is reduced by 20% for residents with Plan 2 Residency and Care Agreements. (2) The Entrance Fee is 80% refundable under Plan 1 and 50% refundable under Plan 2. (3) The Entrance Fees included in the table are rates established for Explorer Members. (4) Pioneer Members transferring from Stage 1 will pay $650 for the second person fee.

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Additional services may be available on a fee-for-service basis including, but not limited to, additional housekeeping, laundry services for personal items, catering, tray service, guest meals, salon services, personalized training, specialized transportation and covered parking.

PIONEER AND EXPLORER BENEFITS

Through December 31, 2016, to encourage early commitments to residency at The Village, the Corporation offered prospective Stage 1 Residents a package of benefits (the “Pioneer Benefits”). Depositors that receive Pioneer Benefits are referred to as “Pioneer Members.” Pioneer Benefits include, but are not limited to, the following: (i) a 5% discount on the Entrance Fee from standard pricing (a “Pioneer Entrance Fee”); (ii) no second person Entrance Fee, if applicable; (iii) no increase in Monthly Service Fees until July 1, 2020; (iv) $100 lifetime discount on second person Monthly Service Fee; (v) interest earned at the prevailing rate on the escrow account until the date the Stage 1 Independent Living Apartment is ready for occupancy (credited to the balance of the Entrance Fee); (vi) guaranteed occupancy regardless of changes in health between signing of the Reservation Agreement and occupancy, as long as Stage 1 of The Village at Mary’s Woods is open and available for occupancy, the appropriate level of care is available and the Resident’s Entrance Fee has been paid in full; (vii) the opportunity to personalize their selected Stage 1 Independent Living Apartment; (viii) a 15 person private party catered by The Village; and (ix) a complimentary underground parking space.

From February 19, 2018, until the issuance of the Series 2018 Bonds, the Corporation is offering a similar package of benefits (“Explorer Benefits”) to encourage early commitments to residency at Stage 2 of The Village. Depositors that receive Explorer Benefits are referred to as “Explorer Members.” Explorer Benefits include, but are not limited to, the following: (i) no second person Entrance Fee, if applicable; (ii) no increase in Monthly Service Fees until July 1, 2020; (iii) interest earned at the prevailing rate on the escrow account until the date the Stage 2 Independent Living Apartment is ready for occupancy (credited to the balance of the Entrance Fee); (iv) guaranteed occupancy regardless of changes in health between signing of the Reservation Agreement and occupancy, as long as Stage 2 of The Village at Mary’s Woods is open and available for occupancy, the appropriate level of care is available and the Resident’s Entrance Fee has been paid in full; (v) the opportunity to personalize their selected Stage 2 Independent Living Apartment; (vi) a 15 person private party catered by The Village; and (vii) a complimentary underground parking space.

All of the Pioneer and Explorer Benefits will expire if the Pioneer or Explorer Member has not moved into his or her respective Expansion Independent Living Apartment within 60 days of the date his or her selected unit is available unless agreed to in writing by the Corporation prior to the 60-day expiration period.

PROJECT MARKETING

GENERAL

A prospective Resident may reserve an Expansion Independent Living Apartment by submitting a confidential data profile, including health and financial disclosure, executing a Reservation Agreement and submitting a Reservation Deposit. The execution of a Residency and Care Agreement does not constitute a binding commitment on the part of any prospective Resident to establish occupancy at the Community. Prospective Residents may terminate their Residency and Care Agreements from time to time and receive refunds of all amounts paid to the Corporation. See “RESIDENCY AGREEMENTS – Termination and Refunds” herein.

MARKETING PROGRAM – EXPANSION INDEPENDENT LIVING APARTMENTS

Management of the Corporation anticipates offering a variety of incentive programs to encourage depositors to move into the Expansion Independent Living Apartments on an accelerated basis.

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RESERVATION OF EXPANSION INDEPENDENT LIVING APARTMENTS

Prospective Residents interested in a Stage 1 Independent Living Apartment were offered the opportunity to enter into a Reservation Agreement beginning in July 2016. As part of the reservation process, a prospective Resident is provided an annual disclosure statement as filed with the State of Oregon, including a project description that includes a draft of the Residency and Care Agreement. Through March 28, 2018, 120 of the 144 available Stage 1 Independent Living Apartments (representing 83.3% of the total available Stage 1 Independent Living Apartments) are reserved by prospective Residents who have paid a Reservation Deposit and executed a Reservation Agreement. The table below depicts the net and cumulative Reservation Deposits received for Stage 1 Independent Living Apartments as of March 28, 2018.

Prospective Residents who have paid a Reservation Deposit and executed a Reservation Agreement also have the opportunity to personalize their future apartments. The personalization program for Stage 1 commenced in July 2017. As of February 28, 2018, 101 prospective residents have selected $491,000 worth of personalization upgrades. Of these 101 prospective residents, 74 have paid non-refundable deposits, totaling $298,000, for their respective personalization upgrades. The marketing team anticipates completing personalizations for Stage 1 in June 2018. The personalization program for Stage 2 is anticipated to commence in April 2018.

Net and Cumulative Deposits

NUMBER OF STAGE 1 EXPANSION INDEPENDENT LIVING NUMBER OF NUMBER OF NET CUMULATIVE CUMULATIVE APARTMENTS TRANSFERS TO CANCELLATIONS RESERVATIONS FOR UNITS % OF TOTAL MONTH/YEAR RESERVED STAGE 2 / REFUNDS MONTH RESERVED UNITS

July 2016 5 - 0 5 5 3.5% August 2016 60 - 0 60 65 45.1% September 2016 43 - 0 43 108 75.0% October 2016 14 - 1 13 121 84.0% November 2016 11 - 1 10 131 91.0% December 2016 4 - 0 4 135 93.8% January 2017 4 - 0 4 139 96.5% February 2017 3 - 1 2 141 97.9% March 2017 0 - 1 (1) 140 97.2% April 2017 1 - 0 1 141 97.9% May 2017 3 - 3 0 141 97.9% June 2017 0 - 4 (4) 137 95.1% July 2017 1 - 3 (2) 135 93.8% August 2017 2 - 1 1 136 94.4% September 2017 2 - 1 1 137 95.1% October 2017 5 - 4 1 138 95.8% November 2017 2 - 4 (2) 136 94.4% December 2017 2 - 0 2 138 95.8% January 2018 2 - 4 (2) 136 94.4% February 2018 3 23 4 (24) 112 77.8% March 2018* 9 - 1 8 120 83.3% Total 176 23 33 120 120 83.3% ______Source: The Corporation. * As of March 28, 2018.

One couple and two individuals currently living in the Existing Independent Living Apartments and Villas have made 10% reservation deposits for the Stage 1 Independent Living Apartments.

As a result of the interest shown in the Stage 1 Independent Living Apartments, the Corporation started a waitlist for prospective Residents. In order to be placed on the waitlist, prospective Residents must make a $1,000

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deposit. As of February 28, 2018, there were 54 people on the waitlist. Most of the people on the waitlist had requested apartment types or specific apartments that are currently reserved by other Residents or were waiting for a Stage 2 Independent Living Apartment. The waitlist deposit is refundable at any time less a $300 administrative fee. Beginning on February 19, 2018, Mary’s Woods began offering first Stage 1 depositors, then waitlist members and then the public at large, the opportunity to enter into a Reservation Agreement for a Stage 2 Independent Living Apartment. Through March 28, 2018, 40 of the 54 available Stage 2 Independent Living Apartments (representing 74% of the total Stage 2 Independent Living Apartments) are reserved by prospective Residents who have paid a Reservation Deposit and executed a Reservation Agreement. The table below depicts the net and cumulative Reservation Deposits received for Stage 2 Independent Living Apartments as of March 28, 2018.

Stage 2 Net and Cumulative Deposits

NUMBER OF STAGE 2 EXPANSION INDEPENDENT NUMBER OF LIVING TRANSFERS NUMBER OF NET CUMULATIVE CUMULATIVE APARTMENTS FROM STAGE CANCELLATIONS/ RESERVATIONS UNITS % OF TOTAL MONTH/YEAR RESERVED 1 REFUNDS FOR MONTH RESERVED UNITS

February 2018 - 23 - 23 23 42.6% March 2018 17 - - 17 40 74.1% Total 17 23 - 40 40 74.1% ______Source: The Corporation. * As of March 28, 2018.

Through March 28, 2018, 160 of the available 198 aggregate Stage 1 and Stage 2 Independent Living Apartments (representing 80.8% of the total Stage 1 and Stage 2 Independent Living Apartments) are reserved by prospective Residents who have paid a Reservation Deposit and executed a Reservation Agreement.

The data submitted by prospective Residents are evaluated and reviewed by the Corporation to determine the suitability of applicants for residency at the Community. A description of the criteria used to evaluate prospective Residents’ applications is set forth in “Residency and Care Agreement” herein. Prospective Residents are subsequently notified of the decision to accept or reject the application. In the case of prospective Residents accepted for residency, Reservation Agreements are executed by the prospective Residents and the Corporation. Additionally, prospective Residents pay the initial 10% reservation deposit at the time the Reservation Agreement is executed. In the case of a depositor’s cancellation, the initial 10% Reservation Deposit is refunded in full, less a $300 administrative fee.

PROJECT DEVELOPMENT

The Corporation retained GCD Oregon, LLC (“Greystone”), a Texas limited liability company, to act as development, marketing, finance, and management consultant for the Project. Together with Greystone, the project team consists of Ankrom Moisan Architectures, Inc. (the “Architect”), R&H Construction (the “General Contractor”), Construction Project Management, Inc. (“CPM”), as owner’s representative, and zumBrunnen, Inc. (the “Construction Monitor”).

THE DEVELOPMENT CONSULTANT – GREYSTONE

The Corporation entered into a Development Management Advisory Agreement effective July 31, 2015, (the “Stage 1 Development Agreement”) with Greystone under which Greystone is responsible for providing development consulting services for Stage 1. The Corporation entered into a second Development Management Advisory Agreement effective January 31, 2018 (the “Stage 2 Development Agreement” and together with the Stage 1

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Development Agreement, the “Development Agreements”) with Greystone under which Greystone is responsible for providing development consulting services for Stage 2.

Greystone and its affiliates specialize in providing planning, development, marketing, management, and strategic consulting services related to all areas critical to the senior housing and services business. Greystone currently has a staff of approximately 85 persons.

Greystone and its affiliates are owned by Greystone Partners II LP, a privately held partnership including employees of Greystone. Greystone Partners II LP and its operating predecessors have a history of working in the senior living industry since 1982.

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GREYSTONE DEVELOPMENT CONSULTING EXPERIENCE

Greystone and its affiliates are currently, or have been, responsible for more than 100 senior living community development and expansion projects. Senior living communities, both completed and in process, for which Greystone and its affiliates have recently provided development services within the last five years include:

YEAR CONSTRUCTION FACILITY LOCATION COMPLETED Oak Trace – Phase II Downers Grove, IL Est. 2021 Waterman Village – Phase II Mount Dora, FL Est. 2021 Cloverwood – Phase II Rochester, NY Est. 2021 Stevenson Oaks Fort Worth, TX Est. 2021 Aberdeen Heights – Phase II Kirkwood, MO Est. 2020 El Castillo – Ghost Ranch Santa Fe, NM Est. 2020 Friendship Village of Waterloo Waterloo, IA Est. 2020 Fleet Landing – Phase II Atlantic Beach, FL Est. 2020 Friendship Village of Bloomington Bloomington, MN Est. 2020 Legacy Pointe at UCF Orlando, FL Est. 2020 The Colonnade of Estero Estero, FL Est. 2020 The Farms at Bailey Station Collierville, TN Est. 2020 Village on the Green Longwood, FL Est. 2020 Riverwoods – Durham Durham, NH Est. 2019 Oak Trace – Phase I Downers Grove, IL Est. 2019 Friendship Village of South Hills Upper St. Clair, PA Est. 2019 Abbey Delray Delray Beach, FL Est. 2019 Woodlands at Furman – Villa Expansion Greenville, SC Est. 2018 Miralea – The Meadow and Grove Pointe Louisville, KY Est. 2018 The Meadows at John Knox Village Lee’s Summit, MO Est. 2018 Deerfield Urbandale, IA 2018 Edgemere – Phase III Dallas, TX 2017 The Buckingham – Phase II Houston, TX 2017 Gulf Coast Village Cape Coral, FL 2017 Baptist Life Communities Alexandria, KY 2017 Santa Marta Olathe, KS 2016 The Terraces at Los Altos – Phase III Los Altos, CA 2016 The Courtyards at John Knox Village Lee’s Summit, MO 2016 The Westerly at Wichita Presbyterian Manor Wichita, KS 2015 East Ridge Retirement Village – Phase II Miami, FL 2015 Miralea – Phase II Louisville, KY 2015 The Crossings League City, TX 2015 The Terraces of Boise Boise, ID 2015 El Castillo Retirement Residences Santa Fe, NM 2015 Redstone Village – Phase VI Huntsville, AL 2015 The Terraces at Los Altos – Phase II Los Altos, CA 2015 Wichita Presbyterian Manor Wichita, KS 2014 The Terraces at Los Altos – Phase I Los Altos, CA 2014 The Terraces at San Joaquin Gardens – Phase II Fresno, CA 2014 The Barrington of Carmel Carmel, IN 2014 Wichita Presbyterian Manor Wichita, KS 2014 Redstone Village – Phase V Huntsville, AL 2013 Edgewood Summit – Phase III Charleston, WV 2013 The Terraces at Bonita Springs Bonita Springs, FL 2013 Arbor Oaks at Crestview Bryan, TX 2013 ______Source: Greystone.

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GREYSTONE CORPORATE OFFICERS

The senior corporate officers of Greystone include the following individuals:

Michael B. Lanahan, Co-Chairman. Mr. Lanahan founded Greystone in 1982 and now serves as Co-Chairman. Mr. Lanahan’s responsibilities include assuring Greystone’s resources are aligned with client needs and positioning the company to succeed in a changing senior living environment. Mr. Lanahan was formerly a Senior Vice President with Blyth Eastman Paine Webber Health Care Funding in New York. He received his B.A. from Syracuse University and M.B.A. from the University of Virginia.

Paul F. Steinhoff, Jr., Co-Chairman. Mr. Steinhoff joined Greystone in 1984 and now serves as Co-Chairman. Mr. Steinhoff’s responsibilities include strategic financial planning, assuring the professional development of Greystone’s staff and interfacing with investors in Greystone developments. Mr. Steinhoff was formerly a Partner with Touche Ross & Co. (now Deloitte & Touche). He received his B.B.A. in Business Statistics and his M.B.A. in Accounting and Finance from the University of Texas. Mr. Steinhoff is a Certified Public Accountant.

Mark P. Andrews, Co-Chief Executive Officer. Mr. Andrews joined Greystone in 1984 and now serves as Co-CEO. His responsibilities include overseeing the planning, finance, marketing, development, and management divisions of Greystone. Mr. Andrews was formerly with the management consulting practice of Deloitte & Touche. He received his B.A. from the University of the South and his M.B.A. from the A.B. Freeman School of Business at Tulane University.

John C. Spooner, Co-Chief Executive Officer. Mr. Spooner joined Greystone in 1986 and now serves as Co-CEO. His responsibilities include managing and driving annual business performance, formulating and executing strategies for clients, and interacting with clients, employees, investors and other stakeholders. Mr. Spooner speaks publicly on a range of topics involving the business of senior living. He received his B.A. in Public Administration from Drake University, an Advanced Fellowship in Economics from University of London and completed graduate studies in Marketing at the University of Pittsburgh.

David C. McDowell, AIA, Senior Vice President. Mr. McDowell is responsible for managing the real estate development activities at Greystone. He oversees the teams responsible for land acquisition, project planning, design coordination and construction phase activities on behalf of Greystone clients. He has more than 30 years of experience in senior living, including project design, development management and construction oversight. Before joining Greystone in 1994, Mr. McDowell was a partner at the architectural firm of Fusch-Serold and Partners, Inc. and was the principal architect for the firm’s senior living work. Mr. McDowell received a Bachelor of Architecture from Texas Tech University in 1973.

Robert “Bud” Green, Senior Vice President. Mr. Green is responsible for delivering a full range of development services to Greystone clients. This includes supervision and coordination of all design and construction consultants, including architects, engineers, contractors, land planners, interior designers, and governing authorities. Before joining Greystone in 2003, Mr. Green was Executive Vice President for a national development firm, with responsibility for all real estate development activities. Additionally, he was responsible for all real estate properties developed for the United States Postal Service.

Stuart Jackson, Senior Vice President. Mr. Jackson’s responsibilities include planning and financial structuring of senior living projects and implementation of Greystone financing programs. He also has responsibility for coordinating Business Plan, Development Plan and Strategic Plan preparation, and works with project finance teams to coordinate financing activities. Before joining Greystone in 1999, Mr. Jackson was with Arthur Andersen, LLP, providing accounting and financial advisory services to clients primarily in the real estate industry. Mr. Jackson received his Bachelor of Business Administration in Accounting from Texas A&M University. He is a Certified Public Accountant in the state of Texas.

Brad Straub, Senior Vice President. Mr. Straub’s responsibilities include planning and financial structuring of senior living projects and implementation of Greystone’s financing programs. He is also responsible for

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coordinating Business Plan, Development Plan and Strategic Plan preparation, and works with project finance teams in coordinating financing activities. Before joining Greystone in 2003, Mr. Straub was an Associate Consultant with Bain & Company, providing strategy consulting, financial consulting and business improvement services to clients in various industries. Mr. Straub received his Bachelor of Business Administration in Accounting and Master of Science in Management Information Systems from Texas A & M University. Mr. Straub is a Certified Public Accountant in the State of Texas.

James D. Knox, Senior Vice President. Mr. Knox leads Greystone’s Financial and Operations Management Services. He oversees teams responsible for operational systems, hospitality and culture, staffing, compliance and accounting, with special emphasis on financial reporting, annual budgeting, and projection of future performance for Greystone-managed communities. Mr. Knox first joined Greystone in 1994 as a member of the Planning and Financial Services team. He previously worked with Coopers & Lybrand.

Bruce C. Byers, Senior Vice President. Mr. Byers joined Greystone in 2003 and is responsible for marketing new development projects through the start of the operational process. He coordinates and assists marketing efforts between regional sales team members and clients. Mr. Byers has worked in the senior living industry for 17 years and has been involved with the marketing of over 60 senior living communities nationwide.

Merna Smith, Senior Vice President. Ms. Smith joined Greystone in 2006 and has responsibility for supervising and supporting the regional managers responsible for the occupancy development and revenue performance in operational communities. This includes staff recruitment and training, sales and marketing execution, strategic planning and budget oversight. Prior to joining Greystone, Ms. Smith was a corporate director of marketing and operations where she was responsible for marketing and sales oversight for 26 various types of senior living community. She handled the opening and start-up operations of new communities for all levels of senior living and health care, including independent living, memory support and skilled nursing.

Janelle E. Wood, Senior Vice President and Chief Financial Officer. Ms. Wood’s primary responsibilities include financial planning and management functions. She has responsibility for all corporate finance and accounting activities, such as customer billing, financial reporting, budgeting and cash management. Before joining Greystone in 2000, Ms. Wood was the controller for a company in Richardson, Texas, and a consultant with PriceWaterhouse, where she provided accounting and financial services to clients in several industries. Ms. Wood received a Bachelor of Business Administration in Accounting from Baylor University. She is a Certified Public Accountant in the State of Texas.

GREYSTONE DEVELOPMENT AGREEMENT

The Development Agreements call for Greystone to provide the following services: (a) all necessary planning to implement the Stage 1 and Stage 2 expansion plan approved by the Corporation, including any revisions thereto; (b) assistance in obtaining all necessary government approvals required for the development and construction of Stage 1 and Stage 2; (c) assistance with selection of design consultants and a pre-construction consultant, and coordinating submission of plans and specifications to the Corporation for the Corporation’s approval; (d) assistance with development of a resident services program; (e) assistance in the implementation of the marketing program for The Village to initial Residents; (f) assistance in securing permanent financing for Stage 1 and Stage 2; (g) assistance in negotiating and awarding a construction contract for Stage 1 and Stage 2 and thereafter monitoring the progress of construction; (h) preparation of monthly cost reports; (i) assistance in providing filing and disclosure requirements imposed by applicable law in connection with the offering of interests in Stage 1 and Stage 2; and (j) assistance related to the Village Ground Lease.

Pursuant to the Development Agreements, Greystone will assist with marketing of The Village until 90% occupancy of Stage 1 and Stage 2 Independent Living Apartments is achieved. In connection therewith, Greystone will (a) advise in coordinating and managing the marketing staff to implement the overall marketing program for The Village; (b) assist in developing and supervising implementation of a marketing and sales program, including promotional, advertising and media campaigns in conjunction with an advertising firm; (c) assist in recruiting, hiring, training and monitoring the marketing and sales staff; (d) assist in identifying a location for an information center and in coordinating the design, construction, and equipping of the information center; (e) assist in developing a program

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for responding to public inquiries; (f) assist the Corporation in preparing any Resident disclosure documents; and (g) assist in developing Resident admission criteria and coordinating the process for the Corporation’s approval of Reservation Agreements and Residency and Care Agreements with prospective Residents.

The Corporation will exercise final authority on the following matters: approval of architect, other design professionals, engineering professionals, pre-construction consultants, and construction representative; approval of final working drawings; selection and engagement of a source of permanent financing, as defined in the Development Agreements, and the execution of all commitments and loan documents with respect to financing; selection and engagement of a feasibility consultant and actuarial consultant, selection and engagement of a general contractor for construction; negotiation and execution of a construction contract; final approval of all budgets for planning, development, construction and marketing prepared by Greystone, final approval and revisions of the Stage 1 and Stage 2 Expansion Plans prepared by Greystone, approval of all regulatory filings or public disclosure for Stage 1 and Stage 2, selection and engagement of the media and promotion firm for Stage 1 and Stage 2 and approval of the marketing materials for Stage 1 and Stage 2, approval of all funding requisitions associated with Stage 1 and Stage 2, approval of the form of Reservation Agreement and Residency and Care Agreement and approval of all actual Reservation Agreements and Residency and Care Agreements with residents, and approval of the resident fees, refund plans and any changes thereto.

As compensation for services rendered pursuant to the Stage 1 Development Agreement, the Corporation will pay Greystone a fee (the “Stage 1 Consulting Fee”) consisting of a Base Fee and an Incentive Occupancy Fee. The Base Fee is equal to $3,700,000. The Incentive Occupancy Fee will be $100,000 and will be paid only if certain occupancy milestones are achieved within specific timeframes beginning when all approvals necessary for occupancy of all units in The Village have been obtained. Based on the project budget as outlined in the financial feasibility study, the Corporation will pay total Stage 1 Consulting Fees of approximately $3,700,000 (excluding the $100,000 Incentive Occupancy Fee).

As compensation for services rendered pursuant to the Stage 2 Development Agreement, the Corporation will pay Greystone a consulting fee equal to $775,000.

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SUMMARY OF STAGE 1 AND STAGE 2 FEES

The following table summarizes the payment terms related to Greystone’s Stage 1 Consulting Fee in connection with Stage 1 of the Community.

Fees Paid Through February 28, 2018 (September 2015 to February 2018): $ 2,610,000

FEES PAID AFTER FEBRUARY 28, 2018:

Fees To Be Paid Prior to Opening During remaining construction (March 2018 to April 2019) 140,000 Subtotal Fees Paid Prior to Opening $2,750,000

Fees To Be Paid After Opening Upon occupancy by the first independent living resident in Stage 1 $ 160,000 Upon occupancy by the first healthcare resident in the expansion 75,000 18 pro-rata monthly payments over fill-up to 90% occupancy of Stage 1 Independent 315,000 Living Apartments Upon achieving of 25% occupancy of Stage 1 Independent Living Apartments 100,000 Upon achieving of 50% occupancy of Stage 1 Independent Living Apartments 100,000 Upon achieving of 75% occupancy of Stage 1 Independent Living Apartments 100,000 Upon achieving of 90% occupancy of Stage 1 Independent Living Apartments 100,000 Subtotal Fees Paid After Opening $ 1,050,000

TOTAL STAGE 1 CONSULTING FEES $3,700,000(1) ______Source: The Corporation and Greystone. (1) An incentive occupancy fee of $100,000 is payable if 90% occupancy of the Stage 1 Independent Living Apartments is achieved in 20 months or less.

The following table summarizes the payment terms related to Greystone’s Stage 2 Consulting Fee in connection with Stage 2 of the Community:

Fees Paid Prior to Stage 2 Permanent Financing: Upon commencement of Development Management Advisory Services $77,500

Fees Paid After Issuance of Series 2018 Bonds:

Fees to be Paid Prior to Opening Upon occurrence of closing of Series 2018 bonds 193,750 During construction 193,750 Subtotal Fees Paid Prior to Opening $465,000

Fees to be Paid After Opening Upon occupancy by the first independent living resident in Stage 2 $ 38,750 Upon occupancy of Stage 2 Independent Living Apartments ($5,535.71/apt. 49 apts.) 271,250 Subtotal Fees Paid After Opening $ 310,000

TOTAL STAGE 2 CONSULTING FEES $775,000

Pursuant to the terms of the Development Agreements, the Corporation will also reimburse Greystone for all reasonable out-of-pocket travel expenses for personnel employed by Greystone, and a 3.5% administrative fee on the Stage 1 and Stage 2 Consulting Fees to cover miscellaneous office expenses.

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THE GENERAL CONTRACTOR

The Corporation has selected R&H Construction as the General Contractor for the Project. Founded in 1979, R&H Construction is based in Portland, Oregon with a branch office in Bend, Oregon. The company has a staff of more than 200 and is consistently awarded local and regional awards as one of Oregon’s Most Admired Companies, 100 Best Companies to Work For in Oregon and 100 Fastest Growing Private Companies in Oregon. The General Contractor has worked on projects in a wide range of market sectors including assisted living, independent senior living, multifamily housing, healthcare, religious, cultural, retail, office, mixed-use buildings, education and hospitality.

The General Contractor has provided pre-construction services for the Corporation including, but not limited to, coordination with the Architect and design consultants, construction sequencing and scheduling, value engineering and estimating the cost of work and general conditions. Ongoing and recently completed work of the General Contractor includes:

CONSTRUCTION COMPLETION PROJECT LOCATION DESCRIPTION COSTS DATE Cedar Sinai Park Portland, OR 97,000 sq. foot, 3 bldg, 92-unit, skilled $24.6 million In Progress nursing, memory care and health center The Cove Apts. Oregon City, OR 252,841 sq. foot, 244 units, 12-story $45.2 million In Progress bldg Vista St. Clair Portland, OR 13-story, multifamily renovation $12.1 million In Progress Red Fox Corestell Portland, OR 65,000 square foot, adaptive reuse, 3- $9.4 million In Progress story Atticus Hotel McMinnville, OR 24,000 square foot hotel, 4-story $5.9 million In Progress Ochoco School Housing Prineville, OR 35,000 square foot, adaptive reuse, 1- $5.7 million In Progress story Union at St. Johns Portland, OR 146,613 sq. foot, 4-story, 103 units $22.9 million 2018 Market of Choice Portland, OR 30,000 sq. foot grocery store $5.1 million 2017 Sovereign Building Portland, OR 58,000 sq. foot, 9-story, renovation $10 million 2017 Cook Crossing Redmond, OR 57,346 sq. foot, 4-story, 48 units $8 million 2017 Maletis Beverage Portland, OR Office & warehouse $12.5 million 2017 renovation/expansion Dallas Retirement Village Dallas, OR 90,361 sq. foot, 2 bldg, 39-units with $18 million 2016 community center Rose Villa Portland, OR 130,000 sq. foot, 12 bldg, 75-unit $35.5 million 2016 The Ella Apts. Portland, OR 250,000 sq. foot, 6-story, 199-unit $38.6 million 2016 Eastlake Village Phase II Bend, OR 34,128 sq. foot, 5 bldg, 40-unit $5.1 million 2016 The Muse Apts. Portland, OR 51,829 sq. foot, 6-story, 58 units $10 million 2016 Janis Medical Building Bend, OR 17,646 sq. foot, 2-story medical office $2.8 million 2016 building Toyota of Corvallis Corvallis, OR 34,868 sq. foot LEED Platinum, Net $11.4 million 2016 Zero auto dealership Market of Choice Bend 42,185 sq. foot grocery store $6.1 million 2016 First Citizens Bank Lake Oswego 9,000 sq. foot, 2-story office/bank $5.5 million 2016 Mary’s Woods Expansion Lake Oswego, OR Commons and villa expansion $10.8 million 2015 2+Taylor Building Portland, OR 70,000 sq. foot mixed use renovation $6.9 million 2015 Victory Flats Beaverton, OR 345,000 sq. foot, 17 bldg, 312-units $29 million 2015 Gilman Court Portland, OR 57,497 sq. foot, 6-story, 60 units $10.2 million 2015 Karuna East Portland, OR 42,938 sq. foot, 4-story office bldg. $8.7 million 2015 Karuna West Portland, OR 42,610 sq. foot, 5-story office bldg. $8.8 million 2015 ______Source: R&H Construction.

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CONSTRUCTION CONTRACT

The Corporation entered into a guaranteed maximum price construction contract dated March 17, 2017 (the “Construction Contract”) with the General Contractor for Stage 1. The Corporation and the General Contractor have executed change orders to the Construction Contract in an amount equal to $29,155,774 in order to include the cost of the Stage 2 construction work in the contract. The Cost of the Work (as defined in the Construction Contract) relating to both the Stage 1 and Stage 2 construction, including all change orders and the General Contractor’s Fee, is guaranteed by the General Contractor not to exceed $117,158,045. The cost of construction is subject to additions and deductions as provided in the Construction Contract.

In the event that the total aggregate sum of the cost of the work plus the General Contractor’s Fee are less than the Guaranteed Maximum Price upon final completion of the work, the Corporation will retain 75% of such savings. Accordingly, the Contractor held contingency remaining at the end of construction returns 100% to the Corporation.

The General Contractor is required under the Construction Contract to furnish the Corporation with a performance bond and labor and materials bond, each in the amount of 100% of the guaranteed maximum price under the Construction Contract, which includes the costs of both the Stage 1 and Stage 2 portions of the Project.

CONSTRUCTION SCHEDULE

The Construction Contract requires the General Contractor to substantially complete construction of The Village and related common areas by the dates set forth below. The Construction Contract allows for time extensions for specified weather days and other force majeure events. Subject to such extension, substantial completion of the Project is contractually required as indicated below:

PROJECT COMPONENT SUBSTANTIAL COMPLETION DELIVERY DATE The Village Commons Stage 1 Building C November 30, 2018(1) Stage 1 Building J January 25, 2019 Stage 2 Building M March 7, 2019 Stage 2 Building N March 20, 2019

The Village Expansion Independent Living Apartments Stage 1 Building H (54 units) January 4, 2019(2) Stage 1 Building L (45 units) February 27, 2019 Stage 1 Building K (45 units) March 13, 2019 Stage 2 Building F (54 units) November 14, 2019 Stage 1 Assisted Living Apartments May 20, 2019 ______(1) Estimated temporary certificate of occupancy on October 10, 2018. (2) Estimated temporary certificate of occupancy on November 12, 2018.

In the event the General Contractor does not substantially complete construction in accordance with the terms of the Construction Contract, the Corporation is entitled to retain or recover liquidated damages. Stage 1 liquidated damages are calculated based on the cumulative total number of days of delayed service for each of the six buildings in Stage 1 while Stage 2 liquidated damages are calculated based on the cumulative total number of days of delayed service for each of the three buildings in Stage 2, with the following schedule of actual damages. The days of delay for each building is measured from the day required for substantial completion (subject to allowed extension) to the date of actual substantial completion. The calculation of liquidated damages is cumulative, in other words, the cumulative days of delay among buildings is used to apply the following chart.

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STAGE 1 LIQUIDATED STAGE 2 LIQUIDATED DAMAGES (PER LATE DAMAGES (PER LATE NUMBER OF DAYS OF DELAYED BUILDING) PER DAY OF BUILDING) PER DAY SUBSTANTIAL COMPLETION DELAY OF DELAY PERCENT OF DAILY DEBT 1-30 days $0/day $0/day 0% 50% (allocated per late 31-60 days $1,562/day $737/day building) 100% (allocated per late 61 Days and Thereafter $3,125/day $1,473/day building)

THE ARCHITECTS

Ankrom Moisan Architects, Inc. is the lead Architect for the Project. The Architect has worked with many senior living communities in the country. The Architect has experience with other residential buildings, as well as hospitality, healthcare, and community centers.

Ongoing and recently completed senior housing and continuing care retirement community projects of the Architect include:

YEAR CONSTRUCTION PROJECT LOCATION COMPLETED

Caliche Senior Living Casa Grande, AZ 2017 Trinity Terrace: River Tower Fort Worth, TX 2017 Aegis Gardens Newcastle, WA 2017 The Meadows of Napa Napa, CA 2006 - 2017 Rogue Valley Manor Medford, OR 1996 – 2017 Casa De Las Campanas San Diego, CA 2016 Mt. Miguel Covenant Village Town Center Spring Valley, CA 2016 The Ackerly Beaverton, OR 2016 Cascade Manor Eugene, OR 2002 - 2016 Mary’s Woods Commons Renovation and Social Lounge Lake Oswego, OR 2016 St. Paul’s Plaza Chula Vista, CA 2015 Heartwood Place Memory Care Woodburn, OR 2015 White Cliffs Senior Living Kingman, AZ 2014 Summit Senior Living Kearns, UT 2014 Saratoga Retirement Community Saratoga, CA 2003 – 2014 Mary’s Woods Villa Estates Lake Oswego, OR 2015 Mary’s Woods Health Care Lake Oswego, OR 2011 McLoughlin Place Memory Care Oregon City, OR 2011 Bozeman Village Bozeman, MT 2010 Mirabella Portland, OR 2010 Walnut Village Anaheim, CA 2008 Mill Creek Point ALF The Dalles, OR 2008 Trinity Terrace: City Tower Fort Worth, TX 2008 The Stafford Lake Oswego, OR 2007 The Quarry Senior Living Vancouver, WA 2007 Masonic Homes of Union City Union City, CA 2006 Masonic Homes of Covina Covina, CA 2005 Springridge Court AL Charbonneau, OR 2004 Assumption Village Portland, OR 2001 University Retirement Community Davis, CA 2000 Skyline Plaza RVM Expansion Medford, OR 1999

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YEAR CONSTRUCTION PROJECT LOCATION COMPLETED

Courtyard Village Albany, OR 1998 Crossings at Colorado Springs Colorado Springs, CO 1996 Riverplace Boise, ID 1996 Carman Oaks Assisted Living Renovation Lake Oswego, OR 1996 Allenmore Assisted Living Tacoma, WA 1996 ______Source: Ankrom Moisan.

THE CONSTRUCTION MONITOR

The Construction Monitor, zumBrunnen, Inc., a full-service national construction consulting company founded in 1989 that specializes in the senior living industry, has been selected and retained by the Corporation to review construction progress, quality, and contractor requisition requests on a monthly basis for the Project during the construction period. In addition, zumBrunnen has provided the consulting services described below.

Prior to construction, the Construction Monitor’s responsibilities include conducting a review of the scope of the Project, including engineering designs, project budgets, drawings, specifications, permits, construction contracts and fees, holding a meeting with the project team to verify current site conditions, reviewing outstanding issues and documents, and establishing an action list, and issuing a final pre-closing report. In its report, zumBrunnen will review and comment on, among other things, whether (i) the design for the Project is suitable for the type of project and geographic area; (ii) the geotechnical report was prepared in accordance with industry standards; (iii) the Phase I Environmental Site Assessment was prepared in accordance with industry standards; (iv) the Phase II Environmental Site Assessment (if required) was prepared in accordance with industry standards; (v) required design documents and permits will be achieved as required without interruption of the critical path of the Project; (vi) the ALTA/ASCM Land Title Survey of the Site indicated that no designated rights-of-way, easements or portions of the site are within a special flood hazard area; (vii) the required utilities will be available to the site and meet the capacity requirements of the Project; (viii) the projected construction schedule for substantial completion is achievable based on the proposed scope of work; and (ix) in view of the Project budgets for construction, permits, fees, architectural and engineering, furnishings and contingency, adequate funds will be available to complete construction and obtain the required certificate of occupancy and licenses for operations.

During the construction process, the Construction Monitor will be responsible for (i) reviewing and certifying all disbursement requests for the payment of expenses incurred by the Corporation for work, labor, materials and equipment furnished in connection with the construction of the Project that are included in the Construction Contract; (ii) monitoring such items as change orders, budget amendments, updates to the construction schedule, releases of liens, governmental approvals and the final as-built survey; and (iii) reporting to the holders of the Series 2018 Bonds, no less than monthly, the status of the Project including (a) whether the total Project account balance (including estimated investment income) is sufficient to pay the expected remaining Project costs of completing the Project in accordance with the Project budget and that there is no Project deficit; (b) the current timing of the Project; and (c) the amount of remaining contingency funds.

OWNER’S REPRESENTATIVE

CPM is the owner’s representative with respect to the Project. CPM was formed as an Oregon corporation in 1999. Mr. Don Hynes, the principal contact at CPM, has extensive experience in project coordination, management and supervision, tenant improvement and residential construction. Mr. Hynes is experienced with feasibility studies, site planning, municipal review, financial planning and cost estimates, financial management of projects, project scheduling, negotiating contracts, specification compliance, coordination of contractual and architectural resources, technical direction of contractors and vendors, and supervision of trades. Mr. Hynes has worked with Mary’s Woods since 1999. He was the owner’s representative for the existing campus construction, Health Care expansion, Villa Estates expansion, and common space renovation. He is the owner’s representative for Stage 1 and is actively involved

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on the construction site. His work with Mary’s Woods will continue with Stage 2. Mr. Hynes serves as liaison between the owner, architect, contractor and developer. Mr. Hynes’ experience also include serving as owner’s representative for the Pioneer Federal Courthouse project in Portland, Oregon, the construction of the Congregation Kol Ami synagogue in Vancouver, Washington and acting as a pre-construction consultant for the Oregon State Capital renovation project. Mr. Hynes earned a Bachelor of Arts degree cum laude from the University of Notre Dame in 1969.

RESIDENCY AGREEMENTS

The Residency and Care Agreement (“Residency and Care Agreement”) is a contract under which the Corporation is obligated to provide certain services to prospective Residents other than any of the Sisters. See “Services to Residents” below.

The Corporation considers applications for residence in Independent Living Apartments based upon the guidelines for the acceptance of Residents described below and maintains sole discretion on the decision to accept a Resident. An application for residence in an Independent Living Apartment will be accepted only if the applicant demonstrates the ability to live independently with reasonable support services and to meet the financial obligations as a Resident of the selected Independent Living Apartment. Each Resident must be 62 years of age or older at the time of establishing occupancy. A person under 62 living with a Resident is allowed provided he or she meets other residency requirements. No children or other guests may permanently reside in an Independent Living Apartment unless otherwise agreed by the Corporation.

Persons who have not executed a Residency and Care Agreement may be admitted to the Health Care Center as Direct Admits for services other than skilled nursing care if beds are available in excess of those needed to satisfy the needs of Residents. Pursuant to the Residency and Care Agreement, Residents requiring care in the Stage 1 Assisted Living Apartments or the Health Care Center will have priority admission into the Stage 1 Assisted Living Apartments or Health Care Center over Direct Admits.

FINANCIAL ASSISTANCE

If a Resident of the Community can no longer pay the Monthly Service Fee in full due to lack of funds for reasons beyond the control of the Resident, the Corporation may subsidize, in whole or in part, the Monthly Service Fees and other charges, provided the ability of the Community to operate on a sound financial basis for all Residents is not materially impaired. Financial assistance provided by the Corporation, plus interest, may be charged against the refund of the Entrance Fee owed to a Resident upon termination of the Residency and Care Agreement. The Corporation may also require a Resident receiving financial assistance to move to a smaller or less expensive Independent Living Apartment, Friendship Place Assisted Living Apartment, Stage 1 Assisted Living Apartment, Caritas House Memory Support suite, Villa Maria Residential Care suite or Villa Maria Nursing suite within the Community.

SERVICES TO RESIDENTS

Upon payment in full of the Entrance Fee and ongoing payment of the Monthly Service Fee, each Resident will be provided an Independent Living Apartment and receive certain basic services. Services provided include: (i) twenty (20) meals per month or a dining dollars meal plan; (ii) tray service if the Resident is receiving care for a minor illness or ordered by physician; (iii) a planned schedule of activities designed to stimulate and support the overall physical, spiritual and emotional well-being of the Resident; (iv) use of dining rooms, lounges, assigned parking, fitness and wellness center, storage lockers, swimming pool, social and recreational rooms and other common activity facilities; (v) maintenance of all common areas and equipment; (vi) regularly scheduled local transportation; (vii) utilities including water, heat, air conditioning, electricity, sewer and basic telephone and basic cable service; (viii) 24-hour monitoring of the emergency call system; (ix) bi-weekly housekeeping of the Independent Living Apartment; (x) repair, maintenance or replacement of furnishings provided in the Independent Living Apartments; (xi) liability property and casualty insurance coverage on the buildings and grounds obtained by the Corporation; and

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(xii) payment of real property taxes for the Community, with the exception of those assessed on the Resident’s personal property (if required).

HEALTHCARE BENEFIT

Residents may be transferred to Friendship Place Assisted Living Apartments, Stage 1 Assisted Living Apartments, Caritas House Memory Support suites, Villa Maria Residential Care suites or Villa Maria Nursing suites in the Health Care Center temporarily or permanently. If a Resident of an Independent Living Apartment transfers to the Health Care Center on a temporary basis and plans to return to his or her Independent Living Apartment, or if a Resident of an Independent Living Apartment permanently transfers to the Health Care Center and vacates his or her Independent Living Apartment, the Resident will receive such level of care for up to 10 days per calendar year, non-cumulative, at no additional cost over his or her normal monthly service fees except for certain additional charges. After the 10th day, the Resident will be responsible for paying 80% of the prevailing per diem rate in such level of care in the Health Care Center, less proceeds from Medicare or other insurance. Certain nursing care supplies and services, such as prescription medicines, physical therapy, occupational therapy, oxygen, eyeglasses and hearing aids, are paid by the Resident. In addition to three daily meals, residents in the assisted living apartments receive a basic level of assistance with bathing, dressing, grooming, and ambulating when necessary. Limited housekeeping and laundry service are provided in the assisted living apartments. Other services available for an additional charge include tray service (after 14 days) and guest meals and accommodations.

TERMINATION AND REFUNDS

Termination Prior to Occupancy. Prior to occupancy, a prospective Resident may terminate the Residency and Care Agreement and withdraw his or her Reservation Deposit in full within thirty days of executing the Residency and Care Agreement. Prospective Residents terminating the Residency and Care Agreement prior to occupancy for reasons other than death or serious illness will receive, within 30 days of such termination, a refund of any Entrance Fee paid less any non-refundable fees as outlined in the Reservation Agreement. Termination of the Residency and Care Agreement prior to occupancy due to death or serious illness results in a full refund of the Entrance Fee in accordance with the Reservation Agreement or Residency and Care Agreement. Termination after 30 days of the date of execution of the Residency and Care Agreement for any reason other than death or serious illness, or the failure of Mary’s Woods to meet its obligations under the Reservation Agreement, will result in an administrative fee in the amount of $300.00.

Termination After Occupancy. After occupancy, the Residency and Care Agreement may be voluntarily terminated by the Resident at any time by providing 30 days’ written notice of termination to the Corporation. Upon termination of the Residency and Care Agreement and release of the Independent Living Apartment, the Corporation will refund the Entrance Fee paid by the departing Resident according to the plan selected. The refund will be paid after the date a new Entrance Fee and executed Residency and Care Agreement have been received from a new Resident and the new Resident has taken occupancy of the Independent Living Apartment of the Resident due a refund or the same type unit. However, in the case of re-occupancy of the same type unit, when more than one Independent Living Apartment of the same type is due a refund, refunds will be made in order, starting with the earliest date such a unit was vacated by the subject Residents. Thus, it is possible for the vacated Resident to receive the refund prior to the time the Resident’s apartment has been re-occupied. A temporary or permanent move of one or both Residents to the Health Care Center will not terminate their Residency and Care Agreement and no refund will be due until such time as such Residency and Care Agreement is terminated in accordance with the terms thereof.

The Corporation may terminate the Residency and Care Agreement (i) if the Resident fails to pay any amount owed to the Corporation under the Residency and Care Agreement, provided that the Residency and Care Agreement will not be terminated solely because of a Resident’s inability to pay Monthly Service Fees to the extent that (1) the inability to pay is not the result of the Resident’s willful action, and (2) in the judgment of the Corporation, the ability of the Corporation to operate on a sound financial basis will not be impaired; (ii) if there is a material misrepresentation or omission by the Resident in the Confidential Data Profile; (iii) if the Resident acquires a condition or engages in conduct that interferes with the health, safety or peaceful lodging of others at the Community; (iv) for failure to engage appropriate and necessary services that in the opinion of Mary’s Woods could potentially endanger the safety of such Resident or others; (v) if Mary’s Wood’s determines, in consultation with the Resident, Resident’s family and

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Resident’s physician that the Resident requires care that cannot be provided by Mary’s Woods; (vi) for breach or default of any of the terms of the Residency and Care Agreement; or (vii) for a failure by the Resident to comply with the policies of the Corporation as described in the Resident Handbook. The Residency and Care Agreement will automatically terminate when a Resident dies (except in the case of double occupancy).

If two Residents occupy an Independent Living Apartment, and one of the Residents terminates the Residency and Care Agreement while the other Resident determines to remain in the Independent Living Apartment, the Monthly Service Fee will be adjusted for single occupancy. In such cases, Residents are not eligible for refund of the Entrance Fee until termination of the Residency and Care Agreement by both Residents. The second person entrance fee will be refunded at that time, if applicable under the Residents’ entrance fee plan.

Residents may elect to move to another Independent Living Apartment, at their own expense, subject to availability. In such event, the current Residency and Care Agreement will be terminated and a new Residency and Care Agreement executed. The Resident will pay the difference between the then-current Entrance Fee and the Entrance Fee in the previously executed Residency and Care Agreement and Monthly Service Fees for the new Independent Living Apartment. Such residents also pay an internal move fee.

FINANCIAL INFORMATION OF THE CORPORATION

SUMMARY FINANCIAL INFORMATION

The following summaries of the Statements of Activities and Statements of Financial Position of the Corporation as of and for the three Fiscal Years ended June 30, 2015, 2016 and 2017 are derived from the financial statements of the Corporation, which have been audited by KPMG LLP, independent certified public accountants. Also included is unaudited summary financial information as of and for the eight-month periods ending February 28, 2017 and 2018 prepared by management of the Corporation. The unaudited summary eight-month statement of activities excludes activity related to temporarily and permanently restricted net assets, which represents a difference from United States generally accepted accounting principles (“GAAP”). Operating results for the eight-month period ended February 28, 2018, are not necessary indicative of the results that may be expected for the full fiscal year ended June 30, 2018. In the audited statements for the full fiscal years ended June 30, 2015, 2016 and 2017, the Corporation includes activity related to temporarily and permanently restricted net assets in accordance with GAAP. Copies of the audited financial statements for the fiscal years ended June 30, 2015, 2016 and 2017 are included in Appendix B— “AUDITED FINANCIAL STATEMENTS OF MARY’S WOODS AT MARYLHURST, INC.” THE DATA SET FORTH IN THE FOLLOWING TABLE SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN APPENDIX B—“AUDITED FINANCIAL STATEMENTS OF MARY’S WOODS AT MARYLHURST, INC.”

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MARY’S WOODS AT MARYLHURST, INC. SUMMARY STATEMENTS OF ACTIVITIES

(UNAUDITED) (AUDITED) FOR THE EIGHT MONTHS ENDED FOR THE FISCAL YEAR ENDED JUNE 30 FEBRUARY 28 2015 2016 2017 2017 2018

REVENUES, GAINS AND OTHER SUPPORT Resident Services $19,115,309 $21,331,141 $21,575,524 $14,406,620 $14,788,614 Earned Entrance Fees 4,059,321 4,297,813 4,485,383 3,059,952 2,855,103 Income On Investments 191,746 238,536 387,197 259,192 399,904 Net Realized Losses On - - (13,028) (23,223) - Investments Other 561,486 619,373 659,362 443,462 449,251 TOTAL REVENUES, GAINS AND OTHER $23,927,862 $26,486,863 $27,094,438 $18,146,003 $18,492,872 SUPPORT

OPERATING EXPENSES: Administration $1,244,433 $1,304,197 $1,423,709 $995,894 $801,733 Information Technology 279,718 380,098 340,775 224,714 189,432 Fundraising 112,537 122,679 122,682 77,710 72,316 Marketing 589,042 663,235 541,596 375,630 285,096 Human Resources 301,620 305,789 290,396 195,696 208,704 Spiritual Care 173,425 200,574 194,140 128,808 115,756 Wellness/Fitness 94,300 109,213 123,544 84,819 70,034 Environmental Services 2,490,190 2,727,546 2,785,552 1,809,374 1,846,760 Resident Services 362,026 458,900 445,633 290,268 296,603 Food and Beverage Services 2,947,172 3,349,168 3,475,949 2,303,132 2,494,532 Nursing Services 3,990,447 4,483,857 4,499,772 2,997,669 2,980,226 Home Care Services 942,359 1,307,627 1,404,181 975,242 875,422 Clinic 125,307 198,032 190,557 134,602 123,173 Facility Costs 4,755,213 5,495,641 5,705,685 3,735,353 3,621,451 Medicare Bed Tax 27,176 33,078 32,853 20,898 19,282 Ground Lease 990,545 1,044,701 1,043,431 697,080 696,362 Interest Expense 600,480 1,176,174 1,452,793 859,055 1,256,405 Depreciation 2,701,612 3,212,322 3,468,246 2,293,529 2,456,664 Amortization 272,754 197,762 0 73,747 - TOTAL OPERATING EXPENSES $23,000,356 $26,770,593 $27,541,494 $18,273,220 $18,409,951

NET INCOME (LOSS) FROM $927,506 ($283,730) ($447,056) ($127,217) $82,921 OPERATIONS

NON-OPERATING INCOME (EXPENSES) Change In Fair Value Of Interest (1,176,797) (890,007) 1,158,507 1,080,977 - Rate Swap Loss on extinguishment of debt - - (395,686) - - TOTAL NON-OPERATING INCOME (1,176,797) (890,007) $762,821 $1,080,977 - (EXPENSES)

Excess (Deficiency) of revenue ($249,291) ($1,173,737) $315,765 $953,760 $82,921 over expenses Change in beneficial interest in 2,998 (97,657) - - - OCF Change in unrealized gains/losses (90,607) 136,270 456,581 506,806 (201,791)

Change in unrestricted net assets ($336,900) ($1,135,124) $772,346 $1,460,566 ($118,870) (deficit) Unrestricted net (deficit) at beginning ($16,288,528) ($16,625,428) ($17,760,552) ($17,760,552) ($16,988,206) of year Unrestricted net (deficit) at end of ($16,625,428) ($17,760,552) ($16,988,206) ($16,299,986) ($17,107,076) year ______Source: The Corporation.

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MARY’S WOODS AT MARYLHURST, INC. SUMMARY STATEMENTS OF FINANCIAL POSITION

(UNAUDITED) (AUDITED) AS OF AS OF JUNE 30 FEBRUARY 28 2015 2016 2017 2017 2018

Assets Cash $1,332,986 $3,158,796 $3,299,547 $1,408,296 $2,337,434 Accounts receivable, net 2,172,855 1,874,251 1,574,490 2,118,639 1,392,201 Prepaid expenses and other assets 195,926 183,182 133,571 112,170 219,300 Interest income receivable - - 466,333 - - Held by trustee-project funds - - 125,288,334 - 97,427,482 Village deposits held in escrow - - 6,742,165 6,603,202 6,849,979 Investments - limited as to use 26,644,973 24,170,911 22,972,691 22,564,106 26,359,312 Property, plant and equipment, net 63,898,528 69,224,302 80,089,724 70,921,296 107,292,530 Prepaid land lease 814,287 771,430 1,480,767 742,862 1,460,958 Deferred financing costs 679,929 486,607 - 412,860 - Total Assets $95,739,484 $99,869,479 $242,047,622 $104,883,431 $243,339,196 Liabilities Accounts payable $918,674 $985,615 $1,349,005 $683,901 $865,162 Accrued liabilities 916,554 1,037,936 966,471 1,164,669 1,138,127 Interest payable 55,287 112,585 1,393,048 107,513 2,321,745 Gift annuity liability 35,321 31,128 40,985 48,818 48,422 Deposits 413,605 812,555 7,384,575 7,356,952 7,650,599 Deferred revenue 69,950,280 70,761,837 69,958,414 69,648,725 69,918,872 Long-term debt 37,016,967 39,876,000 175,705,295 38,999,000 175,988,807 Interest rate swap 1,176,797 2,066,804 - 985,827 - Total Liabilities $110,483,485 $115,684,460 $256,797,793 $118,995,405 $257,931,734 Net Assets (Deficit) Unrestricted ($16,625,428) ($17,760,552) ($16,988,206) ($16,299,986) ($17,107,076) Temporarily restricted 1,881,427 1,945,571 2,238,035 2,188,012 2,514,538 Total Net Deficit ($14,744,001) ($15,814,981) ($14,750,171) ($14,111,974) ($14,592,538) Total Liabilities and Net Deficit $95,739,484 $99,869,479 $242,047,622 $104,883,431 $243,339,196 Allowance for doubtful accounts 25,000 90,000 140,000 90,000 140,000 ______Source: The Corporation.

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DEBT SERVICE COVERAGE

The following table sets forth the historical debt service coverage ratio for the Corporation for the fiscal years ending June 30, 2015 through 2017 and for the eight months ended February 28, 2017 and 2018. The historical long-term debt service coverage ratios set forth below are calculated as required by the Master Indenture. The financial information regarding Income Available for Debt Service for fiscal years ending June 30, 2015 through 2017 is derived from the audited financial statements. The financial information regarding Income Available for Debt Service for the eight months ended February 28, 2017 and 2018 are derived from the unaudited February 28, 2017 and 2018 financial statements of the Corporation. FOR THE EIGHT MONTHS ENDED FOR THE FISCAL YEAR ENDED JUNE 30 FEBRUARY 28 2015 2016 2017 2017 2018 Revenues Resident services $19,115,309 $21,331,141 $21,575,524 $14,406,620 $14,788,614 Plus Income on investments 191,746 238,536 387,197 259,192 399,904 Plus Net realized gains (losses) - - (13,028) (23,223) - Plus Other revenue 561,486 619,373 659,362 443,462 449,251 Plus Net entrance fees (1) 4,983,751 5,109,370 3,681,960 1,946,840 2,815,561 (A) Total Revenues available for debt service $24,852,292 $27,298,420 $26,291,015 $17,032,891 $18,453,330 Expenses Total operating expenses $23,000,356 $26,770,593 $27,541,494 $18,273,220 $18,409,951 Less Depreciation (2,701,612) (3,212,322) (3,468,246) (2,293,529) (2,456,664) Less Amortization (272,754) (197,762) (90,921) (73,747) - Less Amortization of prepaid land lease (42,857) (42,857) (40,662) (28,568) (19,810) Less GAAP Interest Expense (600,480) (1,176,174) (1,361,872) (859,055) (1,256,405) Less Base rent (75,000) (75,000) (75,000) (50,000) (50,000) Less Additional rent (872,688) (926,844) (927,768) (618,512) (626,552) (B) Total Adjusted Operating Expenses $18,434,965 $21,139,634 $21,577,025 $14,349,809 $14,000,520

(D) Historical Debt Service Principal (2) $1,001,000 $1,081,000 $1,122,083 $877,000 $216,664 Interest 600,480 1,176,174 1,366,226 859,055 1,402,680 Base Rent 75,000 75,000 75,000 50,000 50,000 Total Debt Service $1,676,480 $2,332,174 $2,563,309 $1,786,055 $1,669,344

Debt Service Coverage (C)/(D) 3.83x 2.64x 1.84x 1.50x 2.67x

(E) Historical Debt Service with Additional Rent Payments (3) Total Debt Service $1,676,480 $2,332,174 $2,563,309 $1,786,055 $1,669,344 Additional Rent 872,688 926,844 927,768 618,512 626,552 $2,549,168 $3,259,018 $3,491,077 $2,404,567 $2,295,896

Debt Service Coverage with Additional Rent 2.52x 1.89x 1.35x 1.12x 1.94x (C)/(E)

(1) Excludes $9,160,900 of initial entrance fees received in fiscal year 2015. (2) Excludes principal secured by entrance fees. (3) Payments of Additional Rent under the Ground Leases are subordinate to payments with respect to the Series 2017 Bonds and the Series 2018 Bonds. ______Source: The Corporation.

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HISTORICAL DAYS CASH ON HAND

The following table shows Days Cash on Hand for the Corporation for the fiscal years ending June 30, 2015 through 2017 and for the eight months ended February 28, 2017 and 2018.

AS OF OR FOR THE AS OF OR FOR THE EIGHT MONTHS ENDED FISCAL YEAR ENDED JUNE 30 FEBRUARY 28 2015 2016 2017 2017 2018

UNRESTRICTED CASH AND INVESTMENTS Cash $1,332,986 $3,158,796 $3,299,547 $1,408,296 $2,337,434 Investments 26,644,973 24,170,911 22,972,691 22,564,106 26,359,312 Less: Restricted Assets (1,881,427) (1,945,571) (2,238,035) (2,188,013) (2,514,538) Less Funds allocated to repayment of entrance fee debt - (2,389,514) - - -

(A) Total Unrestricted Cash and Investments $26,096,532 $22,994,622 $24,034,203 $21,784,389 $26,182,208

Cash Operating Expenses Total Operating Expenses $23,000,356 $26,770,593 $27,541,494 $17,822,614 $18,335,844 Less Depreciation (2,701,612) (3,212,322) (3,468,246) (2,138,614) (2,308,997) Less Amortization (272,754) (197,762) (90,921) (131,661) (60,531) Less Amortization of prepaid land lease (42,857) (42,857) (40,662) (28,532) (27,071)

(B) Total Cash Operating Expenses $19,983,133 $23,317,652 $23,941,665 $15,523,807(1) $15,939,245(1) (C) Number of Days in Period 365 366 365 243 243 Daily Cash expenses $54,748 $63,709 $65,594 $63,884 $65,594 Days Cash on Hand 477 361 366 341 399 ______(1) Operating expenses are calculated using the prior year’s audited expanses prorated for the number of day in the period.

Source: The Corporation.

MANAGEMENT’S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS – EIGHT MONTHS ENDED FEBRUARY 28, 2018 AND FEBRUARY 28, 2017 (UNAUDITED)

Revenues. Total revenues, gains and other support for the eight months ended February 28, 2018 were $18,492,872 compared to $18,146,003 for the eight months ended February 28, 2017, representing an increase of 2%. A breakdown of revenue components follows.

Resident Services revenue consists of Independent Living monthly service fees, Home Care Services revenue, Health Care Center monthly service fees and related ancillary charges.

Independent Living revenue was $8,536,191 for the eight months ended February 28, 2018 compared to $8,261,129 for the eight months ended February 28, 2017, reflecting a 3% increase due to the annual approved fee increase of 2.5% implemented during fiscal year 2017-2018 and slightly higher average occupancy levels.

Home Care Services revenue was $918,573 for the eight months ended February 28, 2018 compared to $954,566 for the eight months ended February 28, 2017 reflecting a 4% decrease due to service hours provided.

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Health Care Center revenue was $5,333,850 for the eight months ended February 28, 2018 compared to $5,190,925 for the eight months ended February 28, 2017 reflecting a 3% increase due to the annual approved fee increase of 3% implemented during fiscal year 2017-2018.

Income on investments and realized gain/loss increased 69% from $235,969 for the eight months ended February 28, 2017 to $399,904 for the eight months ended February 28, 2018. The increase is due to market performance and a larger investment balance.

Other income consists of fees for guest and extra resident meals, catering, social lounge revenue, and common element (condo) utility charges to a related party (SNJM). Other income increased 1% from $443,462 for the eight months ended February 28, 2017 to $449,251 for the eight months ended February 28, 2018.

Expenses. Operating Expenses increased 1% from $18,273,220 for the eight months ended February 28, 2017 to $18,409,951 for the eight months ended February 28, 2018. Other than general inflationary cost increases, the primary driver of the increase in expenses was due to increased salary expense in Environmental Services, Dining Services and Nursing Services in a planned effort to raise the Corporation’s minimum wage. The Board adopted a four-year plan aimed at a $15 per hour minimum wage to be effective July 1, 2017. The Corporation was able to absorb the majority of this payroll expense increase by executing a cost savings plan, which improved operating efficiencies without sacrificing resident services. A summary of the Corporation’s changes in expenses follows:

Administration expense decreased 19% from $995,894 for the eight months ended February 28, 2017 to $801,733 for the eight months ended February 28, 2018 due to a transition in leadership, which resulted in fewer FTE’s in this department.

Marketing expense decreased 24% from $375,630 for the eight months ended February 28, 2017 to $285,096 for the eight months ended February 28, 2018 due to the planned elimination of one full time position as well as less advertising expense.

Home Care Services expense decreased 10% from $975,242 for the eight months ended February 28, 2017 to $875,422 for the eight months ended February 28, 2018 as a result of decreased caregiver hours and decreased support staff.

Facility Costs decreased 3% from $3,735,353 for the eight months ended February 28, 2017 to $3,621,451 for the eight months ended February 28, 2018 primarily as a result of fewer employees enrolled in employer sponsored health insurance and lower contract services.

Interest Expense increased 46% from $859,055 for the eight months ended February 28, 2017 to $1,256,405 for the eight months ended February 28, 2018 due to refinancing existing debt at a higher interest rate.

Depreciation Expense increased 7% from $2,293,529 for the eight months ended February 28, 2017 to $2,456,664 for the eight months ended February 28, 2018 due to an increase in Property, Plant and Equipment.

Ratio Discussion. For the eight months ended February 28, 2018 the debt service coverage ratio was 2.67 compared to 1.50 for the eight months ended February 28, 2017. The increase is due to increased total revenues available for debt service including higher net entrance fee turnover and decreased operating expenses, and decreased total debt service.

Days Cash on Hand was 399 for the eight months ended February 28, 2018 compared to 341 for the eight months ended February 28, 2017. The reason for the increase is due to higher Cash and Investment balances at February 28, 2018 as a result of the Corporation receiving reimbursement for previously funded Village prefinance capital expenditures.

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FISCAL YEAR ENDED JUNE 30, 2017 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2016

Revenues. Total revenues, gains and other support for the twelve months ended June 30, 2017 (“FY 2017”) were $27,094,438 compared to $26,486,863 for the twelve months ended June 30, 2016 (“FY 2016”), representing an increase of 2.3%. A breakdown of revenue components follows:

Resident Services revenue consists of Independent Living monthly service fees, Home Care Services revenue, Health Care Center monthly service fees and related ancillary charges.

Independent Living revenue was $12,376,410 in FY 2017 compared to $11,994,882 in FY 2016, reflecting a 3.2% increase due to the annual approved fee increase of 3.5% implemented during FY 2017.

Home Care Services revenue was $1,374,937 in FY 2017 compared to $1,384,884 in FY 2016 reflecting a similar number of service hours being provided during both years.

Health Care Center revenue was $7,824,177 for FY 2017 compared to $7,951,375 for FY 2016 reflecting a 1.6% decrease due to fewer occupied days for FY 2017.

Income on investments increased 62% from $238,536 for FY 2016 to $387,197 for FY 2017 due to a combination of market performance, a revised investment policy, and a change in investment managers and strategy.

Other income consists of fees for guest and extra resident meals, catering, employee meals, social lounge revenue, and common elements (condo) utility charges to a related party (SNJM). Other income increased 6.5% from $619,373 for FY 2016 to $659,362 for FY 2017.

Expenses. Operating Expenses increased 3% from $26,770,593 for FY 2016 to $27,541,494 for FY 2017. The majority of the increase was due to general inflationary cost increases. A summary of the Corporation’s changes in expenses follows:

Administration expense increased 9% from $1,304,197 in FY 2016 to $1,423,709 in FY 2017 due to legal and payroll costs related to a transition in leadership.

Dining expense increased 4% from $3,349,168 in FY 2016 to $3,475,949 in FY 2017 due to higher labor costs as a result of an increase in the Corporation’s minimum wage.

Home Care Services expense increased 7% from $1,307,627 in FY 2016 to $1,404,181 in FY 2017 due to higher labor costs as a result of an increase in the Corporation’s minimum wage.

Facility Costs increased 4% from $5,495,641 in FY 2016 to $5,705,685 in FY 2017 primarily because of higher employee benefit costs (health insurance and employer retirement match contributions) as well as higher payroll taxes related to the increase in the Corporation minimum wage and total labor costs.

Depreciation expense increased 8% from $3,212,322 for FY 2016 to $3,468,246 for FY 2017 because of the addition of a social lounge and common space remodel that was completed in January 2016 (first full year of depreciation on these additions was FY 2017).

Ratio Discussion. In FY 2017, the debt service coverage ratio was 1.84 compared to 2.64 in FY 2016. The decrease is due to net entrance fees being $1,427,410 lower in FY 2017 than FY 2016.

Days Cash on Hand was 366 in FY 2017 compared to 361 in FY 2016. The increase in the ratio is due to total unrestricted cash and investments increasing by approximately $1.1 million.

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FISCAL YEAR ENDED JUNE 30, 2016 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2015

Revenues. Total revenues, gains and other support for the twelve months ended June 30, 2016 (“FY 2016”) were $26,486,863 compared to $23,927,862 for the twelve months ended June 30, 2015 (“FY 2015”), representing an increase of 11%. A breakdown of revenue components follows.

Resident Services revenue consists of Independent Living monthly service fees, Home Care Services revenue, Health Care Center monthly service fees and related ancillary charges.

Independent Living revenue was $11,994,882 in FY 2016 compared to $10,461,481 in FY 2015, reflecting a 15% increase due to the annual approved fee increase of 2.5% implemented during FY 2016 and the addition of 17 new villa estate homes that were first occupied in July 2015.

Home Care Services revenue was $1,384,884 in FY 2016 compared to $945,867 in FY 2015 reflecting a 46% increase due to the number of service hours provided.

Health Care Center revenue was $7,951,375 for FY 2016 compared to $7,707,962 for FY 2015 reflecting a 3% increase due to the annual approved fee increase of 3.5% implemented during FY 2016 and higher average occupancy levels.

Income on investments increased 24% from $191,746 for FY 2015 to $238,536 for FY 2016 due to market performance.

Other income consists of fees for guest and extra resident meals, catering, employee meals, social lounge revenue, and common elements (condo) utility charges to a related party (SNJM). Other income increased 10% from $561,486 for FY 2015 to $619,373 for FY 2016.

Expenses. Operating Expenses increased 16% from $23,000,356 for FY 2015 to $26,770,593 for FY 2016. Other than general inflationary cost increases, the primary driver of the increase in expenses was due to increased salary expense in Environmental Services, Dining Services and Nursing Services in a planned effort to raise the Corporation minimum wage. Additionally, 17 new villa homes were completed and occupied in July 2016, which had a slight impact on staffing hours and costs. A summary of the Corporation’s changes in expenses follows:

Home Care Services expense increased 39% from $942,359 in FY 2015 to $1,307,627 in FY 2016 as a result of increased caregiver hours and increased wage rates.

Facility Costs increased 16% from $4,755,213 in FY 2015 to $5,495,641 in FY 2016 primarily because of higher employee benefit costs (health insurance and employer retirement match contributions) as well as higher payroll taxes as a result of the increase in Corporation minimum wage and cost.

Interest Expense increased 96% from $600,480 in FY 2015 to $1,176,174 in FY 2016 as a result of higher interest rates and additional borrowing for the construction of 17 new villa estate homes, a social lounge addition, and common space remodeling.

Depreciation Expense increased 19% from $2,701,612 for FY 2015 to $3,212,322 for FY 2016 because of the addition of a social lounge and common space remodel that was completed in January 2016.

Ratio Discussion. In FY 2016, the debt service coverage ratio was 2.64 compared to 3.83 in FY 2015. The decrease is due to operating expenses being higher in FY 2016, as well as increased debt service for FY 2016 associated with the Village Project.

Days Cash on Hand was 361 in FY 2016 compared to 477 in FY 2015. The decline was primarily due to funds allocated to the repayment of debt from initial entrance fees received from the 17 new villa estate homes constructed.

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CONTRIBUTIONS AND COMMUNITY GIVING

As a mission driven, not-for-profit organization, the Corporation has the privilege of enhancing the lives of both those who live and work on the campus and those residing in the broader community. The Corporation accepts charitable contributions for five funds: (1) Resident Assistance, (2) Employee Education, (3) Innovation, (4) Capital Projects and Improvements and (5) Greatest Need. These funds help the Corporation serve its mission. For example, the Resident Assistance Fund helps residents who, through no fault of their own, face difficulties meeting their basic monthly costs. In these instances, the fund serves as a safety net.

Outreach into the local community is also part of the Mary’s Woods commitment to mission and values. Utilizing the Innovation Fund, Mary’s Woods has entered into a partnership with Northwest Housing Alternatives (“NHA”) to help those seniors living on a fixed income who may encounter barriers to getting the care they need in order to thrive in their environment. This program is designed to help offset the cost of home care services for qualified NHA residents needing assistance with tasks such as cooking, cleaning, bathing and medications. This partnership helps NHA seniors age with dignity at home, and enables Mary’s Woods staff and residents to fulfill the mission to serve the broader community.

The Corporation has also developed the employee giving campaign (“EGC”), an employee initiative born out of a desire to create meaningful opportunities for staff members to work together while giving back to the broader community. The program offers multiple ways to participate, including volunteering at an event, giving to a charity or making a financial contribution to the EGC fund. Some of the recent accomplishments of the committee include: donating services to the Oregon Food Bank, sponsoring a blood drive, participating in a beach clean-up project, adopting a family during the holidays, and collecting school supplies for children in need. The EGC is run solely by employees volunteering their time and talents.

GROWTH OPPORTUNITIES

In addition to the Village at Mary’s Woods, the Corporation will continue to explore future growth opportunities. These opportunities for growth may include additional bricks and mortar developments, acquisitions, affiliations and joint ventures that would enhance its ability to provide high quality, cost effective housing for seniors. Evaluation of potential strategic projects would include an assessment of various factors such as financial strength, competitive position, scope and location of services, quality and cultural fit. As part of its evaluations of such opportunities, Mary’s Woods may enter into letters of intent, which are not definitive agreements. It is possible that Mary’s Woods will enter into a letter of intent or a definitive agreement to acquire or develop other senior living communities. Management of the Corporation expects that any growth opportunities that are separate from the Mary’s Woods campus would be undertaken by an entity that is not a Member of the Obligated Group. Management of Mary’s Woods anticipates that the costs of any such development or acquisition would be paid out of the Vision Fund, a separate fund held by a limited liability company to be established in order to support the future strategic growth opportunities. The Vision Fund will be funded with an initial deposit of $1,000,000 through a transfer of Mary’s Woods unrestricted reserves as permitted under the Master Indenture. The Corporation does not currently anticipate making any additional transfers to the Vision Fund. However, future transfers are possible and would be weighed against the financial strength of the Obligated Group. Management of the Corporation expects the Vision Fund to grow over time. Management’s current plan is to use lease revenues from the service and amenity buildings at the Village at Mary’s Woods for the Vision Fund.

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INSURANCE

The following table describes the type, coverage and expiration date of the insurance policies the Corporation currently maintains.

TYPE COVERAGE EXPIRATION Commercial Property $111,000,000 March 1, 2019 Earthquake and Flood $25,000,000 March 1, 2019 Excess Earthquake $75,000,000 March 1, 2019 Cyber Liability and Crime $500,000 March 1, 2019 Fiduciary Liability $1,000,000 March 1, 2019 General Liability/Professional Liability $1,000,000/$3,000,000 March 1, 2019 Health Care Center Excess Indemnity $15,000,000 March 1, 2019 Commercial Auto Liability $1,000,000 March 1, 2019 Directors and Officers Insurance $10,000,000 March 1, 2019 Workers Compensation Insurance Statutory EL:500/500/500K July 1, 2018 ______Source: The Corporation.

LITIGATION

From time to time, there are certain actions pending against the Corporation that arise in the ordinary course of business. Management of the Corporation believes that adequate provision has been made to cover estimated losses and that the ultimate disposition of any such pending actions will not adversely affect the financial condition of the Corporation or the operations of the Community.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF MARY’S WOODS AT MARYLHURST, INC.

[THIS PAGE INTENTIONALLY LEFT BLANK] MARY’S WOODS AT MARYLHURST, INC. Financial Statements

June 30, 2016 and 2015

(With Independent Auditors’ Report Thereon) KPMG LLP Suite 3800 1300 South West Fifth Avenue Portland, OR 97201

Independent Auditors’ Report

The Board of Directors Mary’s Woods at Marylhurst, Inc.:

We have audited the accompanying financial statements of Mary’s Woods at Marylhurst, Inc., which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mary’s Woods at Marylhurst, Inc. as of June 30, 2016 and 2015, and the results of its activities and its cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

October 12, 2016

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. MARY’S WOODS AT MARYLHURST, INC. Statements of Financial Position June 30, 2016 and 2015

Assets 2016 2015 Assets: Cash $ 3,158,796 1,332,986 Accounts receivable, less allowance for uncollectible accounts of $90,000 in 2016 and $25,000 in 2015 1,874,251 2,172,855 Prepaid expenses and other assets 183,182 195,926 Investments – limited as to use (note 2) 24,170,911 26,644,973 Property, plant, and equipment, net (note 4) 69,224,302 63,898,528 Prepaid land lease (note 7) 771,430 814,287 Deferred financing costs, net 486,607 679,929 Total assets $ 99,869,479 95,739,484 Liabilities and Net Deficit Liabilities: Accounts payable $ 985,615 918,674 Accrued liabilities 1,037,936 916,554 Interest payable 112,585 55,287 Gift annuity liability 31,128 35,321 Deposits 812,555 413,605 Deferred revenue (note 5) 70,761,837 69,950,280 Long-term debt (note 6) 39,876,000 37,016,967 Interest rate swap (note 6 ) 2,066,804 1,176,797 Total liabilities 115,684,460 110,483,485 Net deficit: Unrestricted (17,760,552) (16,625,428) Temporarily restricted 1,945,571 1,881,427 Total net deficit (15,814,981) (14,744,001) Total liabilities and net deficit $ 99,869,479 95,739,484

See accompanying notes to financial statements.

2 MARY’S WOODS AT MARYLHURST, INC. Statement of Activities Year ended June 30, 2016

Temporarily Unrestricted restricted Total Revenues, gains, and other support: Resident services $ 21,331,141 — 21,331,141 Earned entrance fees 4,297,813 — 4,297,813 Income on investments 238,536 — 238,536 Other 619,373 — 619,373 Total revenues, gains, and other support 26,486,863 — 26,486,863 Operating expenses: Administration 1,304,197 — 1,304,197 Information Technology 380,098 — 380,098 Fundraising 122,679 — 122,679 Marketing 663,235 — 663,235 Human resources 305,789 — 305,789 Pastoral care 200,574 — 200,574 Wellness 109,213 — 109,213 Environmental services 2,727,546 — 2,727,546 Resident services 458,900 — 458,900 Dining services 3,349,168 — 3,349,168 Nursing services 4,483,857 — 4,483,857 In-home services 1,307,627 — 1,307,627 Clinic 198,032 — 198,032 Facility costs 5,495,641 — 5,495,641 Medicare bed tax 33,078 — 33,078 Ground lease (note 7) 1,044,701 — 1,044,701 Interest expense 1,176,174 — 1,176,174 Depreciation 3,212,322 — 3,212,322 Amortization 197,762 — 197,762 Total operating expenses 26,770,593 — 26,770,593 Net loss from operations (283,730) — (283,730) Nonoperating income (expenses): Change in fair value of interest rate swap (note 6) (890,007) — (890,007) Total nonoperating expenses (890,007) — (890,007) Deficiency of revenue over expenses (1,173,737) — (1,173,737) Change in beneficial interest in OCF (note 2) (97,657) — (97,657) Contributions — 348,044 348,044 Assets released from restriction — (211,568) (211,568) Change in net unrealized gains/losses 136,270 (113,564) 22,706 Change in charitable gift annuity liability — 7,372 7,372 Income on restricted investments — 33,860 33,860 Change in net assets (deficit) (1,135,124) 64,144 (1,070,980) Net assets (deficit) at beginning of year (16,625,428) 1,881,427 (14,744,001) Net assets (deficit) at end of year $ (17,760,552) 1,945,571 (15,814,981)

See accompanying notes to financial statements.

3 MARY’S WOODS AT MARYLHURST, INC. Statement of Activities Year ended June 30, 2015

Temporarily Unrestricted restricted Total Revenues, gains, and other support: Resident services $ 19,115,309 — 19,115,309 Earned entrance fees 4,059,321 — 4,059,321 Income on investments 191,746 — 191,746 Other 561,486 — 561,486 Total revenues, gains, and other support 23,927,862 — 23,927,862 Operating expenses: Administration 1,244,433 — 1,244,433 Information Technology 279,718 — 279,718 Fundraising 112,537 — 112,537 Marketing 589,042 — 589,042 Human resources 301,620 — 301,620 Pastoral care 173,425 — 173,425 Wellness 94,300 — 94,300 Environmental services 2,490,190 — 2,490,190 Resident services 362,026 — 362,026 Dining services 2,947,172 — 2,947,172 Nursing services 3,990,447 — 3,990,447 In-home services 942,359 — 942,359 Clinic 125,307 — 125,307 Facility costs 4,755,213 — 4,755,213 Medicare bed tax 27,176 — 27,176 Ground lease (note 7) 990,545 — 990,545 Interest expense 600,480 — 600,480 Depreciation 2,701,612 — 2,701,612 Amortization 272,754 — 272,754 Total operating expenses 23,000,356 — 23,000,356 Net income from operations 927,506 — 927,506 Nonoperating income (expenses): Change in fair value of interest rate swap (note 6) (1,176,797) — (1,176,797) Total nonoperating expenses (1,176,797) — (1,176,797) Deficiency of revenue over expenses (249,291) — (249,291) Change in beneficial interest in OCF (note 2) 2,998 — 2,998 Contributions — 571,683 571,683 Assets released from restriction — (364,030) (364,030) Change in net unrealized gains/losses (90,607) (32,095) (122,702) Change in charitable gift annuity liability — 11,624 11,624 Income on restricted investments — 76,592 76,592 Change in net assets (deficit) (336,900) 263,774 (73,126) Net assets (deficit) at beginning of year (16,288,528) 1,617,653 (14,670,875) Net assets (deficit) at end of year $ (16,625,428) 1,881,427 (14,744,001)

See accompanying notes to financial statements.

4 MARY’S WOODS AT MARYLHURST, INC. Statements of Cash Flows Years ended June 30, 2016 and 2015

2016 2015 Cash flows from operating activities: Change in net deficit $ (1,070,980) (73,126) Adjustments to reconcile change in net deficit to net cash (used in) provided by operating activities: Depreciation and amortization 3,410,084 2,974,366 Amortization of prepaid land lease 42,857 42,857 Net realized and unrealized (gains) losses on investments (22,706) 122,702 Change in beneficial interest in OCF 97,657 (2,998) Change in fair value of interest rate swap 890,007 1,176,797 Noncash earned entrance fees (4,297,813) (4,059,321) Changes in: Accounts receivable 298,604 (238,552) Prepaid expenses and other assets 12,744 (36,876) Accounts payable and accrued liabilities 188,323 194,250 Gift annuity liability (4,193) (8,284) Interest payable 57,298 14,913 Deposits 398,950 (654,805) Net cash provided by (used in) operating activities 832 (548,077) Cash flows from investing activities: Capital expenditures (8,538,096) (9,901,579) Proceeds from sale and maturity of investments 20,580,841 2,753,093 Purchase of investments (18,181,730) (13,049,770) Net cash used in investing activities (6,138,985) (20,198,256) Cash flows from financing activities: Financing costs paid (4,440) (8,021) Entrance fees received 11,296,370 20,742,390 Refunded entrance fees (6,187,000) (6,597,739) Principal payments on long-term debt (3,470,514) (1,001,000) Proceeds from long-term debt 6,329,547 8,183,967 Net cash provided by financing activities 7,963,963 21,319,597 Net increase in cash and cash equivalents 1,825,810 573,264 Cash at beginning of year 1,332,986 759,722 Cash at end of year $ 3,158,796 1,332,986 Supplemental disclosures: Cash paid for interest $ 1,118,876 585,567 Change in accounts payable related to acquisition of property, plant, and equipment 42,269 100,962

See accompanying notes to financial statements.

5 MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(1) Organization and Summary of Significant Accounting Policies (a) Organization Mary’s Woods at Marylhurst, Inc. (Mary’s Woods) is a not-for-profit corporation formed in 1997 and located in the Portland metropolitan area. Mary’s Woods is a Life Plan Community, formerly known as a Continuing Care Retirement Community, which opened in February 2001.

(b) Basis of Presentation Net assets are classified based on the existence or absence of donor-imposed restrictions. All net assets are recorded as unrestricted, or, if subject to donor-imposed stipulations that may be met by future activity, as temporarily restricted.

(c) Cash Cash consists of petty cash and cash in demand bank accounts. Amounts held in demand bank accounts are often in excess of Federal Deposit Insurance Corporation (FDIC) coverage levels.

(d) Investments and Investment Income Investments – limited as to use include designated assets set aside by the Board of Directors (the Board) to provide funding for future capital improvements. The Board retains control over these assets and may, at its discretion, use these assets for other purposes.

Investments in debt and equity securities are reported at fair value. Fair value is determined primarily using quoted market prices. Valuation of the private technology fund is determined using net asset value as a practical expedient. Investment return, including realized gains and losses on investments, is reported as a component of revenues, gains, and other support. Changes in unrealized gains and losses on investments are excluded from the determination of excess of revenue over expenses and are reported as a direct change in net assets unless an unrealized loss is determined to be other than temporary. For calculating gains and losses, cost is based on specific-identification. Management considers all investments to be other-than-trading securities.

During the fiscal year ended June 30, 2016, Mary’s Woods liquidated its investment in the Oregon Community Foundation (OCF). This investment represented a beneficial interest in a recipient organization. Mary’s Woods established an interest in OCF by contributing funds to its investment portfolio. The value of this interest was then adjusted at a rate proportional to the investment returns obtained by OCF on its investment portfolio. Mary’s Woods recognized its interest in the net assets of OCF valued at initial investment adjusted for their proportionate share of annual investment earnings at OCF.

Investment income and losses from the investment pool are allocated between the members of the pool, including Mary’s Woods, based upon investment balances. Mary’s Woods recognizes changes in its interest in the investment pool using a method that is similar to the equity method of accounting.

6 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(e) Property, Plant, and Equipment Property, plant, and equipment are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the following estimated useful lives: Buildings and improvements 40 years Equipment and furniture 3–7 years

Mary’s Woods periodically reviews the carrying amount of their long-lived assets whenever events or circumstances provide evidence that suggests that the carrying amount of long-lived assets may not be recoverable. If this review indicates that long-lived assets may not be recoverable, Mary’s Woods reviews the expected undiscounted future net operating cash flows from the use of these assets. If such assets are considered to be impaired, the impairment in value is recognized as a charge in the statements of activities. The impairment charge is the difference between the carrying amount of the long-lived asset and its estimated fair value. As of June 30, 2016 and 2015, Mary’s Woods does not believe that there is any indication that the carrying value of long-lived assets has been impaired.

(f) Deferred Financing Costs Financing costs related to the issuance of bonds and other loans are capitalized and amortized over the term of the related debt or related credit agreement, whichever is shorter, using the effective-interest method. Amortization of deferred financing costs was $197,762 and $272,754 for the years ended June 30, 2016 and 2015, respectively. Accumulated amortization of deferred financing costs as of June 30, 2016 and 2015 was $2,053,540 and $1,855,778, respectively.

(g) Deficiency of Revenues over Expenses The statements of activities include deficiency of revenues over expenses. Changes in unrestricted net assets, which are excluded from deficiency of revenues over expenses, consistent with industry practice, include unrealized gains and losses on investments in other-than-trading securities. Activities included in deficiency of revenues over expenses represent both operating and nonoperating activities.

(h) Deferred Revenue Entrance fees paid by a resident upon entering into a residency agreement are recorded as deferred revenue. Mary’s Woods offers two types of plans, Plan A and Plan B. Under Plan A, upon termination of the residency agreement due to cancellation, death, or other reason, an amount not less than 80% of the original entrance fee or current entrance fee, whichever is lower, would be refunded to the resident only at the time of reoccupancy of the vacated unit or a like unit. The refund is subject to a reduction for any unpaid fees or charges incurred by a resident, and is paid from the proceeds of the new entrance fee. Under Plan B, the amount of entrance fees that are refundable is prorated based on length of stay of the resident, and after a certain length of stay, no refund is provided. Mary’s Woods no longer actively offers Plan B to residents. The nonrefundable portion of entrance fees is amortized to revenue using the straight-line method over the estimated life expectancy of the resident. The refundable entrance fees are amortized to revenue using the straight-line method over the remaining useful life of the building. Amortization of deferred revenue is reported as earned entrance fees revenue in the accompanying statements of activities.

7 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(i) Revenue Recognition Resident services revenue is recognized when services are rendered. It consists of residents’ fees for basic housing and support services and fees associated with additional services such as routine healthcare and personalized assistance on a fee-for-service basis. The collectibility of the accounts receivable is assessed periodically and a provision for doubtful accounts is recorded as considered necessary.

Additionally, Mary’s Woods provides services without charge or at amounts less than its established rates to residents who meet the criteria of its charity care policy. As Mary’s Woods does not pursue collection of amounts determined to qualify as charity care, those amounts are not reported as resident service revenue.

(j) Obligation to Provide Future Services Mary’s Woods annually calculates the present value of the net cost in excess of service revenues of future services and the use of facilities to be provided to current residents and compares that amount with the balance of deferred revenue from advance fees. If the present value of the net cost of future services and the use of facilities exceeds the deferred revenue from advance fees, a liability is recorded with the corresponding charge to income. No such liability was recorded as of June 30, 2016 or 2015.

(k) Income Taxes The Internal Revenue Service (IRS) has recognized Mary’s Woods as exempt from federal income taxes under Section 501(a) of the IRC as an organization described in Section 501(c)(3) of the IRC, except to the extent of unrelated business income tax under Internal Revenue Code Sections 511 – 515. There is no unrelated business income, and therefore, no provision for income tax is reflected in the accompanying financial statements.

Accounting principles generally accepted in the United States of America require Mary’s Woods’ management to evaluate tax positions taken by Mary’s Woods and recognize a tax liability (or asset) if Mary’s Woods has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. Management has analyzed tax positions taken by Mary’s Woods and has concluded that as of June 30, 2016, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. Mary’s Woods is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Mary’s Woods’ management believes it is no longer subject to income tax examinations for years prior to fiscal year 2013.

(l) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

8 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(m) Recent Accounting Pronouncements On May 28, 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. The new standard is effective for Mary’s Woods on July 1, 2019. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The new standard also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. Mary’s Woods has neither selected a transition method nor determined the effect of the standard on its ongoing financial reporting.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU will require that changes in the value of equity investments with readily determinable market values be recognized through revenue in excess of expenses. The new standard is effective for Mary’s Woods on July 1, 2018. Management is in the process of evaluating the impact the adoption of this guidance on Mary’s Woods consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU applies to all leases of tangible assets and the new standard is effective for Mary’s Woods on July 1, 2020. Management is evaluating the effect that ASU 2016-02 will have on its financial statements and related disclosures. Management has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

On April 7, 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30). The new guidance changes the presentation of debt issuance costs in the financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. Amortization of debt issuance costs will be reported as interest expense. This standard is effective for Mary’s Woods on July 1, 2016. Mary’s Woods management does not expect the adoption to have a material impact on the consolidated financial position, and will have no impact on results of operations or cash flows.

On August 18, 2016, the FASB issued ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements for Not-for-Profit Entities. The new guidance makes improvements to the information provided in the financial statements and accompanying notes of not-for-profit entities, including changes to net asset classification requirements, liquidity, financial performance, and cash flows. This standard is effective for Mary’s Woods on July 1, 2018. Management is in the process of evaluating the impact the adoption of this guidance on Mary’s Woods consolidated financial statements.

9 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(n) Recently Adopted Accounting Pronouncement In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820) – Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which eliminates the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value per share, or its equivalent, (NAV) using the practical expedient in the FASB’s fair value measurement guidance. Mary’s Woods adopted this standard effective June 30, 2016. As a result of the adoption of the standard, Mary’s Woods modified its fair value hierarchy footnotes.

(o) Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to current year presentation.

(2) Investments Investments consist of the following as of June 30: 2016 2015 Cash and cash equivalents $ 6,087,719 10,825,189 U.S. government treasuries 1,834,306 — Municipal bonds 478,870 927,160 U.S. government agencies 1,544,506 2,129,653 Mortgage-backed securities — 1,471 Corporate obligations 8,294,051 6,072,328 Equities 3,992,557 — Alternative investmetns 184,301 104,956 Investment in pooled account 1,754,601 1,678,305 Beneficial interest in the Oregon Community Foundation — 4,905,911 $ 24,170,911 26,644,973

A portion of Mary’s Woods assets are invested in an investment pool. The funds are held by a bank custodian, and are managed by professional investment managers. The investment pool invests in fixed income and equity securities with readily determinable fair values.

10 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

Pooled investments held at Mary’s Woods are recorded at Mary’s Woods’ share of the carrying value of the investment pool. The investment pool is invested as follows at June 30, 2016 (in percentages): Board-designated cash and investments: Cash and cash equivalents 2% U.S. government treasuries 1 Mutual funds 22 Equity securities 38 U.S. government agencies 5 Corporate obligations 5 Alternative investments 27 Total pooled investments held 100%

Until fiscal year 2016, Mary’s Woods maintained investments with OCF. The investments were used solely to support the future capital improvement needs of Mary’s Woods, and were recorded as a beneficial interest by Mary’s Woods in accordance with the provisions of FASB ASC 958-20, regarding financially interrelated not-for-profit entities. The investments, which represented an endowment fund that was legally owned by OCF, primarily included equity securities and fixed-income investments; however, approximately $737,000 of the investments at June 30, 2015 were not readily marketable. Mary’s Woods’ investment in OCF was recorded based on their initial contribution to OCF, adjusted for subsequent changes. All earnings of the investments held by OCF, less investment management fees charged by OCF, were allocated to Mary’s Woods, and were recorded by Mary’s Woods as change in beneficial interest in OCF in the statements of activities. Earnings consist of interest, dividends, realized gains and losses, and changes in unrealized gains and losses. Funds held by OCF may be distributed once per quarter, subject to approval by the OCF board of directors.

Amounts reported as income on investments consist of interest income.

The following table summarizes Mary’s Woods’ investments with unrealized losses as of June 30, 2016: Unrealized Less than 12 months Fair value Cost basis loss Corporate CD $ 244,591 245,000 409 Corporate obligations 1,318,744 1,320,979 2,235 Equities 1,147,394 1,180,727 33,333 Total temporarily impaired securities $ 2,710,729 2,746,706 35,977

11 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

The following table summarizes Mary’s Woods’ investments with unrealized losses as of June 30, 2015: Unrealized Less than 12 months Fair value Cost basis loss Corporate CD $ 242,859 245,000 2,141 Corporate obligations 5,237,809 5,336,797 98,988 U.S. government agencies 299,326 302,557 3,231 Mortgage-backed securities 1,471 1,586 115 Total temporarily impaired securities $ 5,781,465 5,885,940 104,475

The number of separate investment positions held by Mary’s Woods that were at an unrealized loss as of June 30, 2016 and 2015 was 95 and 21, respectively.

The individual securities included in the above tables that have unrealized losses have been deemed to not require an adjustment for other-than-temporary impairment as the unrealized losses have resulted due to changes in interest rates rather than the creditworthiness of the issuer of the securities or other decreases in fair value that are not significant enough to warrant recognition under Mary’s Woods’ policy for other-than-temporary impairment.

Mary’s Woods is required, as a Life Plan Community in the State of Oregon, to set aside liquid reserves per the State of Oregon Annual Disclosure and Reserve Requirement Statement. Liquid reserves must equal or exceed the total of all projected principal and interest payments due during the next fiscal year from any mortgage loan or other long-term financing, plus the total of the projected operating expenses for three months of the next fiscal year. At June 30, 2016 and 2015, Mary’s Woods had $27,449,357 and $28,472,508, respectively, in liquid reserves as defined by the State of Oregon, which primarily includes cash, certain investments, and accounts receivable. These amounts meet the State of Oregon requirements, as defined above.

(3) Fair Value of Financial Instruments The carrying amount reported in the statements of financial position for cash and cash equivalents, patient accounts receivable, other receivables, line of credit, accounts payable, accrued salaries, wages, and benefits, and estimated third-party payor settlements approximates fair value because of the short maturity of these instruments.

Financial assets and liabilities are measured at fair value and grouped in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to estimate fair value. These levels are as follows:

12 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Level 2 valuations are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The following table presents the balances of investments measured at fair value on a recurring basis at June 30, 2016: Fair value Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 6,087,719 6,087,719 — — U.S. government treasuries 1,834,306 1,834,306 — — Equities 3,992,557 3,992,557 — — Municipal bonds 478,870 — 478,870 — U.S. government agencies 1,544,506 — 1,544,506 — Corporate obligations 8,294,051 — 8,294,051 — Total assets at fair value 22,232,009 11,914,582 10,317,427 — Investments valued at NAV as a practical expedient 184,301 — — — Total assets $ 22,416,310 11,914,582 10,317,427 — Liabilities: Interest rate swap $ 2,066,804 — 2,066,804 — Total liabilities $ 2,066,804 — 2,066,804 —

13 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

The following table presents the balances of investments measured at fair value on a recurring basis at June 30, 2015: Fair value Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 10,825,189 10,825,189 — — Municipal bonds 927,160 — 927,160 — U.S. government agencies 2,129,653 — 2,129,653 — Mortgage-backed securities 1,471 — 1,471 — Corporate obligations 6,072,328 — 6,072,328 — Total assets at fair value 19,955,801 10,825,189 9,130,612 — Investments valued at NAV as a practical expedient 104,956 — — — Total assets $ 20,060,757 10,825,189 9,130,612 — Liabilities: Interest rate swap $ 1,176,797 — 1,176,797 — Total liabilities $ 1,176,797 — 1,176,797 —

No investments were transferred between fair value levels in the years ended June 30, 2016 and 2015.

The beneficial interest in OCF and pooled investment fund are not included in the above tables as they are measured using principles similar to the equity method, rather than fair value.

(4) Property, Plant, and Equipment Property, plant, and equipment, net, consists of the following as of June 30, 2016 and 2015: 2016 2015 Buildings and improvements $ 88,377,376 85,029,985 Equipment and furniture 11,837,806 9,346,950 Construction in progress 3,304,013 604,164 103,519,195 94,981,099 Less accumulated depreciation (34,294,893) (31,082,571) $ 69,224,302 63,898,528

14 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(5) Deferred Revenue Deferred revenue, net, consists of the following as of June 30, 2016 and 2015: 2016 2015 Nonrefundable $ 22,490,747 21,017,237 Refundable 80,867,442 79,601,822 103,358,189 100,619,059 Less accumulated amortization (32,596,352) (30,668,779) $ 70,761,837 69,950,280

(6) Long-Term Debt Long-term debt consists of the following as of June 30, 2016 and 2015: 2016 2015 2010 Series Bank Qualified Debt, interest at variable monthly interest rate determined by the remarketing agent (1.96% and 1.77% at June 30, 2016 and 2015, respectively) $ 23,970,000 24,875,000 2014 Series A Debt, interest at variable monthly interest rate (2.07% and 1.88% at June 30, 2016 and 2015, respectively) 12,906,000 12,141,967 Front Field Loan, interest at variable monthly interest rate (2.25% at June 30, 2016) 3,000,000 — $ 39,876,000 37,016,967

During the year ended June 30, 2011, Mary’s Woods issued the tax-exempt 2010 Series of Variable Rate Demand Senior Living Facility Revenue Refunding Bonds issued by the State of Oregon Facilities Authority in the amount of $28,730,000. The Series 2010 Bonds are Bank-Qualified Debt, whereby a financial institution has agreed to hold all of the bonds for a minimum term of five years from the date of issuance. The Bank-Qualified Debt was issued by U.S. Bank National Association. In June 2014, the financial institution extended their term for another 7 years, through June 2021. The bond agreement includes a material adverse change clause in the credit agreement, which, if triggered, would result in a covenant violation, allowing the lender to call the debt on demand. The 2010 Series Bank-Qualified Debt bears interest at an adjustable rate, which is 2.25% plus LIBOR, multiplied by the Initial Holder’s Tax-Exempt Factor, as of the reprice date, such rate to be reset monthly on each reprice date. Subsequent to the seven-year term of the Bank-Qualified Bonds, the bondholders would be able to put the bonds back to Mary’s Woods at any future bond remarketing.

In June 2014, Mary’s Woods issued a new series of bonds (Series 2014 A Debt). The proceeds of the 2014 Series A Debt were used to repay a prior term loan of $3,393,426 and to fund construction of 17 villas and common space renovations. Total funds available under the 2014 series are $18,000,000 and will be drawn as costs are incurred during construction. Total draws from the 2014 debt totaled $8,183,967 during the year ended June 30, 2015 and $3,329,546 during the year ended June 30, 2016.

15 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

As part of the 2014 transactions, Mary’s Woods entered into two forward-starting, variable-to-fixed interest rate swaps. The notional amounts of the transactions are $24,580,000 and $13,404,000, as reduced over the life of the swaps based on an amortization schedule. Under the transaction, Mary’s Woods will pay a fixed rate of 1.926% effective October 22, 2015 and 1.968% effective October 1, 2015, respectively, in exchange for receiving a variable rate based on the USD-BMA Municipal Swap Index. The objective of this transaction is to reduce volatility in the interest rate of the bonds.

The interest rate swap transactions do not meet the criteria for hedge accounting; therefore, any changes in fair value under the agreements are recorded as changes in nonoperating (income) expenses in the statements of activities. The fair value of the swap is determined by the spread in interest rates.

The change in unrealized gain and loss on the swap agreements for the years ended June 30, 2016 and 2015 is a loss of $890,007 and $1,176,797, respectively. The fair value of the interest rate swap agreements as of June 30, 2016 and 2015 is a liability of $2,066,804 and $1,176,797, respectively.

The 2010 and 2014 Bond documents contain certain covenants, which include certain financial ratios, as defined in the agreements.

The fair value of outstanding debt approximates carrying value due to the variable interest rate.

Future scheduled principal payments of debt by fiscal year as of June 30, 2016 are as follows: 2017 $ 4,313,000 2018 1,338,000 2019 1,380,000 2020 1,459,000 2021 31,386,000 $ 39,876,000

(7) Commitments and Contingencies (a) Land Lease Mary’s Woods leases 17.75 acres of land from the Society of the Sisters of the Holy Names of Jesus and Mary (the Sisters) (a related party) for an original term of 35 years under an operating lease agreement. Mary’s Woods has the right to extend the term for three successive 10-year periods, based on specific criteria. One of the successive periods has been committed to, therefore the right to two successive 10-year periods remains.

The ground lease has three components:

(1) Initial Base Rent: On September 1, 1999, Mary’s Woods paid an initial base rent payment of $1,500,000, of which $42,857 is recognized each year as expense. The remaining unamortized balance is $771,430 at June 30, 2016, which is recorded as prepaid land lease and will be recognized over the remaining life of the lease.

(2) Mary’s Woods pays annual base rent of $75,000 in equal monthly installments.

16 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

Future minimum rent payments under the operating land lease as of June 30, 2016 are as follows: 2017 $ 75,000 2018 75,000 2019 75,000 2020 75,000 2021 75,000 Thereafter 1,087,500 Total minimum rent payments required $ 1,462,500

(3) Additional Rent: Additional rent is also assessed at the rate of $150 per month, subject to annual increase, for each independent living unit, assisted living unit, specialty care bed, and skilled nursing bed in the facility. Additional rent totaled $926,844 and $872,688 in 2016 and 2015, respectively.

Total rent expense under this land lease was $1,044,701 and $990,545 in 2016 and 2015, respectively.

(b) Equipment Leases Mary’s Woods has operating lease arrangements to lease three passenger vehicles and eight copiers for a term of three to five years. Future minimum lease payments under these operating leases as of June 30, 2016 are as follows: 2017 $ 106,403 2018 104,967 2019 93,703 2020 72,795 2021 5,439 Total minimum lease payments required $ 383,307

Rent expense under these equipment leases was $109,431 and $135,754 in 2016 and 2015, respectively.

(c) Legal Proceedings From time to time, Mary’s Woods is involved in various claims and legal actions arising in the ordinary course of business. Liabilities are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

(8) Retirement Plan Mary’s Woods has a tax-sheltered annuity plan available to all full-time, and certain part-time, employees who have met certain employment and age requirements. The plan document allows for a discretionary matching contribution of up to 5% after the first year of employment to all eligible employees. Mary’s

17 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

Woods’ contributions, which have been recognized as retirement benefit expense, were $264,079 and $203,145 in 2016 and 2015, respectively.

(9) Related-Party Transactions Mary’s Woods was constructed on a portion of land owned by the Sisters. Mary’s Woods has entered into a ground lease agreement with the Sisters (note 7). As of June 30, 2016, the Sisters occupy 3 of the 13 board of directors’ positions.

Mary’s Woods has contracted with the Sisters to provide resident services in exchange for monthly service fees. These services include housekeeping, meals, transportation, security, activities, and wellness. These fees are for the Sisters’ occupied apartments (owned by the Sisters) on the 3rd and 4th floors of the Provincial House and Sisters residing in other housing units, and were $237,019 and $240,194 in 2016 and 2015, respectively. Additionally, Mary’s Woods received amounts from the Sisters per the condominium agreement for the year ended June 30, 2016 as follows: Common element costs $ 230,688 Housekeeping and maintenance services 77,501 Capital projects 15,459

Mary’s Woods has contracted with the Sisters to provide up to 33 beds in the Marie Rose Center, including 20 assisted living, 8 residential care facility, and 5 memory care beds, for use by the Sisters. When these beds are not occupied, they can be made available for use by Mary’s Woods’ residents.

Certain general and administrative functions were shared by the Sisters with Mary’s Woods. In return for these services, Mary’s Woods paid expenses totaling $75,000 in both of the years ended June 30, 2016 and 2015. Mary’s Woods also paid the Sisters for development and fund-raising contract services totaling $50,000 and $50,000 in 2016 and 2015, respectively. Additionally, Mary’s Woods paid the Sisters amounts per the condominium agreement for the year ended June 30, 2016 as follows: Well water usage $ 61,500 Rental of Provincial House office space 19,512 Rental of Provincial House basement 3,852

Other related-party accounts receivable balances, relating to operating costs that require repayment by the Sisters to Mary’s Woods, totaled $51,570 and $147,417 as of June 30, 2016 and 2015, respectively. These amounts are included in accounts receivable in the accompanying statements of financial position.

18 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2016 and 2015

(10) Restricted Net Assets Temporarily restricted net assets as of June 30, 2016 and 2015 are available for the following purposes: 2016 2015 Resident fund for charity care $ 1,676,481 1,745,174 Employee education 192,184 133,324 Capital projects 4,679 2,929 Program development and innovation 71,077 — CNA education 1,150 — Total temporarily restricted net assets $ 1,945,571 1,881,427

Additionally, the Board of Mary’s Woods has determined that the funds received for the purpose of charity care to residents will be treated as a board-designated endowment, and funds will be allocated for expenditure in a manner that protects the purchasing power of the donated funds. To the extent that earnings on endowment funds exceed identified expenditures on which to apply those earnings, the earnings are classified as temporarily restricted net assets as restrictions are established by the donors on earnings related to their original, unspent gifts. As of June 30, 2016, unspent earnings on endowment funds totaling $92,635 are included in unrestricted net assets.

A rollforward of board-designated endowment funds is as follows: Temporarily Unrestricted restricted Balance as of June 30, 2014 $ 92,635 1,540,466 Investment returns — 44,497 Change in charitable gift annuity liability — 11,624 Contributions — 421,613 Appropriated for expenditure (273,026) — Reclassifications and other 273,026 (273,026) Balance as of June 30, 2015 92,635 1,745,174 Investment returns — (79,704) Change in charitable gift annuity liability — 7,372 Contributions — 161,609 Appropriated for expenditure (157,970) — Reclassifications and other 157,970 (157,970) Balance as of June 30, 2016 $ 92,635 1,676,481

(11) Subsequent Events In connection with the preparation of the financial statements, Mary’s Woods evaluated subsequent events after the statements of financial position date of June 30, 2016 through October 12, 2016, which was the date the financial statements were available to be issued.

19 MARY’S WOODS AT MARYLHURST, INC. Financial Statements June 30, 2017 and 2016 (With Independent Auditors’ Report Thereon) KPMG LLP Suite 3800 1300 South West Fifth Avenue Portland, OR 97201

Independent Auditors’ Report

The Board of Directors Mary’s Woods at Marylhurst, Inc.:

We have audited the accompanying financial statements of Mary’s Woods at Marylhurst, Inc., which comprise the statements of financial position as of June 30, 2017 and 2016, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mary’s Woods at Marylhurst, Inc. as of June 30, 2017 and 2016, and the results of its activities and its cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

October 12, 2017

KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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" MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

(c) Cash Cash consists of petty cash and cash in demand bank accounts. Amounts held in demand bank accounts are often in excess of Federal Deposit Insurance Corporation (FDIC) coverage levels.

Investments in debt and equity securities are reported at fair value. Fair value is determined primarily using quoted market prices. Valuation of the private technology fund is determined using net asset value as a practical expedient. Investment return, including realized gains and losses on investments, is reported as a component of revenues, gains, and other support. Changes in unrealized gains and losses on investments are excluded from the determination of excess of revenue over expenses and are reported as a change in net assets unless an unrealized loss is determined to be other than temporary. For calculating gains and losses, cost is based on specific identification. Management considers all investments to be other-than-trading securities.

Investment income and losses from an investment pool are allocated between the members of the pool, including Mary’s Woods, based upon investment balances. Mary’s Woods recognizes changes in its interest in the investment pool using a method that is similar to the equity method of accounting.

Buildings and improvements 40 years Equipment and furniture 3–7 years

6 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

such assets are considered to be impaired, the impairment in value is recognized as a charge in the statements of activities. The impairment charge is the difference between the carrying amount of the long-lived asset and its estimated fair value. As of June 30, 2017 and 2016, Mary’s Woods does not believe that there is any indication that the carrying value of long-lived assets has been impaired.

(f) Deferred Financing Costs Deferred financing costs are amortized using the effective interest method to either interest and amortization expense, or are capitalized as part of capitalized interest, depending on the use of the related bond proceeds. Total financing costs amortized were $198,140 and $197,762 for the years ended June 30, 2017 and 2016, respectively, and total accumulated amortization of deferred financing costs were $107,219 and $2,053,540 as of June 30, 2017 and 2016, respectively.

(g) Excess (Deficiency) of Revenues over Expenses The statements of activities include (deficiency) excess of revenues over expenses. Changes in unrestricted net assets, which are excluded from deficiency of revenues over expenses, consistent with industry practice, include unrealized gains and losses on investments in other-than-trading securities. Activities included in excess (deficiency) of revenues over expenses represent both operating and nonoperating activities.

7 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

Accounting principles generally accepted in the United States of America require Mary’s Woods’ management to evaluate tax positions taken by Mary’s Woods and recognize a tax liability (or asset) if Mary’s Woods has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. Management has analyzed tax positions taken by Mary’s Woods and has concluded that as of June 30, 2017 there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. Mary’s Woods is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Mary’s Woods’ management believes it is no longer subject to income tax examinations for years prior to fiscal year 2014.

(l) Village Deposits In July 2016, Mary’s Woods began accepting deposits for apartments that are part of an expansion project (The Village at Mary’s Woods), which includes 144 independent living apartment-style residences. Reservation agreements between Mary’s Woods and future residents require a deposit equal to 10% of the entrance fee in order to reserve an apartment. The deposits are held in escrow and are fully refundable including interest earned, less an administrative fee of $300, if a reservation is cancelled at least 60 days before the apartment is available for occupancy.

(m) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(n) Recent Accounting Pronouncements On May 28, 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. generally

8 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

accepted accounting principles when it becomes effective. The new standard is effective for Mary’s Woods on July 1, 2018. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. Mary’s Woods has neither selected a transition method nor determined the effect of the standard on its ongoing financial reporting.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU will require that changes in the value of equity investments with readily determinable market values be recognized through revenue in excess of expenses. The new standard is effective for Mary’s Woods on July 1, 2018. Management is in the process of evaluating the impact the adoption of this guidance has on Mary’s Woods consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU applies to all leases of tangible assets and the new standard is effective for Mary’s Woods on July 1, 2019. Management is evaluating the effect that ASU 2016-02 will have on its financial statements and related disclosures. Management has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

On August 18, 2016, the FASB issued ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements for Not-for-Profit Entities. The new guidance makes improvements to the information provided in the financial statements and accompanying notes of not-for-profit entities, including changes to net asset classification requirements, liquidity, financial performance, and cash flows. This standard is effective for Mary’s Woods on July 1, 2018. Management is in the process of evaluating the impact the adoption of this guidance has on Mary’s Woods consolidated financial statements.

(o) Recently Adopted Accounting Pronouncement On April 7, 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30). The new guidance changed the presentation of debt issuance costs in the financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. Amortization of debt issuance costs are reported as interest expense. This pronouncement was adopted for the year ended June 30, 2017.

(p) Reclassifications Certain amounts in the financial statements for the year ended June 30, 2016 have been reclassified to be consistent with current year presentation.

9 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

(2) Investments Investments consist of the following as of June 30:

2017 2016 Cash and cash equivalents $ 19,182,232 6,087,719 U.S. government treasuries 2,869,139 1,834,306 Municipal bonds 701,223 478,870 U.S. government agencies 10,038,858 1,544,506 Corporate obligations 111,603,630 8,294,051 Equities 8,409,139 3,992,557 Alternative investments 201,391 184,301 Investment in pooled account 1,997,578 1,754,601 $ 155,003,190 24,170,911

Board-designated cash and investments: Cash and cash equivalents 3 % Mutual funds 23 Equity securities 41 U.S. government agencies 5 Corporate obligations 5 Alternative investments 23 Total pooled investments held 100 %

Amounts reported as income on investments consist of interest income.

10 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

The following table summarizes Mary’s Woods’ investments with unrealized losses as of June 30, 2017:

Unrealized Less than 12 months Fair value Cost basis loss

Corporate CD $ 244,897 245,000 103 Corporate obligations 95,089,198 95,340,483 251,285 U.S. government agencies 12,338,714 12,367,513 28,799 Equities 1,236,626 1,363,184 126,558

Total temporarily impaired securities $ 108,909,435 109,316,180 406,745

Unrealized More than 12 months Fair value Cost basis loss

Corporate obligations 442,606 449,292 6,686 U.S. government agencies 47,442 54,210 6,768 Equities 41,052 44,046 2,994 Total temporarily impaired securities $ 531,100 547,548 16,448

The following table summarizes Mary’s Woods’ investments with unrealized losses as of June 30, 2016:

Unrealized Less than 12 months Fair value Cost basis loss Corporate CD $ 244,591 245,000 409 Corporate obligations 1,318,744 1,320,979 2,235 Equities 1,147,394 1,180,727 33,333 Total temporarily impaired securities $ 2,710,729 2,746,706 35,977

The number of separate investment positions held by Mary’s Woods that were at an unrealized loss as of June 30, 2017 and 2016 was 302 and 95, respectively.

11 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

three months of the next fiscal year. At June 30, 2017 and 2016, Mary’s Woods had $38,193,852 and $27,449,357, respectively, in liquid reserves as defined by the State of Oregon, which primarily includes cash, certain investments, and accounts receivable. These amounts meet the State of Oregon requirements, as defined above.

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Level 2 valuations are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The following table presents the balances of investments measured at fair value on a recurring basis at June 30, 2017:

Fair value Level 1 Level 2 Level 3 Cash and cash equivalents $ 19,182,232 19,182,232 — — U.S. government treasuries 2,869,139 2,869,139 — — Equities 8,409,139 8,409,139 — — Municipal bonds 701,223 — 701,223 — U.S. government agencies 10,038,858 — 10,038,858 — Corporate obligations 111,603,630 — 111,603,630 — Total assets at fair value 152,804,221 30,460,510 122,343,711 — Investments valued at NAV as a practical expedient 201,391 — — — Total assets $ 153,005,612 30,460,510 122,343,711 —

12 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

The following table presents the balances of investments measured at fair value on a recurring basis at June 30, 2016:

Fair value Level 1 Level 2 Level 3

Assets: Cash and cash equivalents $ 6,087,719 6,087,719 — — U.S. government treasuries 1,834,306 1,834,306 — — Equities 3,992,557 3,992,557 — — Municipal bonds 478,870 — 478,870 — U.S. government agencies 1,544,506 — 1,544,506 — Corporate obligations 8,294,051 — 8,294,051 —

Total assets at fair value 22,232,009 11,914,582 10,317,427 —

Investments valued at NAV as a practical expedient 184,301 — — — Total assets $ 22,416,310 11,914,582 10,317,427 —

Fair value Level 1 Level 2 Level 3 Liabilities: Interest rate swap $ 2,066,804 — 2,066,804 — Total liabilities $ 2,066,804 — 2,066,804 —

No investments were transferred between fair value levels in the years ended June 30, 2017 and 2016.

The pooled investment fund is not included in the above tables as it is measured using principles similar to the equity method, rather than fair value.

(4) Property, Plant, and Equipment Property, plant, and equipment, net, consists of the following as of June 30, 2017 and 2016:

2017 2016

Buildings and improvements $ 88,999,782 88,377,376 Equipment and furniture 13,122,454 11,837,806 Construction in progress 15,730,627 3,304,013 117,852,863 103,519,195

Less accumulated depreciation (37,763,139) (34,294,893) $ 80,089,724 69,224,302

13 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

(5) Deferred Revenue Deferred revenue, net, consists of the following as of June 30, 2017 and 2016:

2017 2016 Nonrefundable $ 23,512,737 22,490,747 Refundable 81,486,562 80,867,442 104,999,299 103,358,189 Less accumulated amortization (35,040,885) (32,596,352) $ 69,958,414 70,761,837

(6) Long-Term Debt Long-term debt consists of the following as of June 30, 2017 and 2016:

2017 2016 2010 Series Bank Qualified Debt, interest at variable monthly interest rate determined by the remarketing agent (1.96% at June 30, 2016) $ — 23,970,000 2014 Series A Debt, interest at variable monthly interest rate (2.07% at June 30, 2016)) — 12,906,000 Front Field Loan, interest at variable monthly interest rate (2.25% at June 30, 2016) — 3,000,000 Public Finance Authority Senior Living Facility Revenue and Refunding Bonds, Series 2017A (5.00% to 5.25% at June 30, 2017, maturing May 15, 2052) 114,815,000 — Public Finance Authority Senior Living Facility Revenue and Refunding Bonds, Series 2017B-1 (3.95% at June 30, 2017, maturing November 15, 2024) 11,500,000 — Public Finance Authority Senior Living Facility Revenue and Refunding Bonds, Series 2017B-2 (3.5% at June 30, 2017, maturing November 15, 2023) 15,000,000 — Public Finance Authority Senior Living Facility Revenue and Refunding Bonds, Series 2017B-3 (3.00% at June 30, 2017, maturing November 15, 2022) 33,750,000 —

175,065,000 39,876,000 Plus unamortized original issue premium 4,157,662 — Less unamortized debt issuance costs (3,517,367) (486,607) $ 175,705,295 39,389,393

14 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

Interest cost incurred related to funds borrowed was $2,562,551 and $1,186,820 in 2017 and 2016, respectively. These amounts were reduced by $1,200,679 and $10,646 in 2017 and 2016, respectively, in the statements of operations, for amounts capitalized for construction and other capital projects.

In June 2014, Mary’s Woods issued a new series of bonds (Series 2014 A Debt). The proceeds of the 2014 Series A Debt were used to repay a prior term loan and to fund construction of 17 villas and common space renovations. These bonds were retired as part of the issuance of the Series 2017 bonds.

As part of the prior year transactions, Mary’s Woods entered into two forward-starting, variable-to-fixed interest rate swaps. The interest rate swap transactions did not meet the criteria for hedge accounting; therefore, any changes in fair value under the agreements were recorded as changes in nonoperating (income) expenses in the statements of activities. The fair value of the swap was determined by the spread in interest rates. Both of the interest rate swaps were terminated during the year ended June 30, 2017.

In April 2017, Mary’s Woods issued $175,065,000 of Senior Living Revenue and Refunding Bonds Series 2017A & B through the Public Finance Authority (the Authority). These bonds will collectively be referred to as the 2017 Bonds. The proceeds of the 2017 Bonds, together with certain other moneys, were used to refund all of the outstanding principal amount of the Series 2010 Bonds; refund all of the outstanding principal amount of the Series 2014 A bonds; fund swap termination payments; finance a portion of the costs of construction, acquisition, development, improvement, renovation, and equipping of an expansion project (the Project); pay a portion of the interest on the Bonds during the construction of the Project; fund a debt service reserve fund for the benefit of the Bonds; and pay certain costs of issuance of the Bonds. Mary’s Woods recorded a loss due to the extinguishment of debt of $395,686 for the fiscal year ended June 30, 2017, which is recorded in nonoperating income (loss) in the statements of operations.

The Project consists of the construction of The Village at Mary’s Woods, which will include 144 independent living apartment-style residences, 48 assisted living apartments, and two commons buildings, plus parking.

The Series 2017A Bonds bear interest at rates ranging from 5.00% to 5.25% payable semiannually each May 15 and November 15, commencing November 15, 2017 and require principal payments each May 15, 2018 through 2052 ranging from $325,000 through $7,095,000. The series 2017A Bonds maturing on or after May 15, 2026 are subject to optional redemption prior to maturity by the Authority at the discretion of the Corporation on any day on or after May 15, 2025.

The Series 2017B Bonds bear interest at rates ranging from 3.00% to 3.95% payable on each May 15 and November 15, commencing November 15, 2017. The Series 2017B-1 Bonds are subject to optional redemption prior to maturity by the Authority at the direction of Mary’s Woods on any day on or after November 15, 2019; the Series 2017B-2 Bonds are subject to optional redemption prior to maturity on any

15 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

day on or after May 15, 2019; and the Series 2017B-3 Bonds are subject to optional redemption prior to maturity on any day on or after November 15, 2018. The Series 2017B Bonds are not redeemable with sinking fund payments prior to their maturity. The Series 2017B-1 Bonds, the Series 2017B-2 Bonds, and the Series 2017B-3 Bonds are also subject to mandatory optional redemption monthly at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, to the extent moneys are on deposit in the Entrance Fee Redemption Account of the Bond Fund.

Mary’s Woods is required to comply with certain debt covenants, maintenance of insurance, financial reporting, and maintenance of certain financial ratios. Also, under the terms of the bonds, Mary’s Woods is required to maintain certain deposits with a trustee.

Future scheduled principal payments of debt by fiscal year as of June 30, 2017 are as follows:

2018 $ 325,000 2019 20,655,000 2020 30,900,000 2021 10,085,000 2022 1,260,000 Thereafter 111,840,000 $ 175,065,000

(7) Commitments and Contingencies (a) Land Lease Mary’s Woods is situated on real property, which is part of a 75-acre campus owned by the Sisters of the Holy Names of Jesus and Mary (the Sisters), a related party. The Mary’s Woods Community currently occupies 24 acres of the campus and leases that land pursuant to a Ground Lease dated August 15, 1999 (the Original Ground Lease).

The Village at Mary’s Woods (the Village) will be located on a 12-acre parcel of land contiguous to the existing Community. The Landlord (the Sisters) also owns the real property on which The Village will be constructed. In connection with the issuance of the Series 2017 Bonds, Mary’s Woods and the Landlord executed a Ground Lease Phase II (The Village Ground Lease).

The Original Ground Lease was amended in connection with the issuance of the Series 2017 Bonds so that the terms of the Original Ground Lease and The Village Ground Lease are substantially similar. The Ground Leases have terms of 50 years beginning April 2017 and expiring April 2067. The Ground Leases grant Mary’s Woods an option to extend the term of the Ground Leases for two additional 10-year terms. At the conclusion of the term of the Ground Leases, all facilities and improvements developed on the real estate covered by the Ground Leases will become exclusive assets of the Landlord.

The Ground Leases grant Mary’s Woods a right of first refusal in the event that the Landlord decides to sell the real estate subject to the Ground Leases. If Mary’s Woods does not exercise its right of first refusal, any sale would be subject to the Ground Leases.

16 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

The Original Ground Lease has three components:

1. Initial Base Rent: On September 1, 1999, Mary’s Woods paid an initial base rent payment of $1,500,000, of which $14,714 is recognized each year as expense. The remaining unamortized balance is $733,267 at June 30, 2017, which is recorded as prepaid land lease and will be recognized over the remaining life of the lease.

2. Annual Base Rent: Mary’s Woods pays annual base rent of $75,000 in equal monthly installments.

Future minimum rent payments under the Original Ground Lease as of June 30, 2017 are as follows:

2018 $ 75,000 2019 75,000 2020 75,000 2021 75,000 2022 75,000 Thereafter 3,362,500

Total minimum rent payments required $ 3,737,500

3. Additional Rent: Additional rent is also assessed at the rate of $197.23 per month, subject to annual increase, for each independent living unit and Health Care Center unit in the existing Community (392 units). Additional rent totaled $927,768 and $926,844 in 2017 and 2016, respectively.

Total rent expense under the Original Ground Lease was $1,040,931 and $1,044,701 in 2017 and 2016, respectively.

The Village Ground Lease has three components:

1. Initial Base Rent: On April 27, 2017, Mary’s Woods paid an initial base rent payment of $750,000, of which $15,000 is recognized each year as expense. The remaining unamortized balance is $747,500 at June 30, 2017, which is recorded as prepaid land lease and will be recognized over the remaining life of the lease.

2. Annual Base Rent: Mary’s Woods pays annual base rent of $75,000 in semiannual installments. The first payment of Annual Base Rent shall be paid within 10 days following the date on which a certificate of occupancy is issued by the City of Lake Oswego for The Village and will be prorated for the number of calendar days prior to the next Annual Base Rent payment date.

3. Additional Rent: Additional rent is also assessed at the rate of $220 per month, subject to annual increase, for each independent living unit and assisted living unit in The Village (192 units). Additional Rent will begin to accrue upon satisfaction of the following conditions: (i) 85% of all of the Expansion Independent Living Apartments included within The Village have been occupied and (ii) the Series 2017B Bonds have been paid in full. In addition, the Village Ground Lease provides

17 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

that Additional Rent is payable in annual installments only after all of the following conditions have been satisfied: (i) one full Fiscal Year has elapsed since the Stable Occupancy for the Project has been achieved, (ii) no event of default has occurred or is continuing, (iii) the Corporation has a Debt Service Coverage Ratio of 1.35, and (iv) the Corporation has 250 Days Cash on Hand.

Total rent expense under the Village Ground Lease was $2,500 and $0 in 2017 and 2016, respectively.

2018 $ 106,854 2019 97,375 2020 77,195 2021 5,439 2022 — Total minimum lease payments required $ 286,863

Rent expense under these equipment leases was $123,527 and $109,431 in 2017 and 2016, respectively.

(9) Related-Party Transactions Mary’s Woods was constructed on a portion of land owned by the Sisters. Mary’s Woods has entered into a ground lease agreement with the Sisters (note 7). As of June 30, 2017 and 2016, the Sisters occupy 3 of the 14 board of directors’ positions.

18 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

2016, respectively. Additionally, Mary’s Woods received amounts from the Sisters per the condominium agreement for the years ended June 30, 2017 and 2016 as follows:

2017 2016

Common element costs $ 241,128 230,688 Housekeeping and maintenance services 70,836 77,501 Capital projects 23,625 15,459

Certain general and administrative functions were shared by the Sisters with Mary’s Woods. In return for these services, Mary’s Woods paid expenses totaling $75,000 in both of the years ended June 30, 2017 and 2016. Mary’s Woods also paid the Sisters for development and fund-raising contract services totaling $50,000 and $50,000 in 2017 and 2016, respectively. Additionally, Mary’s Woods paid the Sisters amounts per the condominium agreement for the years ended June 30, 2017 and 2016 as follows:

2017 2016

Well water usage $ 61,500 61,500 Rental of Provincial House office space 19,512 19,512 Rental of Provincial House basement 5,016 3,852

Other related-party accounts receivable balances, relating to operating costs that require repayment by the Sisters to Mary’s Woods, totaled $49,733 and $51,570 as of June 30, 2017 and 2016, respectively. These amounts are included in accounts receivable in the accompanying statements of financial position.

(10) Restricted Net Assets Temporarily restricted net assets as of June 30, 2017 and 2016 are available for the following purposes:

2017 2016 Resident fund for charity care $ 1,934,479 1,676,481 Employee education 166,651 193,334 Capital projects 4,879 4,679 Program development and innovation 132,026 71,077 Total temporarily restricted net assets $ 2,238,035 1,945,571

19 (Continued) MARY’S WOODS AT MARYLHURST, INC. Notes to Financial Statements June 30, 2017 and 2016

Additionally, the Board of Mary’s Woods has determined that the funds received for the purpose of charity care to residents will be treated as a board-designated endowment, and funds will be allocated for expenditure in a manner that protects the purchasing power of the donated funds. To the extent that earnings on endowment funds exceed identified expenditures on which to apply those earnings, the earnings are classified as temporarily restricted net assets as restrictions are established by the donors on earnings related to their original, unspent gifts. As of June 30, 2017, unspent earnings on endowment funds totaling $92,635 are included in unrestricted net assets.

A rollforward of board-designated endowment funds is as follows:

Temporarily Unrestricted restricted

Balance as of June 30, 2015 $ 92,635 1,745,174 Investment returns — (79,704) Change in charitable gift annuity liability — 7,372 Contributions — 161,609 Appropriated for expenditure (157,970) — Reclassifications and other 157,970 (157,970) Balance as of June 30, 2016 92,635 1,676,481

Investment returns — 242,977 Change in charitable gift annuity liability — 5,523 Contributions — 199,128 Appropriated for expenditure (189,630) — Reclassifications and other 189,630 (189,630) Balance as of June 30, 2017 $ 92,635 1,934,479

(11) Subsequent Events In connection with the preparation of the financial statements, Mary’s Woods evaluated subsequent events after the statements of financial position date of June 30, 2017 through October 12, 2017, which was the date the financial statements were issued.

20 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX C

FINANCIAL FEASIBILITY STUDY

[THIS PAGE INTENTIONALLY LEFT BLANK] Financial Feasibility Study Mary’s Woods at Marylhurst, Inc.

Five Years Ending June 30, 2022

CONTENTS

PAGE

EXAMINATION REPORT OF INDEPENDENT ACCOUNTANTS C-1

FINANCIAL FORECAST Forecasted Statements of Activities C-6 Forecasted Statements of Cash Flows C-7 Forecasted Statements of Financial Position C-8 Forecasted Financial Ratios C-9

SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES Basis of Presentation C-11 Background on the Corporation C-11 Description of the Existing Community C-13 Description of the Project C-17 Development of the Project C-20 Summary of Financing C-22 Reservation Agreement C-26 Residency and Care Agreement C-28 Characteristics of the Market Area C-29 Primary Market Area C-32 Real Estate Trends C-40 Competitor Analysis C-41 Independent Living Penetration Analysis C-48 Marketing of the Community C-51 Summary of Significant Accounting Policies C-56 Management’s Basis for Forecast of Revenues and Entrance Fees C-57 Summary of Expense Assumptions C-64 Lease Payment Terms C-70 Assets Limited as to Use and Project Related Funds C-72 Current Assets and Current Liabilities C-74 Net Assets C-74

REPORT OF INDEPENDENT ACCOUNTANTS ON SENSITIVITY ANALYSES C-75

SENSITIVITY ANALYSES C-76

Examination Report of Independent Accountants

The Board of Directors Mary’s Woods at Marylhurst Lake Oswego, Oregon

We have prepared a financial feasibility study of the plans of Mary’s Woods at Marylhurst, Inc. (the “Corporation”), an Oregon not-for-profit corporation, for a planned campus expansion project that will include two stages of development. Stage 1 includes the development of 144 independent living apartments, 48 assisted living apartments and suites, and two common use buildings plus parking and other associated space, refinancing the Corporation’s previously existing outstanding debt, paying related swap termination fees, funding a debt service reserve fund for all of the then issued debt, and paying issuance expenses related to the Stage 1 bonds further described below. The Stage 1 financing occurred during the first half of 2017. Stage 2 includes the development of 54 independent living apartments and two buildings that will contain amenities for residents, funding a debt service reserve fund for Stage 2 debt, funding capitalized interest, and paying expenses related to the Stage 2 bonds further described below (Stage 1 and Stage 2 are collectively known as “the Project”). The Corporation’s existing facility consists of 233 independent living apartments, 50 independent living villas, 55 assisted living apartments, 23 memory care suites, 26 residential care suites, and five skilled nursing suites. Management of the Corporation anticipates that the Project’s independent living apartments will be available for occupancy beginning in November 2018 and the Project’s assisted living apartments will be available for occupancy beginning in July 2019.

The financial feasibility study was undertaken to evaluate the ability of the Corporation to generate sufficient funds to meet its operating expenses, working capital needs, and other financial requirements, including the debt service requirements associated with the Project.

Stage 1 debt service requirements include Public Finance Authority Senior Living Revenue and Refunding Bonds (Mary’s Woods at Marylhurst Project), Series 2017, in the par amount of $175,065,000 with a premium of $4,189,153. Additionally, the Corporation contributed $2,000,000 in equity to Stage 1. The structure and terms of the bonds (collectively the “Series 2017 Bonds”) are taken from the related Official Statement dated April 6, 2017:

$114,815,000 (with a premium of $4,189,000) of BB rated, tax-exempt, long-term, fixed rate bonds (the “Series 2017A Bonds”), consisting of serial and term maturities to May 2052, with interest rates ranging from 5.000 to 5.250 percent per annum and yields ranging from 2.210 to 4.950 percent per annum; $33,750,000 of BB rated, tax-exempt, Mandatory Paydown Securities (the “Series 2017B-3 Bonds”), consisting of term maturities to November 15, 2022, with an interest rate of 3.000 percent per annum and a yield of 3.000 percent per annum;

C-1 The Board of Directors Mary’s Woods at Marylhurst Lake Oswego, Oregon

$15,000,000 of BB rated, tax-exempt, Mandatory Paydown Securities (the “Series 2017B-2 Bonds”), consisting of term maturities to November 15, 2023, with an interest rate of 3.500 percent per annum and a yield of 3.500 percent per annum; and $11,500,000 of BB rated, tax-exempt, Mandatory Paydown Securities (the “Series 2017B-1 Bonds”), consisting of term maturities to November 15, 2024, with an interest rate of 3.950 percent per annum and a yield of 3.950 percent per annum.

The proceeds from the sale of the Series 2017 Bonds and a contribution from the Corporation are to be used as follows:

To pay a portion of the costs for Stage 1, originally estimated to be approximately $118,935,000, including land, construction, design fee, interior design, capital items, travel, advisory services, filing and permit fees, prepaid lease, marketing, other miscellaneous costs, and development fees; To fund debt service reserve funds for the Series 2017 Bonds; To fund interest for the Series 2017 Bonds for a period of approximately 30 months; To refund the 2010 Series Bank Qualified Bonds in the amount of $23,165,000 and the 2014 Series A Bonds in the amount of $12,616,000 (the “Existing Debt”); To pay costs associated with the issuance of the Series 2017 Bonds; and To pay costs of terminating two interest rate swaps.

Stage 2 debt service requirements include Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018, in the par amount of $41,405,000 with a premium of $673,543. Additionally, the Corporation has determined that $3,500,000 of the contingency funds included in the estimated Stage 1 costs will not be required, and that portion of the project funds from Series 2017 Bonds proceeds will be applied to the costs of Stage 2. The Corporation’s underwriter, B.C. Ziegler and Company (the “Underwriter”), has provided the structure and terms of the Stage 2 bonds as follows (collectively the “Series 2018 Bonds”):

$16,305,000 (with a premium of $673,543) of BB rated, tax-exempt, long-term, fixed rate bonds (the “Series 2018A Bonds”), consisting of serial and term maturities to May 2052, with an interest rate of 5.000 percent per annum and yields ranging from 3.150 to 4.620 percent per annum; $13,000,000 of BB rated, tax-exempt, Mandatory Paydown Securities (the “Series 2018B-3 Bonds”), consisting of term maturities to November 15, 2023, with an interest rate of 3.000 percent per annum and a yield of 3.000 percent per annum; $6,250,000 of BB rated, tax-exempt, Mandatory Paydown Securities (the “Series 2018B-2 Bonds”), consisting of term maturities to May 15, 2024, with an interest rate of 3.250 percent per annum and a yield of 3.250 percent per annum;

C-2 The Board of Directors Mary’s Woods at Marylhurst Lake Oswego, Oregon

$4,750,000 of BB rated, tax-exempt, Mandatory Paydown Securities (the “Series 2018B-1 Bonds”), consisting of term maturities to May 15, 2025 with an interest rate of 3.500 percent per annum and a yield of 3.500 percent per annum; and $1,100,000 of BB rated, taxable, Mandatory Paydown Securities (the “Series 2018C Bonds”), consisting of term maturities to November 15, 2022, with an interest rate of 3.500 percent per annum and a yield of 3.500 percent per annum.

The proceeds from the sale of the Series 2018 Bonds and a contribution from the Corporation are to be used as follows:

To pay a portion of the costs for Stage 2, originally estimated to be approximately $39,712,576, including land, construction, design fee, interior design, capital items, travel, advisory services, filing and permit fees, prepaid lease, marketing, other miscellaneous costs, and development fees; To fund debt service reserve funds for the Series 2018A and 2018B Bonds; To fund interest for the Series 2018 Bonds for a period of approximately 26 months; and To pay costs associated with the issuance of the Series 2018 Bonds.

Our examination procedures included analysis of the following:

The Corporation’s history, objectives, timing, and financing; The future demand for the Corporation's services, including consideration of the following: - Socioeconomic and demographic characteristics of the primary market area (“PMA”) for the Community; - Locations, capacities, and competitive information pertaining to other existing and planned long-term care facilities in the PMA; and - Forecasted occupancy and utilization levels; Project-related costs, debt service requirements, and estimated financing costs; Staffing requirements, salaries and wages, related fringe benefits, and other operating expenses; Anticipated entrance fees, monthly fees, and per diem charges for the Corporation’s residents; Third-party reimbursement policy and history; Sources of other operating and nonoperating revenues; Revenue/expense/volume relationships; and Depositor files.

The Board of Directors and executive management of the Corporation, (collectively “Management”) has set forth its significant financial forecast assumptions upon which the accompanying financial forecast and feasibility study is based in the summary of significant forecast assumptions and accounting policies. These assumptions are integral and essential to an understanding of Management’s financial forecast.

C-3 The Board of Directors Mary’s Woods at Marylhurst Lake Oswego, Oregon

The accompanying financial forecast for each of the years in the five-year period ending June 30, 2022, is based on assumptions that were provided by, or reviewed with and approved by, Management. The financial forecast includes the following:

Forecasted statements of activities; Forecasted statements of cash flows; Forecasted statements of financial position; and Forecasted financial ratios.

We have examined the financial forecast provided to us by the Management, based on the guidelines for the presentation of a forecast established by the American Institute of Certified Public Accountants. Management is responsible for preparing and presenting the financial forecast in accordance with the guidelines for the presentation of a forecast established by the American Institute of Certified Public Accountants. Our responsibility is to express an opinion on the financial forecast based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the forecast is presented in accordance with the guidelines established by the American Institute of Certified Public Accountants, in all material respects. An examination involves performing procedures to obtain evidence about the forecast. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of the forecast, whether due to fraud or error. We believe that the evidence we obtained in sufficient and appropriate to provide a reasonable basis for our opinion.

Legislation and regulations at all levels of government have affected and may continue to affect operations of retirement communities. The financial forecast is based on legislation and regulations currently in effect. If future legislation or regulations related to operations are enacted, such legislation or regulations could have a material effect on future operations.

Management’s financial forecast is based on the achievement of occupancy levels as determined by Management. We have not been engaged to evaluate the effectiveness of Management and we are not responsible for future marketing efforts and other management actions upon which actual results will depend.

The assumed interest rates, principal payments, and other financing assumptions are described in the summary of significant forecast assumptions and accounting policies. If actual interest rates, principal payments, and funding requirements are different from those assumed in this feasibility study, the amount of the Series 2018 Bonds and associated debt service requirements would need to be adjusted accordingly from those indicated in the forecast. If such interest rates, principal payments, and funding requirements are lower than those assumed, such adjustments would not adversely affect Management’s financial forecast.

C-4 The Board of Directors Mary’s Woods at Marylhurst Lake Oswego, Oregon

Sensitivity analyses performed on certain Management forecast assumptions and the potential impact on the Corporation’s forecasted debt service coverage ratio and days cash on hand are presented beginning on page C-76 of the summary of significant forecast assumptions and accounting policies. Management has conducted these sensitivity analyses on its financial forecast which is presented for purposes of additional analysis and is not a required part of the financial forecast. These sensitivity analyses have not been subjected to procedures applied in the examination of the financial forecast and, accordingly, we express no opinion or any other form of assurance on it.

Our conclusions are presented below:

In our opinion, the accompanying financial forecast is presented, in all material respects, in accordance with guidelines for the presentation of a financial forecast established by the American Institute of Certified Public Accountants. In our opinion, the underlying assumptions are suitably supported and provide a reasonable basis for Management's forecast. However, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. The accompanying financial forecast indicates that sufficient funds could be generated to meet the Corporation's operating expenses, working capital needs, and other financial requirements, including the debt service requirements associated with the Series 2017 and proposed Series 2018 Bonds, during the forecast period. However, the achievement of any financial forecast is dependent on future events, the occurrence of which cannot be assured.

We have no responsibility to update this report for events and circumstances occurring after the date of this report.

San Francisco, California April 2, 2018

C-5 Mary’s Woods at Marylhurst Forecasted Statements of Activities (In Thousands)

FORECASTED PERIOD FOR THE YEARS ENDING JUNE 30, 2018 2019 2020 2021 2022 REVENUES, GAINS, AND OTHER SUPPORT Resident services $ 22,240 $ 23,900 $ 30,378 $ 37,310 $ 39,850 Earned entrance fees 4,292 5,278 7,414 9,325 10,082 Income on investments 650 903 1,323 1,531 1,634 Other 660 715 886 1,055 1,114

Total revenues, gains, and other support 27,842 30,796 40,001 49,221 52,680

OPERATING EXPENSES Administration 1,140 1,457 1,843 2,042 2,103 Information technology 290 336 346 357 367 Fundraising 115 118 122 126 129 Marketing 460 474 488 539 801 Human resources 312 321 331 341 351 Pastoral care 179 184 216 223 229 Wellness 110 124 305 316 325 Environmental services 2,840 3,278 3,706 3,997 4,174 Resident services 478 588 648 669 694 Dining services 3,730 4,261 5,263 6,069 6,430 Nursing services 4,530 4,666 5,617 6,222 6,538 Home care services 1,368 1,409 1,451 1,495 1,540 Clinic 185 191 196 202 208 Facility costs 5,605 6,648 7,976 8,584 8,945 Medicare bed tax 30 31 32 33 34 Ground lease 1,046 1,155 1,209 1,411 1,924 Interest expense 2,069 3,380 5,339 6,340 6,690 Depreciation 3,781 4,635 6,407 8,402 9,225 Amortization (27) 94 785 607 523

Total operating expenses 28,241 33,350 42,280 47,975 51,230

NET (LOSS) INCOME FROM OPERATIONS (399) (2,554) (2,279) 1,246 1,450

NONOPERATING EXPENSE Transfer to affiliate for Vision Fund - (1,000) - - -

Total nonoperating expense - (1,000) - - -

CHANGE IN NET DEFICIT (399) (3,554) (2,279) 1,246 1,450

NET DEFICIT, beginning of year (14,750) (15,149) (18,703) (20,982) (19,736)

NET DEFICIT, end of year (15,149)$ $ (18,703) $ (20,982) $ (19,736) $ (18,286)

See Summary of Significant Forecast Assumptions and Accounting Policies C-6 and Examination Report of Independent Accountants Mary’s Woods at Marylhurst Forecasted Statements of Cash Flows (In Thousands)

FORECASTED PERIOD FOR THE YEARS ENDING JUNE 30, 2018 2019 2020 2021 2022 CASH FLOWS FROM OPERATING ACTIVITIES Change in net deficit $ (399) $ (3,554) $ (2,279) $ 1,246 $ 1,450 Adjustments to reconcile change in net deficit to net cash provided by (used in) operating activities Depreciation 3,781 4,635 6,407 8,402 9,225 Amortization (27) 94 785 607 523 Amortization of prepaid land lease 31 35 34 35 35 Noncash earned entrance fees (4,292) (5,278) (7,414) (9,325) (10,082) Changes in Accounts receivable (71) (123) (479) (513) (188) Prepaid expenses and other assets (33) (42) (52) (4) (13) Prepaid land lease (250) - - - - Accounts payable and accrued liabilities 37 255 388 213 171 Accrued ground lease expense - - - 172 654 Interest payable (164) (128) (153) (128) (13)

Net cash (used in) provided by operating activities (1,387) (4,106) (2,763) 705 1,762

CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures - routine (2,387) (2,475) (2,598) (2,719) (2,831) Capital expenditures - project (68,652) (65,224) (11,688) (915) - Net purchase of investments (3,015) (13,331) (8,810) (73) (6,431) Cash paid for deferred marketing costs (3,166) (3,005) (531) - - Net change in debt service reserve fund (1,823) - 1,533 1,046 166 Net change in project fund 31,137 63,203 8,812 - - Net change in capitalized interest fund 2,490 6,360 3,794 46 -

Net cash used in investing activities (45,416) (14,472) (9,488) (2,615) (9,096)

CASH FLOWS FROM FINANCING ACTIVITIES Entrance fees received - initial - 33,126 40,029 22,153 - Entrance fees received - attrition 12,256 14,323 17,942 20,184 21,303 Refunded entrance fees (7,153) (8,034) (9,883) (11,076) (11,502) Net change in deposits 20 50 193 206 76 Proceeds from long-term debt 42,079 - - - - Financing costs paid (1,531) - - - - Principal payments on long-term debt (325) (20,655) (35,660) (29,320) (2,365)

Net cash provided by financing activities 45,346 18,810 12,621 2,147 7,512

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,457) 232 370 237 178

CASH AND CASH EQUIVALENTS, beginning of year 3,300 1,843 2,075 2,445 2,682

CASH AND CASH EQUIVALENTS, end of year $ 1,843 $ 2,075 $ 2,445 $ 2,682 $ 2,860

SUPPLEMENTAL DISCLOSURES Cash paid for interest $ 8,358 $ 9,550 $ 8,555 $ 7,198 $ 6,703 Change in construction payables related to acquisition of property, plant, and equipment $ 10,933 $ (8,080) $ (3,386) -$ $ - Capitalization of amortization expense into property, plant, and equipment $ 543 $ 916 $ 386 $ 10 $ -

See Summary of Significant Forecast Assumptions and Accounting Policies C-7 and Examination Report of Independent Accountants Mary’s Woods at Marylhurst Forecasted Statements of Financial Position (In Thousands)

FORECASTED PERIOD AS OF JUNE 30, 2018 2019 2020 2021 2022 ASSETS Cash $ 1,843 2,075$ 2,445$ 2,682$ $ 2,860 Accounts receivable, net 1,645 1,768 2,247 2,760 2,948 Prepaid expenses and other assets 167 209 261 265 278 Investments - limited as to use Designated for capital improvements 24,216 27,336 30,500 36,209 52,861 Designated for debt service - 10,211 15,857 10,221 - Restricted by donor intent 2,238 2,238 2,238 2,238 2,238 Property, plant, and equipment, net 158,824 214,724 219,603 214,845 208,451 Prepaid land lease 1,700 1,665 1,631 1,596 1,561 Deferred marketing costs, net 3,166 6,122 6,044 5,435 4,826 Deposits held in trust 7,524 5,752 2,205 - - Debt service reserve fund 11,269 11,269 9,736 8,690 8,524 Project fund 72,015 8,812 - - - Capitalized interest fund 10,200 3,840 46 - -

Total assets $ 294,807 $ 296,021 292,813$ $ 284,941 $ 284,547

LIABILITIES Accounts payable $ 952 $ 1,181 1,472$ 1,505$ $ 1,575 Construction payables 11,466 3,386 - - - Accrued ground lease expense - - - 172 826 Accrued liabilities 910 936 1,034 1,214 1,315 Interest payable 1,229 1,101 948 820 807 Deposits 662 712 905 1,111 1,187 Deposits held in trust 7,524 5,752 2,205 - - Deferred revenue 70,769 104,906 145,580 167,516 167,235 Long-term debt 216,444 196,750 161,651 132,339 129,888

Total liabilities 309,956 314,724 313,795 304,677 302,833

NET DEFICIT Unrestricted (17,387) (20,941) (23,220) (21,974) (20,524) Temporarily restricted 2,238 2,238 2,238 2,238 2,238

Total net deficit (15,149) (18,703) (20,982) (19,736) (18,286)

Total liabilities and net deficit $ 294,807 $ 296,021 292,813$ $ 284,941 $ 284,547

See Summary of Significant Forecast Assumptions and Accounting Policies C-8 and Examination Report of Independent Accountants Mary’s Woods at Marylhurst Forecasted Financial Ratios (In Thousands, Except for Ratios)

Cash flow available for debt service $ 7,281 $ 8,476 $ 9,717 $ 9,898 $ 19,530

Forecasted annual debt service (c) $ 2,429 $ 2,428 $ 2,431 $ 2,428 $ 7,958 Annual base rent on ground leases 75 150 175 175 175

Total debt service and annual base rent on ground lease $ 2,504 $ 2,578 $ 2,606 $ 2,603 $ 8,133

Forecasted annual debt service coverage ratio 2.91 3.29 3.73 3.80 2.40

Forecasted annual debt service (c) $ 2,429 $ 2,428 $ 2,431 $ 2,428 $ 7,958 Annual base rent on ground leases 75 150 175 175 175 Additional rent on existing ground lease 940 968 998 1,027 1,058

Total debt service, annual base rent on ground leases, and subordinated existing ground lease payments $ 3,444 $ 3,546 $ 3,604 $ 3,630 $ 9,191

Forecasted annual debt service coverage ratio, including subordinated existing ground lease payments 2.11 2.39 2.70 2.73 2.12

Maximum annual debt service (d) $ 8,711

Maximum annual debt service coverage ratio (d) 2.24

Maximum annual debt service (d) $ 8,711 Additional rent on existing ground lease 1,058 Additional rent on expansion ground lease 655

Total of maximum annual debt service and subordinated ground lease payments (e) $ 10,424

Maximum annual debt service coverage ratio - including subordinated ground lease payments (e) 1.87

See Summary of Significant Forecast Assumptions and Accounting Policies C-9 and Examination Report of Independent Accountants Mary’s Woods at Marylhurst Forecasted Financial Ratios - Continued (In Thousands, Except for Ratios)

Total $ 26,059 $ 29,411 $ 32,945 $ 38,891 $ 55,721

Adjusted operating expenses $ 24,487 $ 25,542 $ 27,281 $ 28,914 $ 41,482

Daily cash expenses $ 67 $ 70 $ 75 $ 79 $ 114

Days cash on hand 388 420 441 491 490

Total $ 37,328 $ 40,680 $ 42,681 $ 47,581 $ 64,245

Long-term debt $ 216,444 $ 196,750 $ 161,651 $ 132,339 $ 129,888

(e) This calculation includes additional rent on the ground lease, which is subordinated to the Series 2017 and 2018 Bonds.

See Summary of Significant Forecast Assumptions and Accounting Policies C-10 and Examination Report of Independent Accountants Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

BASIS OF PRESENTATION

The accompanying financial forecast presents, to the best knowledge and belief of management of Mary’s Woods at Marylhurst, Inc., an Oregon not-for-profit corporation (the “Corporation”), the Corporation’s forecasted results of operations, cash flows, and financial position as of and for each of the five years ending June 30, 2022. Accordingly, the accompanying financial forecast reflects management’s judgment as of April 2, 2018, the date of this forecast, based on present circumstances and the expected course of action during the forecast period. The assumptions disclosed herein are those that management believes are significant to the forecast. There will usually be differences between the prospective and actual results because events and circumstances frequently do not occur as expected, and those differences may be material.

The Corporation is initially the sole member of the Obligated Group under a loan agreement for Stage 1 (“Stage 1 Loan Agreement”) between The Public Finance Authority, a body corporate and politic of the State of Wisconsin, and the Corporation, including payments obligated under a Master Trust Indenture by and between the Corporation and U.S. Bank National Association, and is solely responsible for the payment of debt service on the Public Finance Authority Senior Living Revenue and Refunding Bonds (Mary's Woods at Marylhurst Project), Series 2017 (the “Series 2017 Bonds”).

The Corporation is also initially the sole member of the Obligated Group under a loan agreement for Stage 2 (“Stage 2 Loan Agreement”) between the Hospital Facility Authority of Clackamas County, Oregon (the “Hospital Facility Authority”), and the Corporation, including payments obligated under a Master Trust Indenture by and between the Corporation and U.S. Bank National Association, and is solely responsible for the payment of debt service on the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary's Woods at Marylhurst Project), Series 2018 (the “Series 2018 Bonds”).

BACKGROUND ON THE CORPORATION

Mary’s Woods at Marylhurst, Inc., is incorporated in the State of Oregon as a nonprofit corporation, formed and sponsored by the U.S.-Ontario Province of the Sisters of the Holy Names of Jesus and Mary (“SNJM”) for the purpose of developing and operating a continuing care retirement community, also known as a lifeplan community, known as Mary’s Woods (the “Community” or “Mary’s Woods”). The Community is located in Lake Oswego, Oregon. The Corporation has been recognized as exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code (the “Code”) and is also classified as a public charity under section 509(a)(2) of the Code. The Community includes independent living apartments and villas, assisted living apartments, a residential care unit (“RCF”), skilled nursing suites (“SNF”), and a memory support services unit. The Corporation currently utilizes 24 acres accessed under a ground lease originally dated August 15, 1999 (the “Ground Lease”). The Ground Lease has been renegotiated to accommodate the Stage 1 and Stage 2 expansion of the Community for a total of 37 acres. The revised terms are described on page C-70.

Lifeplan communities are legally recognized as Continuing Care Retirement Communities (“CCRC”) and are required to register with the Oregon Department of Human Services Aging and People with Disabilities Division. They are required to disclose key provisions of residency agreements, establish reserves and escrow requirements, and incorporate standards for the development and operation of the Community. Mary’s Woods qualifies and is licensed and registered with the State of Oregon as a CCRC.

C-11 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Corporation is governed by a Board of Directors (the “Board”) that currently consists of 13 directors (the “Directors”) and two ex-officio nonvoting members. The two Ex-Officio members currently are the Chief Executive Officer, Diane Hood, and SNJM Mission Director, Roswitha Frawley. The Board is to have no fewer than nine and no more than 17 Directors. Directors provide strategic guidance and oversight to the Corporation and are responsible for hiring and monitoring executive management, and setting officer salaries. They are governed by the Corporation’s Articles of Incorporation and by-laws. Directors are elected by a simple majority and can be removed by a majority vote. Terms are three years, and Directors can serve up to one additional three-year term. After a one-year interval, Directors become eligible to serve again. Directors who are residents of the Mary’s Woods residential community shall serve nonrenewable two-year staggered terms.

Board Members:

Jacki Gallo, Chair Mary Breiling, SNJM David Galt, Past Chair James Arp Lynda Thompson, SNJM, Secretary John Erickson Carmen Nazario Robert Tust Dennis M. Finnigan Sr. Gabriela Sanchez John Grammel (Mary’s Woods Resident) Judith Mayer, SNJM Carolyn Snow (Mary’s Woods Resident) Roswitha Frawley, SNJM* Diane Hood*

* Ex-officio Board Members

Management

The management team is led by Diane Hood, Chief Executive Officer. Ms. Hood was promoted to Chief Executive Officer in November 2016 after having served as Chief Operating Officer/Chief Financial Officer since 2011. Prior to 2011, she held the Chief Financial Officer position beginning in 2001. Kimberly Scott is the current Chief Financial Officer and has also been with the organization since its inception. She was promoted to Chief Financial Officer in January 2017. Both Ms. Hood and Ms. Scott are Certified Public Accountants in the State of Oregon with extensive not-for-profit experience. Sister Roswitha Frawley is the Mission Director, and is an integral part of the organization’s leadership.

C-12 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Other Members of Management:

Name Title

Cheri Mussotto-Conyers Director of Marketing & Client Relations Lynn Hyde Director of Healthcare Services Kevin Haberman Director of Environmental Services Colette Rees Director of Philanthropy and Community Life Janet Satterlee Director of Spiritual Care Lynne Michaelson Director of Human Resources Megan Thompson Director of Home Care Services Ralf Brabandt Director of Food & Beverage Services

DESCRIPTION OF THE EXISTING COMMUNITY

SNJM formed the Corporation for the purpose of developing Mary’s Woods. Established in 1997 and opened in 2001, the Community was created to provide residential and continuing care services to members of SNJM (the “Sisters”) and other community members. Mary’s Woods currently has 233 independent living apartment-style residences and 50 semi-detached villa homes. There are five skilled nursing suites and 26 RCF suites, suitable for higher level long-term nursing care. The 55 assisted living apartments and 23 specialty care suites that provide memory care services were incorporated to provide a continuum of care in the Community. The Community also includes common use areas. The idea of developing a CCRC supports the mission of SNJM and provides a much needed sanctuary for Sisters and others to age gracefully with appropriate levels of care. While the independent living apartments provide residents independent space in close proximity to many important services, the SNF, assisted living apartments, RCF, and memory care suites (the "Health Center”), provide different levels of nursing and services all on the same campus, thereby allowing residents to remain close to home.

As part of the development plan for the original community, SNJM agreed that its Sisters receiving varying levels of healthcare services would be moved from the convent building to a “Health Center” that was constructed as part of the community. The Health Center building is available for specialized healthcare needs benefiting both residents and SNJM residents. By agreeing to transfer the Sisters from the convent building to the Health Center, SNJM enabled Mary’s Woods to refurbish and reconfigure the convent building consistent with Mary’s Woods approved development plan for that building. In return, Mary’s Woods created an agreement to ensure that the Sisters would have access to the services at Mary’s Woods into the future (the “Bed Agreement”). Under this agreement, the Sisters and/or their designees have access to healthcare services in up to 38 apartments and healthcare suites in the Mary’s Woods Marie Rose Health Center.

C-13 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

As part of the Bed Agreement, SNJM and Mary’s Woods agreed to use their best efforts to qualify, apply for, and collect reimbursement for services rendered to individuals utilizing the apartments and suites designated for SNJM from any appropriate governmental agency. SNJM agreed that any funds received or collected for such purposes will be remitted to Mary’s Woods to compensate Mary’s Woods for providing services to the Sisters and/or their designees pursuant to the Bed Agreement. Any beds not being utilized by SNJM are available for use by Mary’s Woods.

Independent living units consist of apartments and villas. Residents pay an entrance fee for the independent living units (the “Entrance Fee”). Apartments have either one or two bedrooms and villas have either two or three bedrooms along with an attached garage. Independent living apartments come with standard appliances such as a refrigerator, washer, dryer, stove, oven, microwave oven, dishwasher, and garbage disposal. Independent living residents receive up to 20 meals per month or a dining dollar meal plan and monthly service fees (“MSF”) include utilities, basic phone service, laundry, the emergency call system, housekeeping and maintenance, and access to common areas. Independent living residents receive priority admission to assisted living apartments and the Health Center. Residents can purchase additional housekeeping services as well as personal laundry service, tray service, guest meals, and guest accommodations.

The Health Center is designed to accommodate the needs of residents and, if space is available, other individuals. Clinical staff oversee the operations and care for patients and residents. The Health Center does not provide general acute or surgical healthcare services. It is connected via an enclosed corridor and is centrally located on the Community premises. Residents access the Health Center as needed and as determined by a physician and clinical management of the Community. Certain stipulations apply for residents who need longer term care in the Health Center. This is described later in this report in the Residency and Care Agreement section.

C-14 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 1 provides the existing unit configuration and residence fees of Mary’s Woods.

Table 1 Mary's Woods Existing Unit Configuration and Resident Fees Square Monthly Service Unit Type Inventory Footage Entrance Fee (1) Fee (1)(2) Apartments One Bedroom 10 577-630 $209,900 - $219,900 $2,197 One Bedroom Enhanced 44 661-713 243,900 - 258,900 2,430 One Bedroom Den 74 825-889 318,900 - 333,900 3,032 Two Bedroom 47 1,023-1,047 374,900 - 389,900 3,398 Two Bedroom Den 46 1,143 439,900 - 459,900 3,790 Total Apartments 221 Provincial House Apartments One Bedroom Corner 2 663-690 295,900 - 300,900 2,197 One Bedroom Corner 2 740-770 330,900 - 335,900 2,430 One Bedroom Den 2 874-884 360,900 3,032 Two Bedroom 2 1,122-1,204 487,900 - 492,900 3,790 Two Bedroom Tower 2 1,289-1,347 546,900 - 556,900 4,763 Two Bedroom Den Tower 2 1,355-1,362 564,900 - 569,900 4,860 TotalProvincialHouse 12 Villas Two Bedroom 18 1,356 508,900 - 518,900 5,142 Three Bedroom 15 1,586 583,900 - 603,900 5,998 Two Bedroom Villa Estates 9 1,596-1,615 591,900 5,877 Three Bedroom Villa Estates 8 1,797 656,900 - 666,900 6,634 Total Villas 50 Total&WeightedAverage 283 388,677 3,597

SecondPerson IndependentLiving 38,000 665 AssistedLiving Studio 27 0 4,429-10,171 One Bedroom 18 0 6,278-11,923 Two Bedroom 10 0 9,636-15,062 TotalAssistedLiving 55 0 SecondPerson AssistedLiving 0 633-6,448 Memory Care Studio 23 0 9,417 SkilledNursing Studio 5 0 9,417 ResidentialCare Facility Studio 26 0 9,417 Source: Management

Notes:

(1) The fees included in the table are current rates in current dollars. Entrance Fees and Monthly Service Fees are subject to change upon 60 days written notice. Historically, annual increases of monthly service fees have taken place on July 1.

C-15 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

(2) For Assisted Living, monthly service fees depend upon the level of care. Mary’s Woods provides six levels (0-5), which are assigned by clinical staff based on an assessment of the resident’s needs.

The common use areas are dedicated to providing residents and guests with open space and outdoor amenities (the “Commons”), along with various services to enhance the Mary’s Woods experience. There is an auditorium and a separate café bistro as well as meeting rooms in various locations. There is also a fitness and wellness center and a swimming pool on the premises.

The Corporation entered into the original Ground Lease with SNJM on August 15, 1999, which provides exclusive rights to operate the Community with the exception of the Provincial House. The Provincial House is shared with the Sisters who have administrative offices and apartments there. SNJM retains ownership of all real estate; however, the Corporation controls usage of the leased grounds and facilities. The initial term was 35 years and included three additional 10-year extensions that were at the Corporation’s option. One of the extension options has been exercised. Upon termination, the land and all developments revert to ownership by SNJM. The Corporation has right of first refusal to purchase the land. The Corporation has negotiated a renewal of the existing Ground Lease with consistent terms further described below.

Monthly lease payments in equal installments of $6,250 representing base rent are paid as well as rent payments (the “Additional Rent”) that began as $150 per unit per month. Additional Rent amounts increase based upon changes in the consumer price index specific to all urban wage earners as published by the United States Labor Department. Currently the Corporation pays Additional Rent of $199.79 per existing unit. Additional Rent payments are subordinate to all payments owed by the Corporation under the Loan Agreement and the Corporation achieving debt service coverage ratio and days cash on hand of 1.35 and 250, respectively before any Additional Rent payments are paid.

The Corporation entered into a ground lease for the Stage 1 expansion (The “Village Ground Lease”) with SNJM on April 20, 2017, prior to the final funding of the 2017 Series Bonds, which provides exclusive rights to the Corporation to construct a CCRC consisting of 144 independent living apartments and 48 assisted living apartments on 12 acres of unimproved real property. The lease has an initial term of 50 years with the option to extend the term for two additional 10-year terms. Upon termination of the Village Ground Lease, the land and all developments revert to ownership by SNJM.

Management expects the Corporation to amend the Village Ground Lease for the Stage 2 expansion (The “Stage 2 Amendment”) with SNJM prior to the final funding of the 2018 Series Bonds, which is expected to provide exclusive rights to the Corporation to construct an additional 54 independent living apartments and two buildings that will contain amenities for residents on property included in Stage 1 as well as an additional 1 acre of unimproved real property bringing the total to 37 acres. The Stage 2 Amendment has an initial term of 49 years (so that it is coterminous with the Village Ground Lease) with the option to extend the term for two additional 10-year terms. Upon termination of the Stage 2 Amendment, the land and all developments revert to ownership by SNJM.

C-16 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Village Ground Lease stipulates that the Corporation pay a $750,000 initial rent payment that effectively commits the land for use for the Community. Semi-annual lease payments in the amount of $75,000 are paid each year as well as additional rent payments (the “Expanded Additional Rent”) calculated as the product of $220 multiplied by the total number of expanded independent living apartments, assisted living apartments, specialty care suites, and skilled nursing suites in Stage 1 of the CCRC, that are, as of the first day of each calendar month throughout the term, either occupied or in physical condition such that they could be occupied. Expanded Additional Rent shall begin to accrue on the date when 85% of all of the expanded independent units in Stage 1 have been occupied under long-term Residency and Care Agreements and the Series 2017B Bonds have been paid in full. Expanded Additional Rent payments are subordinate to all payments owed by the Corporation under the Loan Agreement and are payable after one full fiscal year has elapsed after the Stage 1 expansion attains stable occupancy and upon the Corporation achieving a debt service coverage ratio and days cash on hand of 1.35 and 250 days, respectively.

The Stage 2 Amendment stipulates that the Corporation will pay an initial rent payment of $250,000 that effectively commits the land for use for the Community. This ground lease expansion includes lease payments totaling of $25,000 per year as well as additional rent payments (the “Expanded Additional Rent”) calculated as the product of $220 multiplied by the total number of Stage 2 independent living apartments. All other terms remain the same as in the Village Ground Lease.

Under the Ground Lease, the Sisters have certain rights, including use of a portion of the Provincial House and a design and use of that space that is acceptable to them. The Provincial House is a two-unit condominium pursuant to Oregon Statutes. The two condominiums reflect space utilized by SNJM and the Corporation. The portion utilized by SNJM is 39,612 square feet and is used for the chapel, administrative offices, and 21 independent living apartments for the Sisters’ use. This portion is not part of the Community nor is it subject to the Ground Lease. Sisters, as well as residents of the Community, access the Provincial House in the same manner; however, administration and use of the space is distinct for the two entities. Community funds including bond proceeds are not used for SNJM space. Capital expenditures and repairs and maintenance costs, including proportionate allocations of external repairs and maintenance, are funded by SNJM. The condominiums are approved by Clackamas County, Oregon. Bylaws for the Mary’s Woods at Marylhurst Condominium Owners’ Association and the Declaration of Mary’s Woods at Marylhurst Condominiums have been approved by the Oregon Real Estate Agency. The Corporation and SNJM share governance of the association with two seats each.

DESCRIPTION OF THE PROJECT

The expanded facilities known as The Village at Mary’s Woods (“The Village”) are being developed in two Stages. Stage 1, which commenced in March 2017, will consist of 144 independent living apartments in one- and two-bedroom configurations situated in three three-story buildings and 48 assisted living apartments in a separate three-story building. Additional common buildings will also be built as well as parking for residents, guests, and employees. There are three plan types for independent living in The Village. The plan types denote the percentage of Entrance Fees that is refundable. Plan 1 is 80% refundable, Plan 2 is 50% refundable, and Plan 3 is not refundable. Plan 2 also affords a 20% discount on MSFs. Plan 2 will have a maximum of 26 apartments and Plan 3 will have a maximum of 13 apartments. The assisted living apartments will be developed as two types, Standard and Deluxe.

C-17 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Corporation elected to commence development of Stage 2 in 2018 due to the popularity of and interest in Stage 1 as well as the opportunity to take advantage of economies related to construction. Given the high percentage of depositors in Stage 1 and the strong wait list as well as having the experienced marketing team in place, the Corporation decided to move forward with Stage 2. Further, with development of Stage 1 underway, crews and equipment are already onsite, and certain services such as inspections and permitting can be handled more efficiently. Ultimately, management believes that total project cost will be lower by completing Stage 2 sooner.

Stage 2 will consist of 54 independent living style apartments in one- and two-bedroom configurations situated in three-story buildings with underground parking and two two-story buildings with amenities for residents (the “Stage 2 Commons”). The Stage 2 Commons will either be operated by the Corporation, leased to third parties who will provide services to residents, or both. Services and amenities will be provided by Mary’s Woods or unrelated businesses and will be available to both residents and the broader community. There is no rental income associated with these services and amenities assumed in the forecast.

The following table illustrates the proposed configuration of The Village:

Table 2 Mary's Woods The Village Unit Configuration - Stage 1 Square Entrance Monthly Unit type Inventory Footage Fee (1) Fee (1) The Village: One Bedroom - Deschutes Standard 18 823 $360,789 $3,495 One Bedroom - Deschutes Option 2 6 909 385,233 3,545 One Bedroom Den - McKenzie Standard 30 1,055 461,233 3,895 One Bedroom Den - McKenzie Option 4 18 1,110 491,622 3,995 One Bedroom Den - McKenzie Option 5 6 1,110 476,900 3,995 Two Bedroom - Willamette Standard 20 1,225 530,650 4,575 Two Bedroom - Willamette Option 1 6 1,243 545,233 4,575 Two Bedroom - Willamette Option 2 6 1,225 535,233 4,575 Two Bedroom - Willamette Option 3 6 1,254 525,233 4,575 Two Bedroom - Columbia Standard 14 1,423 612,971 4,995 Two Bedroom - Columbia Option 1 2 1,423 596,900 4,995 Two Bedroom - Columbia Option 2 6 1,410 607,733 4,995 Two Bedroom - Columbia Option 3 6 1,441 620,233 4,995 Total Independent Living and Weighted Averages 144 1,148 $498,219 $4,240 Second Person Fees Pioneer Second Person Fees $650 Second Person Fees $750 Assisted Living Standard 17 360 $6,500 Deluxe 31 520 7,500 Total/Weighted Average Assisted Living 48 $7,146 Source: Management

C-18 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 3 Mary's Woods The Village Unit Configuration - Stage 2 Square Entrance Monthly Unit type Inventory Footage Fee (1) Fee (1) The Village: One Bedroom - Deschutes Standard 9 823 $411,678 $3,495 One Bedroom - Deschutes Option 1 3 844 410,567 3,495 One Bedroom Den - McKenzie Standard 3 1,055 522,900 3,895 One Bedroom Den - McKenzie Option 1 3 1,092 525,567 3,895 One Bedroom Den - McKenzie Option 2 3 1,092 523,567 3,895 One Bedroom Den - McKenzie Option 3 9 1,092 530,011 3,895 Two Bedroom - Willamette Standard 12 1,225 585,983 4,575 Two Bedroom - Columbia Standard 12 1,423 679,400 4,995 Total Independent Living and Weighted Averages 54 1,133 $548,289 $4,202 Second Person Fees $750 Source: Management

Notes:

(1) The Entrance fees included in the table are rates in 2020 dollars, based on 80% refundable (Plan 1) options and consist of rates established for Pioneer Members. The second person Monthly Service Fee for Stage 1 is $650 for Pioneer Members and $750 for all other Community Members. The model for Stage 2 incorporates a $650 second person Monthly Service Fee, however, the planned charge for Stage 2 second person fee is $750 for all new Community Members and $650 for Community Members who transfer from Stage 1. Entrance Fees and Monthly Service Fees are subject to change upon 60 days written notice.

Stage 1 construction on the Expansion commenced in March 2017. The following table illustrates Project timing expectations:

Table 4 Expansion Key Dates Stage 1 Construction commenced March 2017 Stage 1 Financing April 2017 Stage 2 Construction commenced January 2018 Stage 2 Financing May 2018 First Stage 1 independent living apartments available for occupancy November 2018 First assisted living apartments available for occupancy July 2019 First Stage 2 independent living apartments available for occupancy November 2019 Construction completion November 2019 Assisted living reaches stabilized occupancy February 2021 Independent living reaches stabilized occupancy April 2021 Source: Management

C-19 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

DEVELOPMENT OF THE PROJECT

Mary’s Woods retained the services of GCD Oregon, LLC (“Greystone”), a Texas limited liability company, to perform development, marketing, finance, and consulting services related to the Expansion. Greystone and its affiliates provide planning, development, marketing, management, and strategic consulting services to senior housing organizations. Including predecessor organizations, Greystone has been operating in the senior living industry since 1982. During that time, Greystone has served many organizations in this capacity, having assisted with the development of many CCRCs across the United States. It is owned by a privately-held partnership that includes Greystone employees.

The Corporation and Greystone entered into an agreement for Stage 1 effective July 31, 2015, which was amended as restated on August 31, 2016 and an additional agreement for Stage 2 dated January 18, 2018 (collectively the “Development Agreements”). Under the Development Agreements, Greystone is responsible for providing development consulting services for the Expansion. The Development Agreements call for Greystone to provide all necessary planning to implement the expansion plan approved by the Corporation, assistance in obtaining all necessary government approvals required for the development and construction of the Project, assistance with selection of design consultants and a pre- construction consultant, assistance with coordinating submission of plans and specifications to the Corporation for the Corporation’s approval, assistance with development of a resident services program, assistance in the implementation of the marketing program for The Village, assistance in securing permanent financing for the Project, assistance in negotiating and awarding a construction contract for the Project and monitoring related progress, preparation of monthly cost reports, assistance in providing filing and disclosure requirements imposed by applicable law in connection with the offering of interests in the Project, and assistance related to the Ground Lease. Management retains final authority on all key matters of development.

Pursuant to the Development Agreements, Greystone will assist with marketing of The Village until 90% occupancy of Expansion independent living is achieved. Greystone will advise in coordinating and managing the marketing staff to implement the overall marketing program for The Village. They are to also assist in developing and supervising implementation of the marketing and sales program, including promotional, advertising, and media campaigns in conjunction with an advertising firm. Development Agreements further stipulate that Greystone will assist in recruiting, hiring, training, and monitoring the marketing and sales staff, identifying the location for and designing an information center, developing a program for responding to public inquiries, and developing and managing the documentation and approval process for prospective residents.

As compensation for services rendered pursuant to the Development Agreements, the Corporation will pay Greystone a fee consisting of a Base Fee and an Incentive Occupancy Fee totaling $3,700,000 for Stage 1 and an additional $775,000 for Stage 2. The Incentive Occupancy Fee is $100,000 and will be paid only if certain occupancy milestones are achieved for Stage 1 within specific timeframes beginning when all approvals necessary for occupancy of all units in Stage 1 of The Village have been obtained.

C-20 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The following table summarizes the targets and compensation related to Greystone’s Consulting Fee in connection with the Community.

Table 5 Stage 1 Development Fee Summary Stage 1 Description Compensation Base Fees paid prior to bond issuance $850,000 Upon execution of construction agreement 75,000 Upon closing of Series 2017 Bonds 1,585,000 During construction 240,000 Upon occupancy of first independent living resident in The Village 160,000 Upon occupancy of first healthcare resident in the Expansion 75,000 Prorated monthly fill-up payments to 90% occupancy 315,000 Upon achievement of 25% occupancy 100,000 Upon achievement of 50% occupancy 100,000 Upon achievement of 75% occupancy 100,000 Upon achievement of 90% occupancy 100,000 Total (1) $3,700,000 Stage 2 Development Fee Summary Stage 2 Description Compensation Base Fees paid prior to bond issuance $77,500 Upon closing of Series 2018 Bonds 193,750 During construction 193,750 Upon occupancy of first independent living resident in The Village 38,750 Stage 2 occupancy at $5,535.71 per unit at 49 units 271,250 Total (1) $775,000 Source: Management

Notes:

(1) Incidental expenses related to travel and other direct costs are separately reimbursable plus a 3.5% administrative fee and are not included in the table above. This amount does not include the Stage 1 Incentive Occupancy Fee, which is earned upon achievement of 90% occupancy in 20 months or less.

C-21 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

SUMMARY OF FINANCING

Stage 1 Financing – Stage 1 of the Project was financed primarily with the proceeds of the Series 2017 Bonds, which are described in detail below.

Permanent Financing (Series 2017A Bonds)

The Series 2017A Bonds of $114,815,000 have an average coupon rate of 5.228 percent per annum. The Series 2017A Bonds were issued at a $4,189,153 premium. The Series 2017A Bonds are being used to fund a portion of Stage 1 of the Project, to pay off the Series 2010 and 2014A Bonds as well as the termination of the interest rate swaps relating to the Series 2014A Bonds, capitalized interest, and cost of bond issuance. Principal amounts on the Series 2017A Bonds are payable annually commencing on May 15, 2018, with final maturity on May 15, 2052.

Entrance Fee Bonds (Series 2017B-1, 2017B-2, and 2017B-3 Bonds)

The Series 2017B-3, 2017B-2, and 2017B-1 Bonds of $33,750,000, $15,000,000, and $11,500,000, respectively, have coupon rates ranging from 3.000 percent to 3.950 percent per annum. The Series 2017B- 3, Series 2017B-2, and Series 2017B-1 Bonds are expected to be repaid during the fill-up period of 2019- 2021 using proceeds from initial Entrance Fees received related to Stage 1. Final maturities on the Series 2017B Bonds are November 15 of 2022, 2023, and 2024, respectively.

Sources and uses of related funds are outlined in the following table and are based on information included in the Official Statement for the Series 2017 Bonds, dated April 6, 2017, as well as details provided by B.C. Ziegler and Company, which management has retained as managing underwriter (the “Underwriter”).

Table 6 Series 2017 Bonds Financing Sources and Uses of Funds (In Thousands)

Sources of Funds: Series 2017A $ 114,815 Premium on 2017A 4,189 Series 2017B 60,250 Total Series 2017 Bonds proceeds 179,254 Equity contribution 2,000 Total sources of funds $ 181,254 Uses of Funds: Project-related costs $ 118,935 Refunding of existing debt 35,781 Interest rate swap termination payments 912 Debt service reserve funds 9,464 Capitalized interest fund deposits 12,389 Cost of issuance 3,773 Total uses of funds $ 181,254

Source: Series 2017 Bonds Official Statement, Management, and Underwriter

C-22 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Stage 2 Financing – Stage 2 of the Project is expected to be financed primarily with the proceeds of the Series 2018 Bonds, which are described in detail below.

Release of Contingency Funds from Series 2017 Bonds Project Fund

Based on the current results of Stage 1 of the Project, management estimates that approximately $3,500,000 of the $8,688,000 contingency reserve will not be utilized for Stage 1 project costs. Based on consultation with their attorneys, management believes that this amount can be applied to Stage 2. The assumptions with respect to the Stage 2 financing include this assumption.

Pre-finance Capital

Management assumes pre-finance costs that will be incurred as of the date of financing will be approximately $4,815,000. The majority of these costs is being funded with the excess contingency funds from the Series 2017 Bonds as described above. The Corporation is funding the remaining costs with its own reserves, which will be reimbursed to the Corporation from the 2018 project funds.

Permanent Financing (Series 2018A Bonds)

The Series 2018A Bonds of $16,305,000 will have an average coupon rate of 5.000 percent per annum. The Series 2018A Bonds are assumed to be issued at a $673,543 premium. The Series 2018A Bonds are being used to fund a portion of the project, capitalized interest, debt service reserve fund, and cost of bond issuance. Principal amounts on the Series 2018A Bonds are payable annually commencing on May 15, 2023, with final maturity on May 15, 2052.

Entrance Fee Bonds (2018C Bonds, Series 2018B-3, 2018B-2, and 2018B-1)

The Series 2018C, 2018B-3, 2018B-2, and 2018B-1 Bonds of $1,100,000, $13,000,000, $6,250,000, and $4,750,000, respectively, will have coupon rates ranging from 3.000 percent to 3.500 percent per annum. The Series 2018C, Series 2018B-3, Series 2018B-2, and Series 2018B-1 Bonds are expected to be repaid during the fill-up period of 2020-2021 using proceeds from initial Entrance Fees received related to the Stage 2 financing. Final maturities on the Series 2018C, 2018B-3, 2018B-2, and 2018B-1 Bonds are November 15, 2022, November 15, 2023, May 15, 2024, and May 15, 2025, respectively.

C-23 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Sources and uses of related funds are outlined in the following table. Assumptions are based upon a forecast provided the Underwriter.

Table 7 Series 2018 Bonds Financing Sources and Uses of Funds (In Thousands) Sources of Funds: Series 2018A(A) $ 16,305 Premium on Series 2018A(A) 674 Series 2018B(A) 24,000 Series 2018C(A) 1,100 Total Series 2018 Bonds proceeds 42,079 Construction contingency funds (B) 3,500 Total sources of funds $ 45,579

Uses of Funds: Land and related costs (C) $ 295 Design and engineering (D) 898 Direct construction (E) Independent living apartments 18,474 Retail space 7,954 Site improvements 2,061 Construction contingency 1,378 Other direct construction 453 Indirect construction (E) 5,107 Development fee (F) 504 Occupancy development (G) 1,074 General costs (H) 353 Project contingency (I) 1,162 Total project-related costs 39,713 Debt service reserve funds (J) 1,822 Capitalized interest fund deposits (K) 2,506 Cost of issuance (L) 1,531 Additional proceeds 7 Total estimated financing and other costs 5,866 Total uses of funds $ 45,579 Source: Management and Underwriter

C-24 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Notes:

(A) The following series of bonds are assumed to be issued:

$16,305,000 of fixed rate serial and term bonds; these bonds are expected to be issued at a $674,000 premium based on bond pricing information provided by the Underwriter $24,000,000 of fixed rate tax-exempt entrance fee principal reduction bonds $1,100,000 of fixed rate taxable entrance fee principal reduction bonds

(B) The Corporation is assuming a release of $3,500,000 of contingency funds from the Stage 1 financing to be repurposed for the Stage 2 project costs.

(C) Land and related costs include approximately $250,000 in an up-front payment for the Expanded Ground Lease. Remaining costs are related to studies, surveys, and zoning for Stage 2.

(D) The majority of the estimated design and engineering fees of approximately $898,000 for Stage 2 are based on contractual agreements with the Corporation’s architect Ankrom Moisan.

(E) Construction costs, including both direct and indirect costs, of approximately $35,427,000 are based on a Stage 2 project budget from the Corporation’s general contractor, R&H Construction. This includes approximately $750,000 in furniture, fixtures, and equipment.

(F) Approximately $504,000 of funds related to the financing will be used to pay development fees for Stage 2. This is in addition to $271,000 of fees that will be paid from Entrance Fee sources.

(G) Occupancy development costs related to the initial marketing of Stage 2 of The Village (to 95 percent occupancy) are assumed to approximate $1,074,000 and include direct marketing costs, promotional materials, and marketing staff through stabilization.

(H) General costs for Stage 2 are estimated at approximately $353,000 and include various administrative expenses, including certain travel and reimbursable costs.

(I) Management has estimated a project contingency for Stage 2 of $1,162,000, which is approximately three percent of all Stage 2 project costs.

(J) Represents the debt service reserve fund deposits related to the 2018 Bonds.

(K) The Underwriter has estimated $2,506,000 plus interest earned on the capitalized interest fund, debt service reserve fund, and project fund, will be used to fund interest for approximately the first 26 months of the 2018 Bonds.

(L) Represents the cost of issuance related to the 2018 Bonds.

C-25 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

RESERVATION AGREEMENT

Prospective residents of The Village commit to residency via a reservation agreement (the “Reservation Agreement”). At the time the Reservation Agreement is executed, a deposit is made, as is selection of a specific unit and agreement to key terms. The deposit is 10% of the Entrance Fee. The remainder of the fee is due no later than sixty (60) days from the date the residential unit will be complete and ready for occupancy.

The Entrance Fee is refundable (less a small administrative fee) under certain circumstances where the Reservation Agreement is terminated prior to occupancy or upon the resident vacating the unit or upon termination of the agreement. If The Village is not constructed within three years of placement of the deposit and execution of the Reservation Agreement, the entire amount is refundable plus any interest earned on escrow funds, less any costs specific to that resident.

Individuals or couples must also indicate that they have the financial resources to afford the Entrance Fee and MSFs. Management generally requires that residents earn 150% to 200% of the MSF amounts and that residents have assets of 150% to 200% of required Entrance Fees in order to qualify for residency at the Community. Certain exceptions apply. For example, if a prospective resident has assets significantly in excess of the minimum requirement, yet monthly income falls short of the required minimum, an exception can be made at management’s discretion. Prospective residents who placed deposits also provided management with income and asset information. Subsequently, they were asked to voluntarily participate in a survey conducted by Moss Adams LLP. A portion of the survey was focused on verification of the financial information recorded by management.

C-26 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The table below summarizes certain financial statistics of the depositor group. The lowest income and asset levels indicated are 150% of the lowest MSF and Entrance Fee. The highest income and asset levels indicated are 200% of the highest MSF and Entrance Fee. The information indicates that depositors overwhelmingly have income and assets in excess of management’s desired levels.

Table 8 Summary of Stage 1 Depositors Monthly Income 150% of Monthly Service Fees 200% of Monthly Service Fees < $5,400 24 20% < $6,990 28 23% $5,400 - $7,068 4 3% $6,991 - $7,990 4 3% $7,069- $7,718 3 3% $7,991 - $9,990 26 22% > $7,719 89 74% >$9,991 62 52% Totals 120 100% Totals 120 100% Median Depositor Income $10,053

Total Assets 150% of Entrance Fees 200% of Entrance Fees < $557,420 1 1% < $743,226 4 3% $557,421 - $819,855 5 4% $743,227- $1,093,140 7 6% $819,856 - $958,260 3 3% $1,093,141 - $1,277,680 5 4% > $958,261 111 93% > $1,277,681 104 87% Totals 120 100% Totals 120 100% Median Depositor Assets $2,186,390 Summary of Stage 2 Depositors Monthly Income 150% of Monthly Service Fees 200% of Monthly Service Fees < $6,360 0 0% < $6,990 0 0% $6,360 - $7,068 0 0% $6,990 - $7,990 3 8% $7,069- $7,718 2 5% $7,991 - $9,990 8 20% > $7,719 38 95% >$9,991 29 73% Totals 40 100% Totals 40 100% Median Depositor Income $14,024

Total Assets 150% of Entrance Fees 200% of Entrance Fees < $615,017 0 0% < $820,022 1 3% $615,018 - $878,975 1 3% $820,023 - $1,171,966 3 8% $878,976 - $1,019,100 2 5% $1,171,967 - $1,358,800 1 3% > $1,019,101 37 93% > $1,358,801 35 88% Totals 40 100% Totals 40 100% Median Depositor Assets $3,778,750 Source: Management as of March 26 , 2018; verified by Moss Adams analysis and testing of depositor files.

C-27 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

RESIDENCY AND CARE AGREEMENT

Prior to occupancy, depositors execute a residency and care agreement (the “Residency and Care Agreement”). The Residency and Care Agreement stipulates that the Community require that at least one resident for each agreement be 62 years of age or older. Prior to occupancy, if a prospective resident terminates their Residency and Care Agreement within ten (10) days from the date it is executed, a refund will be made for the entire deposit without interest earned. Prior to occupancy, a 100% refund will be made if terminated by the prospective resident after ten (10) days of execution of the Residency and Care Agreement with interest earned within thirty (30) days of the date the Corporation receives written notice of termination. If termination is due to any other reason than death of the prospective resident or the failure of the Corporation to fulfill its obligations under the Residency and Care Agreement, a $300 administrative fee will be withheld from the refund.

In the event that a resident is admitted to a healthcare service location (including the Health Center) on a permanent basis, the Residency and Care Agreement between the resident and the Corporation will continue until the resident officially moves out. However, the independent living apartment becomes available for use by management if a resident is in a healthcare service location for 60 or more days. If a resident is admitted to a healthcare service location on a temporary basis for a convalescing period, the Residency and Care Agreement will remain in effect for a period of up to 60 days, unless the resident elects to terminate it. Residents will continue to pay the monthly service fee during a temporary stay in any healthcare service location.

Subsequent to occupancy under the current Residency and Care Agreement, in the case of the resident’s death or termination by the resident, the resident or resident’s estate will receive a refund in the amount of up to 80% of the Entrance Fee paid. The Corporation immediately earns 10%, then 2% per month thereafter, until the 80% threshold is reached and the villa or apartment or a like villa or apartment has been re-occupied. In the event that the Entrance Fee received upon re-occupancy is less than the unamortized balance due to the vacating resident, that lesser amount shall be refunded.

The Entrance Fee structure for The Village provides additional options on a limited basis. In addition to the 80% plan, there are two alternatives. The first alternative is the 50% plan, which is implemented the same as the 80% plan except that the Corporation amortizes the Entrance Fee down 2% per month to the 50% threshold. Residents pay the same Entrance Fees and receive a 20% discount on MSFs under this arrangement. The Corporation has limited the number of 50% plans to twenty-six (26). The second alternative is a fully amortizing plan; however, the Entrance Fees are discounted by 30% and are amortized 2% per month until exhausted. The Corporation has limited the number of fully amortizing plans to thirteen (13).

Certain services are included in the MSFs for independent living residents. Other services are available for additional fees. Services covered by the MSF include:

Monthly dining allocation of 20 meals per person or a dining dollar meal plan: Tray service for up to 14 consecutive days upon approval of the resident’s physician or Community clinical staff; Meal allowance for residents who are away for 14 consecutive days or more; Activities and social services, including certain trips such as shopping trips; Common Facilities such as the dining rooms, swimming pool, and activities rooms; Wellness program and fitness center;

C-28 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Social lounge with bar; Limited local group transportation for shopping and medical facilities; Housekeeping services every other week; One assigned parking spot; Security, which includes a 24-hour emergency call system in the residence and a wearable pendant provided for campus use; Water, sewer, utilities, electric, basic telephone, basic cable television, Wi-Fi service, and refuse service; Building janitor and maintenance service, which includes appliances; Utilities, including complete kitchen appliances and washer and dryer in the residence; Property and casualty insurance on buildings and equipment owned by Mary’s Woods; Mail service; Storage; and Fire detection and sprinkler system.

Additional services that can be purchased for an additional fee include:

Additional meals, including guest meals; Certain trips and tours; Scheduled individual transportation; Guest accommodations; Additional housekeeping services; and Garage parking.

CHARACTERISTICS OF THE MARKET AREA

Assumptions related to occupancy and utilization of the Community were developed by management based on an assessment of the following factors:

Historical experience; Project site plans; General area analysis; Defined Primary Market Area (the “PMA”) for the Community; Demographic and socioeconomic characteristics of the PMA, including an analysis of age and income qualified households within the PMA; Competitor analysis, including descriptions and utilization of comparable retirement communities within the PMA; Penetration rates for independent living units in the PMA; and Management capabilities (including external consultants) related to marketing independent living units.

C-29 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Project Site Description

The Community is located along the Willamette River in Lake Oswego, Oregon. The Village will be located on property currently unused and adjacent to the existing Community at the corner of Holy Names Drive and Willamette Drive (Hwy. 43) on a portion of the 75 acres owned by SNJM. The Corporation and SNJM executed a new ground lease for Stage 1 that will be amended for Stage 2. It will provide access to 37 total acres for a period of 50 years from the execution of the Stage 1 ground lease with two 10-year extensions; the amendment for Stage 2 will be 49 years to align with Stage 1. The parking lot was relocated to the north side of Holy Names Drive. An existing structure, the Heritage Center, is located near the construction site and will remain in place. Marylhurst University, an applied liberal arts university, is located adjacent to the Community and is operated independently from Mary’s Woods.

General Area Analysis (hospitals, shopping, cultural)

Highways – Lake Oswego is approximately ten miles south of the downtown area of Portland, Oregon. Interstate 5 is the primary highway; however, Interstate 205 also provides access to the area. Willamette Drive (Hwy. 43), which connects to Interstate 5, is used to access Mary’s Woods.

Transportation – Area public transportation is provided by the Tri-Met Transit system, which services the greater Portland area. The Community is located on bus route 35. Tri-Met also provides door-to-door transportation for medical appointments, including lift service, to those who are unable to utilize the standard bus service. Lake Oswego also provides a scenic trolley service, the Willamette Shore Trolley, which provides scenic tours and local transportation to points of interest on the Willamette River. The city also provides transportation services to individuals aged 50 or greater through the Adult Community Center (“ACC”) transportation service. This service provides volunteer escorts who utilize their own vehicles to assist individuals with medical appointments and a door-to-door shuttle service to and from the ACC. The shuttle is equipped with a lift and the ACC accepts donations from passengers.

The Lake Oswego area is served by the Portland International Airport (“PDX”). PDX is approximately 20 miles north of Lake Oswego and approximately 21 miles from the Community. PDX provides domestic and international flights to almost all major airports in the continental United States. Private shuttle services provide transportation between PDX and Lake Oswego.

C-30 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Acute Healthcare Services – The following table shows hospitals located near Mary’s Woods.

Table9

AcuteCareHospitalsNeartheCommunity

DrivingMilesfromthe HospitalName Location Type NumberofBeds Community

ProvidenceWillametteFalls ShortTerm MedicalCenter 1500DivisionSt,OregonCity 5.7 111 AcuteCare

LegacyMeridianParkMedical ShortTerm Center 19260SW65thAveTualatin 7 130 AcuteCare

ProvidenceMilwaukieHospital ShortTerm 10150SE32ndAveMilwaukie 8.4 51 AcuteCare

OregonHealth&Sciences 3181SWSamJacksonParkRd ShortTerm UniversityHospital 9 528 Portland AcuteCare

KaiserSunnysideMedicalCenter ShortTerm 9800SESunnysideRd,Clackamas 10 299 AcuteCare Note: Non-acute, behavioral health, and children’s hospitals were omitted. Source: Management; Moss Adams LLP research.

Beyond the hospitals listed above, which are all within ten miles of the Community, Portland boasts several major medical centers. Providence Health and Services is the most significant hospital chain in the greater Portland area with several hospitals and many outpatient locations providing a myriad of services. Of note is Oregon Health & Science University with its affiliated hospitals providing access to significant healthcare services. As an academic medical center, it provides an extensive array of services and conducts medical research. There are also several behavioral health organizations in the area.

Culture and Entertainment – Mary’s Woods is located in a region of Oregon, which offers several options for shopping, cultural attractions, and recreational activities. Lake Oswego is a popular destination for shopping and enjoying the lake and Willamette River. There are many restaurants to choose from as well as many fine shops and boutiques. From May to October, a Farmers Market is held on Saturdays where shoppers can enjoy access to fresh farm products, baked goods, and entertainment.

The Chamber of Commerce provides a walking tour guide for interested parties to enjoy historic and architectural points of interest. Forest hiking and parks are also available in the area as well as a public golf course and the Oswego Lake Country Club, a private club that requires membership.

C-31 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The lake itself provides entertainment for residents of the area as well as tourists and other visitors. It is a natural lake along the Tualatin River that was expanded by a concrete dam to its current size of approximately 395 acres, which qualifies it for classification as a reservoir. The lake is completely surrounded by the city of Lake Oswego. The lake is privately owned by the Lake Oswego Corporation, a private corporation of lakefront property owners.

PRIMARY MARKET AREA (PMA)

The PMA for senior living services is typically defined as the geographic region where a community draws the highest concentration of buyers. Management, in preparing for development of The Village, has defined its PMA to include 20 zip codes surrounding Mary’s Woods. The PMA includes zip codes that have historically provided many independent living unit residents including some that might not be geographically contiguous. The PMA spans approximately 12 miles to the north, 7 miles to the south, and 13 miles to the west. Directly east is the Willamette River, which creates a geographic barrier. While some residents and prospective residents hail from the other side, due to limited convenience with respect to river crossings, the zip codes there generally tend to provide fewer residents. Management, therefore, excludes them from the PMA.

The following table represents the PMA zip codes as well as the number of households.

Table 10 Mary's Woods Primary Market Area Existing ILU Stage 1 Stage 2 Total % of % of % of Zip Code City Occupied (Expansion) (Expansion) Households Total Total Total Units ILU Sales(2) ILU Sales(2) 97034 (1) Lake Oswego 8,689 30 23.6% 26 28.0% 11 40.7% 97035 Lake Oswego 11,689 19 15.0% 13 14.0% 1 3.7% 97068 West Linn 11,876 16 12.6% 20 21.5% 1 3.7% 97219 Portland 17,153 15 11.8% 5 5.4% 4 14.8% 97239 Portland 8,988 7 5.5% 4 4.3% 3 11.1% 97229 Portland 24,867 6 4.7% 4 4.3% 1 3.7% 97201 Portland 9,491 6 4.7% 2 2.2% 0 0.0% 97224 Portland 15,756 6 4.7% 1 1.1% 1 3.7% 97062 Tualatin 11,520 5 3.9% 2 2.2% 0 0.0% 97225 Portland 12,390 4 3.1% 5 5.4% 1 3.7% 97221 Portland 5,263 3 2.4% 2 2.2% 0 0.0% 97008 Beaverton 12,661 3 2.4% 1 1.1% 0 0.0% 97005 Beaverton 11,108 2 1.6% 1 1.1% 0 0.0% 97007 Beaverton 18,329 2 1.6% 1 1.1% 2 7.4% 97210 Portland 6,942 2 1.6% 1 1.1% 2 7.4% 97223 Portland 19,715 1 0.8% 1 1.1% 0 0.0% 97006 Beaverton 17,734 0 0.0% 1 1.1% 0 0.0% 97204 Portland 549 0 0.0% 0 0.0% 0 0.0% 97205 Portland 5,563 0 0.0% 0 0.0% 0 0.0% 97209 Portland 12,345 0 0.0% 3 3.2% 0 0.0% Total 242,628 127 100.0% 93 100.0% 27 100.0% Source: Claritas and Management

C-32 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Notes:

(1) The Community is located in 97034. (2) Does not include 40 sales from outside of the PMA.

The Village will have 198 independent living apartments in total. As of March 28, 2018, there were 120 independent living apartments reserved in The Village Stage 1 by couples or individuals and 40 at Stage 2 representing 160 total depositors or 81% of the 198 available apartments. 120, of the 160 depositors, or 75%, originate from within the defined PMA.

The map on the following page depicts the PMA as well as portions of the Secondary Market Area (“SMA”). The SMA zip codes nearest the PMA are included in the map for informational purposes. The percentage of current independent living residents originating from the PMA is approximately 43%, indicating attractiveness of Mary’s Woods to individuals in a broader catchment area. Village depositors originating from within the PMA represent a much more substantial percentage at 79%.

C-33 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Market Area Map

C-34 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Population – The projected and estimated age distribution is a key factor in determining the PMA’s retirement housing needs. The following table shows the historical 2010 population, 2018 estimated population, and 2022 projected population. The table is broken down by age group as well as gender.

Population Growth – Total population in the PMA is projected to grow by 5.3% from 2018 to 2022. The population age 65 and over grew by 51% from 2010 to 2018 and is anticipated to grow by 20% from 2018 to 2022. The following table shows the historical population growth patterns as well as the projected growth patterns for the PMA.

Table 11 Historical, Estimated, and Projected Population in the PMA 2010 % 2018 Estimate % 2022 Projection % Census

Age 65 - 74 31,700 6.3% 55,096 9.7% 65,988 11.0% Age 75 - 84 17,597 3.5% 22,992 4.1% 29,362 4.9% Age 85 and over 9,310 1.8% 10,378 1.8% 10,575 1.8% Total Population 506,445 567,127 597,680 Age 65 and over 58,607 11.6% 88,466 15.6% 105,925 17.7%

Age 65 - 74 14,767 5.9% 25,565 9.2% 30,749 10.5% Age 75 - 84 7,258 2.9% 9,901 3.5% 12,637 4.3% Age 85 and over 2,947 1.2% 3,508 1.3% 3,649 1.2% Total Population, Male 248,668 278,956 293,998 Age 65 and over 24,972 10.0% 38,974 14.0% 47,035 16.0%

Age 65 - 74 16,933 6.6% 29,531 10.2% 35,239 11.6% Age 75 - 84 10,339 4.0% 13,091 4.5% 16,725 5.5% Age 85 and over 6,363 2.5% 6,870 2.4% 6,926 2.3% Total Population, Female 257,777 288,171 303,682 Age 65 and over 33,635 13.0% 49,492 17.2% 58,890 19.4% Source: Nielsen Claritas

The following table provides summary population statistics for the PMA, Oregon, and the nation.

Table 12 Population PMA Oregon National 2022 Projection 597,680 4,430,300 339,698,000 2018 Estimate 567,127 4,203,200 326,971,407 2010 Census 506,445 3,837,300 308,745,538

Growth 2010 - 2018 11.98% 9.54% 5.90% Growth 2018 - 2022 5.39% 5.40% 3.89% Source: Nielsen Claritas; US Census Bureau; Oregon Department of Economic Analysis

C-35 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Market Area Median Income – The following table shows income projections for individuals in the PMA who are 65 and older.

Table13 HouseholdIncomebyAgeofHouseholder 2000 2018 2022 IncomeAge6574 Census % Estimate % Projection % lessthan$15,000 2,089 15.0% 2,331 6.7% 2,364 5.8% $15,000$24,999 1,794 12.9% 2,433 7.0% 2,437 6.0% $25,000$34,999 1,814 13.0% 2,845 8.2% 2,856 7.0% $35,000$49,999 2,350 16.9% 4,168 12.0% 4,390 10.7% $50,000$74,999 2,646 19.0% 5,149 14.9% 5,778 14.1% $75,000$99,999 1,224 8.8% 4,557 13.2% 5,173 12.6% $100,000$124,999 676 4.9% 3,548 10.3% 4,259 10.4% $125,000$149,999 413 3.0% 2,708 7.8% 3,546 8.7% $150,000$199,999 409 2.9% 2,533 7.3% 3,511 8.6% $200,000ormore 486 3.5% 4,335 12.5% 6,612 16.2% MedianIncome $40,983 $75,098 $87,112 TotalHouseholds 13,901 34,607 40,926

Source: Nielsen Claritas

C-36 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

2000 2018 2022 IncomeAge7584 Census % Estimate % Projection % lessthan$15,000 2,196 18.5% 1,436 9.5% 1,701 8.9% $15,000$24,999 2,009 17.0% 1,976 13.0% 2,226 11.6% $25,000$34,999 2,184 18.4% 2,012 13.2% 2,258 11.8% $35,000$49,999 2,146 18.1% 2,386 15.7% 2,814 14.7% $50,000$74,999 1,517 12.8% 2,510 16.5% 3,168 16.5% $75,000$99,999 634 5.4% 1,660 10.9% 2,121 11.1% $100,000$124,999 470 4.0% 1,046 6.9% 1,420 7.4% $125,000$149,999 179 1.5% 567 3.7% 834 4.4% $150,000$199,999 198 1.7% 525 3.5% 808 4.2% $200,000ormore 307 2.6% 1,071 7.1% 1,812 9.5% MedianIncome $32,090 $47,099 $53,022 TotalHouseholds 11,840 15,189 19,161

2000 2018 2022 HouseholderAge85andover Census % Estimate % Projection % lessthan$15,000 802 26.4% 988 14.0% 942 13.2% $15,000$24,999 558 18.4% 1,252 17.7% 1,131 15.8% $25,000$34,999 547 18.0% 1,068 15.1% 1,002 14.0% $35,000$49,999 479 15.8% 1,047 14.8% 1,049 14.6% $50,000$74,999 316 10.4% 966 13.7% 1,007 14.1% $75,000$99,999 113 3.7% 663 9.4% 701 9.8% $100,000$124,999 80 2.6% 257 3.6% 282 3.9% $125,000$149,999 50 1.6% 285 4.0% 346 4.8% $150,000$199,999 39 1.3% 235 3.3% 290 4.1% $200,000ormore 55 1.8% 302 4.3% 411 5.7% MedianIncome $27,137 $36,789 $41,772 TotalHouseholds 3,039 7,063 7,161 Source:Nielsen Claritas

Management generally considers monthly income of 1.5 – 2.0 times the MSF to be adequate for qualification. Exceptions exist typically when depositors possess assets significantly greater than what is required to cover Entrance Fees. For purposes of the study, we based the income thresholds on 1.5 times the lowest MSF and the weighted average MSF. These figures are used later in the report to analyze market penetration rates. The following table provides the number of income eligible households for those over age 75.

C-37 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 14 Total Income Eligible Households Age 75 and Above with Income $62,900 and Above Base Year 2018 8,293 Penetration Year 2021 9,603 Stable Year 2022 10,668

Age 75 and Above with Income $76,300 and Above Base Year 2018 6,490 Penetration Year 2021 7,584 Stable Year 2022 8,529

Age 75 and Above with Income of $90,000 and Above Base Year 2018 5,217 Penetration Year 2021 6,295 Stable Year 2022 6,564 Source: Management and Claritas

The following table presents the top large employers in the PMA and surrounding areas. Large healthcare organizations account for three of the top large employers. A robust healthcare community is an important component of a strong senior living market.

Table 15A Large Employers (250 + Employees) in the PMA Business Category City, State Intel Computer Hardware Hillsboro, OR Providence Health & Services Hospitals Portland, OR Oregon Health & Science University Hospitals Portland, OR Kaiser Permanente Northwest Hospitals Portland, OR Fred Meyer Retailer Portland, OR Nike, Inc. Retailer Beaverton, OR Daimler Trucks North America, LLC All Other Miscellaneous Manufacturing Portland, OR Precision Castparts Corporation All Other Miscellaneous Manufacturing Portland, OR Columbia Sportswear Company Retailer Portland, OR Tektronix, Inc. Computer Hardware Beaverton, OR Greenbrier All Other Miscellaneous Manufacturing Lake Oswego, OR Warn Industries, Inc. All Other Miscellaneous Manufacturing Clackamas, OR

C-38 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 15B Employers in the Surrounding Area Business Category City, State Boeing Aviation Gresham, OR Northwest Pipe Company All Other Miscellaneous Manufacturing Vancouver, WA Mentor Graphics Software & IT Wilsonville, OR Xerox Software & IT Wilsonville, OR WaferTech, LLC (A TSMC Co) Software & IT Camas, OR Consolidated Metco, Inc. All Other Miscellaneous Manufacturing Vancouver, WA Blount International, Inc. All Other Miscellaneous Manufacturing Milwaukie, OR A-dec All Other Miscellaneous Ambulatory Health Care Services Newberg, OR Qorvo Computer Hardware Hillsboro Source: Census Bureau, County of Clackamas, Labor Department, Greater Portland Inc.

Unemployment trends for Clackamas County generally mirror those of Oregon and the rest of the United States, which have enjoyed positive trends over the past six years. Positive trends in unemployment (declining percentages of unemployed population as depicted in the graph below) bode well for organizations contemplating growth due more robust spending and overall greater desirability of a market.

Table 16 Unemployment 2012 2013 2014 2015 2016 2017 United States 8.1% 7.4% 6.2% 5.3% 4.5% 4.7% State of Oregon 8.8% 7.9% 6.8% 5.7% 4.1% 4.1% Clackamas County 8.0% 7.1% 6.2% 5.2% 3.7% 3.4%

10.0%

8.0%

6.0% UnitedStates StateofOregon 4.0% ClackamasCounty 2.0%

0.0% 2012 2013 2014 2015 2016 2017

Source: Census Bureau, County of Clackamas, Labor Department

C-39 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

REAL ESTATE TRENDS

Estimated Household Value within the Primary Market Area – The following table shows the owner occupied housing units by value in the PMA. Housing values climbed impressively between the 2000 and 2018 estimates. In 2018, it is estimated that roughly 58% of homes will be worth more than $400,000. By 2022 that range is expected to represent over 63%, of households in the PMA.

Table 17 Owner-Occupied Housing Units by Value 2000 2018 2022 Value Census % Estimate % Projection % Value Less than $20,000 1,027 0.95% 1,103 0.79% 1,100 0.74% Value $20,000 - $39,999 1,054 0.97% 1,075 0.77% 1,103 0.75% Value $40,000 - $59,999 857 0.79% 476 0.34% 522 0.35% Value $60,000 - $79,999 996 0.92% 371 0.27% 415 0.28% Value $80,000 - $99,999 2,304 2.13% 576 0.41% 510 0.34% Value $100,000 - $149,999 13,415 12.40% 1,880 1.35% 1,754 1.19% Value $150,000 - $199,999 29,231 27.02% 3,250 2.34% 2,759 1.87% Value $200,000 - $299,999 32,826 30.35% 19,186 13.80% 16,828 11.38% Value $300,000 - $399,999 13,357 12.35% 30,394 21.86% 29,163 19.73% Value $400,000 - $499,999 6,154 5.69% 28,046 20.17% 28,474 19.26% Value $500,000 - $749,999 4,457 4.12% 32,013 23.02% 36,390 24.61% Value $750,000 - $999,999 1,455 1.35% 13,289 9.56% 16,563 11.20% Value $1,000,000 or more 1,038 0.96% 7,383 5.31% 12,264 8.30% Total Households 108,171 139,042 147,845 Source: Claritas

C-40 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The following table provides data on home sales in the zip codes that define the PMA. Strong sales figures including volumes and value growth provide for greater affordability of entrance fee CCRCs such as Mary’s Woods. Table18 HistoricalMedianHomeValuesandPercentageChange

AtDecember31 2014 2015 2016 2017 Numberof Median Numberof Median Numberof Median Numberof Median ZipCode City Sales SalesPrice %Change Sales SalesPrice %Change Sales SalesPrice %Change Sales SalesPrice %Change 97005 Beaverton 939 $251,500 6.2% 1,201 $284,800 13.2% 946 $338,100 18.7% 768 $359,000 6.2% 97006 Beaverton 2,974 312,900 8.0% 3,709 344,100 10.0% 3,596 385,400 12.0% 2,707 401,300 4.1% 97007 Beaverton 3,345 338,300 7.4% 4,298 372,400 10.1% 3,928 418,600 12.4% 2,990 431,600 3.1% 97008 Beaverton 1,096 293,900 6.4% 1,515 337,000 14.7% 1,407 379,200 12.5% 1,054 399,300 5.3% 97034 LakeOswego 1,313 601,700 9.8% 1,472 671,500 11.6% 1,421 751,400 11.9% 1,091 755,200 0.5% 97035 LakeOswego 1,521 461,300 8.2% 1,704 508,100 10.1% 1,707 548,300 7.9% 1,302 575,900 5.0% 97062 Tualatin 1,050 366,100 7.6% 1,396 405,000 10.6% 1,370 443,500 9.5% 979 459,600 3.6% 97068 WestLinn 1,702 418,500 4.9% 2,107 455,200 8.8% 1,920 510,700 12.2% 1,564 518,900 1.6% 97201 Portland 750 722,800 5.7% 878 847,400 17.2% 830 960,600 13.4% 640 947,000 1.4% 97205 Portland 241 736,600 7.6% 293 878,500 19.3% 291 995,400 13.3% 197 965,100 3.0% 97210 Portland 722 752,600 6.5% 714 882,800 17.3% 658 1,016,900 15.2% 495 988,000 2.8% 97219 Portland 2,197 377,200 8.1% 2,795 432,300 14.6% 2,418 480,400 11.1% 2,098 484,900 0.9% 97221 Portland 671 497,700 9.6% 758 570,200 14.6% 704 624,600 9.5% 501 631,200 1.1% 97223 Tigard 2,051 318,000 8.0% 2,366 353,500 11.2% 2,386 400,400 13.3% 1,958 413,400 3.2% 97224 Tigard 2,013 340,400 5.9% 2,347 377,600 10.9% 2,646 418,700 10.9% 2,149 428,800 2.4% 97225 WestSlope 1,084 440,400 5.9% 1,342 496,700 12.8% 1,239 550,200 10.8% 966 560,800 1.9% 97229 CedarMill 3,780 466,300 4.5% 4,067 513,800 10.2% 4,164 558,000 8.6% 3,670 561,800 0.7% 97239 Portland 950 477,200 10.1% 1,123 556,000 16.5% 946 599,200 7.8% 854 607,700 1.4% PMASimpleaverage 1,578 $454,078 7.2% 1,894 $515,939 13.6% 1,810 $576,644 11.8% 1,444 $582,750 1.1% TotalPortlandMetroArea 28,399 $300,212 8.1% 34,085 $340,499 13.4% 32,577 $382,068 12.2% 25,983 $393,912 3.1% Source:ZillowResearchandRedfinDataCenter

COMPETITOR ANALYSIS

Comparable communities include those that offer independent living and at least one level of healthcare services, such as assisted living or nursing care. Within independent living communities, units may be apartments, cottages, or freestanding homes where residents have access to community amenities. Amenities typically include dining venues, a library, community lounge areas, a fitness facility, a game room, a beauty salon, a chapel, and more, such as those services provided by the Community. Services for residents vary from community to community, but can include daily meals or discounted rates for utilizing dining services. In addition, there are often activities programs, 24-hour security, interior and exterior maintenance, and on-site healthcare services.

Comparable facilities are defined by the following characteristics: 1. Offer similar services and amenities within the PMA or as otherwise determined by management; 2. Compete for a similar age group; 3. Include independent living units; 4. Provide one or more levels of healthcare services (i.e., assisted living, memory care, skilled nursing); and 5. Are primarily not-for-profit.

C-41 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Independent living communities may be standalone or part of a CCRC. CCRCs and standalone communities offer a variety of contracts to residents. The following are the three major types of contracts:

Extensive Care Contract (Type A) – A resident typically pays an up-front fee and a monthly fee in exchange for the right to lifetime occupancy of an independent living unit and certain services and amenities. Residents who require assisted living care may transfer to the appropriate level and continue to pay essentially the same monthly fee they had been paying for independent living. Type A contracts are almost always associated with not-for-profit CCRCs and are known as “life care contracts” by some. Although fees may increase over time, they are not to do so for residents with Type A contracts because care needs change.

Modified Contract (Type B) – A resident typically pays an up-front fee and an ongoing monthly service fee for the right to stay in an independent living unit and receive certain services and amenities. A modified contract obligates a CCRC to provide the appropriate level of assisted living or nursing care to residents who entered independent living units (as in an extensive care contract), but only for a specified period of time at a specified rate that may or may not be tied directly to the independent living rate.

Fee-for-Service Contract (Type C) – Requires an entrance fee but does not include any discounted healthcare or assisted living services. Typically, current residents receive priority admission or guaranteed admission for these services, but residents who require assisted living or nursing care pay the regular per diem rate paid by those admitted from outside the CCRC.

In addition to the contracts listed above, some retirement communities may also include rental communities that offer independent living housing and healthcare services, such as assisted living and nursing care. However, the resident is not required to pay an entrance fee, but rather signs a lease for the unit and pays any additional services on a per diem or monthly basis. This is based on market rates.

C-42 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The following tables, 19-A and 19-B, provide information on the comparable competitive communities in or near the Mary’s Woods PMA as determined by Management:

Table19A IndependentLivingCompetitorAnalysis Mary'sWoods Mirabella TerwilligerPlaza HolladayParkPlaza Location LakeOswego Portland97239 Portland97201 Portland97232 MilesfromtheCommunity 6.7Miles 7.29miles 9.1miles Nonprofit,boardof Nonprofit,boardof Nonprofit,boardof Nonprofit,boardof Sponsor/Developer directors directors directors directors YearOpened 2001 2010 1962 1967 TypeofContract TypeB TypeB TypeB BuyinCCRC ForProfit/Nonprofit Nonprofit Nonprofit Nonprofit Nonprofit

UnitConfiguration Studioapartment 18 Onebedroomapartments 134 45 126 113 Twobedroomapartments 99 179 101 48 Threebedroomapartments Homes/Cottages/Villas 50 TotalUnits 283 224 245 161

SquareFootage Studioapartment 378 Onebedroomapartments 577889 9651,009 576954 6151,135 Twobedroomapartments 6101,589 1,2381,658 1,1341,160 1,0451,610 Threebedroomapartments Homes/Cottages/Villas 1,5361,797

EntranceFees Studioapartment $62,600+ Onebedroomapartments $209,900$360,900 $370,000$472,000 $84,100$238,900 $125,588$266,317 Twobedroomapartments $374,900$569,900 $535,000$656,000 $200,100$677,400 $239,122$405,128 Threebedroomapartments Homes/Cottages/Villas $508,900$666,900 SecondPersonMonthlyFee $38,000 N/A $10,000 N/A

MonthlyFees Studioapartment $983$1,388 Onebedroomapartments $2,197$3,032 $4,258$4,405 $1,466$2,858 $2,270$5,096 Twobedroomapartments $3,398$4,860 $4,553$4,931 $2,947$4,035 $4,459$6,043 Threebedroomapartments Homes/Cottages/Villas $5,142$6,634 SecondPersonMonthlyFee $665 $1,023 $405 N/A

RefundOptions 50%80% 85% 80%90% 80%

OccupancyRate IndependentLivingUnits (2) 97% 95% 90% 95%

Source: Management, facility interviews, facility websites

(1) Data as of 3/26/18 (2) Does not include planned units

C-43 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table19B IndependentLivingCompetitorAnalysisOtherEntitiesOutsidethePMA RoseVilla WillametteView TownCenterVillage FriendsviewManor Location Portland97267 Portland97222 HappyValley97086 Newberg97132 MilesfromtheCommunity 1.7miles 1.86miles 4.6miles 20.7miles Nonprofit,boardof Nonprofit,boardof Nonprofit,boardof Nonprofit,boardof Sponsor/Developer directors directors directors directors YearOpened 1960 1955 1985 1961 TypeofContract TypeB TypeC Rental TypeA ForProfit/Nonprofit Nonprofit Nonprofit Nonprofit Nonprofit

UnitConfiguration Studioapartment 20 50 42 Onebedroomapartments 102 135 145 52 Twobedroomapartments 195 117 42 71 Threebedroomapartments 9 1 38 Homes/Cottages/Villas 26 10 TotalUnits 306 298 238 213

SquareFootage Studioapartment 333421 460481 288553 Onebedroomapartments 8131,078 4211,161 5501,064 486626 Twobedroomapartments 1,2761,552 7212,293 7601,300 8251,480 Threebedroomapartments 1,3251,960 N/A N/A Homes/Cottages/Villas 1,2221,641 7001,569

EntranceFees Studioapartment $58,500$128,000 RentalOption $73,395$132,168 Onebedroomapartments $205,000$461,900 $128,000$299,000 RentalOption $121,001$144,168 Twobedroomapartments $245,000$591,600 $200,000$853,000 RentalOption $169,206$287,790 Threebedroomapartments $373,000$489,000 $360,000$495,000 RentalOption N/A Homes/Cottages/Villas $340,000$501,000 N/A $268,082$337,015 SecondPersonMonthlyFee $25,000 $20,000 $20,000

MonthlyFees Studioapartment $1,779$2,045 $2,150 $1,803$2,120 Onebedroomapartments $1,820$3,400 $2,045$4,500 $2550$3450 $1,903$2,269 Twobedroomapartments $2,200$4,400 $3,448$6,780 $2,950$4,150 $1,436$2,641 Threebedroomapartments $3,400$4,400 $4,312$5,760 $4,695 N/A Homes/Cottages/Villas $4,084$5,764 $1,436$2,074 SecondPersonMonthlyFee $680 N/A N/A $937$1,405

RefundOptions 5080% 80% N/A 50%

OccupancyRate IndependentLivingUnits (2) 97% 97% 98% 100%

Source: Management, facility interviews, facility websites

(1) Data as of 3/26/18 (2) Does not include planned units

C-44 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Notes:

General

(1) There is a future development within the PMA. The Springs at Lake Oswego will be a for-profit community located at the intersection of Boones Ferry and Kruse Way in Lake Grove, Oregon, approximately 5 miles from Mary’s Woods, which will offer independent living, assisted living and memory care. The property will be a rental property according to sources at The Springs Living, the parent company based out of McMinnville, Oregon. Press reports indicate that it will have 105 independent living units, 87 assisted living units, and 24 memory care units. The Springs Living owns and operates other properties that take up-front, material, refundable fees that are not technically entrance fees although they may have some similar characteristics. The Springs at Lake Oswego could offer the same type of payment plans. The Springs at Lake Oswego has been included as a competitor to Mary’s Woods for purposes of calculating market penetration rates.

(2) Consistent information was not available on each of the competitors. The table and notes contain key information that was provided by Management or otherwise obtained by Moss Adams LLP to understand competitor characteristics.

Mirabella

(1) This is a 30-story high rise CCRC located in downtown Portland with 224 apartments with either one or two bedrooms, which is currently operating at 95% occupancy.

(2) Flexible meal plan that allows residences to choose number of meals per month and the type of meal per day.

(3) Community includes Willamette Hall Auditorium, which holds performances and educational events for residents.

(4) One block from Oregon Health & Science University Center for Health and Healing.

(5) Developed and owned by Pacific Retirement Services, Inc. (“PRS”) in 2010. PRS has developed 12 other retirement communities in Arizona, California, Oregon, Texas, Washington, and Wisconsin.

Terwilliger Plaza

(1) CCRC with two towers located in Portland. Combined, the towers have 245 apartments. Currently running at 90% occupancy. Terwilliger Plaza is planning on expanding by approximately 100 independent living units with presales expected to begin in the fall of 2018.

(2) Applicants must be at least age 62 or have a spouse of that age, be able to live independently with reasonable accommodations, and demonstrate the financial ability to meet the terms of the residency agreement.

(3) Terwilliger Plaza staff will work with residents to acquire funding through the Terwilliger Foundation if residents funding runs out.

(4) No set meal plan. Residents have access to an on-site café, grocery store, and deli. Residents are encouraged to utilize local food locations and farmers markets.

C-45 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Holladay Park Plaza

(1) Community is exclusively apartment homes located in Portland. CCRC was recently remodeled in 2014.

(2) Features 161 apartments and is currently at 95% occupancy.

(3) All apartment homes feature a complete kitchen including a refrigerator, stove, oven, microwave and wood cabinets. Apartment homes also include central air and heat, cable TV, and internet access.

(4) Recently expanded campus to add new two-story residential building with 10 apartment homes. Homes range in size from 1,450 – 1,750 square feet. Expansion also includes underground parking and on-site storage.

(5) The Health and Wellness Program provides many activities and services for the residents. The dimensions of wellness are social, vocational/professional, nutritional, spiritual, physical, intellectual, environmental, and emotional. Individuals are encouraged to include all aspects of wellness into their active lifestyles.

(6) The main dining room is available for residents to enjoy dinner services. Additional dining options include the recently opened Bistro 1300, which offers flexible dining hours, made to go options for breakfast, lunch, and dinner, as well as ready-made items.

Willamette View

(1) Founded in 1955, Willamette View was the first CCRC in the Portland area. The community has 298 apartments and homes with a total population of 465 residents.

(2) Twenty-seven acre campus with access to Portland public transportation as well as free shuttles and drivers.

(3) Three on-campus dining options that feature local and sustainable foods. The community works in partnership with local farmers and farmers markets to provide fresh and local food for all meals. The community also utilizes a community garden for meals. Residents are offered a flexible meal plan that lets them choose the number of meals per month.

Rose Villa

(1) The community is comprised of 306 independent living units at 97% occupancy. Total residents for Rosa Villa are 297 across all residency options.

(2) Amenities include, but are not limited to, an aquatics center, art studio, community garden, dog park, several dining options, performing arts center, and expansive green spaces with walking trails.

(3) In 2016, work was completed on the $60 million campus redevelopment, including 5 new homes and “Main Street” – a village center with restaurants, garden store, rooftop deck, and spa.

(4) The Rose Villa Resident Council represents on campus residents. Comprised of representatives from volunteer and interest groups that can act on behalf of all residents. The Council is one of the three avenues of responsibility and vision at Rose Villa: the Board, the staff, and the residents.

C-46 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Friendsview Manor

(1) Type-A CCRC with seven neighborhoods offering several different housing options and amenities. Each neighborhood is either individual homes or apartment buildings.

(2) 213 total units across multiple buildings. New units are planned duplex units with individual parking spaces.

(3) Residents pay an entrance fee at move-in and then an ongoing monthly service fee. If a resident needs to move to Creekside enhanced living, Manor residential care, Gardenview (memory support) or the Charles Beals Health Center (24-hour nursing), the monthly fee will not be at market rate, but at standard independent-living rates, which are adjusted each year for inflation and normal operating costs.

(4) No traditional meal plan. Residents have dining dollars, which are included in the monthly fees. Dining dollars range in allotment based on neighborhood of residence.

(5) Friendsview Manor was incorporated in 1958 and founded by the Northwest Yearly Meeting of Friends through the Board of Peace and Service.

Town Center Village

(1) Monthly rental community with 238 apartment homes in three separate buildings. Community also includes assisted living, rehabilitation, home care, and skilled nursing.

(2) Owned by Generations, LLC, a family operated company that owns four retirement communities in California, Oregon, Utah, and Washington.

(3) The community includes One Concierge, which provides a variety of specialty services to residents. Services include housekeeping, meal delivery, grocery shopping, booking travel arrangements, and valet parking.

(4) The Vitality Center provides many activities, programs, and educational opportunities for residents. Additionally, Vitality Center offers benefits such as acupuncture, massage, and support groups.

The following table summarizes the existing and planned number of units at Mary’s Woods and the identified competitors in or near the PMA.

Table 20 Summary of Existing and Planned Comparable Independent Living Units Comparable Retirement Communities Existing Planned Total Mary's Woods 283 198 481 Mirabella 224 - 224 Terwilliger Plaza 245 100 345 The Springs - 105 105 Holladay Park Plaza 171 - 171 Total 923 403 1,326 Source: Management, facility interviews, facility websites

C-47 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

INDEPENDENT LIVING PENETRATION ANALYSIS

Penetration rates are a measure of market saturation. As market penetration increases, or greater saturation occurs, organizations can experience greater challenges related to achieving targeted occupancy. Stated alternatively, higher market penetration rates may indicate a weakness in demand for new units. This can have a negative impact on the financial feasibility of a project. It should be noted that penetration rates are only one method of assessing market opportunity. Qualitative conditions can, and very often do, exist that support occupancy. There are three typical penetration rate analyses utilized when assessing support for demand, which are described below and presented in tables 21 through 23.

Project Penetration Rate

The Project Penetration Rate is the percentage of qualified households in the PMA that The Village is expected to capture in order to achieve stabilized occupancy. It is derived by dividing the number of independent living units at The Village by the number of age and income-qualified households in the PMA. Occupied competitor units are specifically excluded from the number of age- and income-qualified households.

Net Market Penetration Rate or Absorption Rate

The Net Market Penetration Rate is the percentage of qualified households in the PMA that all available units in the market would have to capture in order to achieve stabilized occupancy in the PMA. It is derived by dividing the number of independent living units in the entire market by the number of age- and income- qualified households in the PMA. Occupied competitor units are specifically excluded from the number of age and income-qualified households. All known planned units in the PMA, which consists of The Village and any known competitor units becoming available, are included in the calculation. Attrition is also factored into this analysis. U.S. Census Bureau demographic projections accessed through Nielsen Claritas have been used in our analysis.

Gross Market Penetration Rate

The Gross Market Penetration Rate is the percentage of qualified households that the market would have to absorb in order for the market to achieve stabilized occupancy. Gross market penetration is calculated by dividing the total number of existing and planned independent living units in the PMA by the number of age- and income-qualified households in the PMA. U.S. Census Bureau demographic projections are the basis for information received through Nielsen Claritas for the first year of stabilized occupancy for The Village, which is 2022.

Income qualification levels in the following tables were based upon Management’s target depositor monthly income of 1.5 times MSF. The lower threshold is based upon the lowest current MSF applicable to depositors, the middle threshold is based upon the weighted average MSF, and the third is a higher income bracket established at $90,000 for illustrative purposes.

C-48 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Project Penetration Rate analyzes the portion of the potential available market a new project would represent given certain conditions. The Project Penetration Rate for Mary’s Woods falls within industry norms and indicates that the market can readily withstand the new units.

Table 21 Project Penetration Rate Age 75+ with Age 75+ with Age 75+ with Income Income Income $62,900 and $76,300 and $90,000 and Above Above Above Planned units at The Village 198 198 198 Percentage of units to be filled from the PMA (1) 80.0% 80.0% 80.0% Planned units to be filled from PMA 158 158 158 Percentage of units to be filled by age 75 and older (1) 65.0% 65.0% 65.0% Planned units to be filled by age 75 and older 103 103 103 Total units at The Village to be filled at 95% occupancy (a) 98 98 98 Number of age and income qualified households (2) 8,293 6,490 5,217 Less: Existing inventory of available comparable units (3) (877) (877) (877) Net number of age and income qualified households (b) 7,416 5,613 4,340 Project Penetration Rate (a/b) 1.3% 1.7% 2.3% Source: Claritas, Management

Notes:

(1) Currently, 75% of the depositors originate from the PMA based upon depositor information as of March 26, 2018. Approximately 80% is anticipated; provided by management.

(2) Based on population projections by Claritas.

(3) Provided by management. It is estimated there will be 877 total units in the market upon completion of The Village, assuming PMA average occupancy of 95%.

C-49 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Net Penetration Rate analyzes the percentage of qualified households that must be absorbed for The Village to achieve target occupancy levels.

Table 22 Net Penetration Rate Age 75+ with Age 75+ with Age 75+ with Income Income Income $62,900 and $76,300 and $90,000 and Above Above Above Planned units in the PMA The Village 198 198 198 Other planned units 205 205 205 Total planned units 403 403 403 Percentage of units to be occupied by age 75 and older (1) 65.0% 65.0% 65.0% Total planned units to be occupied by age 75 and older 262 262 262 Total planned units to be occupied at 95% occupancy 249 249 249 Total existing units available due to attrition (2) 121 121 121 Total units to be occupied 370 370 370 Percent of units to be occupied from the PMA 80.0% 80.0% 80.0% Total units to be occupied from the PMA (a) 296 296 296 Estimated number of age and income qualified households 9,603 7,584 6,295 Less: Existing inventory of available comparable units (3) (877) (877) (877) Estimated number of age and income qualified households (b) 8,726 6,707 5,418 Net Market Penetration Rate (a/b) 3.4% 4.4% 5.5% Source: Claritas, Management Notes:

(1) Provided by management, based upon depositor information as of March 26, 2018.

(2) 877 total units at 95.0% occupancy, assuming 22.9% attrition for rental units and 13.1% attrition for entrance fee units (Source: AAHSA State of Seniors Housing, 2012).

(3) Provided by management. Assumes PMA average occupancy of 95.0%.

C-50 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Gross Market Penetration Rate is a broader comparison of market penetration over time.

Table 23 Gross Penetration Rate 2018 2022 Market inventory of retirement communities The Village 0 198 Comparable retirement communities Existing units 913 913 Proposed units 0 205 Total units in the PMA 913 1,316 Percentage of units to be occupied from the PMA (1) 80.0% 80.0% Total units to be occupied from the PMA 730 1053 Total units to be filled at 95% occupancy (a) 694 1,000 Estimated number of age and income qualified households (b) 8,293 10,668 Gross Market Penetration Rate (a/b) 8.4% 9.4% Source: Claritas, Management Notes:

Provided by Management, based upon depositor information as of March 26, 2018.

MARKETING OF THE COMMUNITY

The success of The Village is dependent on the Corporation’s ability to achieve sales targets and manage turnover. The process began with communication to the market about The Village by holding various introductory meetings with groups of seniors and other advertising techniques designed to have an impact in the Corporation’s market.

The Corporation employed a wide variety of marketing tactics to generate interest in the Community. Activities included:

Direct mail; Survey: Paid search; Marketing automation; Drone photography and videos with full 360-degree animation of the community; Community awareness and public relations; Print media; Digital marketing; Educational and social events; and Creation of a priority depositor group called the Key Club.

C-51 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Prior to efforts related to signing up depositors and collecting deposits, the Corporation developed a list of priority prospective residents. Initially, 495 individuals and couples paid a $100 refundable deposit to join the Key Club for Stage 1. To promote The Village and obtain commitments from prospective residents, the Corporation created a category of depositors called Pioneer Members. For executing a Reservation Agreement and making the required deposit for Stage 1 prior to January 1, 2017, Pioneer Members receive certain benefits, including: a 5% discount on the Entrance Fee from standard pricing and no second person entrance fee; fixed MSF through June 30, 2020, and a permanent $100 discount on second person MSF; interest earned on entrance fee escrow accounts until the independent living apartment is ready for occupancy, guaranteed occupancy; irrespective of health status changes so long as the Village is open; certain customization of the selected independent living apartment; and a complimentary underground parking spot. Certain other benefits exist and conditions apply, including that move-in must occur within 60 days of the unit becoming available.

Management ultimately achieved a 98% depositor reservation percentage for Stage 1 prior to financing, which was a very significant step toward Project success. As of March 16, 2017, 141 depositors had reserved 141 residences at The Village.

Table 24 Stage 1 Independent Living Sales Cumulative Net Independent Transfers to Cumulative Month Cancellations Independent Living Sales Stage 2 Sales Living Sales 16-Jul 5 0 0 5 3.47% 16-Aug 60 0 0 65 45.14% 16-Sep 43 0 0 108 75.00% 16-Oct 13 1 0 120 83.33% 16-Nov 10 1 0 129 89.58% 16-Dec 4 0 0 133 92.36% 17-Jan 5 0 0 138 95.83% 17-Feb 3 0 0 141 97.92% 17-Mar 1 0 0 142 98.61% 17-Apr 1 1 0 142 98.61% 17-May 3 3 0 142 98.61% 17-Jun 0 4 0 138 95.83% 17-Jul 1 3 0 136 94.44% 17-Aug 2 1 0 137 95.14% 17-Sep 2 1 0 138 95.83% 17-Oct 5 4 0 139 96.53% 17-Nov 2 4 0 137 95.14% 17-Dec 2 0 0 139 96.53% 18-Jan 2 4 0 137 95.14% 18-Feb 3 5 23 112 77.78% 18-Mar 9 1 0 120 83.33% 176 33 23 120 83.33% Source: Management; reflective of sales through March 28, 2018

C-52 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Stage 1 depositors were given an opportunity to change their unit to Stage 2.

Table 25 Stage 2 Independent Living Sales Cumulative Net Independent Transfers from Cumulative Month Cancellations Independent Living Sales Stage 1 Sales Living Sales 18-Feb 0 0 23 23 43% 18-Mar 17 0 0 40 74% 17 0 23 40 74% Source: Management; reflective of sales through March 28, 2018.

Independent Depositor Confirmation

An independent confirmation process was performed by Moss Adams LLP through a survey conducted by United States mail, a web-based survey, and phone calls to the depositors as well as tracing of deposit amounts to Mary’s Woods bank accounts. For Stage 1, as of March 16, 2017, 141 depositors had signed Reservation Agreements and had been sent the survey. 141 deposits had been verified and 136 depositors responded to the survey.

For Stage 2, Stage 1 depositors were reconfirmed by analysis of subsequent deposits for customization of units and follow-up calls made to a randomly selected sample of 13 depositors who had not purchased upgrades. Of the 13, three were no longer active depositors, eight responded to the survey questions, and two had not been reached by the time of publication. Telephone surveys were conducted wherein depositors were asked to confirm their continued intent to move into their selected apartment when it became available, to confirm their apartment and to confirm their age. All 8 confirmed the requested information and their intent to occupy their apartment. Further, all new depositors were also surveyed via telephone.

The following information was compiled from the surveys:

Mary’s Woods Management has secured signed agreements from all 160 depositors. Ten percent down payments have been verified as deposited into Mary’s Woods bank accounts. According to Management, 86 of the depositors are 75 years of age or older. Residents intend to move into The Village within 60 days of receiving advance notice of availability.

Primary Reasons for Choosing Mary’s Woods

Depositors were asked to identify the level of importance the criteria in the following table had on their decision to choose The Village. Answers quantified on a five-point scale with “not important” being 1 and “very important” being 5. Table 26 represents the weighted averages from the survey responses.

C-53 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 26 Reasons for Choosing The Village Category Level of Importance The services and amenities offered 4.51 Location (close to family, geographic location) 4.32 Aesthetics 4.20 Access to clinical services 4.09 Access to outside services (restaurants, shopping) 3.79 Cost 3.74 Source: Moss Adams LLP Depositor Survey; Scale of 0-5

Other questions requested that depositors consider other important factors. Table 27 provides responses to other key questions intended to provide an understanding of depositor intent as it relates to their upcoming move to The Village. The response summaries consolidate previous survey responses with those obtained from new depositors. Table27 OtherKeySurveyResponses DoyouintendtoresideatTheVillage HowdoyouexpecttopaythebalanceofyourEntrance atMary'sWoods? FeeuponmovingintoTheVillageatMary'sWoods? Yes 132 91.7% Saleofhome 66 45.6% Undecided 8 5.6% Cash 46 31.6% No 1 0.7% Savings/Investments 19 13.2% Unanswered 3 2.1% Other 3 2.2% Unanswered 11 7.4% TotalResponses 144 100.0% TotalResponses 144 100.0% Howwouldyoudescribeyourand,if applicable,yourspouseorother HowdidyouhearaboutTheVillageatMary'sWoods? occupantscurrenthealthstatus? Good 69 47.9% WordofMouth(friends,family) 80 55.6% Excellent 33 22.9% Other 41 28.5% VeryGood 29 20.1% Newspaperorprintadvertisement 15 10.4% Fair 6 4.2% Digitaladvertisement 4 2.8% Unanswered 7 4.9% ProfessionalAdviser 2 1.4% Unanswered 2 1.4% TotalResponses 144 100.0% TotalResponses 144 100.0% Responses as of March 28,2018 from both Stage1 and Stage 2 Depositors are included here.

C-54 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 28 illustrates the inventory of independent living apartments in The Village as well as the number of apartments sold by plan type. The Corporation offers three types of plans that each offer varying degrees of refunds. Plan 1 offers an 80% refund, Plan 2 offers a 50% refund, and Plan 3 offers a 0% refund. Plan 2 also provides a 20% discount on MSFs.

Table28

InventoryoftheVillageUnits

%of #of #of Plan Plan Plan Available UnitName UnitType SquareFootage Available Units 1 2 3 Units Units Sold Sold Sold Sold Sold

Stage1:

Deschutes 1Bedroom 823909 24 20 15 4 1 83.3%

McKenzie 1Bedroomw/Den 10551,110 54 40 33 4 3 74.1%

Willamette 2Bedroom 1,2251,254 38 32 29 3 0 84.2%

2Bedroomw/Denor Columbia 1,4101,441 28 28 27 1 0 GreatRoom 100.0%

TotalStage1 144 120 104 12 4 83.3%

Stage2:

Deschutes 1Bedroom 823844 12 4 4 0 0 33.3%

McKenzie 1Bedroomw/Den 10551,092 18 13 13 0 0 72.2%

Willamette 2Bedroom 1,225 12 11 11 0 0 91.7%

2Bedroomw/Denor Columbia 1,423 12 12 12 0 0 GreatRoom 100.0%

TotalStage2 54 40 40 0 0 74.1%

GrandTotal 198 160 144 12 4 80.8%

C-55 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting – The financial forecast includes only the Corporation and has been prepared on the accrual basis of accounting based on accounting standards in effect as of the date of this report. Forecasted periods do not include the adoption of any accounting standards that are not in effect as of the date of this report.

Cash – Cash consists of petty cash and cash in demand bank accounts.

Investments Limited as to Use and Investment Income – Investments limited as to use are set aside by the Board and are assumed to be carried at fair value, which, based on the nature of the underlying securities or other investments, is assumed to approximate historical cost. Investment income or loss is assumed to be included in operating income. Management assumes no material changes in fair values that result in material net realized or unrealized gains or losses during the forecast period and considers all investments to be other-than-trading securities.

Property, Plant, and Equipment – Property, plant, and equipment are stated at cost. Assets are depreciated over their estimated useful lives using the straight-line method. The cost of maintenance and repairs is charged to operations as incurred, whereas significant renewals and betterments are capitalized.

Prepaid Land Lease – All up-front payments made under the Ground Lease are amortized on the straight- line basis over the term of the lease.

Deferred Marketing Costs – Deferred marketing costs consist of direct mailing and promotional costs for the expansion of the existing facilities. These costs are being amortized over the estimated life of the resident, which is eleven years.

Deposits Held in Trust – Deposits held in trust represent the initial Entrance Fee deposits received related to the expanded business prior to its opening.

Deferred Financing Costs – Fees associated with obtaining long-term financing are amortized over the term of the related loans using the effective interest method. Deferred financing costs are included with long-term debt in the accompanying forecasted statements of financial position.

Deficiency of Revenues Over Expenses – The forecasted statements of activities include deficiency of revenues over expenses. Changes in unrestricted net assets, which are excluded from deficiency of revenues over expenses consistent with industry practice, include unrealized gains and losses on investments in other-than-trading securities. Activities included in deficiency of revenues over expenses represent both operating and nonoperating activities.

Deferred Revenue – Entrance Fees paid by a resident upon entering into a Residency and Care Agreement are recorded as deferred revenue. The nonrefundable portion of Entrance Fees is amortized to revenue using the straight-line method over the estimated remaining life expectancy of the resident. Furthermore, the unamortized deferred revenue from the nonrefundable Entrance Fees is recorded as revenue upon a resident’s death or termination of agreement. The refundable Entrance Fees are amortized to revenue using the straight-line method over the remaining useful life of the building. Amortization of deferred revenue is reported as earned Entrance Fees revenue in the accompanying forecasted statements of activities.

C-56 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Revenue Recognition – Resident services revenue is recognized when services are rendered. It consists of resident fees for basic housing and support services and fees associated with additional services, such as routine healthcare and personalized assistance on a fee-for-service basis. The collectability of accounts receivable is assessed periodically and a provision for doubtful accounts is recorded as considered necessary.

Obligation to Provide Future Services – Annually, the Corporation calculates the present value of the net cost in excess of service revenues of future services and the use of facilities to be provided to current residents and compares that amount to the balance of deferred revenue from advance fees. If the present value of the net cost of future services and the use of facilities exceeds the deferred revenue from advance fees, a liability is recorded (obligation to provide future services and use of facilities) with the corresponding charge to expense. Management has not forecasted an obligation to provide future services to residents as of June 30, 2018, 2019, 2020, 2021, or 2022 based upon estimates provided by the Corporation’s independent consulting actuary.

Income Taxes – The Internal Revenue Service has recognized Mary’s Woods as exempt from federal income taxes under Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3), except to the extent of unrelated business income tax under Sections 511-515. There is no unrelated business income, therefore, no provisions for income taxes has been made in the forecasted financial statements.

Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires that Management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

MANAGEMENT’S BASIS FOR FORECAST OF REVENUES AND ENTRANCE FEES

Mary’s Woods operates as a multi-level community as residents occupy independent living units, assisted living units, or nursing beds. Forecasted earned Entrance Fees and resident services revenue from the existing facilities are based upon Management’s historical experience operating the existing facilities and its plans for operating the existing Community during the forecast period. Forecasted earned Entrance Fees and resident service revenue for the expanded Community is based upon Management’s pricing and future move-in assumptions. The nonrefundable portion of Entrance Fees is earned over the remaining estimated life of the resident or immediately earned upon turnover due to cancelation or death. The refundable portion of Entrance Fees is recognized based upon the estimated remaining life of the building. The forecasted amount of both existing and expanded business earned Entrance Fees were based on the actuarially determined resident life expectancy and turnover, which was provided by Milliman (“Independent Consulting Actuary”). Entrance Fee receipts and refunds are forecasted based upon information provided by management and the Corporation’s Independent Consulting Actuary.

Resident service revenue is primarily generated from residents’ MSF for basic housing and support services and fees associated with additional routine healthcare and personalized assistance. Monthly Service Fees and additional routine healthcare and personalized assistance fees are based on current pricing and are assumed to increase by 3% annually beginning in 2019.

No rental income is assumed for service and amenity buildings.

C-57 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 29 The Village Stage 1 Forecasted Entrance Fees & Monthly Service Fees Plan 1 (80% Refundable) In 2019 Dollars for Fiscal Years Ending June 30, 2019 and 2020 Square Average Entrance Monthly Service Unit Type Footage Unit Mix Fee (A) Fee (A)

Deschutes Units Standard - One Bedroom 823 sq ft 18 $360,789 $ 3,495 Option 2 - One Bedroom 909 sq ft 6 385,233 3,545 McKenzie Units Standard - One Bedroom 1,055 sq ft 30 461,233 3,895 Option 4 - One Bedroom 1,110 sq ft 18 491,622 3,995 Option 5 - One Bedroom 1,110 sq ft 6 476,900 3,995 Willamette Units Standard - Two Bedroom 1,225 sq ft 20 530,650 4,575 Option 1 - Two Bedroom 1,243 sq ft 6 545,233 4,575 Option 2 - Two Bedroom 1,225 sq ft 6 535,233 4,575 Option 3 - Two Bedroom 1,254 sq ft 6 525,233 4,575 Columbia Units Standard - Two Bedroom 1,423 sq ft 14 612,971 4,995 Option 1 - Two Bedroom 1,423 sq ft 2 596,900 4,995 Option 2 - Two Bedroom 1,410 sq ft 6 607,733 4,995 Option 3 - Two Bedroom 1,440 sq ft 6 620,233 4,995 All Independent Living Second Person Fee n/a - 750 Assisted Living Standard - One Bedroom 360 sq ft 17 - 6,500 Deluxe - One Bedroom 520 sq ft 31 - 7,500

Source: Management

Notes:

(A) Entrance Fees and Monthly Service Fees are stated at Pioneer rates. Pioneer residents receive a discount on standard pricing. Non-Pioneer members are subject to the prevailing rates in effect at the time of their residency.

C-58 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 30 The Village Stage 2 Forecasted Entrance Fees & Monthly Service Fees Plan 1 (80% Refundable) In 2020 Dollars for Fiscal Years Ending June 30, 2020 Square Average Entrance Monthly Service Unit Type Footage Unit Mix Fee (A) Fee (A)

Deschutes Units Standard - One Bedroom 823 sq ft 9 $ 411,678 $ 3,495 Option 1 - One Bedroom 844 sq ft 3 410,567 3,495 McKenzie Units Standard - One Bedroom 1,055 sq ft 3 522,900 3,895 Option 1 - One Bedroom 1,091 sq ft 3 525,567 3,895 Option 2 - One Bedroom 1,071 sq ft 3 523,567 3,895 Option 3 - One Bedroom 1,092 sq ft 9 530,011 3,895 Willamette Units Standard - Two Bedroom 1,225 sq ft 12 585,983 4,575 Columbia Units Standard - Two Bedroom 1,423 sq ft 12 679,400 4,995

Source: Management

Table 31 The Village Forecasted Average Monthly Service Fees for Fiscal Year Ending June 30, 2020 Number of Units Plan Type Stage 1 Stage 2 Discount Average Fee Independent Living Apartments Plan 1 114 45 0% $ 4,229 Plan 2 20 6 20% 3,385 Plan 3 10 3 0% 4,231

Second Person Fee 0% 750

Assisted Living Apartments Standard 17 - 0% 6,500 Deluxe 31 - 0% 7,500

Source: Management

C-59 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 32 Forecasted Entrance Fee Receipts and Refunds For the Years Ending June 30, (In Thousands)

Entrance Fees Received from Initial Cohort 2018 2019 2020 2021 2022

The Village Initial Entrance Fees (A) $ - $ 33,126 $ 40,029 22,153$ $ - The Village Independent Living Turnover Assumption (B) Entrance Fees Received from Attrition - 725 3,301 5,326 6,069 Entrance Fees Refunded from Attrition - (436) (2,017) (2,918) (3,039) Net Entrance Fees $ - $ 33,415 $ 41,313 24,561$ $ 3,030

Existing Independent Living Turnover Assumption: (C) Entrance Fees Received from Attrition $ 12,256 $ 13,598 $ 14,641 $ 14,858 $ 15,234 Entrance Fees Refunded from Attrition (7,153) (7,598) (7,866) (8,158) (8,463) Net Entrance Fees from Attrition $ 5,103 $ 6,000 $ 6,775 $ 6,700 $ 6,771

Source: Management

Notes:

(A) Entrance Fees received from initial residents of The Village are based upon the weighted average Entrance Fees shown in tables 2 and 3. Management has forecast the weighted average entrance fee for first generation residents will not be inflated during the forecast period.

(B) Entrance Fees received from attrition are based upon the weighted average Entrance Fees shown in tables 2 and 3 and inflated per Management’s pricing assumptions. All Entrance Fees are inflated by 3% per annum subsequent to the first year during the forecast period.

(C) Entrance Fees received from the existing independent living units were based on actuarial population flow and analysis performed by the Corporation’s Independent Consulting Actuary. For 2018, Management utilized the actuarial analysis prepared in 2017. The forecasted net entrance fees from attrition for 2018 are consistent with the year-to-date experience of the Corporation. For 2019-2022, Management utilized an actuarial analysis prepared in 2018, which includes several updated actuarial inputs and assumptions from the 2017 actuarial analysis.

Move-in Schedule - Management anticipates that the existing independent living units will experience a 45% double occupancy and the existing assisted living apartments will experience a 5% double occupancy based on historical experience. The Village is forecast to experience a 65% double occupancy for the initial cohort and a 50% double occupancy for the replacement cohort. The Village independent living apartments are assumed to achieve stabilized occupancy of 95%, which is assumed to occur in April of 2021 for both Stage 1 and Stage 2. The Village assisted living apartments, which are all within Stage 1, are assumed to achieve stabilized occupancy of 93% in February of 2021. Residents are assumed to begin moving into The Village independent living and assisted living units according to the following table:

C-60 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 33 The Village Independent Living Move-In Schedule Fiscal Year Ending June 30,

Independent Living Cumulative Move-Ins Aggregate Occupancy Year Stage 1 Stage 2 Occupied Units Percentage

2018 - - 270.0 95.4% 2019 67.0 - 337.0 78.9% 2020 46.0 32.0 415.0 86.3% 2021 23.8 19.3 458.1 95.2% 136.8 51.3

Source: Management

Table 34 The Village Assisted Living Move-In Schedule Fiscal Year Ending June 30,

Cumulative Assisted Living Aggregate Occupancy Year Move-Ins Occupied Units Percentage

2017 - 74.5 95.5% 2018 - 74.5 95.5% 2019 - 74.5 95.5% 2020 31.0 105.5 83.7% 2021 13.6 119.1 94.5% 44.6

Source: Management

C-61 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 35 The Village Independent Living Forecasted Monthly Move-In Schedule Independent Living Cumulative Move-Ins Cumulative Occupancy Month/Fiscal Year Stage 1 Stage 2 Occupied Units Percentage Fiscal Year Ending June 30, 2019 November 2018 10.0 - 10.0 5.1% December 2018 9.0 - 19.0 9.6% January 2019 9.0 - 28.0 14.1% February 2019 9.0 - 37.0 18.7% March 2019 9.0 - 46.0 23.2% April 2019 8.0 - 54.0 27.3% May 2019 7.0 - 61.0 30.8% June 2019 6.0 - 67.0 33.8% Fiscal Year Ending June 30, 2020 July 2019 5.0 - 72.0 36.4% August 2019 5.0 - 77.0 38.9% September 2019 5.0 - 82.0 41.4% October 2019 4.0 - 86.0 43.4% November 2019 4.0 4.0 94.0 47.5% December 2019 4.0 6.0 104.0 52.5% January 2020 4.0 5.0 113.0 57.1% February 2020 3.0 5.0 121.0 61.1% March 2020 3.0 4.0 128.0 64.6% April 2020 3.0 3.0 134.0 67.7% May 2020 3.0 3.0 140.0 70.7% June 2020 3.0 2.0 145.0 73.2% Fiscal Year Ending June 30, 2021 July 2020 3.0 2.0 150.0 75.8% August 2020 3.0 2.0 155.0 78.3% September 2020 3.0 2.0 160.0 80.8% October 2020 3.0 2.0 165.0 83.3% November 2020 3.0 2.0 170.0 85.9% December 2020 2.0 2.0 174.0 87.9% January 2021 2.0 2.0 178.0 89.9% February 2021 2.0 2.0 182.0 91.9% March 2021 2.0 2.0 186.0 93.9% April 2021 0.8 1.3 188.1 95.0% 136.8 51.3 Source: Management

C-62 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Table 36 The Village Assisted Living Forecasted Monthly Move-In Schedule Cumulative Assisted Living Cumulative Occupancy Year Net Move-Ins Occupied Units Percentage Fiscal Year Ending June 30, 2020 July 2019 3.0 3.0 6.3% August 2019 3.0 6.0 12.5% September 2019 3.0 9.0 18.8% October 2019 3.0 12.0 25.0% November 2019 3.0 15.0 31.3% December 2019 3.0 18.0 37.5% January 2020 3.0 21.0 43.8% February 2020 2.0 23.0 47.9% March 2020 2.0 25.0 52.1% April 2020 2.0 27.0 56.3% May 2020 2.0 29.0 60.4% June 2020 2.0 31.0 64.6% Fiscal Year Ending June 30, 2021 July 2020 2.0 33.0 68.8% August 2020 2.0 35.0 72.9% September 2020 2.0 37.0 77.1% October 2020 2.0 39.0 81.3% November 2020 2.0 41.0 85.4% December 2020 2.0 43.0 89.6% January 2021 1.0 44.0 91.7% February 2021 0.6 44.6 93.0%

44.6 Source: Management

C-63 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The table below summarizes Management’s occupancy estimate for the existing units for the forecast period.

Table 37 Existing Forecasted Average Occupancy For the Fiscal Years Ending June 30, 2018 through 2022 Location

Apartments and Villas Available Units 283 Occupancy Percentage 95.4% Occupied Units 270 Villa Maria - Nursing Available Units 31 Occupancy Percentage 95.5% Occupied Units 30 Friendship Place - Assisted Living Available Units 55 Occupancy Percentage 95.5% Occupied Units 53 Caritas House - Memory Support Available Units 23 Occupancy Percentage 95.5% Occupied Units 22

Source: Management

Investment Income

Management assumes an average annual rate of return of 3.00% on investments, 2.25% on funds deposited for the Project (the “Project Fund”), 2.25% on the capitalized interest fund, and 2.25% on the debt service reserve fund. Interest earned prior to the Project being ready to be placed into service on the Project Fund, capitalized interest fund, and debt service reserve fund have been capitalized against interest expense through that date.

SUMMARY OF EXPENSE ASSUMPTIONS

Expenses from Existing Operations – Operating expenses for existing operations of Mary’s Woods, with the exception of interest, depreciation, and amortization, are estimated by Management based on historical year-to-date performance for 2018. These expenses are estimated to increase 3.0% annually through the forecast period.

C-64 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Expenses Related to the Project – With respect to both Stage 1 and Stage 2 of the Project, personnel expenses are estimated by Management based on experience with its existing independent living, assisted living, and healthcare business. Staff salaries and benefits are estimated based on prevailing local salary and wage rates. This includes consideration of the minimum wage of $15 per hour, which began on July 1, 2017. The costs of employee benefits are assumed to approximate 28.8% of salaries and wages. These expenses are estimated to increase 3.0% annually through the forecast period.

The following table summarizes the assumed additional staffing by department related to the Expansion.

Table 38 Schedule of Existing and Forecasted Full-Time-Equivalent Employees For the Fiscal Year Ending June 30, 2022 Stage 1 Additional Stage 2 Additional Department Existing FTEs FTEs FTEs

Administration 12.20 4.30 - Information Technology 2.75 0.50 - Marketing 7.00 1.00 - Human Resources 3.00 - - Spiritual Care 2.80 0.50 - Wellness 2.80 4.00 - Environmental Services 41.00 14.96 3.45 Resident Services 8.90 2.60 - Food & Beverage Services 58.03 27.05 4.41 Nursing Services 76.50 31.70 - Home Care Services 41.00 - - Clinic 3.20 - - Total FTEs 259.18 86.61 7.86

Source: Management

Administration – Management has forecasted nonsalary costs of administration to include legal and professional fees, office supplies, contract services, telephone service, and travel and education. Management anticipates these costs to increase 3.0% per annum throughout the forecast period.

Information Technology – Management has forecasted information technology expenses based upon its historical experience operating the existing facilities and its operating budget. Nonsalary related costs within information technology include Management’s estimate of contract services, software licensing, equipment, supplies, travel and education. Management has forecasted these costs based upon historical experience and has included and estimated annual inflationary increase of 3.0% beginning in 2019, one year subsequent to the base year.

Fundraising – Management has forecasted nonsalary fundraising expenses to include contract services, meals and entertainment, equipment, office supplies, licenses, travel, and education. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

C-65 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Marketing – Management has forecasted nonsalary marketing expenses to include printing, media production, materials, advertising, meals and entertainment, equipment, office supplies, and other miscellaneous costs associated with marketing. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Human Resources – Management has forecasted nonsalary human resource expenses to include hiring, meals and entertainment, educational seminars, contract services, office supplies, and other miscellaneous costs associated with human resources. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Spiritual Care – Management has forecasted nonsalary spiritual care expenses to include resident faith groups, meals and entertainment, office supplies, travel, gifts, contract services and other miscellaneous costs associated with spiritual care. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Wellness – Management has forecasted nonsalary wellness expenses to include contract services, office supplies, repair and maintenance, resident activities, travel, and other miscellaneous costs associated with wellness. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Environmental Services – Management has forecasted nonsalary environmental services expenses to include contract services, renovation, repairs, maintenance, supplies, housekeeping supplies, grounds maintenance supplies, and other miscellaneous costs associated with building maintenance, grounds maintenance and housekeeping. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Resident Services – Management has forecasted nonsalary resident services expense to include contract services, resident tours, vehicle leases, vehicle maintenance, fuel, supplies, and other miscellaneous costs associated with resident services. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Dining Services – Management has forecasted nonsalary dining services expense to include raw food, cleaning supplies, linens, tableware, contract services, and other miscellaneous costs associated with dining services. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Nursing Services – Management has forecasted nonsalary nursing services expense to include contract services, physical therapy, speech therapy, medical supplies, dietary supplies, licenses, and other miscellaneous costs associated with nursing services. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

C-66 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Home Care Services – Management has forecasted nonsalary home care services expense to include contract services, equipment, software, medical record supplies, licenses, marketing, and other miscellaneous costs associated with home care services. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Clinic – Management has forecasted nonsalary clinic expense to include contract services, equipment, software, supplies, licenses, uniforms, and other miscellaneous costs associated with clinic services. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Facility Costs – Management has forecasted nonsalary facility costs to include contract services, SNJM sponsorship fee, employee payroll taxes and benefits, contract services, postage, telecommunications, property taxes, utilities, cable, insurance, and other miscellaneous expenses associated with facility costs. These costs are based upon historical experience and are anticipated to increase 3.0% annually throughout the forecast period.

Medicare Bed Tax – Management has forecasted nonsalary Medicare bed tax based upon historical experience and anticipates the expense to increase 3.0% annually throughout the forecast period.

Long-Term Debt and Interest Expense – As of June 30, 2017, the Corporation had a long-term debt balance of approximately $175,705,000. This balance consisted of $175,065,000 of Series 2017 Bonds at par value, and $4,157,000 of unamortized original issue premium on the 2017 Bonds, and was offset by $3,517,000 of unamortized debt issuance costs.

Series 2017 Bonds

The Series 2017 Bonds were issued in April 2017, the proceeds of which were lent to the Corporation to pay for the construction and other project-related costs of Stage 1 of the Project. At the time of issuance, the Series 2017 Bonds consisted of:

$114,815,000 (at a premium of $4,189,000) of BB rated, tax-exempt, fixed rate, long-term bonds (Series 2017A) $33,750,000 of BB rated, tax-exempt, fixed rate, principal reduction bonds (Series 2017B-3); $15,000,000 of BB rated, tax-exempt, fixed rate, principal reduction bonds (Series 2017B-2); $11,500,000 of BB rated, tax-exempt, fixed rate, principal reduction bonds (Series 2017B-1);

The Series 2017A Bonds were issued with a coupon rate ranging from of 5.000 to 5.250 percent per annum. Semiannual interest payments are made May 15 and November 15 of each year. Principal payments are payable annually on May 15 of each year beginning on May 15, 2018, with final maturity on May 15, 2052.

The Series 2017B-3 Bonds were issued with a coupon rate of 3.000 percent per annum. Semiannual interest payments are made May 15 and November 15 of each year. Principal on the Series 2017B-3 Bonds are scheduled to be paid in full by December 1, 2019.

The Series 2017B-2 Bonds were issued with a coupon rate of 3.500 percent per annum. Semiannual interest payments are made May 15 and November 15 of each year. Principal on the Series 2017B-2 Bonds are scheduled to be paid in full by June 1, 2020.

C-67 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The Series 2017B-1 Bonds were issued with a coupon rate of 3.950 percent per annum. Semiannual interest payments are made May 15 and November 15 of each year. Principal on the Series 2017B-1 Bonds is scheduled to be paid in full by March 1, 2021.

Series 2018 Bonds

The Hospital Facility Authority intends to issue the Series 2018 Bonds, the proceeds of which are to be lent to the Corporation to pay for the construction and other project-related costs of Stage 2 of the Project. The Series 2018 Bonds are assumed to consist of:

$16,305,000 (at a premium of $673,543) of BB rated, tax-exempt, fixed rate, long-term bonds (Series 2018A) $1,100,000 of BB rated, taxable, fixed rate, principal reduction bonds (Series 2018C); $13,000,000 of BB rated, tax-exempt, fixed rate, principal reduction bonds (Series 2017B-3); $6,250,000 of BB rated, tax-exempt, fixed rate, principal reduction bonds (Series 2017B-2); and $4,750,000 of BB rated, tax-exempt, fixed rate, principal reduction bonds (Series 2017B-1)

The Series 2018A Bonds are assumed to be issued with a coupon of 5.000 percent per annum. Interest payments on the Series 2018A Bonds are assumed to be payable semi-annually beginning on November 15, 2018. Principal payments on the Series 2018A Bonds are assumed to be payable annually on May 15 of each year beginning on May 15, 2023, with final maturity on May 15, 2052.

The Series 2018C Bonds are assumed to be issued with a coupon rate of 3.500 percent per annum. Interest payments on the Series 2018C Bonds are assumed to be payable semi-annually beginning on November 15, 2018. Principal on the Series 2017C Bonds are anticipated to be paid in full by April 1, 2020.

The Series 2018B-3 Bonds are assumed to be issued with a coupon rate of 3.000 percent per annum. Interest payments on the Series 2018B-3 Bonds are assumed to be payable semi-annually beginning on November 15, 2018. Principal on the Series 2018B-3 Bonds are anticipated to be paid in full by October 1, 2020.

The Series 2018B-2 Bonds are assumed to be issued with a coupon rate of 3.250 percent per annum. Interest payments on the Series 2018B-2 Bonds are assumed to be payable semi-annually beginning on November 15, 2018. Principal on the Series 2018B-2 Bonds are anticipated to be paid in full by January 1, 2021.

The Series 2018B-1 Bonds are assumed to be issued with a coupon rate of 3.500 percent per annum. Interest payments on the Series 2018B-1 Bonds are assumed to be payable semi-annually beginning on November 15, 2018. Principal on the Series 20178-1 Bonds are anticipated to be paid in full by July 1, 2021.

C-68 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

The following table presents the assumed annual debt service during the forecast period and thereafter:

Table 39 Schedule of Annual Debt Service (In Thousands) Years 2018B and 2018C Series Ending 2017A Series Bonds 2017B Series Bonds 2018A Series Bonds Bonds Total Debt June 30, Principal Interest Principal Interest Principal Interest Principal Interest Service 2018 $ 325 $ 6,267 $ - $ 2,091 $ - -$ -$ -$ $ 8,683 2019 440 5,952 20,215 1,950 - 842 - 805 30,204 2020 465 5,930 30,435 1,010 - 815 4,760 799 44,214 2021 485 5,907 9,600 177 - 815 19,235 298 36,517 2022 1,260 5,883 - - - 815 1,105 5 9,068 Thereafter 111,840 112,171 - - 16,305 15,508 - - 255,823

Total$ 114,815 142,110$ $ 60,250 $ 5,228 $ 16,305 18,795$ $ 25,100 $ 1,907 $ 384,509

Source: Management

Property, Plant, and Equipment and Depreciation Expense – Management assumes the Corporation will incur costs associated with routine capital additions during the forecast period, in addition to the expanded business, that are anticipated to be capitalized as property, plant, and equipment. Depreciation expense is computed based on the straight-line method over the estimated useful lives of the related assets. The Corporation’s property, plant, and equipment, net of accumulated depreciation during the forecast period, are summarized below:

Table 40 Schedule of Property, Plant, and Equipment (In Thousands) 2018 2019 2020 2021 2022 Property, plant, and equipment, net beginning balance $ 80,090 $ 158,824 $ 214,724 $ 219,603 $ 214,845

Additions Project costs - Stage 1 66,377 27,336 393 100 - Project costs - Stage 2 8,489 25,004 5,062 104 - Capitalized interest and amortization 5,262 5,719 3,232 720 - Routine capital additions 2,387 2,476 2,599 2,720 2,831

Total additions 82,515 60,535 11,286 3,644 2,831

Depreciation expense (3,781) (4,635) (6,407) (8,402) (9,225)

Property, plant, and equipment, net ending balance $ 158,824 $ 214,724 $ 219,603 $ 214,845 $ 208,451

Source: Management

Transfer to affiliate for Vision Fund (nonoperating expense) – Management has forecasted a 2019 transfer of $1,000,000 to the Vision Fund, a separate limited liability company to be established to support future strategic growth opportunities.

C-69 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

LEASE PAYMENT TERMS

Under an operating lease agreement Mary’s Woods leased 24 acres of land from the Society of the Sisters of the Holy Names of Jesus and Mary for an original term of 35 years. Mary’s Woods had the right to extend the term for three successive 10-year periods and executed one of these terms. During 2017, Mary’s Woods negotiated a renewal of the existing ground lease with a new term of 50 years with two successive 10-year periods, which are at Mary’s Woods discretion. Mary’s Woods paid an initial base rent of $1,500,000 on September 1, 1999, of which $14,714 is assumed to be recognized each year as amortization expense. In addition, Mary’s Woods pays annual base rent of $75,000 in equal monthly installments. Additional Rent is included in the forecast at a rate of $199.79, adjusted for inflation, per month for each independent living unit, assisted living unit, and skilled nursing unit in the facility.

Table 41 Existing Ground Lease Assumptions (In Thousands) 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Base Rent Paid $ 75 $ 75 75$ $ 75 75$ $ 75 75$ $ 75 $ 75 75$ $ 75 $ 75 Additional Rent 940 968 997 1,027 1,058 1,089 1,122 1,156 1,191 1,226 1,263 1,301 Total Rent Paid $ 1,015 $ 1,043 $ 1,072 $ 1,102 $ 1,133 $ 1,164 $ 1,197 $ 1,231 $ 1,266 $ 1,301 $ 1,338 $ 1,376 Source: Management

Original Ground Lease Terms:

Base Rent Fee

$37,500 semiannually

Additional Rent Fee

$199.79 per unit; inflates annually based upon CPI; assumed to be 3% for the forecast 392 total independent living and Health Center units

Conditions for Payment

Payment of additional rent occurs 31 days after the fiscal year end upon the occurrence of achieving each of the following financial tests after having given effect of the payment of the accrued additional rent:

a. Debt service coverage ratio is equal to or greater than 1.35; and

b. Days cash on hand is equal to or greater than 250 days.

C-70 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Village Ground Lease – Management has forecasted a base rent of $75,000 for Stage 1 and $25,000 for Stage 2 paired with an estimated variable expense component that is based on the average number of expanded available units. Management paid an upfront prepaid land lease payment for Stage 1 of $750,000 in 2017 using Series 2017 Bond proceeds, which is assumed to be amortized over the life of the lease in annual amounts of $15,000. Management also anticipates incurring an upfront prepaid land lease payment of $250,000 for Stage 2, which will be funded from Series 2018 Bond proceeds and amortized over the life of the lease in annual amounts of $6,420.

Table 42 Village Ground Lease Assumptions (In Thousands) 2018 2019 2020 2021 2022 2022 (A) 2024 2025 2026 2027 2028 2029 Annual Accrued Additional Rent $ - $ - $ - $ 172 655$ $ 671 $ 691 $ 712 $ 733 755$ $ 778 $ 802 Cumulative Accrued Additional Rent - - - 172 827 1,498 691 712 733 755 778 802 Initial Rent Payment 250 ------Base Rent Paid - 75 100 100 100 100 100 100 100 100 100 100 Additional Rent Paid on July 31st ------1,498 691 712 733 755 778 Total Rent Paid $ 250 $ 75 100$ $ 100 100$ $ 100 $ 1,598 $ 791 $ 812 833$ $ 855 $ 878 Source: Management

Notes:

(A) Represents Stable Year.

Village Ground Lease Terms – Stage 1

Initial Rent Payment

$750,000 paid on April 27, 2017 (Series 2017 finance closing)

Base Rent Fee

$37,500 semiannually Paid after Certificate of Occupancy for Independent Living (estimated November 2018)

Additional Rent Fee

$220 per unit; inflates annually at the greater of 3% or CPI; assumed to be 3% for the forecast 192 total independent living and assisted living apartments

Conditions for Accrual

85% occupancy (estimated September 2020) Repayment of temporary debt (estimated March 2021)

Conditions for Payment

Payment of accrued Additional Rent or Additional Rent occurs 31 days after the fiscal year end upon:

1. The completion of the first full fiscal year after the year in which the Expansion achieves stabilized occupancy, and

C-71 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

2. Achieving each of the following financial tests after having given effect of the payment of the accrued additional rent:

a. Debt service coverage ratio is equal to or greater than 1.35; and

b. Days cash on hand is equal to or greater than 250 days.

Village Ground Lease Terms – Stage 2

Initial Rent Payment

$250,000 paid on May 2, 2018 (Series 2018 finance closing)

Base Rent Fee

$12,500 semi-annually Paid after Certificate of Occupancy for Independent Living (estimated November 2018)

Additional Rent Fee

$220 per unit; inflates annually at the greater of 3% or CPI; assumed to be 3% for the forecast 54 total independent living apartments

Conditions for Accrual

85% occupancy (estimated November 2020) Repayment of temporary debt (estimated July 2021)

Conditions for Payment

Payment of accrued Additional Rent or Additional Rent occurs 31 days after the fiscal year end upon:

1. The completion of the first full fiscal year after the year in which the Expansion achieves stabilized occupancy, and

2. Achieving each of the following financial tests after having given effect of the payment of the accrued additional rent:

a. Debt service coverage ratio is equal to or greater than 1.35; and

b. Days cash on hand is equal to or greater than 250 days.

ASSETS LIMITED AS TO USE AND PROJECT-RELATED FUNDS

Assets Limited as to Use – Assets limited as to use represents amounts that the Corporation has designated for purposes other than current operations as follows:

C-72 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

Designated for capital improvements – represents amounts held for future investment in property, plant, and equipment.

Designated for debt service – represent amounts related to the collection of initial entrance fees on Stage 1 and Stage 2 of the Project, net of amounts expended on principal debt service for the entrance fee bonds, certain costs of the Project, and funding of initial operating deficits of the Project for 2018-2021. In 2022, all remaining net initial entrance fees were re-designated for capital improvements.

Restricted by donor intent – represents funds with a temporary restriction based on donor intent.

U.S. Bank National Association, as bond trustee (the “Bond Trustee”) maintains the following funds and accounts for the Series 2017 Bonds and Series 2018 Bonds under the terms of the respective Master Trust Indentures and the Indentures of Trust:

2017 Project Fund – Monies in the 2017 Project Fund were gross funded at closing from the Series 2017 Bonds proceeds and are paid to, or as directed by, the Corporation for payment of costs related to Stage 1 of the Project.

2017 Capitalized Interest Fund – Monies in the 2017 Capitalized Interest Fund were net funded from Series 2017 Bonds proceeds and are used to fund interest costs for 30 months. Moneys are transferred to the 2017 Bond Fund on or before each Interest Payment Date and applied to the payment of the interest becoming due and payable on the portion of the Series 2017 Bonds allocable to Stage 1 of the Project during its construction.

2017 Debt Service Reserve Fund – The 2017 Debt Service Reserve Fund is maintained by the Bond Trustee and shall be used solely to pay the principal and interest on the Series 2017 Bonds. On the final maturity date of the Series 2017 Bonds, the amount of deposit in the 2017 Debt Service Reserve Fund shall be used to pay the principal and interest on the Series 2017 Bonds.

2018 Project Fund – Monies in the 2018 Project Fund shall be gross funded at closing from the Series 2018 Bonds proceeds and paid to, or as directed by, the Corporation for payment of costs related to Stage 2 of the Project.

2018 Capitalized Interest Fund – Monies in the 2018 Capitalized Interest Fund are to be net funded from Series 2018 Bonds proceeds and are to be used to fund interest costs for 26 months. Moneys shall be transferred to the 2018 Bond Fund on or before each interest payment date and applied to the payment of the interest becoming due and payable on the portion of the Series 2018 Bonds allocable to Stage 2 of the Project during its construction.

2018 Debt Service Reserve Fund – The 2018 Debt Service Reserve Fund shall be maintained by the Bond Trustee and shall be used solely to pay the principal and interest on the Series 2018 Bonds. On the final maturity date of the Series 2018 Bonds, the amount in the 2018 Debt Service Reserve Fund shall be used on such final maturity date to pay the principal and interest on the Series 2018 Bonds.

C-73 See Examination Report of Independent Accountants. Mary’s Woods at Marylhurst Summary of Significant Forecast Assumptions and Accounting Policies

CURRENT ASSETS AND CURRENT LIABILITIES

Operating expenses exclude amortization, depreciation, other noncash expenses, and interest expense. Operating revenues include resident fees for basic housing, support services, and fees associated with additional routine healthcare and personalized assistance. Working capital components have been estimated based on industry standards and Management’s historical experience as follows:

Table 43 Working Capital Assumptions

Cash 30 days cash on hand Accounts receivable, net 27 days of revenue Prepaid expenses and other assets 6 days of operating expense Accounts payable 34 days of operating expense Accrued liabilities 26 days of accrued payroll balance

Source: Management

NET ASSETS

Unrestricted Net Assets – Unrestricted net assets for the forecast period are based on the results of the forecasted statements of operations.

Temporarily Restricted Net Assets – Temporarily restricted net assets represent those net assets subject to donor-imposed restrictions that will be satisfied by actions of the Corporation or the passage of time. The Corporation releases donor funds from restriction upon use of those funds for the designated purpose. Management has forecasted no change in temporarily restricted net assets during the forecast period.

C-74 See Examination Report of Independent Accountants. Report of Independent Accountants On Sensitivity Analyses

The Board of Directors Mary’s Woods at Marylhurst Lake Oswego, Oregon

Our examination of the financial forecast presented in the preceding section of this document was made for the purpose of forming an opinion on whether the financial forecast is presented in conformity with guidelines established by the American Institute of Certified Public Accountants for the presentation of a forecast and whether the underlying assumptions provide a reasonable basis for the forecast.

The accompanying sensitivity analyses are presented for purposes of additional analysis and are not a required part of the financial forecast. Such information has not been subjected to procedures applied in the examination of the financial forecast and, accordingly, we express no opinion or any other form of assurance on it. Furthermore, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date of this report.

San Francisco, California April 2, 2018

C-75 Mary’s Woods at Marylhurst Sensitivity Analyses

SENSITIVITY ANALYSIS I – OCCUPANCY

Occupancy rates can vary depending upon economic conditions, the competitive environment, and Management’s ability to execute the marketing and sales plan. Management’s projection is that 188.1 of the 198 independent living apartments, or 95.00 percent, and 44.6 of the 48 assisted living apartments at The Village, or 93.00 percent, will be filled upon stabilized occupancy.

Sensitivity Analysis IA

The data presented in the following table labeled as Sensitivity IB demonstrates the financial impact of a stabilized 79.80 percent occupancy of The Village or 158.0 of the 198 independent living apartments and a stabilized 79.17 percent occupancy or 38.0 of the 48 assisted living apartments.

Sensitivity Analysis IB

The data presented in the following table labeled as Sensitivity IC demonstrates the occupancy of The Village required to achieve a maximum annual debt service coverage ratio of 1.0, or 50.5 of the 198 independent living apartments and 12.2 of the 48 assisted living apartments.

Sensitivity Analysis I Estimated Financial Information For the Year Ending June 30, 2022 (In Thousands Except for Ratios) As Forecasted Sensitivity IA Sensitivity IB Independent Living Move-In Period (in Months) 30 26 4 Ending Occupancy Achieved April 2021 December 2020 February 2019 Occupancy at June 30, 2022 188.1 158.0 50.5 Average Move-Ins per Month 6.27 6.08 12.63 Assisted Living Move-In Period (in Months) 20 16 5 Ending Occupancy Achieved February 2021 October 2020 November 2019 Occupancy at June 30, 2022 44.6 38.0 12.2 Average Move-Ins per Month 2.23 2.38 2.44 Maximum Annual Debt Service Coverage Ratio (a) 2.24 1.98 1.00 (a) Days Cash on Hand 490 461 236

(a) Forpurposesofthesensitivityanalysis,occupancyandrelatedmonthlyservicefeeswere reducedwithoutacorrespondingadjustmenttoentrancefeesorexpenses.Theassumed schedulefortherepaymentofdebtremainedasoriginallyforecasted.

C-76 Mary’s Woods at Marylhurst Sensitivity Analyses

SENSITIVITY ANALYSIS II – FILL-UP

The period of time it takes to achieve and maintain stabilized occupancy could be longer than management has assumed in the accompanying financial forecast. The independent living apartments begin to fill in November 2018, when the units are available for occupancy, and are projected to reach 95.00 percent occupancy during the 30-month period ending April 2021. The assisted living apartments begin to fill in July 2019 and are projected to reach 93.00 percent occupancy during the 20-month period ending February 2021.

Sensitivity Analysis IIA

The data presented in the following table labeled as Sensitivity IIA demonstrates the financial impact of increasing the move-in period to 45 months.

Sensitivity Analysis IIB

The data presented in the following table labeled as Sensitivity IIB demonstrates the financial impact of increasing the move-in period to 60 months.

Sensitivity Analysis II Estimated Financial Information For the Year Ending June 30, 2022 (In Thousands Except for Ratios) As Forecasted Sensitivity IIA Sensitivity IIB Independent Living Move-In Period (in Months) 30 45 60 Ending Occupancy Achieved April 2021 July 2022 October 2023 Occupancy at June 30, 2022 188.1 183.5 134.5 Average Move-Ins per Month 6.27 4.18 3.14 Assisted Living Move-In Period (in Months) 20 45 60 Ending Occupancy Achieved February 2021 March 2023 June 2024 Occupancy at June 30, 2022 44.6 35.7 26.8 Average Move-Ins per Month 2.23 0.99 0.74 Maximum Annual Debt Service Coverage Ratio (a) 2.24 1.84 1.50 Days Cash on Hand (a) 490 319 261

C-77 Mary’s Woods at Marylhurst Sensitivity Analyses

SENSITIVITY ANALYSIS III – ASSISTED LIVING APARTMENT OCCUPANCY

Sensitivity Analysis IIIA

The data presented in the following table labeled as Sensitivity IIIA demonstrates the financial impact of a stabilized 95.00 percent occupancy of The Village or 188.1 of the 198 independent living apartments and a 50.00 percent occupancy or 24 of the 48 assisted living apartments.

Sensitivity Analysis IIIB

The data presented in the following table labeled as Sensitivity IIIB demonstrates the financial impact of a stabilized 95.00 percent occupancy of The Village or 188.1 of the 198 independent living apartments and a 0.00 percent occupancy or 0 of the 48 assisted living apartments.

Sensitivity Analysis III Estimated Financial Information For the Year Ending June 30, 2022 (In Thousands Except for Ratios) As Forecasted Sensitivity IIIA Sensitivity IIIB Independent Living Move-In Period (in Months) 30 30 30 Ending Occupancy Achieved April 2021 April 2021 April 2021 Occupancy at June 30, 2022 188.1 188.1 188.1 Average Move-Ins per Month 6.27 6.27 6.27 Assisted Living Move-In Period (in Months) 20 9 0 Ending Occupancy Achieved February 2021 March 2020 N/A Occupancy at June 30, 2022 44.6 24.0 0.0 Average Move-Ins per Month 2.23 2.67 0.00 Maximum Annual Debt Service Coverage Ratio (a) 2.24 2.02 1.77 Days Cash on Hand (a) 490 458 399 (a) For purposes of the sensitivity analysis, there was a reduction of revenue related to a decrease in the impact of the revenue strategies with no corresponding adjustments to expenses. The assumed schedule for the repayment of debt remained as originally forecasted.

C-78 Mary’s Woods at Marylhurst Sensitivity Analyses

SENSITIVITY ANALYSIS IV – PENETRATION RATES

Information on new construction of competitive facilities is not always readily available or accurate. Management has provided insight into current activity in the PMA and we conducted our own research to attempt to identify new independent living units that are either planned or under construction.

Sensitivity Analysis IVA

The data presented in the following table labeled as Sensitivity IVA demonstrates the impact of 100 additional independent living units being added to the PMA.

Sensitivity Analysis IVB

The data presented in the following table labeled as Sensitivity IVB demonstrates the impact of 200 additional independent living units being added to the PMA.

Sensitivity Analysis IV Estimated Financial Information As Forecasted Sensitivity IVA Sensitivity IVB Planned Units in the PMA The Village 198 198 198 Other Planned Units 205 305 405 Total 403 503 603 Net Penetration Rate Age 75+ with Income $62,900 and Above 3.4% 4.0% 4.5% Age 75+ with Income $76,300 and Above 4.4% 5.2% 5.9% Age 75+ with Income $90,000 and Above 6.8% 6.4% 7.3% Gross Penetration Rate For the Year Ended June 30, 2018 8.4% 8.4% 8.4% For the Year Ended June 30, 2022 9.4% 10.1% 10.8%

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APPENDIX D

DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS

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DEFINITIONS OF CERTAIN TERMS ...... D-1 Definitions of Certain Terms Used In Master Indenture ...... D-1 Definitions of Certain Terms Used In Bond Indenture and Loan Agreement ...... D-17 THE MASTER INDENTURE ...... D-24 General ...... D-24 Contents of Certificates and Opinions ...... D-24 Authorization for Issuance of Obligations in Series ...... D-24 Conditions to the Issuance of an Obligation or a Series of Obligations ...... D-25 Payment of Principal and Interest ...... D-25 Pledge of Gross Revenues ...... D-26 Covenants as to Maintenance of Properties, Etc...... D-27 Insurance Required ...... D-28 Limitations on Encumbrances ...... D-29 Limitations on Additional Indebtedness ...... D-29 Limitations on Guaranties ...... D-32 Rates and Charges; Debt Coverage ...... D-32 Sale, Lease or Other Disposition of Property ...... D-35 Liquidity Covenant ...... D-36 Consolidation, Merger, Sale or Conveyance ...... D-37 Filing of Financial Statements, Reports and Other Information ...... D-39 Approval of Consultants ...... D-42 Membership in the Obligated Group ...... D-43 Withdrawal from the Obligated Group ...... D-44 Insurance and Condemnation Proceeds ...... D-45 Designation of Principal Property ...... D-46 Defaults ...... D-46 Removal and Resignation of the Master Trustee ...... D-51 Supplements and Amendments to the Master Indenture...... D-52 Satisfaction and Discharge of Master Indenture ...... D-54 SUPPLEMENTAL MASTER INDENTURE NO. 2 ...... D-54 Obligation No. 3 ...... D-54 Obligation No. 4 ...... D-54 Obligation No. 5 ...... D-55 Prepayment of Obligations ...... D-55 Occupancy Covenant ...... D-55 Series 2018 Entrance Fee Fund ...... D-56 Series 2018 Working Capital Fund ...... D-58 Amendments to the Master Indenture ...... D-59 THE BOND INDENTURE ...... D-59 General ...... D-59 Trust Estate ...... D-59 All Bonds Equally and Ratably Secured; Bonds Not an Obligation of Issuer ...... D-60 Registration, Transfer and Exchange of Bonds; Persons Treated as Owners ...... D-60 Issuance of Additional Bonds ...... D-60 Establishment of Funds ...... D-61 The Bond Fund ...... D-62 The Construction Fund ...... D-63

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The Reserve Fund ...... D-64 Investments ...... D-65 Defeasance ...... D-66 Defaults and Remedies ...... D-66 Supplemental Indenture and Amendments to the Loan Agreement ...... D-70 Non-Liability of Issuer ...... D-72 Money Held for Particular Bonds ...... D-72 THE LOAN AGREEMENT ...... D-73 General ...... D-73 Agreement to Construct Project; Completion Certificate ...... D-73 Requests for Disbursements ...... D-73 Disposition of Series 2018 Project ...... D-74 Repayment of Loan ...... D-74 Credits ...... D-74 Additional Payments ...... D-75 Reserve Fund ...... D-76 Maintenance and Insurance ...... D-76 Continuing Disclosure ...... D-76 Failure to Perform Covenants and Remedies Therefor ...... D-77 Prepayment of Obligations ...... D-77 Amendments, Changes and Modifications ...... D-78

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The following is a summary of certain provisions of the Master Indenture, Supplemental Master Indenture No. 2, the Bond Indenture and the Loan Agreement which are not described elsewhere in this Official Statement. These summaries do not purport to be comprehensive and reference should be made to each of said documents for a full and complete statement of their provisions.

DEFINITIONS OF CERTAIN TERMS

Definitions of Certain Terms Used In Master Indenture

The following is a summary of certain terms used in this Appendix D in connection with the Master Indenture and Supplemental Master Indenture No. 2. All capitalized terms used but not defined in this Appendix D or elsewhere in this Official Statement have the meanings set forth in the Master Indenture or Supplemental Master Indenture No. 2.

“Accountant” or “accountant” means any firm of regionally-recognized independent certified public accountants selected by the Obligated Group Representative.

“Additional Indebtedness” means any Indebtedness incurred subsequent to the execution and delivery of the Master Indenture.

“Affiliate” means a corporation, partnership, joint venture, association, limited liability company, business trust or similar entity (a) which controls, is controlled by or is under common control with, directly or indirectly, a Member; or (b) a majority of the members of the Directing Body of which are members of the Directing Body of a Member. For the purposes of this definition, control means with respect to: (a) a corporation having stock, the ownership, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1) of the Securities Act of 1933, as amended) of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the directors of such corporation; (b) a not for profit corporation not having stock, having the power to elect or appoint, directly or indirectly, a majority of the members of the Directing Body of such corporation; or (c) any other entity, the power to direct the management of such entity through the ownership of at least a majority of its voting securities or the right to designate or elect at least a majority of the members of its Directing Body, by contract or otherwise. For the purposes of this definition, “Directing Body” means with respect to: (a) a corporation having stock, such corporation’s board of directors and the owners, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1) of the Securities Act of 1933, as amended) of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporation’s directors (both of which groups shall be considered a Directing Body); (b) a not for profit corporation not having stock, such corporation’s members if the members have complete discretion to elect the corporation’s directors, or the corporation’s directors if the corporation’s members do not have such discretion; and (c) any other entity, its governing board or body. For the purposes of this definition, all references to directors and members shall be deemed to include all entities performing the function of directors or members however denominated.

“Annual Debt Service” means for each Fiscal Year the aggregate amount (without duplication) of principal and interest scheduled to become due (either by maturity or by mandatory redemption) and sinking fund payments required to be paid in that Fiscal Year on all Long-Term Indebtedness, less any amounts on irrevocable deposit in escrow to be applied during that Fiscal Year to pay principal or interest on Long- Term Indebtedness; provided that (i) any annual fees payable in respect of a credit facility issued to secure any series of Related Bonds, if any (other than annual fees to be paid from proceeds of a bond issue escrowed for such purpose) shall be included in the determination of Annual Debt Service; and (ii) to the extent an Interest Rate Agreement has been entered into in connection with any particular Indebtedness, the actual debt service paid after the effect of payments made to or received from the provider of the Interest

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Rate Agreement shall be included in the determination of Annual Debt Service. Whenever the term “Annual Debt Service” is used in the calculation of a Debt Service Coverage Ratio, (i) any Guaranties shall be included only to the extent there was an actual payment on the Guaranty in such Fiscal Year and (ii) any payments of rent under each Ground Lease shall be included, provided that payments of Initial Base Rent and Additional Rent (as such terms are defined in each Ground Lease) shall not be included.

“Authorized Representative” means with respect to each Member, the chairperson of its Governing Body or its chief executive officer or its chief financial officer or any other person designated an Authorized Representative of such Member by a Certificate of such Member signed by the chairperson of its Governing Body or its chief executive officer or chief financial officer and filed with the Master Trustee.

“Balloon Indebtedness” means Long-Term Indebtedness of a Member, 25% or more of the principal of which becomes due (either by maturity or mandatory redemption) during any period of 12 consecutive months, which portion of the principal is not required by the documents governing such Indebtedness to be amortized by redemption prior to such date.

“Book Value” means, when used in connection with Principal Property or other Property of any Member, the value of such property, net of accumulated depreciation, as it is carried on the books of such person and in conformity with generally accepted accounting principles, and when used in connection with Principal Property or other Property of the Obligated Group, means the aggregate of the values so determined with respect to such Property of each Member determined in such a way that no portion of such value of Property of any Member is included more than once.

“Business Day” means a day of the year which is not (a) a Saturday, Sunday or legal holiday on which banking institutions located in the city of the Corporate Trust Office are authorized by law to close or (b) a day on which the New York Stock Exchange is closed.

“Capital Addition” means any additions, improvements, extensions, alterations, relocations, enlargements, expansions, modifications or replacement of or to the Property.

“Cash and Liquid Investments” means all unrestricted cash and liquid investment balances, including without limitation, such amounts constituting board designated funds, whether classified as current or noncurrent assets, held by the Obligated Group for any of their corporate purposes, but excluding amounts available under lines of credit, all as set forth in the most recent financial statements delivered under the Master Indenture.

“Certificate”, “Statement”, “Request”, “Consent” or “Order” of any Member or of the Master Trustee means, respectively, a written certificate, statement, request, consent or order signed in the name of such Member by its respective Authorized Representative or in the name of the Master Trustee by its Responsible Officer. Any such instrument and supporting opinions or certificates, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or certificate and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by the Master Indenture, each such instrument shall include the statements provided for herein under the subheading “THE MASTER INDENTURE—Contents of Certificates and Opinions.”

“Code” means the Internal Revenue Code of 1986 and the regulations issued thereunder, or any successor to the Internal Revenue Code of 1986.

“Completion Indebtedness” means any Long-Term Indebtedness incurred by any Member for the purpose of financing the completion of acquiring, constructing, renovating, refurbishing, equipping or

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improving any project for which Long-Term Indebtedness has previously been incurred in accordance with the provisions of the Master Indenture.

“Construction Consultant” means the architects, engineers, development consultant, supervising contractors or other qualified consultant selected by the Obligated Group or any Member in connection with the acquisition, installation, improvement or construction of a project or a portion thereof for which Long-Term Indebtedness has previously been incurred in accordance with the provisions of the Master Indenture, delivered to the Master Trustee in connection with the issuance of Completion Indebtedness.

“Corporate Trust Office” means the designated office of the Master Trustee, which, at the Closing Date, is located at 555 SW Oak Street, PD-OR-P7TD, Portland, Oregon 97204, Attention: Global Corporate Trust Services.

“Corporation” means Mary’s Woods at Marylhurst, Inc., an Oregon nonprofit corporation, or any corporation which is the surviving, resulting or transferee corporation in any merger, consolidation or transfer of assets permitted under the Master Indenture.

“Current Value” means the aggregate sum of the Book Value of personal property plus the fair market value of the real property. The fair market value of real property shall be as reflected in the most recent written report of an appraiser selected by the Corporation, which shall be an appraiser who is a member of the American Institute of Real Estate Appraisers (MAI), and the report shall be delivered to the Master Trustee (which report shall be dated not more than three years prior to the date as of which Current Value is to be calculated).

“Days Cash on Hand” means the amount determined by dividing (1) the Cash and Liquid Investments of the Obligated Group as of a particular date by (2) the quotient derived by dividing (a) the Obligated Group’s total operating expenses (less depreciation and amortization and other non-cash items, including, without limitation, losses on refinancing of debt) for the most recent preceding Fiscal Year for which audited financial statements have been delivered under the Master Indenture by (b) the number of days in such Fiscal Year.

“Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing Income Available for Debt Service by Annual Debt Service.

“Deed of Trust” means the Commercial Deed of Trust, Assignment, Security Agreement and Fixture Filing, dated as of April 1, 2017, among the Corporation, as Grantor, Chicago Title Insurance Company of Oregon, as the deed of trust trustee, and the Master Trustee, as beneficiary, and as the same may be supplemented and amended from time to time, under which the Corporation has granted a lien and security interest on its Principal Property to be held for the benefit of the Master Trustee.

“EMMA” means the Electronic Municipal Market Access system as described in the Securities Exchange Act of 1934, as amended by Release No. 59062, and maintained by the Municipal Securities Rulemaking Board for purposes of Rule 15c2-12, or any similar system that is acceptable to the Securities and Exchange Commission.

“Entrance Fees” means fees received upon the initial occupancy of any newly-constructed Independent Living Units that are part of a Project (including any such fees collected for the purpose of obtaining a parking space) not previously occupied, other than security deposits, monthly rentals or monthly service charges, paid to a Member by residents of living units for the purpose of obtaining the right to reside in those living units or to obtain a parking space including any refundable resident deposits described in any lease, Residency Agreement or similar agreement with respect to those living units or parking spaces,

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but shall not include any such amounts held in escrow or otherwise set aside pursuant to the requirements of any such agreement or a reservation agreement prior to the occupancy of the living unit or parking space covered by such lease, Residency Agreement or similar agreement (which amounts shall be included if and when occupancy occurs).

“Escrow Obligations” means: (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America; (2) obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Bank System, Export-Import Bank of the United States, Federal Financing Bank, Federal Land Banks, Government National Mortgage Association, Farmer’s Home Administration, Small Business Administration, Federal Home Loan Mortgage Corporation or Federal Housing Administration, (3) certificates which evidence ownership of the right to the payment of the principal of and interest on obligations described in clauses (1) and (2), provided that such obligations are held in the custody of a bank or trust company in a special account separate from the general assets of such custodian, and (4) obligations the interest on which is excluded from gross income for purposes of federal income taxation pursuant to Section 103 of the Internal Revenue Code of 1986, and the timely payment of the principal of and interest on which is fully provided for by the deposit in trust or escrow of cash or obligations described in clauses (1), (2) or (3).

“Event of Default” means any of the events described herein under the heading “THE MASTER INDENTURE—Defaults.”

“Existing Independent Living Units” means the independent living units that are in existence at the Facilities as of the date the Master Indenture was executed and delivered, but shall not include any Existing Independent Living Units that are subsequently removed from available inventory by the Corporation.

“Extendable Indebtedness” means indebtedness which is repayable or subject to purchase at the option of the holder thereof prior to its stated maturity, but only to the extent of money available for the repayment or purchase therefore and not more frequently than once every year.

“Facilities” means the continuing care retirement community and related healthcare facilities owned and to be owned by the Obligated Group Members located on the Property in Lake Oswego, Clackamas County, Oregon, including any Independent Living Units, assisted living units, a health center including nursing beds, all necessary and useful furnishings, equipment and machinery, and such interests in land as may be necessary or suitable for the foregoing, including roads and rights of access, utilities and other necessary site preparation facilities.

“Fair Market Value”, when used in connection with Property, means the fair market value of such Property as determined by either (1) an appraisal of the portion of such Property which is real property made within three years of the date of determination by a member of the American Institute of Real Estate Appraisers and by an appraisal of the portion of such Property which is not real property made within three years of the date of determination by any expert, provided that any such appraisal shall be performed by a person or firm which (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in any Member and (c) is not connected with any Member as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions or (2) a bona fide offer for the purchase of such Property made on an arm’s length basis within six months of the date of determination as established by an Officer’s Certificate.

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“Financing” means a borrowing pursuant to any Obligation authorized by the Master Indenture.

“Fiscal Year” means that period adopted by the Obligated Group Representative as its annual accounting period, which is from July 1 to June 30 of each year.

“Fitch” means Fitch Ratings, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative.

“Governing Body” means, when used with respect to any Member, its board of directors, board of trustees, or other board or group of individuals in which all of the powers of such Member are vested except for those powers reserved to the corporate membership thereof by the articles of incorporation or bylaws of such Member.

“Government Issuer” means the Issuer or any other municipal corporation, political subdivision, state, territory or possession within the United States, or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof, which obligations would constitute Related Bonds under the Master Indenture.

“Gross Revenue Fund” means the fund by that name established under the Master Indenture and described herein under the heading “THE MASTER INDENTURE—Pledge of Gross Revenues.”

“Gross Revenues” means all receipts, revenues, income and other money received by or on behalf of any Member of the Obligated Group from any source whatsoever, including, but not limited to, (a) revenues derived from the operation and possession of each Member’s Facilities, including without limitation, all accounts, Entrance Fees (earned and unearned), monthly service fees and all other operating and non-operating revenues, (b) gifts, bequests, grants, donations and contributions, exclusive of any gifts, bequests, grants, donations or contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of Required Payments or for the payment of operating expenses, and (c) revenues derived from (1) condemnation proceeds, (2) any gain on the sale or other disposition of property by a Member, (3) inventory and other tangible and intangible property, (4) private and governmental health care reimbursement programs and agreements, (5) insurance proceeds, (6) contract rights and other rights now or hereafter owned by each Member, and (7) realized investment earnings; and all of the foregoing, whether now existing or hereafter coming into existence and whether now owned or led or hereafter acquired by a Member.

“Ground Lease” means, collectively, the phase one lease agreement by and between The Society of the Sisters of the Holy Name of Jesus and Mary and the Corporation, dated August 15, 1999, and the phase two lease agreement by and between The Society of the Sisters of the Holy Name of Jesus and Mary and the Corporation, dated at or around the date of the delivery of the Series 2018 Bonds, each as may be amended from time to time.

“Guaranty” means all loan commitments and all obligations of any Member guaranteeing in any manner whatsoever, whether directly or indirectly, any obligation of any other Person which would, if such other Person were a Member, constitute Indebtedness.

“Holder” means the registered owner of any Obligation in registered form or the bearer of any Obligation in coupon form which is not registered or is registered to bearer.

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“Income Available for Debt Service” means, with respect to the Obligated Group, as to any period of time, the excess of revenues over expenses (or, in the case of for-profit Members, net income after taxes) of the Obligated Group for such period, to which shall be added depreciation, amortization, interest and any payments of rent under each Ground Lease, all as determined in accordance with generally accepted accounting principles, provided that no such determination shall include any gain or loss resulting from (i) the extinguishment of Indebtedness, (ii) any disposition of capital assets not made in the ordinary course of business or any revenue of an Affiliate which is not a Member, (iii) any gain or loss resulting from changes in the valuation of Indebtedness, investment securities or any Interest Rate Agreement, (iv) the application of changes in accounting principles, (v) any other extraordinary or non-recurring losses or gains, (vi) Initial Entrance Fees, or (vii) any other non-cash revenue or expense items. For purposes of this definition, revenues shall include (1) resident service revenues, (2) other operating revenues, (3) non-operating revenues or contributions (other than restricted contributions, income derived from the sale or other disposition of assets not in the ordinary course of business or any gain from the extinguishment of debt or other extraordinary item or earnings which constitute funded interest or earnings on amounts which are irrevocably deposited in escrow to pay the principal of or interest on Indebtedness), and (4) Entrance Fees received minus (a) Entrance Fees amortized during such Fiscal Year and (b) Entrance Fees refunded to residents.

“Indebtedness” means, for any Person, (a) all Guaranties by such Person, (b) all liabilities (exclusive of reserves such as those established for deferred taxes or litigation) recorded or required to be recorded as such on the audited financial statements of such Person in accordance with generally accepted accounting principles, and (c) all obligations for the payment of money incurred or assumed by such Person (i) due and payable in all events or (ii) if incurred or assumed primarily to assure the repayment of money borrowed or credit extended, due and payable upon the occurrence of a condition precedent or upon the performance of work, possession of Property as lessee, rendering of services by others or otherwise; provided that Indebtedness shall not include Indebtedness of one Member to another Member, any Guaranty by any Member of Indebtedness of any other Member, the joint and several liability of any Member on Indebtedness issued by another Member, Interest Rate Agreements or any obligation to repay moneys deposited by patients or others with a Member as security for or as prepayment of the cost of patient care or any rights of residents of life care, elderly housing or similar facilities to Entrance Fees (whether amortized into income or not), endowment or similar funds deposited by or on behalf of such residents including but not limited to any deferred obligations for the refund or repayment of Entrance Fees, any rent, development, marketing, operating or other fees that have been deferred from the year in which they were originally due as a result of deferral or subordination.

“Independent Consultant” means a firm (but not an individual) which (1) is in fact independent of and has no relationship with the Corporation or a Member other than as provided within the scope of a consulting engagement including, but not limited to, subparagraphs (2) and (3) below, (2) does not have any direct financial interest or any material indirect financial interest in any Member or any Affiliate and (3) is not connected with any Member or any Affiliate as an officer, employee, trustee, partner, director or person performing similar functions, and designated by the Obligated Group Representative, qualified to pass upon questions relating to the financial affairs of facilities of the type or types operated by the Obligated Group and having a favorable reputation for skill and experience in the financial affairs of such facilities, it being understood that an arm’s length contract with any Member for the performance of consulting, accounting, investment banking or financial analysis or other services is not regarded as creating any such disqualifying interest or employee relationship.

“Independent Living Units” means all of the independent living units, excluding Existing Independent Living Units, that are or become part of the Project regardless of whether or not they are offered for occupancy on an Entrance Fee basis or a rental basis.

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“Industry Restrictions” means federal, state or other applicable governmental laws or regulations or general industry standards or general industry conditions placing restrictions and limitations on the rates, fees and charges to be fixed, charged and collected by the Members.

“Initial Entrance Fees” means Entrance Fees received upon the initial occupancy of any Independent Living Units not previously occupied, including, without limitation, Entrance Fees paid by residents that will transition to a Reserved Independent Living Unit at the time that such Independent Living Unit is available to be Occupied.

“Insurance Consultant” means a person or firm (which may be an insurance broker or agent of a Member) who is not, and no member, director, officer or employee of which is, an officer or employee of any Member or any Affiliate, designated by the Obligated Group Representative and qualified to survey risks and to recommend insurance coverage for senior living facilities, health-related facilities and services and organizations engaged in such operations.

“Interest Rate Agreement” means an interest rate exchange, hedge or similar agreement, expressly identified in an Officer’s Certificate of the Corporation delivered to the Master Trustee as being entered into in order to hedge the interest payable on all or a portion of any Indebtedness, which agreement may include, without limitation, an interest rate swap, a forward or futures contract or an option (e.g. a call, put, cap, floor or collar) and which agreement does not constitute an obligation to repay money borrowed, credit extended or the equivalent thereof. An Interest Rate Agreement shall not constitute Indebtedness under the Master Indenture.

“Interim Indebtedness” means Long-Term Indebtedness with a final maturity sixty (60) months or less from the date of incurrence, certified in an Officer’s Certificate filed with the Master Trustee to have been incurred in anticipation of refinancing with the proceeds of other Long-Term Indebtedness other than Interim Indebtedness prior to the final maturity thereof.

“Issuer” means the Hospital Facility Authority of Clackamas County, Oregon, a public authority of the State of Oregon, created by virtue of the authority of the Constitution and laws of the State, and particularly Oregon Revised Statutes Sections 441.525 to 441.595, inclusive, as amended.

“Kroll” means Kroll Bond Rating Agency, its successors and assigns, and, if such corporation is dissolved or liquidated or does not any longer perform the functions of a securities rating agency, “Kroll” will be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative by notice to the Master Trustee.

“Lien” means any mortgage or pledge of, or security interest in, or lien or encumbrance on, any Property, excluding Liens applicable to Property in which any Member has only a leasehold interest unless the Lien is with respect to such leasehold interest.

“Long-Term Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing Income Available for Debt Service by Maximum Annual Debt Service.

“Long-Term Indebtedness” means Indebtedness having an original maturity greater than one year or renewable at the option of a Member for a period greater than one year from the date of original incurrence or issuance thereof unless, by the terms of such Indebtedness, no Indebtedness is permitted to be outstanding thereunder for a period of at least thirty (30) consecutive days during each calendar year.

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“Master Indenture” means the Master Trust Indenture, dated as of April 1, 2017, between the Corporation and Master Trustee, as originally executed and as it may from time to time be supplemented, modified or amended in accordance with the terms of thereof.

“Master Trustee” means U.S. Bank National Association, a national banking association organized and existing under and by virtue of the laws of the United States of America and, subject to the limitations contained in the Master Indenture, any other corporation or association which may be co-trustee with the Master Trustee and any successor or successors to said trustee or co-trustee in the trusts created under the Master Indenture.

“Maximum Annual Debt Service” means the greatest amount of Annual Debt Service becoming due and payable in any Fiscal Year including the Fiscal Year in which the calculation is made or any subsequent Fiscal Year; provided, however, that for the purposes of computing Maximum Annual Debt Service:

(a) There shall be included in the Long-Term Indebtedness of any Member, 20% of the annual principal and interest requirements with respect to the debt of any Person subject to a Guaranty by such Member. If any Member has been required by reason of its Guaranty to make a payment in respect of another Person’s Indebtedness within the immediately preceding two Fiscal Years, all of the annual principal and interest requirements with respect to the debt subject to the Guaranty shall be included in Long-Term Indebtedness.

(b) For any Long-Term Indebtedness for which a binding commitment, letter of credit or other credit arrangement providing for the extension of such Indebtedness beyond its original maturity date exists, the computation of Maximum Annual Debt Service shall, at the option of the Obligated Group Representative, be made on the assumption that such Long-Term Indebtedness will be amortized in accordance with such credit arrangement.

(c) For any Balloon Indebtedness and Interim Indebtedness, the computation of Maximum Annual Debt Service shall, at the option of the Obligated Group Representative, assume that such Long-Term Indebtedness is to be amortized over a period specified by the Obligated Group Representative up to 30 years in duration, beginning on the date of maturity of such Indebtedness or such earlier date as may be specified by the Obligated Group Representative, assuming level debt service and a rate of interest equal to the Projected Rate; provided, however that if the Projected Rate cannot be determined the rate shall be assumed to be a fixed rate of interest equal to the most recently published Bond Buyer 30-year Revenue Bond Index or a similar index.

(d) For any Extendable Indebtedness, the computation of Maximum Annual Debt Service shall, at the option of the Obligated Group Representative, assume that such Extendable Indebtedness is to be amortized over the period until its stated maturity, assuming level debt service and a fixed rate of interest equal to the current rate of interest on such Extendable Indebtedness.

(e) If interest on Long-Term Indebtedness is payable pursuant to a variable interest rate formula (including Balloon Indebtedness and Interim Indebtedness, if the Obligated Group Representative does not choose to use paragraph (c) above, and including Extendable Indebtedness, if the Obligated Group Representative does not choose to use paragraph (d) above), the interest rate on such Long-Term Indebtedness for periods when the actual interest rate cannot yet be determined shall be assumed to be a fixed rate of interest equal to the most recently published average of the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index over the preceding ten years (or a similar index if unavailable), plus the cost of any credit enhancement fees.

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(f) Anything in the Master Indenture to the contrary notwithstanding, any portion of any Indebtedness of any Member for which an Interest Rate Agreement has been obtained by such Member shall be deemed to bear interest for the period of time that such Interest Rate Agreement is in effect at a net rate which takes into account the interest payments made by such Member on such Indebtedness and the payments made or received by such Member on such Interest Rate Agreement.

“Member” means each signatory to the Master Indenture, together with each other Person which is obligated under the Master Indenture to the extent and in accordance with the provisions of the Master Indenture, from and after the date upon which such Person joins the Obligated Group, but excluding any member of the Obligated Group which withdraws from the Obligated Group to the extent and in accordance with the provisions of the Master Indenture described herein under the heading “THE MASTER INDENTURE—Withdrawal from the Obligated Group,” from and after the date of such withdrawal.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative.

“Obligated Group” means all Members.

“Obligated Group Representative” means the Corporation or such other Member as may have been designated pursuant to written notice to the Master Trustee executed by all of the Members.

“Obligation” means any obligation of the Obligated Group issued under the Master Indenture, as a joint and several obligation of each Member, which may be in any form set forth in a Related Supplement, including, but not limited to, bonds, obligations, debentures, reimbursement agreements, loan agreements or leases. Reference to a “Series of Obligations” or to “Obligations of a Series” means Obligations or series of Obligations issued pursuant to a single Related Supplement.

“Occupied” means (a) an Independent Living Unit for which a Residency Agreement has been executed, all related Entrance Fees then due have been paid in accordance with such Residency Agreement and the monthly service fees for which are currently being paid (for purposes of this definition, combined Independent Living Units are counted as the number of original individual units so combined) and (b) with respect to any other Independent Living Unit or any assisted living unit or nursing bed, such units that are occupied by a resident or patient for which monthly service fees are currently charged and paid; provided, however, with respect to nursing beds, to the extent a resident desires a private room and pays the appropriate fees to convert a semi private room to a private room, then in such case the number of available nursing beds shall be reduced accordingly for such period.

“Officer’s Certificate” means a certificate signed by the Authorized Representative of the Obligated Group Representative.

“Opinion of Bond Counsel” means an opinion of nationally recognized municipal bond counsel, which opinion may be based upon a ruling or rulings of the Internal Revenue Service, and which counsel and opinion, including the scope, form, substance and other aspects thereof.

“Opinion of Independent Counsel” means an opinion in writing signed by an attorney or firm of attorneys, duly admitted to practice law before the highest court of any state and, without limitation, may include independent legal counsel for the Obligated Group Representative.

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“Outstanding,” when used with reference to Indebtedness, means, as of any date of determination, all Indebtedness theretofore issued or incurred and not paid and discharged other than (a) Obligations theretofore cancelled by the Master Trustee or delivered to the Master Trustee for cancellation, (b) Obligations in lieu of which other Obligations have been authenticated and delivered or have been paid pursuant to the provisions of a Related Supplement regarding mutilated, destroyed, lost or stolen Obligations unless proof satisfactory to the Master Trustee has been received that any such Obligation is held by a bona fide purchaser, (c) any Obligation held by any Member, and (d) Indebtedness deemed paid and no longer outstanding pursuant to the terms thereof; provided, however, that if two or more Obligations which constitute Indebtedness represent the same underlying obligation (as when an Obligation secures an issue of Related Bonds and another Obligation secures repayment obligations to a bank under a letter of credit which secures such Related Bonds) for purposes of the various financial covenants contained in the Master Indenture, but only for such purposes, only one of such Obligations shall be deemed Outstanding. Interest Rate Agreements shall not be deemed Outstanding as they are not deemed Indebtedness.

“Permitted Encumbrances” means and includes:

(a) Liens securing any Member’s Obligations;

(b) Liens arising by reason of good faith deposits by any Member in the ordinary course of business (for other than borrowed money), deposits by any Member to secure public or statutory obligations or deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

(c) any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Member to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with worker’s compensation, unemployment insurance, pension or profit-sharing plans or other similar social security plans, or to share in the privileges or benefits required for companies participating in such arrangements;

(d) any judgment Lien against any Member so long as such judgment is being contested in good faith and execution thereon is stayed;

(e) rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law affecting any Property, to:

(i) terminate such right, power, franchise, grant, license, or permit, provided, that the exercise of such right would not materially impair the use of such Property or materially and adversely affect the value thereof, or

(ii) purchase, condemn, appropriate or recapture, or designate a purchaser of, the Property or any portion thereof;

(f) any Liens on any of the Property for taxes, assessments, levies, fees, water and sewer rents, and other governmental and similar charges and any Liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to Liens of mechanics, materialmen, laborers, suppliers or vendors, have been due for less than ninety (90) days;

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(g) easements, rights-of-way, servitudes, restrictions, oil, gas, or other mineral reservations and other minor defects, encumbrances, and irregularities in the title to any of the Property that may arise after April 1, 2017, but which do not materially impair the use of such Property or materially and adversely affect the value thereof;

(h) rights reserved to or vested in any municipality or public authority to control or regulate any of the Property or to use such Property in any manner, which rights do not materially impair the use of such Property or materially and adversely affect the value thereof, to the extent that it affects title to any Property;

(i) landlord’s Liens;

(j) Liens on moneys deposited with any Member as security for or as prepayment for the cost of patient care;

(k) Liens on Property received by any Member through gifts, grants or bequests, such Liens being related only to restrictions on such gifts, grants or bequests or the income thereon;

(l) Liens on Property resulting solely from rights of third-party payors for recoupment of amounts paid to any Member;

(m) purchase of money security interest and security interest existing on any of the Property prior to the time of its acquisition through purchase, merger, consolidation or otherwise, or placed upon Property to secure a portion of the purchase price thereof, or lessee’s interest in leases required to be capitalized in accordance with GAAP;

(n) any Lien described in the Master Indenture which is existing on April 1, 2017, provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased, extended, renewed or modified to apply to any Property of any Member not subject to such Lien on such date, unless such Lien as so extended, renewed or modified otherwise qualifies as a Permitted Encumbrance under the Master Indenture; and

(o) Liens on funds or securities posted in a collateral account held by a counterparty to an Interest Rate Agreement, or by a third party custodian therefore.

“Permitted Investments” means, if and to the extent the same are at the time legal for investment of funds held under the Master Indenture, dollar denominated investments in any of the following:

(a) Government Obligations;

(b) debt obligations which are (i) issued by any state or political subdivision thereof or any agency or instrumentality of such state or political subdivision, and (ii) at the time of purchase, rated in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by any Rating Agency;

(c) any bond, debenture, note, participation certificate or other similar obligation issued by a government sponsored agency (such as the Federal National Mortgage Association, the Federal Home Loan Bank System, the Federal Home Loan Mortgage Corporation or the Federal Farm Credit Bank) which is either (i) at the time of purchase, rated in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by any Rating Agency, or (ii) backed by the full faith and credit of the United States of America;

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(d) U.S. denominated deposit account, certificates of deposit and banker’s acceptances of any bank, trust company, or savings and loan association, including the Master Trustee, the Related Bond Trustee or their affiliates, which have a rating on their short term certificates of deposit on the date of purchase in one of the two highest short term rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by any Rating Agency, and which mature not more than 365 days after the date of purchase;

(e) commercial paper which is rated at the time of purchase in one of the two highest short term rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by any Rating Agency, and which matures not more than 270 days after the date of purchase;

(f) bonds, notes, debentures or other evidences of indebtedness issued or guaranteed by a corporation which are, at the time of purchase, rated by any Rating Agency in any of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise);

(g) investment agreements with banks that at the time the agreement is executed are at the time of purchase rated in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned by any Rating Agency or investment agreements with non-bank financial institutions, provided that (i) all of the unsecured, direct long term debt of either the non-bank financial institution or the related guarantor of such non-bank financial institution is rated by any Rating Agency at the time the agreement is executed in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) for obligations of that nature; or (ii) if the non-bank financial institution and any related guarantor have no outstanding long term debt that is rated, all of the short term debt of either the non-bank financial institution or the related guarantor of the non-bank financial institution is at the time of purchase rated by any Rating Agency in one of the two highest rating categories (without regard to any refinement or gradation of the rating category by numerical modifier or otherwise) assigned to short term indebtedness by any Rating Agency. If such non-bank financial institution and any guarantor do not have any short term or long term debt, but do have a rating in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), then investment agreements with the non- bank financial institution will be permitted;

(h) repurchase agreements with respect to and secured by Government Obligations or by obligations described in clause (b) and (c) above, which agreements may be entered into with a bank (including without limitation the Related Bond Trustee or the Master Trustee or an affiliate thereof), a trust company, financial services firm or a broker dealer which is a member of the Securities Investors Protection Corporation, provided that (i) the Master Trustee, the Related Bond Trustee or a custodial agent thereof has possession of the collateral and that the collateral is free and clear of third party claims, (ii) a master repurchase agreement or specific written repurchase agreement governs the transaction, (iii) the collateral securities are valued no less frequently than monthly, (iv) the fair market value of the collateral securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%, and (v) such obligations must be held in the custody of the Master Trustee’s or Related Bond Trustee’s agent; and

(i) investments in a money market fund, including funds of the Master Trustee or its affiliates, rated (at the time of purchase) in the highest rating category for this type of investment by any Rating Agency; and

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(j) shares in any investment company, money market mutual fund, fixed income mutual fund, Exchange Traded Fund or other collective investment fund registered under the federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and whose investments consist solely of Permitted Investments as defined in paragraphs (a) through (i) above, including money market mutual funds from which the Master Trustee, the Related Bond Trustee or an affiliate thereof derive a fee for investment advisory or other services to the fund.

To the extent such investment is no longer a Permitted Investment, the Obligated Group Representative shall promptly provide the Master Trustee written notice of such status and the Master Trustee shall proceed to invest such amounts pursuant to the Master Indenture.

The Master Trustee shall be entitled to assume that any investment which at the time of purchase is a Permitted Investment remains a Permitted Investment thereafter, absent receipt of written notice or information to the contrary.

For the purposes of this definition, obligations issued or held in the name of the Master Trustee in book entry form on the books of the Department of Treasury of the United States shall be deemed to be deposited with the Master Trustee.

“Person” means any natural person, firm, joint venture, association, partnership, business trust, corporation, limited liability company, public body, agency or political subdivision thereof or any other similar entity.

“Principal Property” means that portion of the Property, Plant and Equipment, wherever situated and whether now owned or hereafter acquired that: (a) is material and integral to or a material and integral part of the primary operations of a Member, and (b) is so designated pursuant to the Master Indenture.

“Project” means the construction, installation, renovation, rehabilitation, and equipping of certain capital improvements to any Property of the Obligated Group.

“Projected Rate” means the projected yield at par of an obligation as set forth in the report of an Independent Consultant. Such report shall state that in determining the Projected Rate such Independent Consultant reviewed the yield evaluations at par of no fewer than three obligations selected by such Independent Consultant, the interest on which is entitled to the exemption from federal income tax afforded by Section 103(a) of the Code or any successor thereto (or, if it is not expected that it will be reasonably possible to issue such tax-exempt obligations, then obligations the interest on which is subject to federal income taxation) which obligations such Independent Consultant states in its report are reasonable comparators for utilizing in developing such Projected Rate and which obligations: (i) were outstanding on a date selected by the Independent Consultant which date so selected occurred during the 90-day period preceding the date of the calculation utilizing the Projected Rate in question, (ii) to the extent practicable, are obligations of Persons engaged in operations similar to those of the Obligated Group and having a credit rating similar to that of the Obligated Group, (iii) are not entitled to the benefits of any credit enhancement, including without limitation any letter or line of credit or insurance policy, and (iv) to the extent practicable, have a remaining term and amortization schedule substantially the same as the obligation with respect to which such Projected Rate is being developed.

“Property” means any and all rights, titles and interests in and to any and all assets of the Obligated Group, whether real or personal, tangible or intangible and wherever situated, as shown on the most recent audited financial statements for the Obligated Group for the most recent Fiscal Year for which they are available.

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“Property, Plant and Equipment” means any Property of the Obligated Group which constitutes property, plant and equipment in accordance with generally accepted accounting principles.

“Rating Agency” means any of the following, Kroll, Moody’s, S&P or Fitch, and their respective successors and assigns.

“Related Bond Indenture” means any indenture, trust agreement, bond resolution or other comparable instrument pursuant to which a series of Related Bonds are issued or executed and delivered.

“Related Bond Issuer” means the Government Issuer of any issue of Related Bonds, including the Issuer for the Series 2018 Bonds.

“Related Bond Trustee” means the trustee and its successors in the trusts created under any Related Bond Indenture, and if there is no such trustee, means the Related Bond Issuer.

“Related Bonds” means any revenue bonds, certificates of participation or other obligations issued or executed and delivered by any Government Issuer, pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to the Corporation or a Member in consideration of the execution, authentication and delivery of an Obligation or Obligations to or for the order of such Government Issuer, including the Series 2018 Bonds.

“Related Loan Document” means any document or documents (including without limitation any loan agreement, lease, sublease or installment sales contract) pursuant to which any proceeds of any Related Bonds are advanced to any Member (or any Property financed or refinanced with such proceeds is loaned, leased, subleased or sold to a Member).

“Related Supplement” means an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture.

“Required Information Recipients” means the Master Trustee, any Related Bond Trustee, EMMA or any other nationally recognized municipal securities information repositories identified by the Securities and Exchange Commission, the Government Issuer, and all owners of $500,000 or more in aggregate principal amount of Related Bonds who request such reports in writing (which written request shall include a certification as to such ownership).

“Required Payment” means any payment whether at maturity, by acceleration, upon proceeding for redemption or otherwise, required to be made by any Member under the Master Indenture, any Related Supplement, any Obligation or otherwise in connection with a Financing, including, but not limited to, the payment of principal, interest and premium and lease payments.

“Reserved” means an Independent Living Unit (a) which is Occupied or (b) for which a Member of the Obligated Group has received a deposit equal to not less than 10% of the Entrance Fee related to such Independent Living Unit.

“Residency Agreement” means any written agreement or contract, as amended from time to time, between a Member and a resident or potential resident of the Project giving the resident certain rights of occupancy in the Project, including without limitation, independent living units, assisted living units, memory support units, nursing beds or specialty care beds and providing for certain services to such resident including any reservation agreement or other agreement or contract reserving rights of occupancy.

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“Responsible Officer” means, with respect to the Master Trustee, the chairman and vice chairman of the board of directors, the chairman of the executive committee of the board of directors, the vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, any assistant vice president, the cashier, any assistant cashier, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer, any assistant trust officer or any other officer of the Master Trustee customarily performing functions similar to those performed by the persons above-designated or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject. With respect to the Corporation, “Responsible Officer” means the president, chief executive officer, chief financial officer or any executive vice president of the Corporation.

“Rule 15c2-12” means Rule 15c2-12 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended.

“S&P” means S&P Global Ratings, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative.

“Securities Act of 1933” means the Securities Act of 1933, as amended, or similar legislation subsequently enacted.

“Series 2017 Bonds” means the Public Finance Authority Senior Living Revenue and Refunding Bonds (Mary’s Woods at Marylhurst Project), Series 2017A, Series 2017B-1, Series 2017B-2 and Series 2017B-3, issued on April 27, 2017.

“Series 2018 Bonds” means, collectively, the Series 2018A Bonds, the Series 2018B Bonds and the Series 2018C Bonds.

“Series 2018 Entrance Fee Fund” means the fund by that name established pursuant to the Supplemental Master Indenture No. 2.

“Series 2018 Entrance Fee Redemption Account” has the meaning assigned to the term “Entrance Fee Redemption Account” by the Bond Indenture.

“Series 2018 Obligations” means, collectively, Obligation No. 3, Obligation No. 4 and Obligation No. 5.

“Series 2018 Project” means, collectively, (i) financing all or a portion of the costs of the construction, acquisition, development, improvement, renovation and equipping of an expansion project and other capital projects with respect to the Corporation’s continuing care retirement community located at 17400 Holy Names Drive, Lake Oswego, Oregon; (ii) funding a debt service reserve fund; and (iii) paying capitalized interest and certain costs of issuance of the Series 2018 Bonds.

“Series 2018 Working Capital Fund” means the fund by that name established pursuant to the Supplemental Master Indenture No. 2.

“Series 2018A Bonds” means the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018A Tax Exempt, issued pursuant an Indenture of Trust, dated as of May 1, 2018, between the Issuer and the Related Bond Trustee.

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“Series 2018B Bonds” means the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-1, Series 2018B-2 and Series 2018B-3 Tax Exempt Mandatory Paydown Securities, issued pursuant an Indenture of Trust, dated as of May 1, 2018, between the Issuer and the Related Bond Trustee.

“Series 2018C Bonds” means the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018C Taxable Mandatory Paydown Securities, issued pursuant an Indenture of Trust, dated as of May 1, 2018, between the Issuer and the Related Bond Trustee.

“Short-Term Indebtedness” means all Indebtedness having an original maturity less than or equal to one year and not renewable at the option of a Member for a term greater than one year.

“Stable Occupancy” means, (i) with respect to the Project, the date on which the total percentage of all such living units Occupied is equal to or greater than 93%, calculated as of the last day of any fiscal quarter, and (ii) with respect to any Capital Addition financed with Indebtedness for which the Master Trustee was furnished an Independent Consultant’s report pursuant to the Master Indenture (or, if no Independent Consultant’s report was required by the Master Indenture, an Officer’s Certificate), the percentage of Occupied units in that Capital Addition at the level reflected as substantially at the sustainable capacity for which such Capital Addition was designed or “stabilized occupancy” for that Capital Addition in the Independent Consultant’s report or the Officer’s Certificate.

“Subordinated Indebtedness” means Indebtedness incurred by a Member which by its terms is specifically subordinated with respect to any security therefor and with respect to right of payment to all Outstanding Obligations and to all other obligations of a Member not containing such subordination provisions.

“Supplemental Master Indenture No. 1” means the Supplemental Master Trust Indenture No. 1 dated as of April 1, 2017, between the Corporation and the Master Trustee.

“Supplemental Master Indenture No. 2” means the Supplemental Master Trust Indenture No. 2 dated as of May 1, 2018, between the Corporation and the Master Trustee, pursuant to which the Series 2018 Obligations will be issued.

“Tax-Exempt Organization” means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) and exempt from federal income taxation under Section 501(a) of the Internal Revenue Code of 1986 or corresponding provisions of federal income tax laws from time to time in effect.

“The Village at Mary’s Woods Expansion Project” means, in connection with the Series 2017 Bonds, the development, construction and equipping of an approximately 144-unit expansion project, ancillary common areas and related facilities.

“The Village at Mary’s Woods Expansion Project Start-Up Period” means the period commencing on April 27, 2017, the closing date of the Series 2017 Bonds, and continuing until the earlier of the first full Fiscal Year after The Village at Mary’s Woods Expansion Project Stable Occupancy and Fiscal Year ended June 30, 2023.

“The Village at Mary’s Woods Expansion Project Stable Occupancy” means, in connection with the Series 2017 Bonds, actual occupancy of not less than 93% of the living units to be constructed in connection with The Village at Mary’s Woods Expansion Project.

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“The Village at Mary’s Woods Stage 2 Entrance Fees” means Initial Entrance Fees received by the Corporation in connection with residential living apartments in The Village at Mary’s Woods Stage 2 Expansion Project, including without limitation, any Entrance Fee paid to occupy an Independent Living Unit (wherever located) that was made available for occupancy because it was vacated by a resident transferring residency to an Independent Living Unit in The Village at Mary’s Woods Stage 2 Expansion Project.

“The Village at Mary’s Woods Stage 2 Expansion Project” means the development, construction and equipping of an approximately 54-unit expansion project, ancillary common areas and related facilities, as more particularly described in The Village at Mary’s Woods Stage 2 Expansion Project Feasibility Study.

“The Village at Mary’s Woods Stage 2 Expansion Project Feasibility Study” means the report prepared by Moss Adams LLP in connection with The Village at Mary’s Woods Stage 2 Expansion Project.

“The Village at Mary’s Woods Stage 2 Expansion Project Start-Up Period” means the period commencing on the date of issuance of the Series 2018 Obligations and continuing until the earlier of the first full Fiscal Year after The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy and Fiscal Year ended June 30, 2023.

“The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy” means actual occupancy of not less than 93% of the living units to be constructed in connection with The Village at Mary’s Woods Stage 2 Expansion Project.

“Total Operating Revenues” means the sum of total unrestricted operating revenues as shown on the consolidated or combined financial statements of the Obligated Group, determined in accordance with generally accepted accounting principles.

Definitions of Certain Terms Used In Bond Indenture and Loan Agreement

The following is a summary of certain terms used in this Appendix D in connection with the Bond Indenture and Loan Agreement. All capitalized terms used but not defined in this Appendix D or elsewhere in this Official Statement have the meanings set forth in the Bond Indenture or the Loan Agreement.

“Account” means any account established within a Fund.

“Act” means Oregon Revised Statutes Sections 441.525 to 441.595, as now in effect and as the same may from time to time hereafter be amended or supplemented.

“Additional Bonds” means the one or more series of additional bonds authorized to be issued by the Issuer pursuant to the Bond Indenture.

“Additional Payments” means the payments so designated and required to be made by the Corporation pursuant to the Loan Agreement.

“Administration Expenses” means any application, commitment, financing or similar fee charged, or reimbursement for administrative or other expenses incurred, by the Issuer or the Bond Trustee in connection with the Bonds, including Additional Payments.

“Bond Counsel” means Orrick, Herrington & Sutcliffe LLP, and its successors, or such other attorney, or firm of attorneys, nationally recognized and experienced in legal work relating to the financing

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of facilities through the issuance of tax-exempt bonds as may be selected by the Corporation with the approval of the Issuer.

“Bond Fund” means the Bond Fund created under the Bond Indenture.

“Bond Indenture” means the Indenture of Trust relating to the Bonds between the Issuer and the Bond Trustee, including any indentures supplemental thereto made in conformity therewith.

“Bondholder,” “Holder” or “owner” of the Bonds mean the registered owner of any fully registered Bond.

“Bonds” means, collectively, the Series 2018 Bonds and any Additional Bonds issued pursuant to the Bond Indenture.

“Bond Trustee” means U.S. Bank National Association, in its capacity as registrar, paying agent and bond trustee under the Bond Indenture, or any successor trustee.

“Business Day” means a day which is not (a) a Saturday, Sunday or legal holiday on which banking institutions in the state where the principal corporate office of the Corporation or the corporate trust office of the Bond Trustee are located are authorized by law to close or (b) a day on which the New York Stock Exchange is closed.

“Closing Date” means the date on which a series of Bonds is delivered to the purchaser or purchasers thereof and payment is received by the Bond Trustee.

“Code” means the Internal Revenue Code of 1986, as amended.

“Completion Certificate” means a certificate of the Corporation delivered pursuant to the Loan Agreement.

“Completion Date” means the date specified in the Completion Certificate as the date of completion or termination.

“Construction Fund” means the construction fund created under the Bond Indenture and any construction fund created in connection with an issue of Additional Bonds under the Bond Indenture.

“Corporation” means Mary’s Woods at Marylhurst, Inc., an Oregon nonprofit corporation, and any and all successors thereto in accordance with the Master Indenture and the Loan Agreement.

“Corporation Documents” means the Loan Agreement, the Master Indenture, the Supplemental Master Indenture No. 2, the Obligations and the Deed of Trust.

“Cost” or “Costs” means any cost of the Project now or hereafter permitted under the Act, not including Cost of Issuance and working capital.

“Cost of Issuance” means all costs and expenses incurred by the Issuer or the Corporation in connection with the issuance and sale of the Bonds, including without limitation (i) reasonable fees and expenses of accountants, attorneys, engineers, and financial advisors, (ii) materials, supplies, and printing and engraving costs, and (iii) recording and filing fees.

“Cost of Issuance Fund” means the cost of issuance fund created under the Bond Indenture.

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“Determination of Taxability” means written notice to the Bond Trustee of (i) failure to make any amendment to the Bond Indenture, the Loan Agreement or the Tax Certificate, or to take any other action that, in the written opinion of Bond Counsel, is necessary to preserve the exclusion for purposes of federal income taxation from gross income of interest on the Bonds, or (ii) a final judgment or order of a court of competent jurisdiction, or a final ruling or decision of the Internal Revenue Service, in either case to the effect that the interest on the Bonds is includable for federal income tax purposes in the gross incomes of the recipients thereof. A judgment or order of a court of competent jurisdiction or a ruling or decision of the Internal Revenue Service shall be considered final only if no appeal or action for judicial review has been filed (and is pending) and the time for filing such appeal or action has expired.

“Disbursement Agreement” means the Construction Disbursement and Monitoring Agreement dated April 27, 2017, as amended by a First Amendment to Construction Disbursement and Monitoring Agreement to be dated as of May 1, 2018, each by and among the Corporation, zumBrunnen, Inc. and the Bond Trustee.

“Electronic Means” means telecopy or electronic mail transmission or other similar electronic means of communication approved in writing by the applicable notice party, including a telephonic communication confirmed by writing or written transmission.

“Entrance Fee Redemption Account” means the account of such name in the Bond Fund.

“Entrance Fee Redemption Date” means the twenty-fifth (25th) day of each calendar month.

“Entrance Fee Transfer Date” means the first Business Day of the last month of each fiscal quarter prior to the termination of the Entrance Fee Fund.

“Event of Default” means those defaults described under the subheading “THE BOND INDENTURE—Defaults and Remedies—Events of Default.”

“Fitch” means Fitch Inc., a corporation organized and existing under the laws of the state of its organization, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Corporation by notice to the Bond Trustee.

“Funded Interest Account” means the account of such name in the Construction Fund.

“Funds” means the Bond Fund, the Reserve Fund and the Construction Fund.

“Government Obligations” means direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America, including (in the case of direct obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust company acts as custodian and holds the underlying Government Obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the Corporation of the underlying Government Obligations; and (c) the underlying Government Obligations are held in a special account, segregated from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated.

“Interest Account” means the account of such name in the Bond Fund created under the Bond Indenture.

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“Interest Payment Date” means (i) as to the Series 2018 Bonds, each May 15 and November 15 of each year, commencing November 15, 2018, in the years during which a series of the Series 2018 Bonds are Outstanding under the provisions of the Bond Indenture, and (ii) as to Additional Bonds, the dates specified in the applicable supplemental indenture on which interest on such Additional Bonds is to be paid.

“Issuer” means the Hospital Facility Authority of Clackamas County, Oregon and its successors and assigns.

“Issuer Indemnified Person” means any past, present, or future director, board member, governing member, trustee, commissioner, elected or appointed official, officer, employee, attorney, agent or advisor to the Issuer (including, but not limited to, counsel and financial advisors), and including in each case their respective successor and assigns.

“Loan Agreement” or “Agreement” means the Loan Agreement, between the Issuer and the Corporation, and any amendments and supplements made in conformity therewith and with the Bond Indenture.

“Master Indenture” means the Master Trust Indenture, dated as of April 1, 2017, between the Corporation and the Master Trustee, including any supplements or amendments thereto.

“Master Trustee” means U.S. Bank National Association, as trustee under the Master Indenture, and its successors as trustee thereunder.

“Maximum Annual Debt Service” for any series of Series 2018 Bonds means an amount equal to the maximum principal and interest requirements (taking into account all mandatory sinking fund payments) due in any calendar year on such series of the Series 2018 Bonds; provided, however, that principal of a series of the Series 2018 Bonds in its final year shall be excluded from the determination of Maximum Annual Debt Service to the extent moneys are on deposit as of the date of calculation in the Reserve Fund.

“Moody’s” shall mean Moody’s Investors Service, a corporation organized and existing under the laws of the state of its organization, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Corporation by notice to the Bond Trustee.

“Obligation No. 3” means the Obligation issued by the Corporation pursuant to Supplemental Master Indenture No. 2 relating to the Series 2018A Bonds.

“Obligation No. 4” means the Obligation issued by the Corporation pursuant to Supplemental Master Indenture No. 2 relating to the Series 2018B Bonds.

“Obligation No. 5” means the Obligation issued by the Corporation pursuant to Supplemental Master Indenture No. 2 relating to the Series 2018C Bonds.

“Obligations” means the Series 2018 Obligations and any other Obligation payable to the Issuer issued under the Master Indenture pursuant to the Agreement and Supplemental Master Indenture No. 2, evidencing the Corporation’s obligation to make loan repayments, including without limitation, any replacement or substitute obligation substituted therefor pursuant to a supplement to the Master Indenture. “Obligated Group Members” has the meaning given such term in the Master Indenture.

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“Obligated Group Representative” means (i) Mary’s Woods at Marylhurst, Inc., a nonprofit corporation incorporated under the laws of the State of Oregon, and (ii) any surviving, resulting or transferee corporation.

“Opinion of Bond Counsel” shall mean an opinion in writing signed by Bond Counsel.

“Opinion of Counsel” means an opinion in writing signed by an attorney or firm of attorneys, who may be counsel to the Corporation or other counsel.

“Outstanding” means, as of any particular time, all Bonds which have been duly authenticated and delivered by the Bond Trustee under the Bond Indenture, except:

(a) Bonds theretofore cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation after purchase in the open market or because of payment at or redemption prior to maturity;

(b) Bonds for the payment or redemption of which cash funds (or Government Obligations to the extent permitted in the Bond Indenture) shall have been theretofore deposited with the Bond Trustee (whether upon or prior to the maturity or redemption date of any such Bonds); provided that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Bond Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Bond Trustee, shall have been filed with the Bond Trustee and provided further that prior to such payment or redemption, the Bonds to be paid or redeemed shall be deemed to be Outstanding for the purpose of transfers and exchanges under the Bond Indenture; and

“Paying Agent” means any bank or trust company, including the Bond Trustee, designated pursuant to the Bond Indenture to serve as a paying agency or place of payment for the Bonds, and any successor designated pursuant to the Bond Indenture.

“Payment Office” with respect to the Bond Trustee or other Paying Agent means the office maintained by the Bond Trustee or any affiliate of the Bond Trustee or of another Paying Agent for the payment of interest and principal on the Bonds.

“Permitted Investments” has the meaning assigned to such term in Supplemental Master Indenture No. 2 and as defined herein under the subheading “DEFINITIONS OF CERTAIN TERMS—Definitions of Certain Terms Used in Master Indenture.”

“Person” means an individual, association, unincorporated organization, corporation, limited liability company, partnership, joint venture, business trust or a government or an agency or a political subdivision thereof, or any other entity.

“Premium Security” means any Permitted Investment purchased or to be purchased at a premium from funds in the Project Account.

“Principal Account” means the account of such name in the Bond Fund created under the Bond Indenture.

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“Project” means any adult congregate living facility or hospital facility permitted by the Act to be financed by the Bonds.

“Project Account” means the account of such name in the Construction Fund created under the Bond Indenture.

“Rating Agency” means Fitch, Moody’s or S&P, and any successor thereto.

“Rebate Fund” means that special fund established in the name of the Issuer with the Bond Trustee pursuant to the Bond Indenture.

“Registered Owner” or “Owners” means the person or persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Bond Trustee for that purpose in accordance with the terms of the Bond Indenture.

“Regular Record Date” means for the Series 2018 Bonds the close of business on the last day of the calendar month prior to each Interest Payment Date, whether or not such date is a Business Day, and for Additional Bonds shall be the day established by the supplement to the Bond Indenture relating to such Additional Bonds.

“Regulations” means the applicable proposed, temporary or final Income Tax Regulations promulgated under the Code or, to the extent applicable to the Code, under the Internal Revenue Code of 1954, as such regulations may be amended or supplemented from time to time.

“Reserve Account” means an account established within the Reserve Fund relating to a specific series of Bonds issued under the Bond Indenture.

“Reserve Fund” means the Reserve Fund created under the Bond Indenture.

“Reserve Fund Obligations” means cash and Permitted Investments.

“Reserve Fund Requirement” means, (a) with respect to the Series 2018A Bonds, the Series 2018B-1 Bonds, the Series 2018B-2 Bonds and the Series 2018B-3 Bonds, the amounts described in the front part of this Official Statement; and (b) with respect to any Additional Bonds, the amount specified in the supplemental indenture pursuant to which such Additional Bonds are issued.

“S&P” shall mean S&P Global Ratings, a corporation organized and existing under the laws of the state of its organization, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Corporation by notice to the Bond Trustee.

“Series 2018 Bonds” means, collectively, the Series 2018A Bonds, the Series 2018B Bonds and the Series 2018C Bonds.

“Series 2018 Obligations” means, collectively, Obligation No. 3, Obligation No. 4 and Obligation No. 5.

“Series 2018 Project” means the Project described in the Loan Agreement and in the front part of this Official Statement under “PLAN OF FINANCE – The Project.”

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“Series 2018B Bonds” means, collectively, the Series 2018B-1 Bonds, the Series 2018B-2 Bonds and the Series 2018B-3 Bonds.

“Series 2018B-1 Bonds” means the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-1 Tax Exempt Mandatory Paydown Securities (TEMPS – [__]SM) issued pursuant to the Bond Indenture.

“Series 2018B-2 Bonds” means the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-2 Tax Exempt Mandatory Paydown Securities (TEMPS – [__]SM) issued pursuant to the Bond Indenture.

“Series 2018B-3 Bonds” means the Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-3 Tax Exempt Mandatory Paydown Securities (TEMPS – [__]SM) issued pursuant to the Bond Indenture.

“State” means the State of Oregon.

“Supplemental Master Indenture No. 2” means the Supplemental Master Trust Indenture No. 2, dated as of May 1, 2018, by the Corporation executed and delivered to the Master Trustee, supplemental to the Master Indenture, providing for the issuance of the Series 2018 Obligations and certain other obligations.

“Surplus Construction Fund Moneys” means all moneys (including moneys earned pursuant to the provisions of Article VI of the Bond Indenture) remaining in the Construction Fund after completion or termination of a Project (as evidenced by a Completion Certificate) and payment of all other costs then due and payable from the Construction Fund.

“Tax Certificate” means the Tax Certificate and Agreement, dated as of the Closing Date, relating to the Tax Exempt Bonds, between the Issuer and the Corporation, including any supplements and amendments thereto.

“Tax Exempt Bonds” means, collectively, the Series 2018A Bonds, the Series 2018B Bonds and any Additional Bonds, the interest on which is intended to be excludable from the gross income of the owners thereof for federal income tax purposes.

“Trust Estate” means the property pledged and assigned to the Bond Trustee pursuant to the Bond Indenture.

“Unassigned Rights” means the rights of the Issuer under the Loan Agreement and under the Bond Indenture to (i) inspect books and records; (ii) give or receive notices, approvals, consents, requests and other communications; (iii) receive payment or reimbursement for expenses, including without limitation any Additional Payments; (iv) immunity from and limitation of liability; and (v) indemnification by the Corporation; and further, to enforce, its own name and on its own behalf, those provisions of the Bond

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Indenture and any other document, instrument or agreement entered into with respect to the Bonds that provides generally for the foregoing enumerated rights or any similar rights of the Issuer.

THE MASTER INDENTURE

The following summarizes certain provisions of the Master Indenture, including as supplemented by the Supplemental Master Indenture No. 2. Such summary does not purport to be complete and reference is made to the Master Indenture for full and complete statements of all such provisions.

General

Under the Master Indenture, the Obligated Group Representative is authorized to incur, for itself and on behalf of any other Members that may be added to the Obligated Group, Obligations to evidence or secure indebtedness. The Obligated Group Representative will issue, pursuant to Supplemental Master Indenture No. 2, Obligation No. 3 to secure the Series 2018A Bonds, Obligation No. 4 to secure the Series 2018B Bonds and Obligation No. 5 to secure the Series 2018C Bonds.

Contents of Certificates and Opinions

Every Certificate or opinion provided for in the Master Indenture with respect to compliance with any provision thereof shall include (1) a statement that the Person making or giving such certificate or opinion has read such provision and the definitions in the Master Indenture relating thereto; (2) a brief statement as to the nature and the scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such Person, he or she has made, or caused to be made, such examination or investigation as is necessary to enable him or her to express an informed opinion with respect to the subject matter referred to in the instrument to which his or her signature is affixed; and (4) a statement as to whether, in the opinion of such Person, such provision has been complied with.

Any such Certificate or opinion made or given by an officer of a Member or the Master Trustee may be based, insofar as it relates to legal, accounting or hospital management matters, upon a Certificate or opinion or representation of counsel, an accountant or Independent Consultant unless such officer knows, or in the exercise of reasonable care should have known, that the Certificate, opinion or representation with respect to the matters upon which such Certificate, opinion or representation may be based, as aforesaid, is erroneous. Any such Certificate, opinion or representation made or given by counsel, an accountant, or an Independent Consultant, may be based, insofar as it relates to factual matters (with respect to which information is in the possession of any Member) upon the Certificate or opinion of, or representation by an officer of any Member unless such counsel, accountant or Independent Consultant knows, or in the exercise or reasonable care should have known, that the Certificate, opinion of or representation by such officer, with respect to the factual matters upon which such Person’s Certificate or opinion may be based, as aforesaid, is erroneous. The same officer of any Member or the same counsel or accountant or Independent Consultant, as the case may be, need not certify as to all the matters required to be certified under any provision of the Master Indenture, but different officers, counsel, accountants or Independent Consultants may certify as to different matters, respectively.

Authorization for Issuance of Obligations in Series

From time to time when authorized by the Master Indenture and subject to the terms, limitations and conditions established in the Master Indenture, the Obligated Group Representative may authorize the issuance of an Obligation or a Series of Obligations by entering into a Related Supplement. The Obligation or the Obligations of any such Series may be issued and delivered to the Master Trustee for authentication upon compliance with the provisions of the Master Indenture and of any Related Supplement.

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Each Related Supplement authorizing the issuance of an Obligation or a Series of Obligations shall specify and determine the principal amount of such Obligation or Series of Obligations, the purposes for which such Obligation or Series of Obligations are being issued, the form, title, designation, and the manner of numbering or denominations, if applicable, of such Obligations, the date or dates of maturity of such Obligations, the date of issuance of such Obligations, and any other provisions deemed advisable or necessary by the Obligated Group Representative.

Any Interest Rate Agreement may be authenticated as an Obligation under the Master Indenture. Any Interest Rate Agreement which is authenticated as an Obligation under the Master Indenture shall be equally and ratably secured by any lien created under the Master Indenture with all other Obligations issued thereunder except as otherwise expressly provided; provided, however, that any such Obligation shall be deemed Outstanding under the Master Indenture solely for the purpose of receiving payment under the Master Indenture and shall not be entitled to any other rights thereunder.

Conditions to the Issuance of an Obligation or a Series of Obligations

The issuance, authentication and delivery of any Obligation or Series of Obligations is subject to the following specific conditions:

(a) The Obligated Group Representative and the Master Trustee shall have entered into a Related Supplement providing for the terms and conditions of such Obligations and the repayment thereof.

(b) The Master Trustee shall have received an Officer’s Certificate to the effect that each Member is in full compliance with all warranties, covenants and agreements set forth in the Master Indenture and in any Related Supplement.

(c) The Master Trustee shall have received an Officer’s Certificate to the effect that neither an Event of Default nor any event which with the passage of time or the giving of notice or both would become an Event of Default has occurred or would occur upon issuance of such Obligations or is continuing under the Master Indenture or any Related Supplement.

(d) All requirements and conditions to the issuance of such Obligations, if any, set forth in the Related Supplement have been complied with and satisfied, as provided in an Officer’s Certificate, a certified copy of which shall be delivered to the Master Trustee.

(e) An Opinion of Independent Counsel to the effect that registration of the Obligation under the Securities Act of 1933, is not required, or, if such registration is required, that the Obligated Group has complied with all applicable provisions of said Securities Act of 1933.

(f) If each Obligation constitutes Indebtedness, the requirements described below under the subheading “—Limitations on Additional Indebtedness” have been satisfied.

Payment of Principal and Interest

Each Member jointly and severally covenants and agrees in the Master Indenture to pay or cause to be paid promptly all Required Payments at the place, on the dates and in the manner provided therein, in any Related Supplement and in the Obligations whether at maturity, upon proceedings for redemption, by acceleration or otherwise, and that each Member shall faithfully observe and perform all of the conditions, covenants and requirements of the Master Indenture, any Related Supplement and any Obligation, and that

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the time of such payment and performance is of the essence concerning the obligations under the Master Indenture.

The obligation of each Member with respect to Required Payments shall not be abrogated, prejudiced or affected by:

(1) the granting of any extension, waiver or other concession given to any Member by the Master Trustee or any Holder or by any compromise, release, abandonment, variation, relinquishment or renewal of any of the rights of the Master Trustee or any Holder or anything done or omitted or neglected to be done by the Master Trustee or any Holder in exercise of the authority, power and discretion vested in them by the Master Indenture, or by any other dealing or thing which, but for this provision, might operate to abrogate, prejudice or affect such obligation;

(2) the liability of any Member under the Master Indenture ceasing for any cause whatsoever, including the release of any Member pursuant to the provisions of the Master Indenture or any Related Supplement from membership in the Obligated Group; or

(3) any Member’s becoming incompetent or otherwise failing to become liable as, or losing eligibility to become, a Member with respect to an Obligation.

The obligation of each Member to make Required Payments is a continuing one and is to remain in effect until all Required Payments have been paid in full in accordance with the Master Indenture. All moneys from time to time received by the Obligated Group Representative or the Master Trustee to reduce indebtedness on Obligations, whether from or on account of the Members or otherwise, shall be regarded as payments in gross without any right on the part of any one or more of the Members to claim the benefit of any moneys so received until the whole of the amounts owing on Obligations has been paid or satisfied and so that if any Member files bankruptcy, the Obligated Group Representative or the Master Trustee shall be entitled to prove up the total Indebtedness on Obligations Outstanding as to which the liability of such Member has become fixed.

Each such Obligation shall be a primary obligation and shall not be treated as ancillary to or collateral with any other obligation and shall be independent of any other security so that the obligation of each Member shall be enforceable without first having recourse to any such security or source of payment and without first taking any steps or proceedings against any other Person. The Obligated Group Representative and the Master Trustee, and each of them, are empowered to enforce each such obligation, as hereinbefore provided, and to enforce the making of Required Payments; and each Member hereby authorizes the Obligated Group Representative and the Master Trustee, and each of them, to enforce or refrain from enforcing any obligation and to make any arrangement or compromise with any particular Member or Members as the Obligated Group Representative or the Master Trustee may deem appropriate, consistent with the Master Indenture and any Related Supplement, and waives under the Master Indenture in favor of the Obligated Group Representative and the Master Trustee all rights against the Obligated Group Representative, the Master Trustee and any other Member, insofar as is necessary to give effect to any of the provisions summarized under this caption.

Pledge of Gross Revenues

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and maintain, subject to the provisions of this subheading. Subject only to the provisions of the Master Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Master Indenture, each Member pledges, and to the extent permitted by law, grants a security interest to the Master Trustee in all of the Gross Revenues of the Obligated Group to secure the payment of Required Payments and the performance by the Members of their other obligations under the Master Indenture; provided however that each Member may create, assume or suffer to exist Permitted Encumbrances. Each Member shall execute a depository account control agreement with each Depository Bank, and shall execute and deliver such other documents as may be necessary or reasonably requested by the Master Trustee in order to perfect or maintain as perfected such security interest or give public notice thereof.

Amounts in the Gross Revenue Fund may be used and withdrawn by any Member at any time for any lawful purpose, except as provided in the Master Indenture. If any Member is delinquent for more than one Business Day in the payment of any Required Payment with respect to any Obligation issued pursuant to a Related Supplement, the Master Trustee shall notify the Obligated Group Representative and the Depository Bank(s) of such delinquency, and, unless such Required Payment is paid, or provision for payment is duly made in a manner satisfactory to the Master Trustee in its sole discretion, within five days after receipt of such notice, the Obligated Group Representative or the appropriate Member shall cause the Depository Bank(s) to transfer the Gross Revenue Fund to the name and credit of the Master Trustee. The Master Trustee shall continue to hold the Gross Revenue Fund until amounts on deposit in said fund are sufficient to pay in full, or have been used to pay in full, all Required Payments in default and all other Events of Default actually known to a Responsible Officer of the Master Trustee have been made good or cured to the satisfaction of the Master Trustee in its sole discretion or provision deemed by the Master Trustee in its sole discretion to be adequate shall have been made therefor, whereupon the Gross Revenue Fund (except for the Gross Revenues required to make such payments or cure such defaults) shall be returned to the name and credit of the appropriate Members. During any period that the Gross Revenue Fund is held in the name and to the credit of the Master Trustee, the Master Trustee shall use and withdraw amounts in said fund from time to time to make Required Payments as such payments become due (whether by maturity, redemption, acceleration or otherwise), and, if such amounts shall not be sufficient to pay in full all such payments due on any date, then to the payment of debt service on Obligations ratably, without any discrimination or preference, and to such other payments in the order which the Master Trustee, in its discretion, shall determine to be in the best interests of the Holders, without discrimination or preference. During any period that the Gross Revenue Fund is held in the name and to the credit of the Master Trustee, the Members shall not be entitled to use or withdraw any of the Gross Revenues of the Obligated Group unless and to the extent that the Master Trustee at its sole discretion so directs for the payment of current or past due operating expenses of the Members; provided, however, that the Members shall be entitled to use or withdraw any amounts in the Gross Revenue Fund which do not constitute Gross Revenues of the Obligated Group. Each Member agrees to execute and deliver all instruments as may be required to implement the provisions described under this subheading. Each Member further agrees in the Master Indenture that a failure to comply with the terms described under this subheading shall cause irreparable harm to the Holders and shall entitle the Master Trustee, with or without notice, to take immediate action to compel the specific performance of the obligations of the Members as provided in the Master Indenture.

Covenants as to Maintenance of Properties, Etc.

Each Member, respectively, covenants and agrees in the Master Indenture:

(a) That it will operate and maintain its Principal Property in accordance with all valid and applicable governmental laws, ordinances, approvals and regulations including, without limitation, such zoning, sanitary, pollution and safety ordinances and laws and such rules and regulations thereunder as may be binding upon it; provided, however, that no Member shall be required to comply with any law, ordinance, approval or regulation as long as it shall in good faith

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contest the validity thereof. Each Member, respectively, further covenants and agrees that it will maintain and operate its Principal Property and all engines, boilers, pumps, machinery, apparatus, fixtures, fittings and equipment of any kind in or that shall be placed in any building or structure now or hereafter at any time constituting part of its Principal Property in good repair, working order and condition, and that it will from time to time make or cause to be made all needful and proper replacements, repairs, renewals and improvements so that the operations of such Member will not be materially impaired.

(b) That it will pay and discharge all applicable taxes, assessments, governmental charges of any kind whatsoever, water rates, meter charges and other utility charges which may be or have been assessed or which may have become liens upon the Principal Property and will make such payments or cause such payments to be made, respectively, in due time to prevent any delinquency thereon or any forfeiture or sale of the Principal Property or any part thereof, and, upon request, will furnish to the Master Trustee receipts for all such payments, or other evidences satisfactory to the Master Trustee; provided, however, that no Member shall be required to pay any tax, assessment, rate or charge as provided in the Master Indenture as long as it shall in good faith contest the validity thereof, provided that such Member shall have set aside reserves with respect thereto that, in the opinion of the Governing Body of the Obligated Group Representative, are adequate.

(c) That it will pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Obligations issued and Outstanding under the Master Indenture) whose validity, amount or collectability is being contested in good faith.

(d) That it will at all times comply with all terms, covenants and provisions of any Lien at such time existing upon its Property or any part thereof or securing any of its Indebtedness noncompliance with which would have a material adverse effect on the operations of the Obligated Group or its Property.

(e) That it will use its best efforts (as long as it is in its best interest and will not materially adversely affect the interests of the Holders) to procure and maintain all permits, licenses and other governmental approvals necessary for the operation of its Property and to maintain its qualification for participation in and payment under private insurance programs having broad application and federal, state and local governmental programs providing for payment or reimbursement for services rendered.

(f) That it will take no action or suffer any action to be taken by others which would result in the interest on any Related Bonds issued as tax-exempt bonds becoming subject to federal income taxation.

Insurance Required

Each Member covenants and agrees that it will keep its Property and all of its operations adequately insured at all times and carry and maintain such insurance in amounts which are commercially feasible, customarily carried, subject to customary deductibles, and against such risks as are customarily insured against by other corporations in connection with the ownership and operation of facilities of similar character and size.

The Obligated Group Representative shall employ an Insurance Consultant at least every two years to review the insurance requirements of the Members. If the Insurance Consultant makes recommendations

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for the increase of any Members’ insurance coverage, the Obligated Group Representative shall increase or cause to be increased such coverage in accordance with such recommendations, subject to a good faith determination of the Governing Body of the Obligated Group Representative that such recommendations, in whole or in part, are in the best interests of the Obligated Group. In lieu of maintaining insurance coverage that the Governing Body of the Obligated Group Representative deems necessary, the Members shall have the right to adopt alternative risk management programs that the Governing Body of the Obligated Group Representative determines to be reasonable and that shall not have a material adverse impact on reimbursement from third party payors; including, without limitation, the right to self-insure in whole or in part individually or in connection with other institutions, to participate in programs of captive insurance companies, to participate with other health care institutions in mutual or other cooperative insurance or other risk management programs, to participate in state or federal insurance programs, to take advantage of state or federal laws now or hereafter in existence limiting medical and malpractice liability, or to establish or participate in other alternative risk management programs; all as may be approved, in writing, as reasonable and appropriate risk management by the Insurance Consultant and reviewed each year thereafter.

The Master Trustee shall not be responsible for the sufficiency of any insurance required or for the obtaining of such insurance and in all events shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by any Member. The Obligated Group Representative shall cause to be delivered to the Master Trustee on the date of the execution of the Master Indenture and at least biannually thereafter, no later than within 120 days following the date audited financial statements are required to be furnished pursuant to the Master Indenture, an Officer’s Certificate stating that the Obligated Group is in compliance with the provisions described the Master Indenture. The Master Trustee may conclusively rely on such Certificate.

Limitations on Encumbrances

Each Member, respectively, covenants and agrees in the Master Indenture that it will not create, assume or suffer to exist any Lien upon the Gross Revenues or the Principal Property other than Permitted Encumbrances. Each Member, respectively, further covenants and agrees that if such a Lien is created or assumed by any Member, it will make or cause to be made effective a provision whereby all Obligations will be secured prior to any such Indebtedness or other obligation secured by such Lien. Nothing in the Master Indenture is intended to create an equitable or legal lien or interest on or in the Property, though the Deed of Trust pledges certain Property to the Master Trustee for the benefit of the Holders of the Obligations.

Limitations on Additional Indebtedness

Each Member, respectively, agrees that it will not incur any Additional Indebtedness except as follows:

(a) Long-Term Indebtedness, provided that:

(i) the aggregate principal amount of such Long-Term Indebtedness and all other Outstanding Long-Term Indebtedness incurred as described in this clause (i) does not exceed 10% of the Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available immediately preceding the issuance of such Long-Term Indebtedness (provided that to the extent Long- Term Indebtedness initially incurred pursuant to this clause subsequently complies with any other incurrence requirement, such Long-Term Indebtedness shall, at the option of the

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Obligated Group Representative, thereafter not be deemed to be incurred pursuant to this clause); or

(ii) the Master Trustee receives an Officer’s Certificate certifying the Long- Term Debt Service Coverage Ratio, taking into account all Outstanding Long-Term Indebtedness and the Long-Term Indebtedness proposed to be incurred, for the most recent complete Fiscal Year for which audited financial statements are available, which Long- Term Debt Service Coverage Ratio is not less than 1.20:1; or

(iii) the Master Trustee receives:

A. an Officer’s Certificate certifying that, taking into account all Outstanding Long-Term Indebtedness but not the Long-Term Indebtedness proposed to be incurred, for the most recent Fiscal Year for which audited financial statements are available, the Long-Term Debt Service Coverage Ratio is not less than 1.20:1; and

B. either

1. an Officer’s Certificate, accompanied by the written report of an Independent Consultant, stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (x) in the case of Long-Term Indebtedness to finance capital improvements, the Fiscal Year succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness issued for other purposes than are described in (x), the Fiscal Year succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.25:1, as shown by forecasted statements of revenues and expenses for such Fiscal Year, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based; or

2. an Officer’s Certificate stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (x) in the case of Long-Term Indebtedness to finance capital improvements, the two Fiscal Years succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness issued for other purposes than are described in (x), the two Fiscal Years succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.50:1, as shown by forecasted statements of revenues and expenses for such Fiscal Years, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based; or

C. the Master Trustee receives an Officer’s Certificate, accompanied by a written report of an Independent Consultant, stating the forecasted Long-Term Debt Service Coverage Ratio, taking into account the Long-Term Indebtedness proposed to be incurred, for (A) in the case of Long-Term Indebtedness to finance capital improvements, the Fiscal Year succeeding the date on which such capital improvements are expected to be in operation or (B) in the case of Long-Term Indebtedness issued for other purposes than are described in (A), the Fiscal Year

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succeeding the date on which the proposed Long-Term Indebtedness is to be incurred, is not less than 1.50:1, as shown by forecasted statements of revenues and expenses for such Fiscal Year, accompanied by a statement of the relevant assumptions upon which such forecasted statements are based.

(d) Short-Term Indebtedness provided that:

(i) such Short-Term Indebtedness is incurred in compliance with the provisions of subsection (a) described above, treating such Short-Term Indebtedness for such purposes only as if it were Long-Term Indebtedness; or

(ii) (1) the total amount of such Short-Term Indebtedness does not exceed 15% of Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available; and (2) in every Fiscal Year, there shall be at least a 30-day period when the balance of such Short-Term Indebtedness is reduced to an amount which shall not exceed 5% of Total Operating Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements of the Obligated Group are available.

(e) Subordinated Indebtedness without limitation.

(f) Balloon Indebtedness or Interim Indebtedness provided that the conditions described in subsection (a) above are satisfied with respect to the incurrence of such Balloon Indebtedness or Interim Indebtedness utilizing the assumptions specified in clause (c) of the definition of “Maximum Annual Debt Service.”

(g) Extendable Indebtedness provided that the conditions described in subsection (a) above are satisfied with respect to the incurrence of such Extendable Indebtedness utilizing the assumptions specified in clause (d) of the definition of “Maximum Annual Debt Service.”

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(i) Indebtedness which is non-recourse to any Member of the Obligated Group.

(j) Indebtedness to fund a Capital Addition if, prior to incurrence thereof, there is delivered to the Master Trustee (i) a written report of an Independent Consultant (prepared in accordance with industry standards) to the effect that the estimated projected Long-Term Debt Service Coverage Ratio of the Obligated Group will be not less than 1.25:1 for the first full Fiscal Year following the later of (A) the estimated completion of the Capital Addition, or (B) the first full Fiscal Year following achievement of Stable Occupancy of the Capital Addition, provided that the achievement of Stable Occupancy is projected to occur no later than during the sixth full Fiscal Year following the incurrence of such Capital Addition Indebtedness; provided that such report shall include forecast balance sheets, statements of revenues and expenses and statements of changes in financial position for such Fiscal Years and a statement of the relevant assumptions upon which such forecasted statements are based, which financial statements must indicate that sufficient revenues and cash flow could be generated to pay the operating expenses of the Obligated Group’s proposed and existing Facilities and the debt service on the Obligated Group’s other existing Indebtedness during such Fiscal Year plus the proposed Long-Term Indebtedness, and (ii) an Officer’s Certificate of the Obligated Group Representative dated the date of the incurrence of the Capital Addition indebtedness to the effect that (A) the Obligated Group is then in compliance with all covenants in the Master Indenture and no Event of Default or event that with the passage of time could become an Event of Default then exists with respect to the Master Indenture, (B) the Obligor has executed and delivered a guaranteed maximum price construction contract, stipulated sum construction contract or such other construction contract that establishes the complete construction cost with respect to the Capital Addition, (C) a construction monitor having the skill and experience necessary to perform its duties with respect to the monitoring of the construction process and having a favorable reputation for such skill and experience has been engaged with respect to the Capital Addition, (D) all permits required to be obtained for the commencement of construction of the Capital Addition have been obtained or receipt of any such permit is perfunctory and will be received prior to such commencement; and (E) the Facilities constituting the Capital Addition will be constructed on the Principal Property.

Limitations on Guaranties

Each Member covenants and agrees in the Master Indenture that it will not enter into, or become liable with respect to, any Guaranty except: (a) Guaranties of Indebtedness of another Member; (b) Guaranties of Obligations issued under the Master Indenture; (c) Any other Guaranty provided that the conditions described in subparagraph (a) above under the subheading “—Limitations on Additional Indebtedness” are satisfied with respect to the issuance of such Guaranty utilizing the assumptions specified in clause (a) of the definition of “Maximum Annual Debt Service;” and (d) Guaranties issued as summarized under this caption, the outstanding aggregate principal amount of which does not exceed $5,000,000,

Rates and Charges; Debt Coverage

Each Member covenants and agrees in the Master Indenture to operate all of its Principal Property in the aggregate on a revenue-producing basis and to charge such fees and rates for its Facilities and services and to exercise such skill and diligence, including obtaining payment for services provided, as to provide income from its Facilities together with other available funds sufficient to pay promptly all payments of principal and interest on its Indebtedness, all expenses of operation, maintenance and repair of its Property and all other payments required to be made by it under the Master Indenture to the extent permitted by law. Each Member further covenants and agrees that it will from time to time as often as necessary and to the

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extent permitted by law, revise its rates, fees and charges in such manner as may be necessary or proper to comply with the following provisions:

(a) Within 120 days after the end of each Fiscal Year (commencing with the first full Fiscal Year following the execution of the Master Indenture) the Obligated Group Representative shall compute Income Available for Debt Service, Annual Debt Service and Debt Service Coverage Ratio of the Obligated Group and promptly furnish to the Required Information Recipients a Certificate setting forth the results of such computation.

(b) If the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.20:1, the Master Trustee shall require the Obligated Group Representative, at the Obligated Group’s expense, to retain an Independent Consultant within 30 days following the calculation described in the immediately preceding paragraph to make recommendations with respect to the rates, fees and charges of the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase such Debt Service Coverage Ratio to at least 1.20:1 for the following Fiscal Year.

For purposes of calculations described under this subheading, an unrestricted contribution from any other Affiliate of any Member of the Obligated Group may, at the sole discretion of the Obligated Group Representative, be treated as Income Available for Debt Service being earned during the period of such calculation so long as the unrestricted contribution is made prior to the date the applicable Certificate is required to be delivered with respect to such calculation. If the unrestricted contribution is counted in a period prior to the date of such transfer in accordance with the previous sentence, it shall not be included in the calculation for the period in which such contribution was actually made.

If a written report of an Independent Consultant is delivered to the Master Trustee stating that Industry Restrictions have made it impossible for the ratio in this subsection to be met, then such ratio shall be reduced to 1.00:1 for such Fiscal Year.

The provisions of this subsection (b) are subject to the provisions of subsection (e) below with respect to Capital Additions.

(c) A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with each of the Required Information Recipients within 60 days of retaining the Independent Consultant. Each Member shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Member) and permitted by law. The provisions described under this subheading shall not be construed to prohibit any Member from serving indigent patients or residents to the extent required for such Member to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients or residents without charge or at reduced rates so long as such service does not prevent the Obligated Group from satisfying the other requirements of described under this subheading.

(d) Notwithstanding any other provisions of the Master Indenture, an Event of Default arising from the Debt Service Coverage Ratio shall only occur under the Master Indenture if one or more of the following conditions applies:

(i) the Obligated Group:

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A. fails to achieve a Debt Service Coverage Ratio of at least 1.20:1, and

B. fails to take all necessary action to comply with the procedures described under this subheading for retaining an Independent Consultant to prepare a report, adopting a plan, and following all recommendations contained in such report or plan to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law; or

(ii) the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00:1 for any Fiscal Year and the Days Cash on Hand of the Obligated Group as of the last day of such Fiscal Year is less than 250 days; or

(iii) the Obligated Group fails to achieve a Debt Service Coverage Ratio of at least 1.00:1 for two consecutive Fiscal Years.

(e) Notwithstanding any other provisions of the Master Indenture to the contrary, in the event that any Member of the Obligated Group incurs any Additional Indebtedness for any acquisition, construction, renovation or replacement project or Capital Addition, the Debt Service Requirements on such Additional Indebtedness and the Gross Revenues relating to the Project or Capital Addition financed in whole or in part with the proceeds of such Additional Indebtedness shall be excluded from the calculation of the Debt Service Coverage Ratio (but not from any required calculation of the Long-Term Debt Service Coverage Ratio) of the Obligated Group for the applicable period (each a “Start-Up Period”) and conditions described below are satisfied:

(i) The debt service requirements, revenues and expenses described above shall be excluded from the calculation of the Debt Service Coverage Ratio of the Obligated Group for the period commencing on the date of incurrence of the Additional Indebtedness until:

A. In the case of Additional Indebtedness to fund new revenue producing Facilities, the earlier of the first full Fiscal Year after Stable Occupancy is achieved with respect to such new Facilities and the sixth full Fiscal Year following the incurrence of such Additional Indebtedness; or

B. In the case of Additional Indebtedness to fund a capital project not described in the Master Indenture, the first full Fiscal Year after the earlier of the date of substantial completion of such project and the date which is six months after the projected date of substantial completion of such project, as set forth in a report of an Independent Consultant in connection with the incurrence of such Additional Indebtedness; or

C. In the case of Additional Indebtedness incurred for any other purpose, the first full Fiscal Year after the date of incurrence of such Additional Indebtedness.

(ii) The interest on such Additional Indebtedness and any projected start-up losses during the applicable Start-Up Period must be funded from the proceeds of such Additional Indebtedness or other moneys designated by the Obligated Group, and such proceeds or other moneys must continue to be available for such purposes at all times during the applicable Start-Up Period. Further, no principal of such Additional

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Indebtedness is payable during the applicable Start-Up Period, other than principal that may become due as the result of the collection of Initial Entrance Fees during such period.

(f) Pursuant to an amendment to the Master Indenture by Supplemental Master Indenture No. 1, and any other provision of the Master Indenture notwithstanding, during The Village at Mary’s Woods Expansion Project Start-Up Period, the calculation of the Debt Service Coverage Ratio of the Obligated Group shall exclude all principal, interest and premium requirements in respect of certain of the Series 2017 Bonds, and all revenue and expense properly allocable to The Village at Mary’s Woods Expansion Project in accordance with generally accepted accounting principles. Pursuant to a further amendment to the Master Indenture by Supplemental Master Indenture No. 2, and any other provision of the Master Indenture notwithstanding, during The Village at Mary’s Woods Stage 2 Expansion Project Start-Up Period, the calculation of the Debt Service Coverage Ratio of the Obligated Group shall exclude all principal, interest and premium requirements in respect of the Series 2018 Bonds, and all revenue and expense properly allocable to The Village at Mary’s Woods Stage 2 Expansion Project in accordance with generally accepted accounting principles.

Sale, Lease or Other Disposition of Property

Each Member agrees in the Master Indenture that it will not transfer any Property except as permitted as described below.

(a) Each Member may sell, lease or otherwise dispose (including without limitation any involuntary disposition) of Property (either real or personal, including cash and investments) to another Member, except that none of the Property or any other Property financed with the proceeds of any Related Bonds issued as tax-exempt bonds shall be transferred by the Member to any other Member unless the Related Bond Trustee has received an Opinion of Bond Counsel to the effect that such transfer shall not adversely affect the validity of the Related Bonds or any exemption from federal income taxation to which such Related Bonds would otherwise be entitled.

(b) A Member may transfer Property, including cash or cash equivalents, to an Affiliate if the Property sold, leased or otherwise disposed of does not, for any consecutive 12- month period, exceed 3% of the Book Value or Current Value of all Property of the Obligated Group (as shown in the most recent audited financial statements of the Obligated Group) and the Debt Service Coverage Ratio was greater than 1.25:1 for the last Fiscal Year for which audited financial statements have been delivered to the Master Trustee, provided that, if such transfer is a transfer of cash, (i) in calculating the Debt Service Coverage Ratio for purposes of this transfer of Property, the Income Available for Debt Service will be reduced by one year’s estimated interest earnings attributable to the Property to be transferred using, at the option of the Obligated Group Representative, either (1) the current budgeted investment rate, as certified in an Officer’s Certificate, or (2) the actual average investment rate on the transferred Property, as certified in a report of an Independent Consultant; and (ii) as of the end of the last fiscal quarter for which financial statements have been delivered to the Master Trustee as required under the subheading “THE MASTER INDENTURE—Filing of Financial Statements, Reports and Other Information” herein, the Obligated Group had greater than 180 Days Cash on Hand after giving effect to the transaction. If the Debt Service Coverage Ratio is not less than 1.25:1, the foregoing percentage of the total Book Value or Current Value may be increased as follows under the following conditions:

(i) up to 5%, if Days Cash on Hand would be greater than 300 after the effect of such sale, lease or disposition of assets; or

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(ii) up to 7.5%, if Days Cash on Hand would be greater than 350 after the effect of such sale, lease or disposition of assets; or

(iii) up to 10%, if Days Cash on Hand would be greater than 450 after the effect of such sale, lease or disposition of assets;

(c) A Member may transfer Property, including cash or cash equivalents, to a Person other than a Member or an Affiliate without limitation if:

(i) the transfer is:

A. in return for other Property of equal or greater value and usefulness; or

B. in the ordinary course of business upon fair and reasonable terms; or

(ii) prior to such sale, lease or other disposition there is delivered to the Master Trustee an Officer’s Certificate of a Member stating that, in the judgment of the signer, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property; or

(iii) such Property consists solely of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on the Obligations.

(d) If any Property to be disposed in accordance with the provisions described under this subheading is subject to a Lien, the Master Trustee shall, upon the request of the Obligated Group Representative, release such Property from the Lien pursuant to the terms of any documentation creating the Lien.

Nothing described under this subheading shall prohibit any Member from making secured or unsecured loans provided that (1) any such loan is evidenced in writing, (2) the Obligated Group Representative reasonably expects such loan to be repaid and (3) such loan bears interest at a reasonable rate of interest as determined in good faith by the Obligated Group Representative.

If the Property to be disposed in accordance with the provisions described in this paragraph is subject to a Deed of Trust, the Master Trustee shall, upon the request of the Obligated Group Representative, release such Property from the applicable Deed of Trust pursuant to the terms of such Deed of Trust.

Liquidity Covenant

The Obligated Group covenants that it will calculate the Days Cash on Hand of the Obligated Group as of December 31 and June 30 of each Fiscal Year (such date being a “Testing Date”). The Obligated Group shall include such calculations in the Officer’s Certificate delivered pursuant to paragraph (b)(1) described below under the subheading “THE MASTER INDENTURE—Filing of Financial Statements, Reports and Other Information.” Each Obligated Group Member is required to conduct its business so that on each Testing Date the Obligated Group shall have not less than 180 Days Cash on Hand.

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If the Obligated Group has not achieved 180 Days Cash on Hand by the next Testing Date following delivery of the Officer’s Certificate required in the preceding paragraph, the Obligated Group Representative shall, within 30 days after receipt of the Officer’s Certificate disclosing such deficiency, retain an Independent Consultant to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase the Days Cash on Hand to the required level for future periods. A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with each of the Required Information Recipients within 60 days of the date such Independent Consultant is retained. Each Member of the Obligated Group shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the Member) and permitted by law.

Pursuant to an amendment to the Master Indenture by Supplemental Master Indenture No. 1, and any other provision of the Master Indenture notwithstanding, during The Village at Mary’s Woods Expansion Project Start-Up Period, the calculation of the Days Cash on Hand shall exclude all interest requirements in respect of certain of the Series 2017 Bonds, and all revenue and expense properly allocable to The Village at Mary’s Woods Expansion Project in accordance with generally accepted accounting principles.”

Consolidation, Merger, Sale or Conveyance

(a) Each Member agrees in the Master Indenture that it will not merge into, or consolidate with, one or more corporations which are not Members, or allow one or more of such corporations to merge into it, or sell or convey all or substantially all of its Property to any Person who is not a Member, unless:

(i) Any successor corporation to such Member (including without limitation any purchaser of all or substantially all the Property of such Member) is a Person (other than a natural person) organized and existing under the laws of the United States of America or a state thereof and shall execute and deliver to the Master Trustee an appropriate instrument containing the agreement of such successor to assume, jointly and severally, the due and punctual payment of the principal of, premium, if any, and interest on all Obligations according to their tenor and the due and punctual performance and observance of all the covenants and conditions of the Master Indenture to be kept and performed by such Member;

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(ii) Immediately after such merger or consolidation, or such sale or conveyance, no Member would be in default in the performance or observance of any covenant or condition of any Related Loan Document or the Master Indenture;

(iii) Assuming that any Indebtedness of any successor or acquiring corporation is Indebtedness of such Member and that the revenues and expenses of the Member for such most recent Fiscal Year include the revenues and expenses of such other corporation (A) immediately after such merger or consolidation, sale or conveyance, the Debt Service Coverage Ratio of the Obligated Group for the most recent Fiscal Year for which financial statements that have been reported upon by independent certified public accountants are available, if calculated on a pro forma basis including the effect of such merger or consolidation, sale or conveyance, would have been not less than 1.20:1, or that such pro forma Debt Service Coverage Ratio of the Obligated Group is not less than the Debt Service Coverage Ratio of the Obligated Group was for such Fiscal Year prior to such merger or consolidation, sale or conveyance and (B) immediately after such merger or consolidation, sale or conveyance, the Days Cash on Hand of the Obligated Group as set forth on the most recent quarterly financial statements delivered to the Master Trustee pursuant to the provisions described under the subheading “THE MASTER INDENTURE—Filing of Financial Statements, Reports and Other Information” would be not less than 180 or that such calculation of Days Cash on Hand of the Obligated Group is greater than such calculation would be immediately prior to such merger or consolidation, sale or conveyance;

(iv) If all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or fully provided for, there shall be delivered to the Master Trustee an Opinion of Bond Counsel to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance would not adversely affect the validity of such Related Bonds or the exemption otherwise available from federal or state income taxation of interest payable on such Related Bonds; and

(v) If any Related Bonds were rated by a Rating Agency prior to such merger, consolidation, sale or conveyance, written evidence that, after such merger, consolidation, sale or conveyance, all Related Bonds will have a rating of at least “BBB-” (or an equivalent rating) from at least one Rating Agency, or that such rating is equivalent to or better than immediately before such merger, consolidation, sale or conveyance.

(b) In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for its predecessor, with the same effect as if it had been named as such Member. Each successor, assignee, surviving, resulting or transferee corporation of a Member must agree to become, and satisfy the conditions described below under the subheading “THE MASTER INDENTURE—Membership in the Obligated Group” to becoming, a Member of the Obligated Group prior to any such succession, assignment or other change in such Member’s corporate status. Any successor corporation to such Member thereupon may cause to be signed and may issue in its own name Obligations under the Master Indenture and the predecessor corporation shall be released from its obligations under the Master Indenture and under any Obligations, if such predecessor corporation shall have conveyed all Property owned by it (or all such Property shall be deemed conveyed by operation of law) to such successor corporation. All Obligations so issued by such successor corporation shall in all respects have the same legal rank and benefit under the Master Indenture as Obligations theretofore or thereafter issued in accordance with the terms of the Master

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Indenture as though all of such Obligations had been issued under the Master Indenture by such prior Member without any such consolidation, merger, sale or conveyance having occurred.

(c) In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Obligations thereafter to be issued as may be appropriate.

(d) The Master Trustee may rely upon an Opinion of Independent Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions described under this subheading and that it is proper for the Master Trustee under the provisions of the Master Indenture and under the provisions described under this subheading to join in the execution of any instrument required to be executed and delivered under this subheading.

Filing of Financial Statements, Reports and Other Information

(a) The Members covenant in the Master Indenture that they will keep or cause to be kept proper books of records and accounts in which full, true and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Obligated Group in accordance with generally accepted accounting principles consistently applied except as may be disclosed in the notes to the audited financial statements referred to in subparagraph (b) below. To the extent that generally accepted accounting principles would require consolidation of certain financial information of entities which are not Members of the Obligated Group with financial information of one or more Members, consolidated financial statements prepared in accordance with generally accepted accounting principles which include information with respect to entities which are not Members of the Obligated Group may be delivered in satisfaction of the requirements described under this subheading so long as: (i) supplemental information in sufficient detail to separately identify the information with respect to the Members of the Obligated Group is delivered to the Master Trustee with the audited financial statements; (ii) such supplemental information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements delivered to the Master Trustee and, in the opinion of the accountant, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole; and (iii) such supplemental information is used for the purposes of the Master Indenture or for any agreement, document or certificate executed and delivered in connection or pursuant to the Master Indenture.

(b) The Obligated Group Representative will furnish or cause to be furnished to the Required Information Recipients the following:

(i) A monthly statement of the Obligated Group as soon as practicable after the information is available but in no event more than 45 days after the completion of such month, including (1) a calculation of the marketing levels for the Project as of the end of such month, including the number of independent living units that have been sold or cancelled during that month and on an aggregate basis; (2) occupancy levels of the Project as of the end of such month including the number of independent living units, assisted living units and health care units that were Occupied and vacated during that month and on an aggregate basis, as applicable; (3) a summary statement on the status of construction since the prior month; (4) unaudited financial reports on the development costs incurred during that month and on an aggregate quarterly basis; (5) an unaudited statement of revenues and expenses and statement of cash flows of the Obligated Group for such month compared to the approved budget for that month and an unaudited balance sheet of the

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Obligated Group as of the end of such month; and (6) statements of the balances for each fund and account required to be established under the Master Indenture or under any Related Bond Indenture as of the end of such month (obtained from the applicable trustee), all in reasonable detail and certified by an officer of the Obligated Group Representative. The Obligated Group Representative does not need to deliver any monthly statement of the Obligated Group described in this subsection (i) after the occurrence of Stable Occupancy.

(ii) Quarterly unaudited financial statements of the Obligated Group as soon as practicable after they are available but in no event more than 45 days after the completion of such fiscal quarter or 60 days after the completion of the fiscal quarter in the case of a fiscal quarter ending on June 30, including a combined or combining statement of revenues and expenses and statement of cash flows of the Obligated Group during such period, a combined or combining balance sheet as of the end of each such fiscal quarter, and a calculation of the Days Cash on Hand for the second and last fiscal quarters of each year as required by the provisions summarized above under the subheading “THE MASTER INDENTURE—Liquidity Covenant;” a calculation of Debt Service Coverage Ratio for the last fiscal quarter as required by the provisions summarized above under the subheading “THE MASTER INDENTURE—Rates and Charges; Debt Coverage” and occupancy levels of all of the Facilities operated by the Obligated Group by level of care as of the end of each such quarter, all prepared in reasonable detail and certified, subject to year-end adjustment, by an officer of the Obligated Group Representative, and an Officer’s Certificate of the Obligated Group Representative stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or if not, specify all such defaults and the nature thereof.

(iii) Within 120 days of the end of each Fiscal Year, an annual audited financial report of the Obligated Group prepared by a firm of certified public accountants, including a combined balance sheet as of the end of such Fiscal Year and a combined statement of changes in fund balances for such Fiscal Year and a combined statement of revenues and expenses and statement of cash flows of the Obligated Group for such Fiscal Year, showing in each case in comparative form the financial figures for the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing calculations of the Obligated Group’s Debt Service Coverage Ratio for said Fiscal Year and of the Obligated Group’s Days Cash on Hand as of the last day of such Fiscal Year and a statement that such accountants have no knowledge of any default under the Master Indenture, insofar as such default relates to accounting matters, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof, insofar as such default or defaults relate to accounting matters.

(iv) Summary of the board-approved annual budget.

(v) If the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 1.00:1 as provided in the Master Indenture, the Obligated Group will deliver the financial information and the calculations described in paragraph (ii) above on a monthly basis, with the Debt Service Coverage Ratio calculated on a year-to-date basis each month, within 45 days of the end of each month until the Debt Service Coverage Ratio of the Obligated Group is at least 1.00:1.

(vi) Pursuant to an amendment to the Master Indenture by Supplemental Master Indenture No. 1, a monthly statement of the Obligated Group Representative as

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soon as practicable after the information is available but in no event more than 45 days after the completion of such month, which shall include a marketing report on presales of, entrance fees received and refunds for, and occupancy levels of The Village at Mary’s Woods Expansion Project as of the last day of such month, an occupancy report, by type of unit, for all Facilities of the Obligated Group as of the last day of such month, a summary statement showing the status of construction of The Village at Mary’s Woods Expansion Project as of the last day of such month, and a copy of the statement of cash flows of the Obligated Group for such month (and on a Fiscal Year-to-date basis), all in reasonable detail and certified by an officer of the Obligated Group Representative. The reporting described in this subparagraph shall not be required after the achievement of The Village at Mary’s Woods Expansion Project Stable Occupancy.

(vii) Pursuant to an amendment to the Master Indenture by Supplemental Master Indenture No. 2, a monthly statement of the Obligated Group Representative as soon as practicable after the information is available but in no event more than 45 days after the completion of such month, which shall include a marketing report on presales of, entrance fees received and refunds for, and occupancy levels of The Village at Mary’s Woods Stage 2 Expansion Project as of the last day of such month, an occupancy report, by type of unit, for all Facilities of the Obligated Group as of the last day of such month, a summary statement showing the status of construction of The Village at Mary’s Woods Stage 2 Expansion Project as of the last day of such month, and a copy of the statement of cash flows of the Obligated Group for such month (and on a Fiscal Year-to-date basis), all in reasonable detail and certified by an officer of the Obligated Group Representative. The reporting described in this subparagraph shall not be required after the achievement of The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy.

(c) The Obligated Group Representative shall furnish or cause to be furnished to the Master Trustee or any Related Bond Trustee, such additional information as the Master Trustee or any Related Bond Trustee may reasonably request concerning any Member in order to enable the Master Trustee or such Related Bond Trustee to determine whether the covenants, terms and provisions of the Master Indenture have been complied with by the Members and for that purpose all pertinent books, documents and vouchers relating to the business, affairs and Property (other than resident, donor and personnel records) of the Members shall, to the extent permitted by law, at all times during regular business hours be open to the inspection of such accountant or other agent (who may make copies of all or any part thereof) as shall from time to time be designated by the Master Trustee or such Related Bond Trustee.

(d) The Members also agree that, within ten (10) days after its receipt thereof, the Obligated Group Representative will file with each Required Information Recipient a copy of each Independent Consultant’s report or counsel’s opinion required to be prepared under the terms of the Master Indenture.

(e) The Obligated Group Representative shall give prompt written notice of a change of accountants by the Obligated Group to the Master Trustee and each Related Bond Trustee. The notice shall state (i) the effective date of such change; (ii) whether there were any unresolved disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which the accountants claimed would have caused them to refer to the disagreement in a report on the disputed matter, if it was not resolved to their satisfaction; and (iii) such additional information relating thereto as such Related Bond Trustee or the Master Trustee may reasonably request.

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(f) Without limiting the foregoing, each Member will permit, upon reasonable notice, the Master Trustee or any Related Bond Trustee (or such persons as they may designate) to visit and inspect, at the expense of such Person, its Property and to discuss the affairs, finances and accounts of the Obligated Group with its officers and independent accountants, all at such reasonable times and locations and as often as the Master Trustee or the Related Bond Trustee may reasonably desire, provided that the Master Trustee shall have no duty to visit or inspect.

(g) The Obligated Group Representative may designate a different Fiscal Year for the Members of the Obligated Group by delivering a notice to the Master Trustee designating the first and last day of such new Fiscal Year and whether or not there will be any interim fiscal period (the “Interim Period”) of a duration of greater than or less than twelve (12) months preceding such new Fiscal Year. The Members covenant that they will furnish to the Required Information Recipients, as soon as practicable after they are available, but in no event more than 150 days after the last day of such Interim Period, a financial report for such Interim Period certified by a firm of independent certified public accountants selected by the Obligated Group Representative covering the operations of the Obligated Group for such Interim Period and containing a combined balance sheet as of the end of such Interim Period and a combined statement of changes in fund balances and changes in financial position for such Interim Period and a combined statement of revenues and expenses for such Interim Period, showing in each case in comparative form the financial figures for the comparable period in the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing a calculation of the Obligated Group’s Debt Service Coverage Ratio for the Interim Period and a statement that such accountants have obtained no knowledge of any default by any Member in the fulfillment of any of the terms, covenants, provisions or conditions of the Master Indenture, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof (but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any default).

Approval of Consultants

(a) If at any time the Members of the Obligated Group are required to engage an Independent Consultant as described above under the subheadings “THE MASTER INDENTURE—Rates and Charges; Debt Coverage” and “THE MASTER INDENTURE— Liquidity Covenant,” such Independent Consultant shall be engaged in the manner set forth in this subheading.

(b) Upon selecting an Independent Consultant as described above under the subheadings “THE MASTER INDENTURE—Rates and Charges; Debt Coverage” and “THE MASTER INDENTURE—Liquidity Covenant,” the Obligated Group Representative will notify the Master Trustee of such selection. The Master Trustee shall, as soon as practicable but in no case longer than five Business Days after receipt of notice, notify the Holders of all Obligations outstanding of such selection. Such notice shall (i) include the name of the Independent Consultant and a brief description of the Independent Consultant, (ii) state the reason that the Independent Consultant is being engaged including a description of the covenant(s) of the Master Indenture that require the Independent Consultant to be engaged, and (iii) state that the holder of the Obligation will be deemed to have consented to the selection of the Independent Consultant named in such notice unless such Obligation holder submits an objection to the selected Independent Consultant in writing (in a manner acceptable to the Master Trustee) to the Master Trustee within thirty (30) days of the date that the notice is sent to the Obligation Holders. No later than two Business Days after the end of the thirty (30) day objection period, the Master Trustee shall notify the Obligated Group of the number of objections. If two-thirds (66.6%) or more in aggregate principal amount

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of the Holders of the outstanding Obligations have been deemed to have consented to the selection of the Independent Consultant, the Obligated Group Representative may engage the Independent Consultant within five days of receiving notice of that consent. If more than one-third (33.3%) in aggregate principal amount of the owners of the Obligations outstanding have objected to the Independent Consultant selected, the Obligated Group Representative shall select another Independent Consultant within fourteen (14) days after receiving notice of such objection which may be engaged upon compliance with the procedures of this subsection.

All Independent Consultant reports required under the Master Indenture shall be prepared in accordance with then-effective industry-appropriate standards.

(c) When the Master Trustee notifies the Holders of Obligations of such selection, the Master Trustee shall also request any Related Bond Trustee send a notice containing the information required by subparagraph (b) above to the owners of all of the Related Bonds outstanding. Such Related Bond Trustee shall, as the owner of an Obligation securing such Related Bonds, consent or object to the selection of the Independent Consultant in accordance with the response of the owners of such Related Bonds. If two-thirds (66.6%) or more in aggregate principal amount of the Related Bonds have been deemed to have consented to the selection of the Independent Consultant, the Related Bond Trustee shall approve the Independent Consultant within five (5) days of receiving notice of that consent. If more than one-third (33.3%) in aggregate principal amount of the owners of the Related Bonds have objected to the Independent Consultant selected, the Related Bond Trustee shall reject the Independent Consultant within fourteen (14) days after receiving notice of such objection.

The 30-day notice period described in subparagraph (b) above may be extended by the Master Trustee in order to permit each Related Bond Trustee to give the owners of the Related Bonds 30 days to respond to the notice given by the Related Bond Trustee. By acceptance of an Obligation securing any Related Bonds, the Related Bond Trustee agrees to comply with the provisions of this subsection.

Membership in the Obligated Group

Additional Members may be added to the Obligated Group from time to time, provided that prior to such addition, the Master Trustee receives:

(a) a copy of a resolution of the proposed new Member which authorizes the execution and delivery of the Master Indenture or a Related Supplement and compliance with the terms of the Master Indenture;

(b) a Related Supplement pursuant to which the proposed new Member:

(i) agrees to become a Member;

(ii) agrees to be bound by the terms and restrictions imposed by the Master Indenture and Indebtedness represented by the Obligations;

(iii) irrevocably appoints the Obligated Group Representative as its agent and attorney-in-fact and grants to the Obligated Group Representative full power to execute Related Supplements authorizing the issuance of Obligations or Series of Obligations; and

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(iv) designates any or all of its Property as Principal Property consistent with the determination of the Governing Body of the Obligated Group Representative that such Property is Principal Property, pursuant to the Master Indenture;

(c) an Opinion of Independent Counsel to the proposed new Member, which opinion states that the proposed new Member has taken all necessary action to become a Member, and upon execution of a Related Supplement, such proposed new Member will be bound by the terms of the Master Indenture;

(d) a description of any existing Long-Term Indebtedness of the proposed new Member and any Indebtedness which the proposed new Member plans to incur simultaneously with the execution of the Related Supplement;

(e) an Officer’s Certificate (i) (accompanied by a written report of an Independent Consultant if required by the provisions summarized under subparagraph (a) described above under the subheading “THE MASTER INDENTURE—Limitations on Additional Indebtedness”) showing that the Obligated Group could issue at least one dollar of Long-Term Indebtedness immediately following the addition of such Member to the Obligated Group, and showing that immediately following the addition of such Member to the Obligated Group, the Obligated Group shall have not less than 180 Days Cash on Hand, or (ii) demonstrating that an Event of Default under the Master Indenture will be cured if the new Member becomes a Member of the Obligated Group; or (iii) to the effect that the Debt Service Coverage Ratio of the Obligated Group for each of the two most recent Fiscal Years would have been equal to or greater than that required as described under the subheading “THE MASTER INDENTURE—Rates and Charges; Debt Coverage” above;

(f) an Opinion of Bond Counsel to the effect that the addition of such Member (1) under then existing law, would not adversely affect the validity of any Related Bond or any exemption from federal or state income taxation of interest payable on such Related Bond otherwise entitled to such exemption; and (2) will not cause the Master Indenture or the Obligations issued under the Master Indenture to be subject to registration under federal securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred);

(g) an Officer’s Certificate to the effect that no Member, immediately after the addition of such new Member, would be in default in the performance or observance of any covenant or condition of the Master Indenture; and

(h) if any Related Bonds were rated by a Rating Agency prior to the proposed new Member becoming a Member of the Obligated Group, written evidence from at least one Rating Agency that, after such proposed new Member becomes a Member, all Related Bonds will have a rating of at least “BBB-” (or an equivalent rating) from such Rating Agency or that such rating is equivalent to or better than immediately before the Member was added to the Obligated Group; and

(i) such additional documentation as may be required by the Related Supplements.

Withdrawal from the Obligated Group

Any Member may withdraw from the Obligated Group, and be released from further liability or obligation under the provisions of the Master Indenture, provided that prior to such withdrawal, the Master Trustee receives:

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(a) an Officer’s Certificate stating that immediately following withdrawal of such Member, no Member would be in default in the performance or observance of any covenant or condition of the Master Indenture;

(b) an Officer’s Certificate stating that such Member is not a party to any Related Loan Documents with respect to Related Bonds which remain outstanding;

(c) an Officer’s Certificate (i) (accompanied by a written report of an Independent Consultant if required by the provisions summarized under subparagraph (a) described above under the subheading “THE MASTER INDENTURE—Limitations on Additional Indebtedness”) showing that the Obligated Group could issue at least one dollar of Long-Term Indebtedness immediately following the withdrawal of such Member from the Obligated Group, and showing that immediately following the withdrawal of such Member from the Obligated Group, the Obligated Group shall have not less than 180 Days Cash on Hand, or (ii) demonstrating that an Event of Default under the Master Indenture will be cured if the Member withdraws from the Obligated Group, or (iii) to the effect that the Debt Service Coverage Ratio of the Obligated Group for each of the two most recent Fiscal Years would have been equal to or greater than that required as described under the subheading “THE MASTER INDENTURE—Rates and Charges; Debt Coverage” above;

(d) an Opinion of Bond Counsel to the effect that the withdrawal of such Member, under then existing law, would not adversely affect the validity of any Related Bond or any exemption from federal or state income taxation of interest payable on such Related Bond to which such Related Bond would otherwise be entitled; and

(e) if any Related Bonds were rated by a Rating Agency prior to the Member withdrawing from the Obligated Group, evidence from at least one Rating Agency that, after such Member withdraws from the Obligated Group, all Related Bonds will have a rating of at least “BBB-” (or an equivalent rating) from such Rating Agency or that such rating is equivalent to or better than immediately before the Member was withdrawn from the Obligated Group.

Upon compliance with the conditions described under this subheading, the Master Trustee shall execute any documents reasonably requested by the withdrawing Member to evidence the termination of such Member’s obligations under the Master Indenture, under any Related Supplements and under all Obligations.

Insurance and Condemnation Proceeds

Subject to the next paragraph, any insurance proceeds, condemnation award or payment in lieu of condemnation in an amount more than $1,000,000 shall, at the option of the Obligated Group Representative: (a) be deposited with the Master Trustee to apply to the prepayment or redemption of Obligations outstanding, on a pro rata basis; or (b) be applied by the Obligated Group to repair, renovate or rebuild the Facilities subject to the payment; or (c) for any other legitimate purpose, in the sole discretion of the Obligated Group Representative.

Notwithstanding the foregoing, in the case of the destruction of the Obligated Group’s Facilities or any portion thereof as a result of fire or other casualty, or any damage to such Facilities or portion thereof as a result of fire or other casualty, any related proceeds in an amount more than $1,000,000 shall be applied pursuant to the Deed of Trust in accordance with clause (b) above.

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Any Member may make agreements and covenants with the holder of any Indebtedness which is incurred in compliance with the provisions of the Master Indenture and which is secured by a Permitted Encumbrance with respect to the application or use to be made of insurance proceeds or condemnation awards which may be received in connection with Property which is subject to such Permitted Encumbrance.

Designation of Principal Property

The Obligated Group Representative:

(a) shall monitor the Property of the Members at least annually to determine whether such Property meets the qualifications contained in clause (a) of the definition of Principal Property; and

(b) shall determine, at the time a Member is added to the Obligated Group, whether any property of the Member (that will constitute Property upon such Member joining the Obligated Group) satisfies the description contained in clause (a) of the definition of Principal Property.

Upon such determination, the Governing Body of the Obligated Group Representative shall designate by resolution such Property as Principal Property under the Master Indenture, and, pursuant to the Master Indenture, each Member, upon joining the Obligated Group, shall designate such Property as Principal Property. Any such designation by the Obligated Group Representative is conclusive and binding upon the Members.

Defaults

Events of Default. Each of the following events is an Event of Default under the Master Indenture:

(a) Failure on the part of the Obligated Group to make due and punctual payment of the principal of, redemption premium, if any, or interest on an Obligation.

(b) Failure of any Member to duly observe and perform any other covenant or agreement under the Master Indenture (including covenants or agreements contained in any Obligation) for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Obligated Group Representative by the Master Trustee or to the Obligated Group Representative and the Master Trustee by the Holders of 25% in aggregate principal amount of Outstanding Obligations.

(c) Default by any Member in the payment of any Indebtedness for borrowed moneys (other than an Obligation), whether such Indebtedness now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired, or an Event of Default, as defined in any mortgage, indenture or instrument, under which there may be secured or evidenced any Indebtedness, whether such Indebtedness now exists or shall hereafter be created, shall occur; provided, however, that such default shall not constitute an Event of Default within the meaning of the provisions described under this subheading if within 60 days, or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced (1) any Member in good faith commences proceedings to contest the existence or payment of such Indebtedness, and (2) sufficient moneys are escrowed with a bank or trust company or a bond acceptable to the Master Trustee is posted for the payment of such Indebtedness.

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(d) Entry by a court having jurisdiction of a decree or order for (1) relief with respect to any Member in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or (2) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for any Member or for any substantial part of the property of any Member, or (3) winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days.

(e) Occurrence of the following actions of any Member: (1) commencement of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, (2) consent to the entry of an order for relief in an involuntary case under any such law, or (3) consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of any Member or for any substantial part of its property, or (4) making any general assignment for the benefit of creditors, or (5) failure to generally pay its debts as they become due, or (6) taking any corporate action in furtherance of the foregoing.

(f) An event of default shall exist under any Related Bond Indenture or under the Deed of Trust.

(g) The occurrence of an event of default under the Ground Lease as described in subsection (1) of Appendix E under the heading “GROUND LEASES — Defaults.” or the occurrence and continuation of any other of event of default of the Ground Lease described under that same heading that would give the Landlord (as defined in the Ground Lease) the right to terminate the Corporation’s interests under the Ground Lease.

Acceleration; Annulment of Acceleration. Upon the occurrence and during the continuation of an Event of Default, the Master Trustee may and, upon (1) the written request of the Holders of not less than 25% in aggregate principal amount of Outstanding Obligations or of any Holder if an Event of Default described under subparagraph (a) above under the subheading “—Events of Default” has occurred or (2) the acceleration of any Obligation pursuant to the terms of the Related Supplement under which such Obligation was issued, shall, by notice to the Members, declare all Outstanding Obligations immediately due and payable. Upon such declaration of acceleration, all Outstanding Obligations shall become and be immediately due and payable. If the terms of any Related Supplement give a Person the right to consent to acceleration of the Obligations issued pursuant to such Related Supplement, the Obligations issued pursuant to such Related Supplement may not be accelerated by the Master Trustee unless such consent is properly obtained pursuant to the terms of such Related Supplement. In the event of acceleration, an amount equal to the aggregate principal amount of all Outstanding Obligations, plus all interest accrued thereon and, to the extent permitted by applicable law, which accrues on such principal and interest to the date of payment, shall be due and payable on the Obligations.

At any time after the Master Trustee has declared the principal of the Obligations to be due and payable, and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of an Event of Default, the Master Trustee may annul such declaration and its consequences if:

(a) the Obligated Group has paid or caused to be paid (or deposited with the Master Trustee moneys sufficient to pay) all payments then due on all Outstanding Obligations (other than the principal or other payments then due only because of such declaration):

(b) the Obligated Group has paid (or caused to be paid or deposited with the Master Trustee) moneys sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Master Trustee and any paying agents.

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(c) the Obligated Group has paid all other amounts then payable by the Obligated Group under the Master Indenture (or a sum sufficient to pay the same shall have been deposited with the Master Trustee); and

(d) every Event of Default (other than a default in the payment of the principal or other payments of such Obligations then due only because of such declaration) shall have been remedied.

No such annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.

Additional Remedies and Enforcement of Remedies. Upon the occurrence and continuance of any Event of Default, the Master Trustee may, and upon the request of (1) the Holders of not less than 25% in aggregate principal amount of the Obligations Outstanding, (2) any Holder which, pursuant to a Related Supplement, is given the right to require the Master Trustee to institute actions pursuant to the provisions described in this paragraph, or (3) any Holder if an Event of Default under subparagraph (a) above under the subheading “—Events of Default” has occurred, shall upon the indemnification of the Master Trustee to its satisfaction therefor, proceed forthwith to protect and enforce its rights and the rights of the Holders under the Master Indenture by such suits, actions or proceedings as the Master Trustee, being advised by its counsel, shall deem expedient, including but not limited to:

(a) Enforcement of the right of the Holders to collect and enforce the payment of amounts due or becoming due under the Obligations and exercise of the Master Trustee’s rights under the second paragraph described above under the subheading “THE MASTER INDENTURE—Pledge of Gross Revenues” to direct the transfer of the Gross Revenue Fund to the Master Trustee and to hold and use the same in accordance with the provisions described above under the subheading “THE MASTER INDENTURE—Pledge of Gross Revenues;”

(b) Suit upon all or any part of the Obligations;

(c) Civil action to require any Person holding moneys, documents or other property pledged to secure payment of amounts due or to become due on the Obligations to account as if it were the trustee of an express trust for the Holders of Obligations;

(d) Civil action to enjoin any acts or things, which may be unlawful or in violation of the rights of the Holders of Obligations; and

(e) Enforcement of any other right or remedy of the Holders conferred by law or by the Master Indenture.

Regardless of the happening of an Event of Default, the Master Trustee shall, if requested in writing by the Holders of not less than 25% in aggregate principal amount of the Obligations then Outstanding and upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (1) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation of the Master Indenture, or (2) to preserve or protect the interests of the Holders. However, the Master Trustee shall not comply with any such request or institute and maintain any such suits or proceedings that are in conflict with any applicable law or the provisions of the Master Indenture or (in the sole judgment of the Master Trustee) is unduly prejudicial to the interest of the Holders of Obligations not making such request.

Application of Revenues and Other Moneys After Default. During the continuance of an Event of Default, all moneys received by the Master Trustee pursuant to any right given or action taken under the

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provisions described under this subheading, after payment of the costs and expenses of any action, proceeding or the like resulting in the collection of such moneys and payment of the fees, costs, expenses, advances and all other amounts owed to the Master Trustee, including, without limitation, fees and expenses of its attorneys, agents and advisors, shall be applied as follows:

(a) If the Master Trustee has not declared the principal of all Outstanding Obligations due and payable:

First: To the payment of all installments of interest then due on the Obligations in the order of their due dates, and, if the amount available is not sufficient to pay in full all installments due on the same date, then to the payment thereof ratably, according to the amounts of interest due on such date, without any discrimination or preference; and

Second: To the payment of the unpaid installments of principal then due on the Obligations, whether at maturity or by call for redemption, in the order of their due dates, and, if the amount available is not sufficient to pay in full all installments due on the same date, then to the payment thereof ratably, according to the amounts of principal due on such date, to the Persons entitled thereto, without any discrimination or preference.

(b) If the Master Trustee has declared all Outstanding Obligations due and payable (and has not annulled such declaration under the terms of the Master Indenture), to the payment of the principal and interest then due and unpaid upon the Obligations and, if the amount available is not sufficient to pay in full the whole amount then due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, of interest over principal, of any installment over any other installment, or of any Obligation over any other Obligation, according to the amounts due, without any discrimination or preference.

Such moneys shall be applied by the Master Trustee as it shall determine, having due regard for the amount of moneys available for application and the likelihood of additional moneys becoming available in the future. Whenever the Master Trustee shall apply such moneys, it shall fix the date 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 Master Trustee shall give such notices as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date. The Master Trustee shall not be required to make payment to the Holder of any unpaid Obligation until such Obligation (and all unmatured coupons, if any) is presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Obligations have been paid under the terms described under this subheading and all expenses and charges of the Master Trustee have been paid, any balance remaining shall be paid to the Person entitled to receive such balance. If no other Person shall be entitled thereto, then the balance shall be paid to the Members, their successors, or as a court of competent jurisdiction may direct.

Master Trustee to Represent Holders. The Master Trustee is irrevocably appointed (and the successive respective Holders of the Obligations, by taking and holding the same, shall be conclusively deemed to have so appointed the Master Trustee) as trustee and true and lawful attorney-in-fact of the Holders of the Obligations for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Holders under the provisions of the Master Indenture, the Obligations, any Related Supplement, and applicable provisions of any other law. In addition to the provisions described above under the subparagraph “—Additional Remedies and Enforcement of Remedies,” upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Master Trustee to represent the Holders, the Master Trustee may, and upon the written direction of the Holders of

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not less than 25% in aggregate principal amount of the Obligations then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Holders by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained in the Master Indenture, or in aid of the execution of any power granted in the Master Indenture, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Master Trustee or in such Holders under the Master Indenture, the Obligations, any Related Supplement, or any other law; and upon instituting such proceeding, the Master Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the assets pledged under the Master Indenture, pending such proceedings. All rights of action under the Master Indenture, the Obligations or Related Supplement, or otherwise may be prosecuted and enforced by the Master Trustee without the possession of any of the Obligations or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Master Trustee shall be brought in the name of the Master Trustee for the benefit and protection of all the Holders of such Obligations, subject to the provisions of the Master Indenture.

Holders’ Control of Proceedings. If an Event of Default shall have occurred and be continuing, notwithstanding anything in the Master Indenture to the contrary, the Holders of at least a majority in aggregate principal amount of Obligations then Outstanding shall have the right, at any time, by any instrument in writing executed and delivered to the Master Trustee, to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions or for the appointment of a receiver or any other proceedings under the Master Indenture. However, the Master Trustee shall not follow any such direction that is in conflict with any applicable law or the provisions of the Master Indenture or, in the sole judgment of the Master Trustee, is unduly prejudicial to the interest of Holders not joining in such direction. Nothing in described under this paragraph shall impair the right of the Master Trustee in its discretion to take any other action authorized by the Master Indenture that it may deem proper and which is not inconsistent with such direction by Holders. Nothing in the Master Indenture shall affect or impair the rights of any Holder to enforce the payment of principal of, interest on and other amounts due under the Obligation held by such Holder or any agreement or instrument secured by such Obligation, by suit or other action available pursuant thereto or in law or in equity.

Termination of Proceedings. In case any proceeding taken by the Master Trustee on account of an Event of Default is discontinued or abandoned for any reason or is determined adversely to the Master Trustee or to the Holders, then the Members, the Master Trustee and the Holders shall be restored to their former positions and rights under the Master Indenture, and all rights, remedies and powers of the Master Trustee and the Holders shall continue as if no such proceeding had been taken.

Waiver of Event of Default. No delay or omission of the Master Trustee or of any Holder to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of or acquiescence to any such Event of Default. Every power and remedy given to the Master Trustee and the Holders may be exercised from time to time and as often as may be deemed expedient by them. The Master Trustee may waive any Event of Default which in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of the Master Indenture, or before the completion of the enforcement of any other remedy under the Master Indenture. Notwithstanding anything contained in the Master Indenture to the contrary, upon the written request of the Holders of at least a majority of the aggregate principal amount of Obligations then Outstanding, the Master Trustee shall waive any Event of Default under the Master Indenture and its consequences; provided, however, that, except under the circumstances set forth under the second paragraph of “—Acceleration; Annulment of Acceleration” above, a default in the payment of the principal of, premium, if any, or interest on any Obligation when due may not be waived without the written consent of the Holders of all Outstanding Obligations. If the Master Trustee waives an Event of

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Default under the Master Indenture, the Members, the Master Trustee and the Holders shall be restored to their former positions and rights. No such waiver shall extend to, or impair any right with respect to any other Event of Default.

Notice of Default. Within ten days after the Master Trustee has actual knowledge or has received written notice of the occurrence of an Event of Default, the Master Trustee shall mail to all Holders notice of such Event of Default, unless such Event of Default shall have been cured before the giving of such notice (the term “Event of Default” for the purposes described in this paragraph being hereby defined to be the events specified in clauses (a)-(f) above under the subparagraph “—Events of Default,” not including any periods of grace provided for in clauses (b), (c) and (d) respectively, and irrespective of the giving of written notice described in clause (b) thereof). Except in the case of default in the payment of the principal of or premium, if any, or interest on any of the Obligations and the Events of Default specified in clauses (d) and (e) under the subparagraph “—Events of Default” above, the Master Trustee shall be protected in withholding such notice if and so long as the Master Trustee in good faith determines that the withholding of such notice is in the best interests of the Holders.

Removal and Resignation of the Master Trustee

The Master Trustee may be removed at any time by an instrument or instruments in writing signed by the Holders of not less than a majority of the principal amount of Obligations then Outstanding or, unless an Event of Default has occurred and is then continuing, the Obligated Group Representative.

The Master Trustee may at any time resign by giving written notice of such resignation to the Obligated Group Representative and by giving the Holders of all Obligations then Outstanding notice of such resignation by mail at the addresses shown on the registration books maintained by the Master Trustee.

No such resignation or removal shall become effective unless and until a successor Master Trustee has been appointed and has assumed the trusts created by the Master Indenture. Written notice of removal shall be given to the Members and to each Holder at the address then reflected on the books of the Master Trustee. A successor Master Trustee may be appointed at the direction of the Holders of not less than a majority in aggregate principal amount of Obligations Outstanding, or, if the Master Trustee has resigned or has been removed by the Obligated Group Representative, by the Obligated Group Representative. If a successor Master Trustee has not been appointed and qualified within 60 days of the date notice of resignation is given, the Master Trustee, any Member or any Holder may apply to any court of competent jurisdiction for the appointment of an interim successor Master Trustee to act until such time as a permanent successor is appointed.

Unless otherwise ordered by a court or regulatory body having competent jurisdiction, or unless required by law, any successor Master Trustee shall be a trust company or bank having the powers of a trust company as to trusts, qualified to do and doing trust business in one or more states of the United States of America and having an officially reported combined capital, surplus, undivided profits and reserves (or if the Master Trustee is a subsidiary of such financial institution, the parent institution shall satisfy these requirements) aggregating at least $50,000,000, if there is such an institution willing, qualified and able to accept the trust upon reasonable or customary terms.

Every successor Master Trustee howsoever appointed under the Master Indenture shall execute, acknowledge and deliver to its predecessor and also to each Member an instrument in writing, accepting such appointment. Upon the delivery of such acceptance, such successor Master Trustee shall, without further action, become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor. The predecessor Master Trustee shall execute and deliver an instrument transferring to such successor Master Trustee all the rights, powers and trusts of such predecessor Master Trustee. The

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predecessor Master Trustee shall execute any and all documents necessary or appropriate to convey all interest it may have to the successor Master Trustee. The predecessor Master Trustee shall promptly deliver all records relating to the trust or copies thereof and communicate all material information it may have obtained concerning the trust to the successor Master Trustee.

Each successor Master Trustee, not later than 10 days after its assumption of the duties under the Master Indenture, shall mail a notice of such assumption to each Holder.

Supplements and Amendments to the Master Indenture

Supplements Not Requiring Consent of Holders. The Obligated Group Representative, acting for itself and as agent for each Member, and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Related Supplements for one or more of the following purposes:

(a) To cure any ambiguity or formal defect or omission in the Master Indenture;

(b) To correct or supplement any provision which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising thereunder and which shall not materially and adversely affect the interests of the Holders;

(c) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority, or to add to the covenants of and restrictions on the Members;

(d) To qualify the Master Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect;

(e) To create and provide for the issuance of an Obligation or Series of Obligations as permitted under the Master Indenture;

(f) To obligate a successor to any Member as provided in the Master Indenture;

(g) To add a new Member as provided in the Master Indenture, or have a Member withdraw as provided in the Master Indenture; or

Supplements Requiring Consent of Holders.

(a) Other than Related Supplements referred to above and subject to the terms and provisions and limitations described under this subheading, the Holders of not less than a majority in aggregate principal amount of the Outstanding Obligations have the right to consent to and approve the execution by the Obligated Group Representative, acting for itself and as agent for each Member, and the Master Trustee of such Related Supplements as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained therein. Nothing summarized under this subheading shall permit or be construed as permitting a Related Supplement which would:

(i) extend the stated maturity of or time for paying interest on any Obligation or reduce the principal amount of or the redemption premium or rate of interest or method of calculating interest payable on any Obligation without the consent of the Holder of such Obligation;

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(ii) modify, alter, amend, add to or rescind any of the terms or provisions described under the subheading “THE MASTER INDENTURE—Defaults” above so as to affect the right of the Holders of any Obligations in default as to payment to compel the Master Trustee to declare the principal of all Obligations to be due and payable, without the consent of the Holders of all Obligations then Outstanding; or

(iii) reduce the aggregate principal amount of Obligations then Outstanding (the consent of the Holders of which is required to authorize such Related Supplement) without the consent of the Holders of all Obligations then Outstanding.

(b) The Master Trustee may execute a Related Supplement (in substantially the form delivered to it as described below) without liability or responsibility to any Holder (whether or not such Holder has consented to the execution of such Related Supplement) if the Master Trustee receives:

(i) a Request of the Obligated Group Representative to enter into such Related Supplement;

(ii) a certified copy of the resolution of the Governing Body of the Obligated Group Representative approving the execution of such Related Supplement;

(iii) the proposed Related Supplement; and

(iv) an instrument or instruments executed by the Holders of not less than the aggregate principal amount or number of Obligations specified in subparagraph (a) for the Related Supplement in question which instrument or instruments shall refer to the proposed Related Supplement and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof as on file with the Master Trustee.

(c) Any such consent shall be binding upon the Holder of the Obligation giving such consent and upon any subsequent Holder of such Obligation and of any Obligation issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Obligation giving such consent or by a subsequent Holder thereof by filing with the Master Trustee, prior to the execution by the Master Trustee of such Related Supplement, such revocation and, if such Obligation or Obligations are transferable by delivery, proof that such Obligations are held by the signer of such revocation. At any time after the Holders of the required principal amount or number of Obligations have filed their consents to the Related Supplement, the Master Trustee shall make and file with the Obligated Group Representative a written statement to that effect. Such written statement shall be conclusive that such consents have been so filed.

(d) If the Holders of the required principal amount or number of the Outstanding Obligations have consented to and approved the execution of such Related Supplement, no Holder of any Obligation have any right to object to the execution thereof, or to object to any of the terms and provisions contained therein or the operation thereof, or to question the propriety of the execution thereof, or to enjoin or restrain the Master Trustee or the Obligated Group Representative from executing the same or from taking any action pursuant to the provisions thereof.

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Satisfaction and Discharge of Master Indenture

Satisfaction and Discharge of Master Indenture. If (1) the Members shall deliver to the Master Trustee for cancellation all Obligations previously authenticated (other than any Obligations which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in any Related Supplement) and not cancelled, or (2) upon payment of all Obligations not previously cancelled or delivered to the Master Trustee for cancellation, or (3) the Members shall deposit with the Master Trustee (or with a bank or trust company pursuant to an agreement between a Member and such bank or trust company) as cash or Escrow Obligations or both, sufficient to pay at maturity or upon redemption all Obligations not previously cancelled or delivered to the Master Trustee for cancellation, including without limitation principal and interest due or to become due to such date of maturity or redemption date, as the case may be, and if in any case the Members shall also pay or cause to be paid all other sums payable under the Master Indenture by the Members, then the Master Indenture shall cease to be of further effect, and the Master Trustee, on demand of the Members and at the cost and expense of the Members, shall execute proper instruments acknowledging satisfaction of and discharging the Master Indenture. The Members shall cause a report to be prepared by a firm nationally recognized for providing verification services regarding the sufficiency of funds for such discharge and satisfaction, upon which report the Master Trustee may rely.

Payment of Obligations After Discharge of Lien. Notwithstanding the discharge of the lien of the Master Indenture as provided therein, the Master Trustee shall retain such rights, powers and duties under the Master Indenture as may be necessary and convenient for the payment of amounts due or to become due on the Obligations and for the registration, transfer, exchange and replacement of Obligations as provided in any Related Supplement. Any moneys held by the Master Trustee for the payment of the principal of, premium, if any, or interest on any Obligation remaining unclaimed for two years after the principal of all Obligations has become due and payable, whether at maturity or upon proceedings for redemption or by declaration as provided in the Master Indenture, shall then be paid to the Members and the Holders of any Obligations not theretofore presented for payment shall thereafter be entitled to look only to the Members for payment thereof as unsecured creditors and all liability of the Master Trustee with respect to such moneys shall thereupon cease.

SUPPLEMENTAL MASTER INDENTURE NO. 2

The following summarizes certain provisions of Supplemental Master Indenture No. 2, supplementing the Master Indenture. Such summary does not purport to be complete and reference is made to Supplemental Master Indenture No. 2 for full and complete statements of all such provisions.

Obligation No. 3

Supplemental Master Indenture No. 2 provides for the creation of an Obligation under the Master Indenture to be known and entitled “Obligation No. 3”. Obligation No. 3 is to be executed, authenticated and delivered in accordance with the Master Indenture. Obligation No. 3 shall be in the form of a fully registered Obligation without coupons, shall be dated as of the date of issuance of the Series 2018A Bonds, shall bear interest on the principal balance thereof in the amount set forth in such Obligation No. 3, payable as described in such Obligation No. 3.

Obligation No. 4

Supplemental Master Indenture No. 2 provides for the creation of an Obligation under the Master Indenture to be known and entitled “Obligation No. 4”. Obligation No. 4 is to be executed, authenticated and delivered in accordance with the Master Indenture. Obligation No. 4 shall be in the form of a fully registered Obligation without coupons, shall be dated as of the date of issuance of the Series 2018B Bonds,

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shall bear interest on the principal balance thereof in the amount set forth in such Obligation No. 4, payable as described in such Obligation No. 4.

Obligation No. 5

Supplemental Master Indenture No. 2 provides for the creation of an Obligation under the Master Indenture to be known and entitled “Obligation No. 5”. Obligation No. 5 is to be executed, authenticated and delivered in accordance with the Master Indenture. Obligation No. 5 shall be in the form of a fully registered Obligation without coupons, shall be dated as of the date of issuance of the Series 2018C Bonds, shall bear interest on the principal balance thereof in the amount set forth in such Obligation No. 5, payable as described in such Obligation No. 5.

Prepayment of Obligations

The Obligations and their principal installments shall be subject to prepayment, in whole at any time, or in part from time to time at the option of the Members of the Obligated Group upon payment of a sum sufficient, together with any other cash and/or obligations held by the Bond Trustee and available for such purpose, to cause an equal aggregate principal amount of the respective Outstanding Series 2018 Bonds to be deemed to have been paid within the meaning of the Bond Indenture, and to pay all fees and expenses and all Administration Expenses, as defined in the Loan Agreement, and all fees, costs and expenses of the Master Trustee and the Bond Trustee, accrued and to be accrued to the date of discharge of the Bond Indenture with respect to such Series 2018 Bonds. Any prepayment of the principal of the Obligations shall be credited against the scheduled principal payment corresponding to the maturity or sinking fund redemption date for the respective Series 2018 Bonds redeemed with the proceeds of such prepayment.

Occupancy Covenant

The Obligated Group covenants that for each fiscal quarter (a) commencing with the first fiscal quarter which ends not less than 60 days following the issuance of the first certificate of occupancy for the first building containing Independent Living Units in The Village at Mary’s Woods Stage 2 Expansion Project, and (b) ending with the first full fiscal quarter following the fiscal quarter upon achieving The Village at Mary’s Woods Stage 2 Expansion Project Stable Occupancy (each an “Occupancy Quarter”), the Obligated Group will use its best efforts to have Occupied the percentage of the total number of all Independent Living Units in The Village at Mary’s Woods Stage 2 Expansion Project (the “Percentage of Units Occupied”) at or above the Occupancy Requirements set forth below which levels shall be measured as of the last day of the applicable Occupancy Quarter (the “Occupancy Requirements”):

Occupancy Quarter Occupancy Requirements (%) 1 24.0% 2 39.8% 3 50.9% 4 62.0% 5 73.1% 6 80.5% 7 84.2% 8 87.9% 9 90.7% 10 93.0%

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If the Percentage of Units Occupied for any two consecutive fiscal quarters is less than the Occupancy Requirement set forth above for those fiscal quarters, the Obligated Group Representative shall select an Independent Consultant in accordance with provisions of the Master Indenture, as summarized herein under the heading “THE MASTER INDENTURE—Approval of Consultants,” within 30 days thereafter to prepare a report which addresses the information identified in the Corrective Occupancy Action Plan described above and to make recommendations regarding the actions to be taken to increase the Percentage of Units Occupied to at least the Occupancy Requirement set forth above for future periods. Within 60 days of the actual engagement of any such Independent Consultant, the Obligated Group Representative shall cause a copy of the Independent Consultant’s report and recommendations, if any, to be filed with each Member and each Required Information Recipient. Each Member shall follow each recommendation of the Independent Consultant to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Member) and permitted by law. The Obligated Group shall not be required to obtain an Independent Consultant’s report for failing to meet an Occupancy Requirement if such failure occurs within three fiscal quarters of the failure that triggered the delivery of a prior Independent Consultant’s report addressing the information identified in the Corrective Occupancy Action Plan described above.

Series 2018 Entrance Fee Fund

Unless an Event of Default that has not been cured or waived exists, for so long as any Series 2018B Bond or any Series 2018C Bond remains Outstanding, within five Business Days of receipt, the Corporation shall pay, or cause to be paid, to the Master Trustee for deposit into the related Entrance Fee Fund all of The Village at Mary’s Woods Stage 2 Entrance Fees, including any partial payments of such The Village at Mary’s Woods Stage 2 Entrance Fees that are made by potential residents as a deposit against the full entrance fee due and payable upon occupancy of an Independent Living Unit (subject to the provisions of the Corporation’s standard reservation and deposit agreement); provided that no The Village at Mary’s Woods Stage 2 Entrance Fees shall be subject to transfer by the Corporation so long as such The Village at Mary’s Woods Stage 2 Entrance Fees, if any, must be held in escrow pursuant to ORS Chapter 101, as amended from time to time. Upon the occurrence of an Event of Default and continuing until such Event of Default is cured or waived, The Village at Mary’s Woods Stage 2 Entrance Fees shall be retained in the Gross Revenue Fund until transferred or applied in accordance with the provisions of the Master Indenture, including those described herein under the heading “THE MASTER INDENTURE—Pledge of Gross Revenues.”

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The Master Trustee shall establish and maintain a separate fund to be known as the “Entrance Fee Fund – Series 2018 Bonds” (the “Series 2018 Entrance Fee Fund”). All moneys received by the Master Trustee and held in the Series 2018 Entrance Fee Fund shall be trust funds held for the benefit of the holders of all of the Series 2018 Obligations outstanding under the Master Indenture (except as otherwise provided) and shall not be subject to lien or attachment of any creditor of any Member of the Obligated Group. Such moneys shall be held in trust and applied in accordance with the provisions of the Master Indenture.

Moneys deposited into the Series 2018 Entrance Fee Fund are pledged and shall be applied by the Master Trustee within two Business Days of receipt, solely to the following, in order of priority:

First: To the Corporation to pay refunds of The Village at Mary’s Woods Stage 2 Entrance Fees, in accordance with the requirements of any Residency Agreement relating to The Village at Mary’s Woods Stage 2 Expansion Project and certified by the Corporation to the Master Trustee.

Second: To the Series 2018 Working Capital Fund established under the Master Indenture, until the total principal amount deposited into the Series 2018 Working Capital Fund equals the amount specified in the Supplemental Master Indenture No. 2. The Master Trustee shall not replenish funds withdrawn from the Series 2018 Working Capital Fund.

Third: On the first Business Day of each month, provided the amount on deposit in the Series 2018 Entrance Fee Fund (after making provision for the payments of refunds in accordance with the paragraph “First” above (the “Entrance Fee Refund Holdback”)) is equal to $100,000 or more, for transfer to the Bond Trustee, deposit to the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of the Series 2018C Bonds then Outstanding, as soon as practicable following such deposit.

Fourth: On the first Business Day of each month, provided all of the Series 2018C Bonds have been redeemed and the amount in the Series 2018 Entrance Fee Fund exceeds the Entrance Fee Refund Holdback” by $100,000 or more, for transfer to the Bond Trustee, deposit to the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of the Series 2018B-3 Bonds then Outstanding, as soon as practicable following such deposit.

Fifth: On the first Business Day of each month, provided all of the Series 2018B-3 Bonds have been redeemed and the amount in the Series 2018 Entrance Fee Fund exceeds the Entrance Fee Refund Holdback” by $100,000 or more for transfer to the Bond Trustee, deposit to the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of the Series 2018B-2 Bonds then Outstanding, as soon as practicable following such deposit.

Sixth: On the first Business Day of each month, provided all of the Series 2018B-2 Bonds have been redeemed and the amount in the Series 2018 Entrance Fee Fund exceeds the Entrance Fee Refund Holdback” by $100,000 or more, for transfer to the Bond Trustee, deposit to the Series 2018 Entrance Fee Redemption Account, and application to the payment and redemption of the Series 2018B-1 Bonds then Outstanding, as soon as practicable following such deposit.

Seventh: Upon final redemption and payment of all of the Series 2018C Bonds, the Series 2018B- 3 Bonds, the Series 2018B-2 Bonds and the Series 2018B-1 Bonds, for remittance to the Corporation of all funds then remaining in the Series 2018 Entrance Fee Fund.

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If amounts on deposit in the Series 2018 Entrance Fee Fund are less than $100,000 and the Master Trustee has received a written certification from the Corporation that no further The Village at Mary’s Woods Stage 2 Entrance Fees are expected to be received, the Master Trustee shall transfer such remaining amounts in the Series 2018 Entrance Fee Fund to the Series 2018 Entrance Fee Redemption Account to redeem any Outstanding Series 2018B Bonds and Series 2018C Bonds, as described in Supplemental Master Indenture No. 2, or, if no Series 2018B Bonds or Series 2018C Bonds remain Outstanding, to the Corporation.

Upon the occurrence and during the continuance of an Event of Default, the Master Trustee will apply funds held in the Series 2018 Entrance Fee Fund, if any, as provided in the Master Indenture. Upon remittance of the remaining balance on deposit in the Series 2018 Entrance Fee Fund to the Corporation, in connection with the Series 2018B Bonds and the Series 2018C Bonds, the Series 2018 Entrance Fee Fund will be closed.

Series 2018 Working Capital Fund

The Master Trustee shall establish and maintain a separate account to be known as the “Working Capital Fund – Series 2018 Bonds” (the “Series 2018 Working Capital Fund”). All moneys received by the Master Trustee and held in the Series 2018 Working Capital Fund shall be trust funds held for the benefit of the Series 2018 Obligations (except as otherwise provided) and shall not be subject to lien or attachment of any creditor of the Obligated Group. Such moneys shall be held in trust and applied in accordance with the provisions summarized under this subsection.

Moneys in the Series 2018 Working Capital Fund shall be disbursed by the Master Trustee to or for the account of the Obligated Group within seven days after receipt by the Master Trustee of a written request certifying that (i) the withdrawal is made to pay (A) development and marketing fees and expenses related to The Village at Mary’s Woods Stage 2 Expansion Project, (B) operating expenses of the Obligated Group, (C) the costs of needed repairs to the Facilities, (D) routine capital expenditures of the Obligated Group, (E) judgments against the Obligated Group, (F) refunds of any Entrance Fees as required by Residency Agreements with respect to residential living apartments in The Village at Mary’s Woods Stage 2 Expansion Project, (G) amounts required to restore funds on deposit in the Reserve Fund to the required level, or (H) amounts due on any Series 2018 Obligations (other than optional prepayment or redemption), other than funds advanced by an Affiliate of the Obligated Group, (ii) such moneys have been expended or are anticipated to be expended in the calendar month following the month in which such Officer’s Certificate is submitted, together with a budget describing the uses for which such moneys are needed and the amount needed for each such use, and (iii) no other funds are available or will reasonably be available to make such payments.

All amounts on deposit in the Series 2018 Working Capital Fund shall be released to the Obligated Group, and the Series 2018 Working Capital Fund shall be closed when all the Series 2018B Bonds and the Series 2018C Bonds have been redeemed and if no Event of Default has occurred and is continuing.

Notwithstanding anything to the contrary contained in the Master Indenture, upon receipt of notice from the Bond Trustee pursuant to the Loan Agreement stating that the Corporation has failed to make any required payment necessary to satisfy the Reserve Fund Requirement under the Bond Indenture, the Master Trustee shall disburse an amount sufficient to cure such failure from the amounts then on deposit in the Series 2018 Working Capital Fund within three (3) days of receipt of such notice.

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Amendments to the Master Indenture

Supplemental Master Indenture No. 2 contains certain amendments to the Master Indenture, which are all described under the respective subheading under “THE MASTER INDENTURE” herein.

THE BOND INDENTURE

The following summarizes certain provisions of the Bond Indenture. Such summary does not purport to be complete and reference is made to the Bond Indenture for full and complete statements of all such provisions.

General

The Bond Indenture sets forth the terms of the Bonds, the nature and extent of security, the various rights of the Bondholders of the Bonds, the rights, duties and immunities of the Bond Trustee and the rights and obligations of the Issuer.

Trust Estate

In consideration of the premises and of the mutual covenants contained in the Bond Indenture and of the purchase and acceptance of the Series 2018 Bonds by the owners thereof and of the sum of One Dollar ($1.00) to it duly paid by the Bond Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt of which is acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on all Bonds at any time Outstanding under the Bond Indenture, according to their tenor and effect, and to secure the performance and observance of all the covenants and conditions in the Bonds, and to declare the terms and conditions upon and subject to which the Bonds are issued and secured, has executed and delivered the Bond Indenture and has granted, bargained, sold, warranted, alienated, remised, released, conveyed, assigned, pledged, set over, and confirmed, and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, pledge, set over, and confirm unto U.S. Bank National Association, as bond trustee, and to its successors and assigns forever, all and singular the following described property, franchises, and income (the “Trust Estate”): (A) all of the Issuer’s right, title and interest in and to the Series 2018 Obligations delivered by the Corporation to the Issuer pursuant to the Master Indenture; and (B) all of the Issuer’s right, title and interest in and to the Loan Agreement (except for the Unassigned Rights); provided, however, that nothing described in this clause shall impair, diminish or otherwise affect the Issuer’s obligations under the Loan Agreement or, except as otherwise provided in the Bond Indenture, impose any such obligations on the Bond Trustee; and (C) amounts on deposit from time to time in the Bond Fund, Reserve Fund and Construction Fund, but excluding the Rebate Fund, subject to the provisions of the Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein; and (D) any and all property of every kind or description which may from time to time hereafter be sold, transferred, conveyed, assigned, hypothecated, endorsed, deposited, pledged, mortgaged, granted or delivered to, or deposited with the Bond Trustee as additional security by the Issuer or anyone on its part or with its written consent, or which pursuant to any of the provisions described in the Bond Indenture or of the Loan Agreement or any Obligation may come into the possession of or control of the Bond Trustee or a receiver appointed pursuant to the Bond Indenture, as such additional security; and the Bond Trustee is authorized in the Bond Indenture to receive any and all such property as and for additional security for the payment of the Bonds, and to hold and apply all such property subject to the terms of the Bond Indenture.

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All Bonds Equally and Ratably Secured; Bonds Not an Obligation of Issuer

All Bonds issued under the Bond Indenture and at any time Outstanding shall in all respects be equally and ratably secured thereby, without preference, priority, or distinction on account of the date or dates or the actual time or times of the issuance or maturity of the Bonds, so that all Bonds at any time issued and Outstanding under the Bond Indenture shall have the same right, lien, and preference under and by virtue of the Bond Indenture, and shall all be equally and ratably secured thereby. The Bonds shall be payable solely out of the revenues and other security pledged under the Bond Indenture and shall not constitute an indebtedness of the Issuer, the State of Oregon or any political subdivision thereof, the County or any political subdivision approving the issuance of the Bonds, within the meaning of any state constitutional provision or statutory limitation and shall never constitute nor give rise to a pecuniary liability of the Issuer.

Registration, Transfer and Exchange of Bonds; Persons Treated as Owners

The Issuer shall cause books for the registration and for the transfer of the Bonds as provided in the Bond Indenture to be kept by the Bond Trustee which is appointed the bond registrar of the Issuer for the Series 2018 Bonds. Upon surrender for transfer of any fully registered Bond at the Payment Office of the Bond Trustee, duly endorsed for transfer or accomplished by an assignment duly executed by the registered owner or his attorney duly authorized in writing, the Issuer shall execute and the Bond Trustee shall authenticate and deliver in the name of the transferee or transferees a new fully registered Bond or Bonds of a like aggregate principal amount for a like principal amount and maturity.

The Issuer shall execute and the Bond Trustee shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously Outstanding. The execution by the Issuer of any fully registered Bond of any denomination shall constitute full and due authorization of such denomination and the Bond Trustee shall thereby be authorized to authenticate and deliver such Bond.

The Bond Trustee shall not be required to transfer or exchange any Bond after the mailing of notice calling such Bond or any portion thereof for redemption has been given as provided in the Bond Indenture, nor during the period beginning at the opening of business fifteen days before the day of mailing by the Bond Trustee of a notice of prior redemption and ending at the close of business on the day of such mailing except for Bondholders of $1,000,000 or more in aggregate principal amount of the Series 2018 Bonds.

As to any Bond, the Person in whose name the same shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of principal of or interest on any Bond shall be made only to or upon the written order of the registered owner thereof or his legal representative, but such registration may be changed as provided in the Bond Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums paid.

The Bond Trustee shall require the payment by any Bondholder requesting exchange or transfer of any tax or other governmental charge required to be paid with respect to such exchange or transfer.

Issuance of Additional Bonds

Additional Bonds are authorized to be issued under the Bond Indenture for the purposes set forth in the Loan Agreement. If the Corporation requests the issuance of any Additional Bonds, it shall file with the Issuer and the Bond Trustee a certificate specifying the amount of Additional Bonds to be issued and the purpose for such issuance.

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NOTWITHSTANDING THE FOREGOING OR ANY OTHER COVENANT OR PROVISION OF THE BOND INDENTURE, THE LOAN AGREEMENT OR ANY OTHER AGREEMENT TO THE CONTRARY, THE ISSUANCE OF ADDITIONAL BONDS SHALL REMAIN IN THE ISSUER’S SOLE AND EXCLUSIVE DISCRETION AND THE ISSUER SHALL HAVE NO LIABILITY WHATSOEVER FOR ITS ELECTION, FOR WHATEVER REASON OR NO REASON, NOT TO ISSUE ADDITIONAL BONDS; AND THE EXERCISE OF SUCH DISCRETION SHALL UNDER NO CIRCUMSTANCES, UNDER ANY CONCEIVABLE THEORY BE CONSIDERED “WILLFUL MISCONDUCT” OF THE ISSUER OR ANY ISSUER INDEMNIFIED PERSON FOR ANY PURPOSE WHATSOEVER UNDER THE BOND INDENTURE, THE LOAN AGREEMENT OR ANY OTHER AGREEMENT.

Thereupon, the Issuer may request the authentication and delivery of such Additional Bonds; provided that the Corporation and the Issuer shall have entered into an amendment to the Loan Agreement to provide, among other things, that the Project shall include the additional Facilities, if any, being financed by the Additional Bonds, for delivery of Obligations entitled to the benefit and security of the Master Indenture in an amount at least sufficient to pay principal of, premium, if any, and interest on the Additional Bonds when due, for a deposit into a separate account in the Reserve Fund relating to such Additional Bonds of additional Reserve Fund Obligations which, together with amounts then contained in the other accounts in the Reserve Fund will equal the Reserve Fund Requirement on all Bonds Outstanding at the date of issuance of such series of Additional Bonds and for such additional covenants and conditions as the Issuer and the Corporation deem desirable. All Additional Bonds shall be secured in the same manner as and rank on a parity with the Series 2018 Bonds, but shall bear such date or dates, bear such interest rate or rates, have such maturity dates, redemption dates, options and premiums, and be issued at such prices as shall be approved in writing by the Issuer and the Corporation. Upon the execution and delivery of appropriate supplements to the Bond Indenture and the Master Indenture and amendments to the Loan Agreement, the Issuer may execute and deliver to the Bond Trustee, and the Bond Trustee shall authenticate, such Additional Bonds and deliver them to the initial purchasers thereof as directed by the Issuer.

Establishment of Funds

The Bond Indenture creates a Bond Fund, Construction Fund, Reserve Fund, Cost of Issuance Fund and a Rebate Fund, and such accounts within those funds, all of which are to be held by the Bond Trustee. References to funds in the Bond Indenture shall be deemed to be references to the applicable funds established under the Bond Indenture.

Bond Fund. There is created by the Issuer and ordered established with the Bond Trustee a trust fund under the Bond Indenture to be designated as the “Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) Bond Fund” (the “Bond Fund”). There are created by the Issuer and ordered established with the Bond Trustee three separate accounts within the Bond Fund to be designated as the Principal Account, the Interest Account and the Entrance Fee Redemption Account, respectively. Moneys on deposit in the Principal Account shall be used to pay the principal of and premium, if any, on the Bonds, when due and payable. Moneys on deposit in the Interest Account shall be used to pay the interest on the Bonds. Moneys on deposit in the Entrance Fee Redemption Account shall be used to pay the redemption price of, first, the Series 2018C Bonds and, then the Series 2018B-3 Bonds and, then Series 2018B-2 Bonds and, then, Series 2018B-1 Bonds, on each Entrance Fee Redemption Date.

Construction Fund. There is created and established with the Bond Trustee a trust fund under the Bond Indenture designated as the “Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) Construction Fund” (the “Construction Fund”). There are created by the Issuer and ordered established with the Bond Trustee two separate accounts within the Construction Fund to be designated as the “Funded Interest Account” and the “Project Account.”

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Moneys in the Construction Fund shall be used to pay Costs of a Project or as otherwise provided in the Bond Indenture. Except as described below under the subheading “THE BOND INDENTURE—The Construction Fund,” under no circumstances shall moneys in the Construction Fund be used to pay Cost of Issuance.

Reserve Fund. There is created and established with the Bond Trustee a trust fund under the Bond Indenture designated as the “Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) Debt Service Reserve Fund” (the “Reserve Fund”). Within the Reserve Fund there is created and established four separate reserve accounts: (i) the Series 2018A Reserve Account, (ii) the Series 2018B-1 Reserve Account, (iii) the Series 2018B-2 Reserve Account and (iv) the Series 2018B-3 Reserve Account. Moneys on deposit in the Reserve Fund shall be used to provide a reserve for the payment of the principal of and interest on the Bonds. Moneys on deposit in the Series 2018A Reserve Account shall be used solely to provide a reserve for the payment of the principal of and interest on the Series 2018A Bonds. Moneys on deposit in the Series 2018B-1 Reserve Account, the Series 2018B-2 Reserve Account and the Series 2018B-3 Reserve Account shall be used solely to provide a reserve for the payment of the principal of and interest on the Series 2018B-1 Bonds, the Series 2018B-2 Bonds and the Series 2018B-3 Bonds, respectively.

Cost of Issuance Fund. There is created and established with the Bond Trustee a trust fund under the Bond Indenture designated as the “Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) Cost of Issuance Fund” (the “Cost of Issuance Fund”). The Bond Trustee shall disburse moneys in the Cost of Issuance Fund as provided in the Loan Agreement. Moneys in the Cost of Issuance Fund may be used only for payment of the Cost of Issuance. On the earliest to occur of (a) written notice from the Corporation to the Bond Trustee that all Cost of Issuance has been paid and (b) August 1, 2018, any moneys remaining in the Cost of Issuance Fund shall be transferred to the Project Account of the Construction Fund, and thereafter no such moneys shall be used to pay Cost of Issuance. The Cost of Issuance Fund shall then be closed.

Rebate Fund. A Rebate Fund is established by the Issuer under the Bond Indenture to be held by the Bond Trustee. The Rebate Fund shall be for the sole benefit of the United States of America and shall not be subject to the claim of any other Person, including without limitation the Bondholders. The Rebate Fund is established for the purpose of complying with Section 148 of the Code and the Regulations promulgated pursuant thereto. The money deposited in the Rebate Fund, together with all investments thereof and investment income therefrom, shall be held in trust and applied solely as provided in the Bond Indenture. The Rebate Fund is not a portion of the Trust Estate and is not subject to the lien of the Bond Indenture. Notwithstanding the foregoing, the Bond Trustee with respect to the Rebate Fund is afforded all the rights, protections and immunities otherwise accorded to it under the Bond Indenture.

Repayment to the Corporation from the Funds. Any amounts remaining in the Bond Fund, Reserve Fund or Construction Fund after payment in full of the Bonds (or after making provision for such payment), the fees and expenses of the Bond Trustee and the Paying Agents (including attorneys fees, if any), the Administration Expenses, and all other amounts required to be paid under the Bond Indenture and the Loan Agreement shall be paid to the Corporation upon the termination of the Loan Agreement and used only for the payment of Costs of the Project.

The Bond Fund

Payments into the Bond Fund. There shall be deposited into the Interest Account all accrued interest received from the sale of the Bonds to the initial purchasers thereof, if any. In addition, there shall also be deposited into the Principal Account or the Interest Account, as and when received, (i) all payments on the Obligations, (ii) all moneys transferred to the Bond Fund from the Reserve Fund as described under

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the subheading “THE BOND INDENTURE—Reserve Fund—Use of Moneys in the Reserve Fund,” (iii) all other moneys required to be deposited therein pursuant to the Loan Agreement, and (iv) all other moneys received by the Bond Trustee when accompanied by directions that such moneys are to be paid into the Principal Account or the Interest Account. There also shall be retained or deposited in the Principal Account or the Interest Account all interest and other income received on investments or moneys required to be transferred thereto, in accordance with the provisions described under the subheading “THE BOND INDENTURE—Investments—Allocation and Transfers of Investment Income.” The Issuer covenants and agrees in the Bond Indenture that so long as any of the Bonds are Outstanding it will deposit, or cause to be deposited, into the Principal Account or the Interest Account for its account sufficient sums from revenues and receipts derived from the Loan Agreement promptly to meet and pay the principal of, premium, if any, and interest on the Bonds as the same become due and payable. There shall be deposited into the Entrance Fee Redemption Account all moneys received by the Bond Trustee from the Master Trustee on each Entrance Fee Transfer Date for deposit therein.

Use of Moneys in the Principal Account and the Interest Account. The amounts deposited into the Interest Account pursuant to the Bond Indenture shall be used to pay accrued interest on the appropriate series of Bonds on the first Interest Payment Date. Except as described under the subheadings “THE BOND INDENTURE—Establishment of Funds—Repayment to the Corporation from the Funds” and “THE BOND INDENTURE—Defaults and Remedies—Application of Moneys,” moneys in the Principal Account or the Interest Account shall be used solely for the payment of the principal of, premium, if any, and interest on the Bonds on a pro rata basis.

The Construction Fund

Use of Moneys in the Construction Fund. If construction of the Project has not been completed, if at any time there are insufficient moneys in the Interest Account of the Bond Fund to pay interest on the Bonds when due, the Bond Trustee shall transfer moneys in the Funded Interest Account of the Construction Fund to the Interest Account of the Bond Fund to pay such interest when due. Moneys in the Funded Interest Account of the Construction Fund shall be used to pay investment management fees and working capital of the Corporation as set forth in a written request of the Corporation to the Bond Trustee. Upon the maturity or sale of a Premium Security, the Bond Trustee shall transfer the appropriate amount of premium as set forth in the Bond Indenture to the account in which such Premium Security was held. The Bond Trustee shall disburse moneys in the Project Account of the Construction Fund as provided in the Loan Agreement. All Surplus Construction Fund Money remaining in the Construction Fund after the Completion Certificate is filed with the Bond Trustee and payment of all other costs then due and payable shall be transferred to the Principal Account and shall be used to redeem Bonds in accordance with the Bond Indenture.

Payments from the Construction Fund will be made in accordance with the Bond Indenture and the Loan Agreement. Upon receipt of a disbursement request and the required certificates, the Bond Trustee shall pay the amount requested to the extent that the Corporation is entitled to payment pursuant to the Loan Agreement.

If an Event of Default occurs under the Bond Indenture, and the Bond Trustee declares the principal of all Bonds and the interest accrued thereon to be due and payable, no moneys may be paid out of the Construction Fund by the Bond Trustee during the continuance of such an Event of Default; provided, however, that if such an Event of Default shall be waived and such declaration shall be rescinded by the Bond Trustee or the holders and owners of the Bonds pursuant to the terms of the Bond Indenture, the full amount of any such remaining moneys in the Construction Fund may again be disbursed by the Bond Trustee in accordance with the provisions of the Loan Agreement and the Bond Indenture.

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The Reserve Fund

Payments Into the Reserve Fund. In addition to the deposits to the Reserve Fund required by the Bond Indenture, there shall be deposited into the appropriate Reserve Account of the Reserve Fund any Reserve Fund Obligations delivered by the Corporation to the Bond Trustee pursuant to the Loan Agreement. In addition, there shall be deposited into the appropriate Reserve Account of the Reserve Fund all moneys required to be transferred thereto pursuant to the provisions described under the subheading “THE BOND INDENTURE—Investments—Allocation and Transfers of Investment Income,” and all other moneys received by the Bond Trustee when accompanied by directions that such moneys are to be paid into such Series 2018A Reserve Account of the Reserve Fund. There shall also be retained in each Reserve Account of the Reserve Fund all interest and other income received on investments of Reserve Fund moneys in such Reserve Account to the extent described under the subheading “THE BOND INDENTURE—Investments—Allocation and Transfers of Investment Income.”

Use of Moneys in the Reserve Fund. Except as provided in the Bond Indenture and as described under the subheading “THE BOND INDENTURE—Establishment of Funds—Repayment to the Corporation from the Funds,” moneys in each Reserve Account in the Reserve Fund shall be used solely for the payment of the principal of and interest on the related series of Bonds in the event moneys in the Bond Fund and the Funded Interest Account are insufficient to make such payments when due, whether on an interest payment date, redemption date, maturity date, acceleration date or otherwise.

Upon the occurrence of an Event of Default of which the Bond Trustee is deemed to have notice under the Bond Indenture and the election by the Bond Trustee of the remedy specified in the Bond Indenture, any Reserve Fund Obligations in the Reserve Fund shall, subject to the provisions described under the heading “THE BOND INDENTURE—Establishment of Funds—The Rebate Fund,” be transferred by the Bond Trustee to the Principal Account and applied in accordance with the provisions described under the heading “THE BOND INDENTURE—Defaults and Remedies—Application of Moneys.” In the event of the redemption of any series of Bonds, any Reserve Fund Obligations on deposit in the applicable Reserve Account of the Reserve Fund in excess of the Reserve Fund Requirement on the Bonds of such series to be Outstanding immediately after such redemption may, subject to the provisions described under the heading “THE BOND INDENTURE—Establishment of Funds—The Rebate Fund,” be transferred to the Principal Account and applied to the payment of the principal of the series of Bonds to be redeemed, or as otherwise directed in writing by the Corporation, as permitted in the Bond Indenture. In the event the value of the Reserve Fund Obligations on deposit in any Reserve Account of the Reserve Fund is in excess of the Reserve Fund Requirement for such Reserve Account (as determined pursuant to the statement of the Bond Trustee furnished in accordance with the provisions described herein under the subheading “THE BOND INDENTURE—Investments—Valuation of Permitted Investments”), then such excess shall be immediately transferred during the construction period for any Project into the Funded Interest Account of the Construction Fund created in connection with the issuance of Bonds for such Project or, if after the completion of such construction period, into the Interest Account of the Bond Fund.

On the final maturity date of any series of Bonds, any Reserve Fund Obligations in the applicable Reserve Account of the Reserve Fund in excess of the Reserve Fund Requirement for such Reserve Account after giving effect to such maturity may, upon the direction of the Corporation, be used to pay the principal of and interest on such series of Bonds on such final maturity date or for the payment of Costs of the Project.

If at any time moneys in a Reserve Account in the Reserve Fund are sufficient to pay the principal or redemption price of all the Bonds of a related series, the Bond Trustee may use the moneys on deposit in the Reserve Fund to pay such principal or redemption price of such related series of Bonds.

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Investments

Investment of Bond Fund, Construction Fund and Reserve Fund Moneys. Any moneys held as part of the Bond Fund, Construction Fund or Reserve Fund shall be invested or reinvested by the Bond Trustee at the written request and direction of the Corporation (upon which the Bond Trustee is entitled to rely) in Permitted Investments. If the Corporation fails to provide the Bond Trustee with written request and direction, the Bond Trustee shall invest such moneys as provided in subsection (i) of the definition of “Permitted Investments.” The Corporation will direct the Bond Trustee to invest only in Permitted Investments that are either subject to redemption at any time at a fixed value at the option of the owner thereof or that mature or are marketable not later than the business day prior to the date on which the proceeds are expected to be expended. For the purpose of any investment or replacement described under this subheading, the Permitted Investments shall be deemed to mature at the earliest date on which the Corporation is, on demand, obligated to pay a fixed sum in discharge of the whole of such obligation. The Bond Trustee may make any and all investments permitted by the provisions described under this subheading through its trust or investment department. In order to comply with the directions of the Corporation, the Bond Trustee may sell, or present for redemption, or may otherwise cause liquidation prior to their maturities, any of the obligations in which funds have been invested, and the Bond Trustee shall not be liable for any loss or penalty of any nature resulting therefrom. In order to avoid loss in the event of any need for funds, the Corporation may instruct the Bond Trustee, in lieu of a liquidation or redemption of investments in the fund or account needing funds, to exchange such investment for investments in another fund or account that may be liquidated at no, or at reduced, loss. The Bond Trustee shall be under no liability for interest on any moneys received under the Bond Indenture unless specifically agreed to in writing. Notwithstanding anything to the contrary described under this subheading, (i) the Corporation shall not direct the Bond Trustee to purchase any Premium Security unless the instructions sent by Electronic Means of the Corporation to make such purchase set forth the amount of premium on such Premium Security, and (ii) the Corporation shall not direct the Bond Trustee to sell any Premium Security, unless prior to such sale, the Corporation has directed the Trustee as to the amount of realized premium on such Premium Security to be transferred from the Funded Interest Account to the account in which such Premium Security was held.

Allocation and Transfers of Investment Income. Any investments in any Fund shall be held by or under the control of the Bond Trustee and shall be deemed at all times a part of the Fund from which the investment was made. Any loss resulting from such investments shall be charged to such Fund. The Bond Trustee shall not be liable for any loss or penalty resulting from any investment made in accordance with the provisions described under the subheading “—Investment of Bond Fund, Construction Fund and Reserve Fund Moneys” or any direction of the Corporation or for the Bonds becoming “arbitrage bonds” by reason of any such investment. Any interest or other gain from any fund from any investment or reinvestment described under the subheading “—Investment of Bond Fund, Construction Fund and Reserve Fund Moneys” shall be allocated and transferred as follows:

(a) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Funded Interest Account of the Construction Fund or the Project Account of the Construction Fund shall be credited to the Funded Interest Account of the Construction Fund until such Funded Interest Account of the Construction Fund expires, and thereafter, to the Interest Account of the Bond Fund.

(b) Any interest or other gain realized as a result of any investments or reinvestments of moneys in the Principal Account and the Interest Account of the Bond Fund shall be credited at least semiannually to the Interest Account unless a deficiency exists in any Reserve Account of the Reserve Fund, in which case such interest or other gain shall be paid into such Reserve Account forthwith.

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(c) Any interest or other gain realized as a result of any investments or reinvestments of moneys in a Reserve Account of the Reserve Fund shall be credited to any Reserve Account of the Reserve Fund if a deficiency exists therein at that time. If a deficiency does not exist in a Reserve Account of the Reserve Fund at that time, such interest or other gain on other amounts paid into such Reserve Account shall be paid during the construction period for any Project for deposit into Funded Interest Account of the Construction Fund created in connection with the issuance of Bonds for such Project or if after the completion of such construction period, for deposit into the Interest Account of the Bond Fund, in each case at least semiannually.

The Bond Trustee shall sell and reduce to cash a sufficient portion of such investments whenever the cash balance in any fund is insufficient for the purposes of such fund.

Valuation of Permitted Investments. Accounting and valuation of Permitted Investments in any Fund or Account will be performed as follows: (a) on a monthly basis the Bond Trustee shall furnish to the Corporation a full and complete statement of all receipts and disbursements of Permitted Investments in any Fund and Account covering such period; and (b) the Bond Trustee shall also furnish on or before May 15 and November 15 of each year a statement of the assets contained in each Fund and Account. Assets will be valued at market value as of April 30 and October 31, respectively, by the Bond Trustee in such statement in accordance with the normal valuation procedures of the Bond Trustee.

Defeasance

If, when the Bonds secured by the Bond Indenture shall become due and payable in accordance with their terms or otherwise as provided in the Bond Indenture and the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Bonds shall be paid, or provision shall have been made for the payment of the same, together with all other sums payable under the Bond Indenture (including but not limited to the fees and expenses of the Bond Trustee and any Paying Agent, in accordance with the Bond Indenture), then the right, title and interest of the Bond Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Issuer to the Bondholders shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, upon the written request of the Issuer or of the Corporation, and upon receipt of an Opinion of Counsel to the effect that all conditions precedent provided relating to the satisfaction and discharge of the Bond Indenture have been complied with, the Bond Trustee shall execute such documents as may be reasonably required by the Issuer and shall turn over to the Corporation any surplus in the Bond Fund, Reserve Fund and Construction Fund.

Defaults and Remedies

Events of Default. If any of the following events occur, it is defined as and shall be deemed an “Event of Default” under the Bond Indenture:

(a) Default in the payment of the principal of or premium, if any, on any Bond when the same shall become due and payable, whether at the stated maturity thereof, or upon proceedings for redemption or as required by the sinking fund provisions of the Bond Indenture or otherwise.

(b) Default in the payment of any installment of interest on any Bond when the same shall become due and payable.

(c) Declaration under the Master Indenture that the principal of, and accrued interest on, any Obligation issued thereunder is immediately due and payable.

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(d) Failure by the Issuer in the performance or observance of any other of the covenants, agreements or conditions in its part in the Bond Indenture or in the Bonds contained, which failure shall continue for a period of 60 days after written notice specifying such failure and requesting that it be remedied, is given to the Issuer and the Corporation by the Bond Trustee or to the Issuer, the Corporation and to the Bond Trustee by the owners of not less than 25% in principal amount of the Bonds Outstanding; provided that such failure is the result of the failure of the Corporation to perform its obligations under the Loan Agreement.

Remedies on Events of Default. Upon the occurrence of an Event of Default, the Bond Trustee shall have the following rights and remedies:

(a) The Bond Trustee shall, in the event that the payment of the principal of and accrued interest on any Obligation has been declared due and payable immediately by the Master Trustee, by notice in writing given to the Issuer and the Corporation, declare the principal amount of all Bonds then Outstanding and the interest accrued thereon to be immediately due and payable and said principal and interest shall thereupon become immediately due and payable. Upon any declaration of acceleration under the Bond Indenture, the Bond Trustee shall give notice to the Bondholders in the same manner as a notice of redemption under the Bond Indenture, stating the date upon which the Obligations and the Bonds shall be payable.

The provisions described in the preceding paragraph, however, are subject to the condition that if, after the payment of the principal of, and accrued interest on, the Obligations and the Bonds has been declared due and payable immediately, the declaration of the acceleration of the Obligations shall be annulled in accordance with the provisions of the Master Indenture, the declaration of the acceleration of the Bonds shall be automatically annulled, and the Bond Trustee shall promptly give written notice of such annulment to the Issuer and the Corporation and notice to Bondholders in the same manner as a notice of redemption under the Bond Indenture; but no such annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent thereon;

(b) The Bond Trustee may, by mandamus, or other suit, action or proceeding at law or in equity, enforce the rights of the Bondholders, and require the Issuer or the Corporation or both of them to carry out the agreements with or for the benefit of the Bondholders and to perform its or their duties under the Act, the Loan Agreement and the Bond Indenture.

(c) The Bond Trustee may, by action or suit in equity, require the Issuer to account as if it were the trustee of an express trust for the Bondholders but any such judgment against the Issuer shall be enforceable only against the funds and accounts under the Bond Indenture in the hands of the Bond Trustee.

(d) The Bond Trustee may, by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders.

(e) The Bond Trustee may, upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and the Bondholders, have appointed a receiver or receivers of the Trust Estate upon a showing of good cause with such powers as the court making such appointment may confer.

No right or remedy is intended to be exclusive of any other right or remedy, but each and every such right or remedy shall be cumulative and in addition to any other remedy given under the Bond Indenture or now or hereafter existing at law or in equity or by statute.

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If any Event of Default shall have occurred and if requested by the owners of at least 25% in aggregate principal amount of Bonds then Outstanding and indemnified as provided in the Bond Indenture (except the remedy under subparagraph (a) above, for which no indemnity may be required), the Bond Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the provisions described under this subheading as it, being advised by counsel, shall deem most expedient in the interests of such Bondholders. In the event the Bond Trustee shall receive inconsistent or conflicting requests and indemnity from two or more groups of owners of Outstanding Bonds, each representing less than a majority of the aggregate principal amount of the Outstanding Bonds, the Bond Trustee, in its sole discretion, may determine what action, if any, shall be taken.

Majority of Bondholders May Control Proceedings. Anything in the Bond Indenture to the contrary notwithstanding, the owners of at least a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, at any time, to the extent permitted by law, by an instrument or instruments in writing executed and delivered to the Bond Trustee, to direct the time, method, and place of conducting all proceedings, to be taken in connection with the enforcement of the terms and conditions of the Bond Indenture, or for the appointment of a receiver, and any other proceedings under the Bond Indenture; provided that such direction shall not be otherwise than in accordance with the provisions of the Bond Indenture and provided, further, that notwithstanding anything to the contrary in the Bond Indenture, the Issuer shall have the sole ability to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the Loan Agreement. The Bond Trustee shall not be required to act on any direction given to it pursuant to the provisions described under this subheading until indemnity as set forth in the Bond Indenture is provided to it by such Bondholders.

Rights and Remedies of Bondholders. No owner of any Bond shall have any right to institute any suit, action, or proceeding in equity or at law for the enforcement of the Bond Indenture or for the execution of any trust or for the appointment of a receiver or any other applicable remedy under the Bond Indenture, unless a default has occurred of which the Bond Trustee has been notified as provided in the Bond Indenture, or of which by it is deemed to have notice, nor unless such default shall have become an Event of Default and the owners of at least a majority in aggregate principal amount of Bonds then Outstanding shall have made written request to the Bond Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers granted under the Bond Indenture or to institute such action, suit, or proceeding in their own names, nor unless they have also offered to the Bond Trustee indemnity as provided in the Bond Indenture, nor unless the Bond Trustee shall thereafter fail or refuse to exercise the powers granted under the Bond Indenture, or to institute such action, suit, or proceeding in its own name; and such notification, request, and offer of indemnity are declared in every case at the option of the Bond Trustee to be conditions precedent to the execution of the powers and trusts of the Bond Indenture, and to any action or cause of action for the enforcement of the Bond Indenture, or for the appointment of a receiver or for any other remedy under the Bond Indenture; it being understood and intended that no one or more owners of the Bonds shall have the right in any manner whatsoever to affect, disturb, or prejudice the lien of the Bond Indenture by his, her, its, or their action or to enforce any right under the Bond Indenture except in the manner provided in the Bond Indenture and that all proceedings at law or in equity shall be instituted, had, and maintained in the manner provided in the Bond Indenture and for the equal benefit of the owners of all Bonds then Outstanding. Nothing in the Bond Indenture contained shall, however, affect or impair the right of any owner of Bonds to enforce the payment of the principal of, premium, if any, or interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to pay the principal of, premium, if any, and interest on each of the Bonds to the respective owners of the Bonds at the time and place, from the source and in the manner in the Bond Indenture, and in the Bonds expressed.

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Application of Moneys.

(a) Subject to the provisions of subparagraph (c) described under this subheading, all moneys received by the Bond Trustee pursuant to any right given or action taken under the provisions described under this heading and any other moneys held as part of the Trust Estate shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and the expenses, liabilities, and advances incurred or made by the Bond Trustee, including, without limitation, fees and expenses of its attorneys, agents and advisors, be deposited into the Bond Fund, and all moneys so deposited into the Bond Fund and all moneys held in or deposited into the Bond Fund during the continuance of an Event of Default and available for payment of the Bonds under the provisions described under the subheading “THE BOND INDENTURE—The Bond Fund—Uses of Moneys in the Principal Account and the Interest Account” shall (after payment of the fees and expenses of the Bond Trustee) be applied as follows:

(i) Unless the principal of all of the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied:

First: To the payment to the Persons entitled thereto of all installments of interest then due on the Bonds in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; and

Second: To the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Bond Indenture), in the order of their due dates, with interest on such Bonds from the respective dates upon which they become due at the rate of interest borne by such Bonds and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto, without any discrimination or privilege.

(ii) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon all of the Bonds (together with interest on overdue installments of principal at the rate of interest borne by each Bond), without preference or priority of principal over interest, any other installment of interest, or of any Bond over any other Bond, or of any series of Bonds over any other series of Bonds ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege.

(iii) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled as described under the provisions of this heading then, subject to the provisions of paragraph (ii) under this subheading in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of the foregoing paragraph (i) under this subheading.

(b) Whenever moneys are to be applied pursuant to the provisions described under this subheading, such moneys shall be applied at such times, and from time to time, as the Bond Trustee shall determine, having due regard to the amount of such moneys available for application and the

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likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Bond Trustee shall give such notice as it may deem appropriate of the deposit of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any unpaid Bond until such unpaid Bond shall be presented to the Bond Trustee for appropriate endorsement or for cancellation if fully paid.

(c) Notwithstanding the foregoing, any moneys transferred into any Account of the Bond Fund from any Reserve Account of the Reserve Fund shall be (i) held by the Bond Trustee separate and apart from any other moneys in such Account of the Bond Fund and (ii) applied solely to payment of principal of and interest on the series Bonds related to such Reserve Account.

(d) Whenever all of the Bonds and interest thereon have been paid under the provisions described under this subheading and all expenses and fees of the Bond Trustee and the Paying Agents and all Administration Expenses have been paid, any balance remaining in any funds shall be paid to the Corporation as described under the subheading “THE BOND INDENTURE— Establishment of Funds—Repayment to the Corporation from the Funds.”

Discontinuance of Proceedings on Default, Position of Parties Restored. In case the Bond Trustee shall have proceeded to enforce any right under the Bond Indenture, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Bond Trustee, then and in every such case the Issuer and the Bond Trustee shall be restored to their former positions and rights under the Bond Indenture with respect to the Trust Estate, and all rights, remedies, and powers of the Bond Trustee shall continue as if no such proceedings had been taken.

Supplemental Indenture and Amendments to the Loan Agreement

Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and the Bond Trustee may, without the consent of, or notice to, the Bondholders, enter into such indentures or agreements supplemental to the Bond Indenture (which supplemental indentures or agreements shall thereafter form a part thereof) for any one or more or all of the following purposes:

(a) To add to the covenants and agreements in the Bond Indenture contained other covenants and agreements thereafter to be observed for the protection or benefit of the Bondholders.

(b) To cure any ambiguity, or to cure, correct, or supplement any defect or inconsistent provision contained in the Bond Indenture, or to make any provisions with respect to matters arising under the Bond Indenture or for any other purpose if such provisions are necessary or desirable and do not adversely affect the interests of the owners of Bonds.

(d) To qualify the Bond Indenture under the Trust Indenture Act of 1939, if such be required in the Opinion of Counsel.

(e) To set forth the terms and conditions of Additional Bonds issued under the Bond Indenture.

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(f) To satisfy any requirements imposed by a rating agency if necessary to maintain the then current rating on the Bonds.

(g) To maintain the extent to which the interest on the Tax Exempt Bonds is not includable in the gross income of the recipients thereof, if in the opinion of Bond Counsel such supplemental indenture or agreement is necessary.

Supplemental Indentures Requiring Consent of Bondholders. Exclusive of supplemental indentures described above under the subheading “—Supplemental Indentures Not Requiring Consent of Bondholders,” the owners of not less than a majority in aggregate principal amount of the Bonds of all series then Outstanding affected thereby, in case one or more but less than all series of Bonds then Outstanding under the Bond Indenture are so affected, shall have the right, from time to time, to consent to and approve the execution by the Issuer and the Bond Trustee of such indenture or indentures supplemental to the Bond Indenture as shall be deemed necessary or desirable by the Issuer for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Bond Indenture; provided, however, that without the consent of the owners of all the Bonds at the time Outstanding nothing contained in the Bond Indenture shall permit, or be construed as permitting any of the following:

(a) An extension of the maturity of, or a reduction of the principal amount of, or a reduction of the rate of, or extension of the time of payment of interest on, or a reduction of a premium payable upon any redemption of, any Bond.

(b) The deprivation of the owner of any Bond then Outstanding of the lien created by the Bond Indenture (other than as originally permitted by the Bond Indenture).

(d) A reduction in the aggregate principal amount of the Bonds required for consent to any supplemental indenture.

Upon the execution of any supplemental indenture pursuant to the provisions described under this subheading, the Bond Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties, and obligations under the Bond Indenture of the Issuer, the Bond Trustee and all owners of Bonds then Outstanding shall thereafter be determined, exercised, and enforced under the Bond Indenture, subject in all respects to such modifications and amendments.

If at any time the Issuer shall request the Bond Trustee to enter into such supplemental indenture for any of the purposes described under this subheading, the Bond Trustee shall, upon being satisfactorily indemnified with respect to costs, fees and expenses (including attorneys fees), cause notice of the proposed execution of such supplemental indenture to be mailed to the registered owners of the Bonds at their addresses as the same last appear on the registration books. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the designated office of the Bond Trustee for inspection by all Bondholders. If, within sixty days or such longer period as shall be prescribed by the Issuer following the giving of such notice, the owners of not less than a majority in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as provided in the Bond Indenture, no owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof.

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Amendments of the Loan Agreement Not Requiring Consent of Bondholders. The Issuer and the Bond Trustee shall, without the consent of or notice to the Bondholders, consent to any amendment, change, or modification of the Loan Agreement as may be required (i) by the provisions of the Loan Agreement and the Bond Indenture, (ii) for the purpose of curing any ambiguity or formal defect or omission, (iii) in connection with the issuance of Additional Bonds as provided in the Bond Indenture, (iv) to satisfy any requirements imposed by a rating agency if necessary to maintain the then current rating on the Bonds, (v) to maintain the extent to which the interest on the Bonds is not includable in the gross income of the recipients thereof, if in the opinion of Bond Counsel such amendment is necessary and (vi) in connection with any other change therein which does not adversely affect the Bond Trustee or the owners of the Bonds.

Amendments of the Loan Agreement Requiring Consent of Bondholders. Except for the amendments, changes, or modifications as described under the subheading “—Amendments of the Loan Agreement Not Requiring Consent of Bondholders,” neither the Issuer nor the Bond Trustee shall consent to any other amendment, change, or modification of the Loan Agreement without the giving of notice to and the written approval or consent of the owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding given and procured as described under the subheading “— Supplemental Indentures Requiring Consent of Bondholders.” If at any time the Issuer and the Corporation shall request the consent of the Bond Trustee to any such proposed amendment, change, or modification of the Loan Agreement, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change, or modification to be given in the same manner as described under the subheading “—Supplemental Indentures Requiring Consent of Bondholders.” Such notice shall briefly set forth the nature of such proposed amendment, change, or modification and shall state that copies of the instrument embodying the same are on file at the designated office of the Bond Trustee for inspection by all Bondholders.

In executing any amendment, change or modification of the Loan Agreement, the Bond Trustee shall be provided, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution and delivery of such amendment, change, modification of the Loan Agreement is authorized or permitted by the Bond Indenture and the Loan Agreement and has been effected in compliance with the provisions of the Bond Indenture and the Loan Agreement. The Bond Trustee may, but shall not be obligated to, enter into any such amendment, change, or modification which affects the Bond Trustee’s own rights, duties or immunities. In connection with any amendment, change or modification in connection with clause (vi) described above under the subheading “—Amendments of the Loan Agreement Not Requiring Consent of Bondholders,” the Bond Trustee may in its discretion determine whether or not in accordance with such provision the Bond Trustee is adversely affected. Any such determination shall be binding and conclusive on the Issuer, the Corporation, and the Bondholders. The Bond Trustee may receive an Opinion of Counsel as conclusive evidence as to whether the Bondholders would be so affected by any such amendment, change, or modification of the Loan Agreement.

Non-Liability of Issuer

The Issuer shall not be obligated to pay the principal of, premium, if any, or interest on the Bonds, except from the Trust Estate. The Issuer shall not be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reason of or in connection with the Bond Indenture, the Bonds or the Loan Agreement, except only to the extent amounts are received for the payment thereof from the Corporation under the Loan Agreement.

Money Held for Particular Bonds

The money held by the Bond Trustee for the payment of the principal of, premium, if any, or interest on any of the Bonds due on any date with respect to particular Bonds (or portions of Bonds in the case of

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Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Bondholders of the Bonds entitled thereto, subject, however, to the provisions described under the heading “THE BOND INDENTURE—Defeasance.”

THE LOAN AGREEMENT

The following summarizes certain provisions of the Loan Agreement. Such summary does not purport to be complete and reference is made to the Loan Agreement for full and complete statements of all such provisions.

General

The Loan Agreement provides the terms of the loan of the proceeds of the Bonds by the Issuer thereof to the Corporation and the repayment of the loan by the Corporation.

Agreement to Construct Project; Completion Certificate

The Corporation agrees in the Loan Agreement to cause each Project to be acquired, constructed, and improved with due diligence and pursuant to the requirements of the applicable laws of the State in all material respects.

The Corporation shall deliver to the Bond Trustee within 90 days after the final completion or termination of the Project a certificate (the “Completion Certificate”) of the Corporation to the effect that: (i) the Project has been completed substantially in accordance with the plans and specifications, as then amended, and the date of completion; (ii) the Cost of the Project has been fully paid for and no claim or claims exist against the Corporation or against the Project out of which a lien based on furnishing labor or material exists or might ripen; provided, however, there may be excepted from the foregoing statement any claim or claims out of which a lien exists or might ripen in the event that the Corporation intends to contest such claim or claims in accordance with the Loan Agreement, in which event such claim or claims shall be described; provided, further, that it shall be stated that moneys are on deposit in the Construction Fund sufficient to make payment of the full amount that might in any event be payable in order to satisfy such claim or claims; provided, further, that there may also be excepted from the foregoing statement any claim that has been insured over pursuant to an endorsement to any title insurance; and (iii) all permits, certificates and licenses necessary for the occupancy and use of the Project have been obtained and are in full force and effect.

Requests for Disbursements

The Corporation shall be entitled to disbursements of moneys in the Construction Fund to pay the Costs related to a Project. Requests for disbursements by the Corporation are to be made to the Bond Trustee in accordance with the Disbursement Agreement, and the Corporation shall request disbursements from the Construction Fund as described in the Loan Agreement to pay the Costs related to a Project, and to reimburse itself for Costs related to a Project paid by the Corporation, upon presentation to the Bond Trustee of a request for disbursement signed by the Corporation.

The Corporation shall be entitled to disbursement of moneys in the Cost of Issuance Fund to pay the Cost of Issuance. The Corporation shall request disbursements from the Cost of Issuance Fund as described in the Loan Agreement to pay Cost of Issuance, and to reimburse itself for Cost of Issuance paid by the Corporation, upon presentation to the Bond Trustee of a request for disbursement signed by the Corporation, but in no event more often than four times a month. Notwithstanding the foregoing, the

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Corporation shall make no request for disbursement of moneys from the Construction Fund for payment of Cost of Issuance.

Disposition of Series 2018 Project

The Corporation covenants in the Loan Agreement that the property constituting the Series 2018 Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the Corporation of cash or other compensation, unless the Corporation obtains an Opinion of Bond Counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Tax Exempt Bonds.

Repayment of Loan

Anything to the contrary in the Loan Agreement notwithstanding, the Corporation shall make loan payments with respect to the Series 2018 Bonds in accordance with the Bond Indenture and the Loan Agreement directly to the Bond Trustee for deposit in the appropriate account of the Bond Fund.

Credits

Any amount in either account of the Bond Fund at the close of business of the Bond Trustee on the day immediately preceding any payment date on the Obligations in excess of the aggregate amount then required to be contained in such account of the Bond Fund pursuant to the Loan Agreement shall be credited pro rata against the payments due by the Corporation on such next succeeding principal or interest payment date on the Obligations.

In the event that all of the Bonds then Outstanding are called for redemption, any amounts contained in the Reserve Fund and the Bond Fund at the close of business of the Bond Trustee on the day immediately preceding such redemption date shall be credited against the payments due by the Corporation on the Obligations, as provided below.

The principal amount of any Series 2018A Bonds to be applied by the Bond Trustee as a credit against any sinking fund payment pursuant to the Bond Indenture shall be credited against the obligation of the Corporation with respect to payment of installments of principal of Obligation No. 3 as described in the Supplemental Master Indenture No. 2.

The cancellation by the Bond Trustee of any Series 2018A Bonds purchased by the Corporation or of any Series 2018A Bonds redeemed or purchased by the Issuer through funds other than funds received on the Obligation No. 3 shall constitute payment of a principal amount of Obligation No. 3 equal to the principal amount of the Series 2018A Bonds so cancelled. Upon receipt of written notice from the Bond Trustee of such cancellation, the Master Trustee shall at the request of the Corporation endorse on Obligation No. 3 such payment of such principal amount thereof.

The cancellation by the Bond Trustee of any Series 2018B Bonds purchased by the Corporation or of any Series 2018B Bonds redeemed or purchased by the Issuer through funds other than funds received on Obligation No. 4 shall constitute payment of a principal amount of Obligation No. 4 equal to the principal amount of the Series 2018B Bonds so cancelled. Upon receipt of written notice from the Bond Trustee of such cancellation, the Master Trustee shall at the request of the Corporation endorse on Obligation No. 4 such payment of such principal amount thereof.

The cancellation by the Bond Trustee of any Series 2018C Bonds purchased by the Corporation or of any Series 2018C Bonds redeemed or purchased by the Issuer through funds other than funds received on Obligation No. 5 shall constitute payment of a principal amount of Obligation No. 5 equal to the principal

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amount of the Series 2018C Bonds so cancelled. Upon receipt of written notice from the Bond Trustee of such cancellation, the Master Trustee shall at the request of the Corporation endorse on Obligation No. 5 such payment of such principal amount thereof.

Additional Payments

In addition to the loan payments, the Corporation shall also pay to the Issuer or to the Bond Trustee, as the case may be, “Additional Payments,” as follows:

(a) All taxes and assessments of any type or character charged to the Issuer or to the Bond Trustee affecting the amount available to the Issuer or the Bond Trustee from payments to be received under the Loan Agreement or in any way arising due to the transactions contemplated by the Loan Agreement (including taxes and assessments assessed or levied by any public agency or governmental authority of whatsoever character having power to levy taxes or assessments) but excluding franchise taxes based upon the capital and/or income of the Bond Trustee and taxes based upon or measured by the net income of the Bond Trustee; provided, however, that the Corporation shall have the right to protest any such taxes or assessments and to require the Issuer or the Bond Trustee, at the Corporation’s expense, to protest and contest any such taxes or assessments levied upon them and that the Corporation shall have the right to withhold payment of any such taxes or assessments pending disposition of any such protest or contest unless such withholding, protest or contest would adversely affect the rights or interests of the Issuer or the Bond Trustee;

(b) All reasonable fees, charges and expenses of the Bond Trustee for services rendered under the Bond Indenture and all amounts referred to in the Bond Indenture, as and when the same become due and payable;

(c) The reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Issuer or the Bond Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under the Loan Agreement, the other Corporation Documents or the Bond Indenture, including, but not limited to, any audit or inquiry by the Internal Revenue Service or any other governmental body;

(d) All fees and expenses of the Rating Agency and any rebate analyst, and if a deposit is required to be made to the Rebate Fund as a result of any calculation made pursuant to the Bond Indenture, the amount of such deposit, which shall be deposited in the Rebate Fund not later than the tenth day of the calendar month immediately following the date on which such calculation was made pursuant to the Bond Indenture; and

(e) The reasonable fees and expenses of the Issuer or any agent or attorney selected by the Issuer to act on its behalf in connection with the Loan Agreement, the other Corporation Documents, the Bonds or the Bond Indenture, including, without limitation, any and all reasonable expenses incurred in connection with the authorization, issuance, sale and delivery of any such Bonds or in connection with any litigation, investigation, inquiry or other proceeding which may at any time be instituted involving the Loan Agreement, the other Corporation Documents, the Bonds or the Bond Indenture or any of the other documents contemplated thereby, or in connection with the reasonable supervision or inspection of the Corporation, its properties, assets or operations or otherwise in connection with the administration of the Loan Agreement and the other Corporation Documents.

All such payments shall be made by the Corporation from the loan payments or other legally available funds of the Corporation, for payment to the Person or Persons entitled to such

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payments or for deposit to the appropriate fund or account held by the Bond Trustee under the Bond Indenture.

Such Additional Payments shall be billed to the Corporation by the Issuer, the Rating Agency or the Bond Trustee from time to time, together with a statement certifying that the amount billed has been incurred or paid by the Issuer or the Bond Trustee for one or more of the above items. After such a demand, amounts so billed shall be paid by the Corporation within thirty (30) days after receipt of the bill by the Corporation.

Reserve Fund

In the event any moneys in any Reserve Account of the Reserve Fund are transferred to the Bond Trustee for deposit to the Bond Fund pursuant to the Bond Indenture, except if such moneys are transferred due to the redemption of all Bonds of the related series, the Corporation agrees to deposit additional Reserve Fund Obligations in an amount sufficient to satisfy the Reserve Fund Requirement for such Reserve Account, such amount to be deposited in no more than 12 equal consecutive monthly installments, the first installment to be made within seven months of such transfer or receipt of written notice from the Bond Trustee of a deficiency.

In the event the value of the Reserve Fund Obligations (as determined pursuant to the statement of the Bond Trustee furnished in accordance with the Bond Indenture) on deposit in any Reserve Account of the Reserve Fund is less than 90% of the Reserve Fund Requirement for such Reserve Account, the Corporation agrees to deposit additional Reserve Fund Obligations in an amount sufficient to satisfy the Reserve Fund Requirement for such Reserve Account, such amount to be deposited within 120 days of receipt of written notice from the Bond Trustee of such deficiency.

Maintenance and Insurance

The Corporation may, at its own expense, cause to be made from time to time any additions, modifications or improvements to any Project provided such additions, modifications or improvements do not impair the character of the Project as an “adult congregate living facility” or a “hospital facility” within the meaning of the Act or impair the extent of the exemption of interest on the Tax Exempt Bonds from Federal income taxation.

Throughout the term of the Loan Agreement, the Corporation will, at its own expense, provide or cause to be provided insurance against loss or damage to each Project in accordance with the terms of the Master Indenture.

Continuing Disclosure

The Corporation covenants and agrees in the Loan Agreement that, simultaneously with the execution and delivery of the Loan Agreement, the Corporation will enter into, comply with and carry out all of the provisions of a disclosure agreement with respect to such Bonds that complies with the provisions of Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission, in form and substance satisfactory to the participating underwriter and Bond Counsel. Notwithstanding any other provision of the Loan Agreement, failure of the Corporation to enter into and comply with such a disclosure agreement shall not be considered an Event of Default; however, the Bond Trustee or any Bondholder or beneficial owner may and, upon the written direction of any participating underwriter or any Bondholders owning not less than 25% in aggregate principal amount of all of the Bonds then Outstanding, the Bond Trustee shall, subject to receipt of indemnity as provided in the Bond Indenture, take such actions as it may deem

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necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Corporation to comply with its obligations described under this subheading.

Failure to Perform Covenants and Remedies Therefor

Failure to Perform Covenants. Upon failure of the Corporation to pay when due any payment (other than failure to make any payment on any Obligation, which default shall have no grace period) required to be made under the Loan Agreement or to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Loan Agreement, and continuation of such failure for a period of 60 days after written notice, specifying such failure and requesting that it be remedied, is given to the Corporation by the Issuer or the Bond Trustee, the Issuer or the Bond Trustee shall have the remedies described below under the subheading “—Remedies for Failure to Perform.”

Remedies for Failure to Perform. Upon the occurrence of a failure of the Corporation to perform as above under the subheading above “—Failure to Perform Covenants,” the Issuer or the Bond Trustee, as assignee or successor of the Issuer, upon compliance with all applicable law, in its discretion may take any one or more of the following steps: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Issuer, and require the Corporation to carry out any agreements with or for the benefit of the Bondholders and to enforce performance and observance of any duty, obligation, agreement or covenant of the Corporation under the Act or the Loan Agreement; or (b) by action or suit in equity require the Corporation to account as if it were the trustee of an express trust for the Issuer; or (c) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer; or (d) upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and the Bondholders, have appointed a receiver or receivers of the Trust Estate upon a showing of good cause with such powers as the court making such appointment may confer.

Discontinuance of Proceedings. In case any proceeding taken by the Issuer or the Bond Trustee on account of any failure to perform as described under the subheading above “—Failure to Perform Covenants” shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Issuer or the Bond Trustee, then and in every case the Issuer and the Bond Trustee shall be restored to their former positions and rights under the Loan Agreement, respectively, and all rights, remedies and powers of the Issuer and the Bond Trustee shall continue as though no such proceeding had been taken.

Prepayment of Obligations

The Corporation shall have and is granted by the Loan Agreement the option exercisable at any time to prepay all or any portion of its payments due or to become due on any or all of the Obligations by depositing with the Bond Trustee for payment into the Bond Fund or any bond fund created with respect to any series of Additional Bonds an amount of money or Government Obligations the principal and interest on which when due, will be equal to an amount sufficient to pay the principal of, premium, if any, and interest on any portion of the Bonds then Outstanding under the Bond Indenture, without penalty. The exercise of the option described under this heading shall not be cause for redemption of Bonds unless such redemption is permitted at that time under the provisions of the Bond Indenture and the Corporation specifies the date for such redemption. In the event the Corporation prepays all of its payments due and to become due on all the Obligations by exercising the option described under this heading and upon payment of all reasonable and necessary fees and expenses of the Bond Trustee, the Issuer and any Paying Agent accrued and to accrue through final payment of the Bonds called for redemption as a result of such prepayment and of all Administration Expenses through final payment of the Bonds called for redemption as a result of such prepayment, the Loan Agreement shall terminate; provided that no such termination shall occur unless all of the Bonds are no longer Outstanding.

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Amendments, Changes and Modifications

Except as otherwise provided in the Loan Agreement or in the Bond Indenture, subsequent to the initial issuance of Bonds and prior to their payment in full (or provision for the payment thereof having been made in accordance with the provisions of the Bond Indenture), the Loan Agreement may not be effectively amended, changed, modified, altered, or terminated without the written consent of the Bond Trustee and the Issuer. See the subheading “THE BOND INDENTURE—Supplemental Indenture and Amendments to the Loan Agreement” herein.

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APPENDIX E

SUMMARY OF CERTAIN PROVISIONS OF THE GROUND LEASES AND THE LEASEHOLD DEED OF TRUST

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The following is a summary of certain provisions of the Ground Leases and the Leasehold Deed of Trust that are not described elsewhere in this Official Statement. These summaries do not purport to be comprehensive and reference should be made to each of said documents for a full and complete statement of their provisions.

DEFINITIONS OF CERTAIN TERMS

Definitions of Certain Terms Used in Ground Leases

The following is a summary of certain terms used in this Appendix E in connection with the Ground Leases. All capitalized terms used but not defined in this Appendix E or elsewhere in this Official Statement have the meanings set forth in the Ground Leases.

“Additional Rent” means all of the Additional Rent due under the Ground Leases summarized below under the heading “GROUND LEASES — Rent — Additional Rent.”

“Amended Additional Rent” has the meaning summarized below under the heading “GROUND LEASES — Rent — Additional Rent-Computation-Village Ground Lease (Amended).”

“Amended Base Rent” has the meaning summarized below under the heading “GROUND LEASES — Rent — Base Rent-Initial Base Rent-Village Ground Lease (Amended).”

“Amended Rent” has the meaning summarized below under the heading “GROUND LEASES — Rent — Definition of Rent.”

“Base Rent” means all of the Base Rent due under the Ground Leases summarized below under the heading “GROUND LEASES — Rent — Base Rent.”

“CCRC” means a continuing care retirement community under Oregon law.

“Debt Service Coverage Ratio” is described (i) in the Master Trust Indenture and (ii) when the Master Trust Indenture is not in effect, as the ratio of net income available for debt service of Tenant for the period of time in question to the actual annual debt service on all outstanding long-term indebtedness of Tenant for such period of time.

“Dispute Resolution” means the process set forth in the Ground Lease to solve any applicable dispute regarding the Ground Lease.

“Effective Date” or “Commencement Date” means the date on which the respective Ground Lease is executed and delivered by Landlord and Tenant. The Effective Date of the Original Ground Lease was August 15, 1999, the Effective Date of the Village Ground Lease was the date of issuance of the Series 2017 Bonds (April 27, 2017), and the Effective Date of the Village Ground Lease (Amended) will be the date of issuance of the Series 2018 Bonds.

“Event of Default” has the meaning summarized below under the heading “GROUND LEASES — Defaults.”

“Existing Improvements” is defined as the improvements on the Premises in existence as of the Effective Date.

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“Future Improvements” means any alterations, improvements, or modifications made to the Premises after the completion of the Initial Improvements, if any.

“Ground Leases” means the Original Ground Lease and the Village Ground Lease.

“Imposition” means any tax, the non-payment of which could result in a lien upon Landlord’s interest in the Premises or upon Tenant’s Leasehold Estate, including, but not limited to, ad valorem real property taxes and personal property taxes.

“Initial Improvements” means the Stage 1 Project Improvements and the Stage 2 Project Improvements.

“Land Premises” has the meaning summarized below under the heading “GROUND LEASES — Description of the Premises.”

“Landlord” means The Society of the Sisters of the Hold Names of Jesus and Mary, an Oregon not-for-profit corporation.

“Lease Year” is defined as that period of time between the Commencement Date and the first anniversary of the Commencement Date, and thereafter, the period of time between each anniversary of the Commencement Date and the next following anniversary of the Commencement Date.

“Leasehold Estate” means the estate of Tenant created under the terms of the Ground Lease.

“Leasehold Mortgage” means the Leasehold Deed of Trust and any other deed of trust or mortgage granted by Tenant on its Leasehold Estate.

“Leasehold Mortgagee” means a Person holding a deed of trust or mortgage on Tenant’s Leasehold Estate.

“Lender in Possession” means the Leasehold Mortgagee or its successor, assignee, nominee, or designee which becomes the new tenant under the Lease.

“Loan Documents” or “Bond Documents” is defined as the Loan Agreement, the Bond Indenture, the Master Trust Indenture, the Leasehold Mortgage(s), and the agreements the performance of which is secured by the Leasehold Mortgage(s).

“Memorandum of Lease” means the memorandum executed and acknowledged by the Landlord and the Tenant for public recordation purposes, so that public notice of the Term of the Ground Lease be given.

“Original Ground Lease” means that certain Ground Lease dated August 15, 1999 between the Tenant and the Landlord, pursuant to which, the Landlord retains fee title ownership to the real estate upon which the existing community is located.

“Person” is defined as any natural person or any legal entity.

“Premises” has the meaning summarized below under the heading “GROUND LEASES — Description of the Premises.”

“Prime Rate” is defined as the quoted prime rate or reference rate, fluctuating over time, charged by Landlord’s bank.

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“Project Improvements” is defined, collectively, as the Existing Improvements, the Initial Improvements and the Future Improvements (if any).

“Rent” has the meaning summarized below under the heading “GROUND LEASES — Rent — Definition of Rent.”

“Series 2017 Bonds” means the bonds issued in 2017 to finance the Stage 1 Project Improvements.

“Series 2018 Bonds” is defined in the Bond Indenture and Appendix D hereto.

“Stage 1 Project Improvements” means the improvements to be constructed with proceeds of the Series 2017 Bonds.

“Stage 2 Project Improvements” means the improvements to be constructed with proceeds of the Series 2018 Bonds.

“Taking” means a taking or condemnation by any authority for any public use or purpose.

“Tenant” means Mary’s Woods at Marylhurst, Inc., an Oregon not-for-profit corporation, and its successors and assigns.

“Term” has the meaning summarized below under the heading “GROUND LEASES — Term.”

“Transfer” is defined as the assignment, conveyance, sale, or other disposition by Tenant of all of its rights under the Lease.

“Transferee” means the assignee, purchaser or transferee of Tenant’s interest in the Lease.

“Trustee of Insurance” means an Institution with an office located in Portland, Oregon with authority to hold escrowed funds.

“Village Ground Lease” means that certain Ground Lease Phase II dated as of the date of issuance of the Series 2017 Bonds, between the Tenant and the Landlord, pursuant to which the Landlord will retain fee title ownership to the real estate upon which the Stage 1 Improvements will be constructed, and, as context requires, as amended by the Village Ground Lease (Amended).

“Village Ground Lease (Amended)” means the Amendment to Village Ground Lease Phase II dated as of the date of issuance of the Series 2018 Bonds, between the Tenant and the Landlord, pursuant to which the Landlord will retain fee title ownership to the real estate upon which the Stage 2 Improvements will be constructed.

Definitions of Certain Terms Used in the Leasehold Deed of Trust

The following is a summary of certain terms used in this Appendix E in connection with the Leasehold Deed of Trust. All capitalized terms used but not defined in this Appendix E or elsewhere in this Official Statement have the meanings set forth in the Leasehold Deed of Trust.

“Additions” means any and all alterations, additions, accessions, extensions, betterments and improvements to the Property (or any portion thereof), substitutions therefor, and renewals and replacements thereof.

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“Beneficiary” means U.S. Bank Trust National Association, as master trustee under the Master Trust Indenture.

“Bond Documents” means and includes (without limitation) the Series 2017 Bonds, the Series 2018 Bonds, the bond indenture pursuant to which the Series 2017 Bonds were issued, the Bond Indenture (as defined in Appendix D hereto), the Master Trust Indenture, the loan agreement relating to the Series 2017 Bonds, the Loan Agreement (as defined in Appendix D hereto), the Leasehold Deed of Trust and any and all other documents which Beneficiary, Grantor, or any other party or parties or their representatives, have executed and delivered, or may hereafter execute and deliver, to evidence or secure Secured Obligations, or any part thereof, or in connection therewith, together with any and all Supplements thereto.

“Condemnation Award” has the meaning summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Equipment Collateral” has the meaning summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Facilities” has the meaning given to that term in the Master Trust Indenture and summarized in Appendix D hereto.

“Grantor” means Mary’s Woods at Marylhurst, Inc., an Oregon not-for-profit corporation.

“Gross Revenues” has the meaning given to that term in the Master Trust Indenture and summarized in Appendix D hereto.

“Improvements” has the meaning summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Land” has the meaning summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Leasehold Deed of Trust” means that certain Leasehold Line of Credit and Construction Deed of Trust, dated as of April 1, 2017, as amended by the First Amendment of Leasehold Line of Credit and Construction Deed of Trust, dated as of May 1, 2018, delivered by the Grantor, naming the Master Trustee as Beneficiary to secure the payment of its obligations under the Master Trust Indenture.

“Leasehold Deed of Trust Indebtedness” includes, but is not limited to, (i) all moneys and all sums of principal, interest and premium (if any) due or to become due under the Master Trust Indenture, (ii) all other moneys now or hereafter advanced or expended by the Master Trustee or by Beneficiary as provided for in the Leasehold Deed of Trust or in any other of the Bond Documents, or by applicable law, and (iii) all costs, expenses, charges, liabilities, commissions, half-commissions and attorneys’ fees now or hereafter chargeable to the Grantor, or incurred by, or disbursed by, the Trustee or Beneficiary on behalf of the Grantor as provided for in the Leasehold Deed of Trust, or in any of the other Bond Documents or by applicable law, provided however, that until the occurrence of an Event of Default under the Leasehold Deed of Trust, and subject to any provisions of the Leasehold Deed of Trust to the contrary, the Grantor will have the right to remain in quiet and peaceful possession of the Property, and to collect, receive and retain the rents, revenues, profits, proceeds, income and royalties therefrom and to collect the Rents and Gross Revenues.

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“Leases” means any and all leases, ground leases and subleases which may have been heretofore executed by Grantor or which may be hereafter executed by Grantor in connection with, or for, the use and occupation of the Property (or any part thereof), together with any and all supplements thereto.

“Master Trust Indenture” means the Master Trust Indenture dated as of April 1, 2017, between the Grantor and the Beneficiary, as amended, modified or supplemented from time to time, including by the Second Supplemental Master Trust Indenture dated as of May 1, 2018 between the Grantor and the Beneficiary.

“Permitted Encumbrance” has the meaning given to that term in the Master Trust Indenture and summarized in Appendix D hereto.

“Person” means any natural person, firm, association, corporation, company, trust, partnership, public body or other entity.

“Property” means the all of Grantor’s rights, title and interest in and to the Land, Improvements, Facilities, Equipment Collateral, Residency Agreement and all real property and all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements thereon, including, without limitation, the Facilities, and all other items of property summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Rents” has the meaning summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Residency Agreement” means each and every contract, as amended from time to time, between Grantor and a resident of the Facilities giving the resident certain rights of occupancy in the Facilities, including, without limitation, the independent living units, the assisted living units, skilled nursing beds, specialty care (dementia) beds and providing for certain services to such resident.

“Secured Obligations” has the meaning summarized below under the heading “LEASEHOLD DEED OF TRUST — Mortgaged Property and Obligations Secured.”

“Supplement” or “Supplements” means any and all extensions, renewals, modifications, amendments, supplements, and substitutions.

GROUND LEASES

The following summarizes certain provisions of the Ground Leases. Such summary does not purport to be complete and reference is made to the Original Ground Lease and the Village Ground Lease for full and complete statements of all such provisions.

The Original Ground Lease and the Village Ground Lease contain substantially similar provisions and are therefore summarized together under this Appendix. Unless the context indicates otherwise, each reference to the “Ground Lease” shall be deemed to refer to the Original Ground Lease or the Village Ground Lease, as applicable.

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Description of the Premises

ORIGINAL GROUND LEASE

The Land Premises consists of approximately 24 acres of real property in Lake Oswego, Oregon, which is owned by the Landlord and depicted in an exhibit attached to the Original Ground Lease. The Premises include the Land Premises and all presently existing and future appurtenances, improvements, easements, and other property rights inherent in the Land Premises or which utilize the Land Premises but exclude Unit A of the condominium declaration described in Appendix A to this Official Statement. The Land Premises also includes nonexclusive easements for use in common with Landlord, and other specified parties, for vehicular, pedestrian and utility purposes, utilizing the vehicular and pedestrian ways and utility rights of way depicted in the Original Ground Lease.

VILLAGE GROUND LEASE

The Land Premises consists of approximately 13 acres of presently unimproved real property described and depicted in an exhibit attached to the Village Ground Lease. The Premises include the Land Premises and all presently existing and future appurtenances, improvements, easements, and other property rights inherent in the Land Premises or which utilize the Land Premises. The Land Premises also includes nonexclusive easements for use in common with Landlord, and other specified parties, for vehicular, pedestrian and utility purposes, utilizing the vehicular and pedestrian ways and utility rights of way depicted in the Village Ground Lease.

Ownership of Project Improvements

As Tenant constructs the Project Improvements, the Project Improvements will be automatically incorporated into the Premises and become part of the CCRC. Upon termination of the Ground Lease, all Project Improvements will revert exclusively to Landlord, subject only to any applicable Leasehold Mortgage provisions and Tenant’s Right of First Refusal, summarized below under the heading “GROUND LEASES — Right of First Refusal.”

Term

The Term of the Ground Lease will commence (and be binding upon Landlord and Tenant) on the Effective Date. Unless terminated or extended pursuant to the provisions of the Ground Lease, the Ground Lease will terminate on the 49th anniversary of the issuance of the Series 2018 Bonds.

The term of the Ground Lease may not be amended without the consent of the Beneficiary of the Leasehold Deed of Trust which consent shall be subject to the provisions of the Master Trust Indenture. See below under the heading “GROUND LEASES — Lease Extension” for additional information related to the extension of the Term.

Lease Extension

Provided at the time of a Lease extension that Tenant: (a) is not in default under either Ground Lease; and (b) has paid current all rent, charges or reimbursements due Landlord under both of such leases, the following rights are granted to Tenant:

1) Tenant will have the right to extend the Ground Lease for two (2) additional, consecutive ten (10) year terms, with the first extension commencing at the time the initial Lease term expires and the second, if exercised by Tenant, upon the expiration of the first ten (10)

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year extension period. Tenant will not be obligated to extend the Ground Lease, nor required to do so by Landlord.

2) For an extension to be effective, Tenant will provide written notice to Landlord not later than nine (9) months prior to the expiration of the then-current Lease term. Such notice will also be deemed notice that Tenant is extending the Phase I lease, as Tenant will be required to extend both Leases concurrently or neither Lease will be extended.

3) Once Tenant provides its notice to extend, Tenant will immediately execute appropriate documentation extending both the Original Ground Lease and the Village Ground Lease. The extended Ground Leases will be on the same terms as the Ground Leases’ respective initial term, except there will be no further right to extend beyond the two (2) ten (10) year terms described in the Ground Lease. Any provisions dealing with the Bonds or Bond Documents included in the Ground Leases will be deemed deleted if, or when, the Bonds have been paid in full.

Exercise by Tenant of its extension right will be subject to any applicable Leasehold Mortgage.

Rent

DEFINITION OF RENT

Rent is equal to the sum of all Base Rent, Additional Rent, and all other payments owed by Tenant to Landlord under the terms of the Ground Lease.

BASE RENT

Initial Base Rent – Original Ground Lease. An initial one-time payment equal to one million five hundred thousand dollars ($1,500,000) was previously paid by the Tenant (the “Original Initial Base Rent”).

Initial Base Rent – Village Ground Lease. On the Effective Date of the Village Ground Lease, Tenant paid Landlord a one-time, Initial Base Rent Payment equal to seven hundred fifty thousand dollars ($750,000) (the “Village Initial Base Rent”).

Initial Base Rent – Village Ground Lease (Amended). On the Effective Date of the Village Ground Lease (Amended), Tenant will pay Landlord a one-time, Initial Base Rent Payment equal to two hundred fifty thousand dollars ($250,000) (the “Amended Village Initial Base Rent”).

Annual Base Rent – Original Ground Lease. The Tenant has paid to the Landlord, since the Effective Date of the Original Ground Lease, and will continue to pay throughout the Term, an annual Base Rent payment equal to Seventy-Five Thousand and No/100 Dollars ($75,000.00) for each Lease Year during the Term (the “Original Annual Base Rent”). The Original Annual Base Rent is paid in advance in two (2) semi-annual payments of Thirty-Seven Thousand Five Hundred and No/100 Dollars ($37,500.00). The Original Annual Base Rent installment payment dates are the 15th day of May and the 15th day of November of each Lease Year. If there are fewer than six months remaining between the final Original Annual Base Rent annual payment date of the Term and the last day of the last Lease Year, then the final Original Annual Base Rent payment installment will be a fraction of the semi-annual Original Annual Base Rent payment due on that date, i.e. the numerator of which is the number of days remaining from the final Original Annual Base Rent Payment Date through the last day of the Lease Year

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and the denominator of which is 180. The term “Base Rent” under the Original Ground Lease includes the Original Initial Base Rent and the Original Annual Base Rent.

Annual Base Rent – Village Ground Lease. Commencing on the Village Annual Base Rent Commencement Date (defined below) and continuing throughout the Term, Tenant will pay Landlord an annual Base Rent payment equal to Seventy-Five Thousand and No/100 Dollars ($75,000.00) for each Lease Year during the Term (the “Village Annual Base Rent”). The Village Annual Base Rent will be paid in advance in two (2) semi-annual payments of Thirty-Seven Thousand Five Hundred and No/100 Dollars ($37,500.00) each except for the first installment of Village Annual Base Rent. The first payment of Village Annual Base Rent will be paid by Tenant within ten (10) days following the date on which a certificate of occupancy (the “CO”) is issued by the City of Lake Oswego for all of the 144 independent living units in the CCRC (the “Village Annual Base Rent Commencement Date”). The initial Village Annual Base Rent payment will be a prorated payment in the amount of Seventy-Five Thousand and No/100 Dollars ($75,000.00) multiplied by the number of calendar days beginning on the date the CO is issued, continuing through the day before the next following Village Annual Base Rent payment date. Then, beginning on the next Village Annual Base Rent payment date, and continuing on each Village Annual Base Rent payment date. Tenant will pay Landlord its semi-annual installment of Village Annual Base Rent, in advance, in the amount of Thirty-Seven Thousand Five Hundred and No/100 Dollars ($37,500.00) each. The Village Annual Base Rent installment payment dates will be the 15th day of May and the 15th day of November of each Lease Year. If there are fewer than six months remaining between the final Village Annual Base Rent payment date of the Term and the last day of the last Lease Year, then the final Village Annual Base Rent payment installment will be a fraction of the semi-annual Village Annual Base Rent payment due on that date, i.e. the numerator of which is the number of days remaining from the final Village Annual Base Rent Payment Date through the last day of the Lease Year and the denominator of which is 180. The term “Base Rent” under the Village Ground Lease includes the Village Initial Base Rent and the Village Annual Base Rent.

Annual Base Rent – Village Ground Lease (Amended). Commencing on the Amended Village Annual Base Rent Commencement Date (defined below) and continuing throughout the Term, Tenant will pay Landlord an annual Base Rent payment equal to Twenty-Five Thousand and No/100 Dollars ($25,000.00) for each Lease Year during the Term (the “Amended Village Annual Base Rent”). The Amended Village Annual Base Rent will be paid in advance in two (2) semi-annual payments of Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00) each except for the first installment of Village Annual Base Rent. The first payment of Amended Village Annual Base Rent will be paid by Tenant within ten (10) days following the date on which a certificate of occupancy (the “CO”) is issued by the City of Lake Oswego for all of the 54 independent living units in the Village Stage 2 project (the “Amended Village Annual Base Rent Commencement Date”). The initial Amended Village Annual Base Rent payment will be a prorated payment in the amount of Twenty-Five Thousand and No/100 Dollars ($25,000.00) multiplied by the number of calendar days beginning on the date the CO is issued, continuing through the day before the next following Amended Village Annual Base Rent payment date. Then, beginning on the next Amended Village Annual Base Rent payment date, and continuing on each Village Annual Base Rent payment date. Tenant will pay Landlord its semi-annual installment of Amended Village Annual Base Rent, in advance, in the amount of Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00) each. The Amended Village Annual Base Rent installment payment dates will be the 15th day of May and the 15th day of November of each Lease Year. If there are fewer than six months remaining between the final Amended Village Annual Base Rent payment date of the Term and the last day of the last Lease Year, then the final Amended Village Annual Base Rent payment installment will be a fraction of the semi-annual Amended Village Annual Base Rent payment due on that date, i.e. the numerator of which is the number of days remaining from the final Amended Village Annual Base Rent Payment Date through the last day of the Lease Year and the denominator of which is 180. The

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term “Base Rent” under the Village Ground Lease (Amended) includes the Amended Village Initial Base Rent and the Amended Village Annual Base Rent.

ADDITIONAL RENT

Computation – Original Ground Lease. Additional Rent under the Original Ground Lease is equal to the product of $199.79 per month multiplied by the total number of independent living units, assisted living units, specialty care beds, and skilled nursing beds in the CCRC that are, as of the first day of each calendar month throughout the Term, either occupied or in a physical condition such that they could be occupied and for which a CO has been issued and is outstanding. Additional Rent will be increased, but not decreased, based upon by the annual increase in the Consumer Price Index for all Urban Consumers Portland-Salem, Oregon, commencing with the first anniversary of the Additional Rent Accrual Date, and annually will be re-calculated on each anniversary of the Additional Rent Accrual Date thereafter during the Term. Additional Rent is currently accruing under the Original Ground Lease and is due and payable as summarized below under the subheading “—Payments of Additional Rent – Original Ground Lease.”

Computation – Village Ground Lease. Additional Rent under the Village Ground Lease is equal to the product of Two Hundred Twenty and No/100 Dollars ($220.00) per month multiplied by the total number of CCRC independent living apartments, assisted living apartments, memory support beds, and other levels of service (total: 192 living modes x $220/mo. = $42,240/mo. or $506,880 annually) that are, as of the first day of each calendar month throughout the Term, either occupied or in a physical condition such that they could be occupied and for which a CO has been issued and is outstanding. Additional Rent will begin to accrue (but will not be payable until the provisions of the paragraph summarized immediately below are met) on the date when: (a) 85% of all of the independent living apartments included within the Village Stage 1 Project have been occupied under Residency Agreements and (b) the Series 2017B Bonds have been paid in full (the “Additional Rent Accrual Date”). Additional Rent will be annually increased by the greater of: three percent (3%) over the prior year’s amount, or the annual increase in the Consumer Price Index for all Urban Consumers Portland-Salem, Oregon. The increase will commence with the first anniversary of the Additional Rent Accrual Date, and annually will be re- calculated on each anniversary of the Additional Rent Accrual Date thereafter during the Term.

Computation – Village Ground Lease (Amended). Amended Additional Rent under the Village Ground Lease (Amended) is equal to the product of Two Hundred Twenty and No/100 Dollars ($220.00) per month multiplied by the total number of CCRC independent living apartments (total: 54 living modes x $220/mo. = $11,800/mo. or $142,560 annually) that are, as of the first day of each calendar month throughout the Term, either occupied or in a physical condition such that they could be occupied and for which a CO has been issued and is outstanding. Amended Additional Rent will begin to accrue (but will not be payable until the provisions of the paragraph summarized immediately below are met) on the date when: (a) 85% of all of the independent living apartments included within the Village Stage 2 Project have been occupied under Residency Agreements and (b) the Series 2018B Bonds have been paid in full (the “Amended Additional Rent Accrual Date”). Amended Additional Rent will be annually increased by the greater of: three percent (3%) over the prior year’s amount, or the annual increase in the Consumer Price Index for all Urban Consumers Portland-Salem, Oregon. The increase will commence with the first anniversary of the Amended Additional Rent Accrual Date, and annually will be re-calculated on each anniversary of the Amended Additional Rent Accrual Date thereafter during the Term.

Payments of Additional Rent – Original Ground Lease. Additional Rent is due and payable in annual installments and will continue to be be due and payable until the scheduled expiration date of the Term unless Tenant is no longer in compliance with the following conditions (collectively the “Original

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Ground Lease Additional Rent Payment Conditions”): (i) no event of default, or event that would result in an event of default under the Bond Documents with the passage of time or giving of notice, has occurred or is continuing under the Bond Documents, (ii) the Tenant has achieved a Debt Service Coverage Ratio of 1.35x calculated in accordance with the definition established under the Master Trust Indenture and (iii) 250 Days Cash on Hand exists, after giving effect to payment of Rent in accordance with the definition established under the Master Trust Indenture but calculated post-disbursement of the Additional Rent.

Payments of Additional Rent – Village Ground Lease. Additional Rent will be due and payable in annual installments when Tenant is in compliance with all of the following conditions (collectively the “Village Ground Lease Additional Rent Payment Conditions” and, together with the Original Ground Lease Additional Rent Payment Conditions, the “Additional Rent Payment Conditions”): (i) no event of default, or event that would result in an event of default under the bond documents relating to the Series 2017 Bonds with the passage of time or giving of notice, has occurred or is continuing under such bond documents, (ii) one full Fiscal Year has elapsed since the Village Stage 1 Project attained Stable Occupancy (as defined in the Master Trust Indenture), (iii) the Tenant has achieved a Debt Service Coverage Ratio of 1.35x calculated in accordance with the definition established under the Master Trust Indenture and (iv) 250 Days Cash on Hand exists, after giving effect to payment of Rent in accordance with the definition established under the Master Trust Indenture but calculated post-disbursement of the Additional Rent.

Payments of Additional Rent – Village Ground Lease (Amended). Amended Additional Rent will be due and payable in annual installments when Tenant is in compliance with all of the following conditions (collectively the “Village Ground Lease Amended Additional Rent Payment Conditions” and, together with the Original Ground Lease Additional Rent Payment Conditions and the Village Ground Lease Additional Rent Payment Conditions, the “Additional Rent Payment Conditions”): (i) no event of default, or event that would result in an event of default under the Bond Documents with the passage of time or giving of notice, has occurred or is continuing under the Bond Documents, (ii) one full Fiscal Year has elapsed since the Village Stage 2 Project attained Stable Occupancy (as defined in the Master Trust Indenture), (iii) the Tenant has achieved a Debt Service Coverage Ratio of 1.35x calculated in accordance with the definition established under the Master Trust Indenture and (iv) 250 Days Cash on Hand exists, after giving effect to payment of Rent in accordance with the definition established under the Master Trust Indenture but calculated post-disbursement of the Additional Rent.

Whenever the Additional Rent Payment Conditions are met as of the last day of a Lease Year, within thirty-one (31) days after the end of such Lease Year, Tenant will be obligated to pay Landlord all Additional Rent which is then accrued and unpaid pursuant to the provisions of the Ground Lease summarized under the subheadings “—Computation - Original Ground Lease,” “—Computation - Village Ground Lease” and “—Computation - Village Ground Lease (Amended)” above, and subject to the provisions of the Ground Lease summarized under the heading “—Subordination” below.

Subordination. The obligation of Tenant to pay Additional Rent is subordinate to all payments owed by Tenant under the Bond Documents with respect to Series 2018 Bonds and under the bond documents relating to the Series 2017 Bonds with respect to the Series 2017 Bonds. In the event of a default by Tenant under such bond documents, and written notice of such a default is given by the Trustee to Landlord, then the obligation of Tenant to pay Additional Rent will be suspended until the default is cured. If the Leasehold Deed of Trust is foreclosed and a Lender in Possession or a successor to Tenant is in possession of the Premises, then (a) the obligation to accrue Additional Rent pursuant to the provisions of the Ground Lease summarized under the subheadings “—Computation - Original Ground Lease,” “— Computation - Village Ground Lease” and “—Computation - Village Ground Lease (Amended)” above

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will be suspended until such time as the Additional Rent Payment Conditions are again met, at which time the obligation to accrue and pay Additional Rent will be again effective, and (b) the obligation to pay previously accrued and unpaid Additional Rent will be forgiven.

PRORATION OF RENT

If the Term commences or ends on other than the first day of a Lease Year, or if a Rent change occurs on other than the first day of a Lease Year, or if there is an abatement of Rent that commences or ends on other than the first day of a Lease Year, then Rent will be prorated for that Lease Year on a daily basis of a 365 day year.

PAST DUE RENT

Interest. Any Rent not paid when due will bear interest, at the Prime Rate, as provided in the Ground Lease.

Late Charges. If Tenant fails to make any payment of Rent when due as provided in the Ground Lease, then Tenant will pay a late charge of one percent (1%) of the past due payment of Rent for processing of late payments as additional Rent within ten (10) days of notice that such late charge is due.

NET RENT

Rent and other sums to be paid by Tenant will be payable in lawful money of the United States of America. Rent and all other sums payable by Tenant will be absolutely net to Landlord, free from all costs, expenses, charges and deductions to Landlord and without any Tenant claimed offset. All costs, expenses, and obligations of every kind and nature whatsoever relating to the use, maintenance, operation, repair, restoration and replacement of the Premises will be paid for and performed by Tenant.

RENT DURING ANY HOLDOVER PERIOD

If Tenant holds over beyond the last day of the Term, the respective Base Rent due commencing with the end of the Term and for each month thereafter, will be 150% of such monthly Base Rent (the respective Annual Base Rent divided by 12) until Tenant surrenders the Premises to Landlord as required by the Ground Lease.

RESTRICTION ON AMENDMENT AND WAIVER

No part of the provisions of the Ground Lease summarized under this heading may be amended or waived by either party without the prior written consent of any beneficiary under a Leasehold Mortgage, which consent is subject to the provisions of the Master Trust Indenture.

Prohibition on Liens

Tenant will not allow or suffer the filing of any lien against Tenant’s leasehold estate except for (a) the Permitted Encumbrances and (b) as permitted by the Ground Lease including the provisions summarized below under the subheading “GROUND LEASES — Leasehold Mortgages.” If any such lien is filed, then within thirty (30) days of its filing, Tenant will bond or discharge the lien from Tenant’s Leasehold Estate. If Landlord allows or suffers the filing of any mechanics lien or lien against Landlord’s fee interest in the Premises due to Landlord’s activities, Landlord will pay or bond off the lien. Until such time as the Series 2017 Bonds and the Series 2018 Bonds are redeemed, and all other obligations secured

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under a Leasehold Mortgage have been fully paid and satisfied, Landlord will not place a lien or encumbrance on the Premises or on Tenant’s leasehold estate, except as permitted by the Leasehold Mortgage. In the event that Landlord, at any time, so places a mortgage or deed of trust on the Premises, said mortgage or deed of trust will be subject to, and will not be a lien on the Premises prior to the Ground Lease or the Leasehold Deed of Trust, or any modifications or extensions thereof, including rights to insurance proceeds and condemnation awards, and any such mortgage or deed of trust by Landlord will not be deemed to give any such mortgagees of the Premises any greater rights than Landlord under the Ground Lease, or the right to cancel the Ground Lease, unless there is a default on the part of the Tenant, uncured by the Tenant, which, under the terms of the Ground Lease, would enable the Landlord or its successors to cancel the Ground Lease. As of the time of the recording of the Memorandum of Lease in accordance with the Ground Lease, Landlord represents and warrants that no mortgages or deeds of trust exist.

Leasehold Mortgages

Tenant will have the right to mortgage and assign for security purposes its interest under the Ground Lease to one or more Leasehold Mortgagees, subject to the limitations of the Ground Lease and so long as the required time for repayment of the loan secured by each Leasehold Mortgage does not extend beyond the scheduled expiration date of the Term at the time the Leasehold Mortgage is executed. Except for the subordination of the Additional Rent as summarized under the subheading “GROUND LEASES – Additional Rent” above, Landlord is not subordinating and will not subordinate its interest in the Premises to any Leasehold Mortgage or any other security interest created by Tenant. Leasehold Mortgages will encumber only the Leasehold Estate and not Landlord’s fee ownership of the Premises.

Protection of Leasehold Mortgagees and Landlord

So long as any Leasehold Mortgage of which Landlord is given notice according to the Ground Lease will remain unsatisfied of record, the following provisions will apply to benefit any Leasehold Mortgagee and to benefit Landlord, as applicable:

(1) Subject to fulfillment of the obligations set forth below for a Leasehold Mortgagee to prevent termination of the Ground Lease, no cancellation, surrender or modification of the Ground Lease will be effective as to any Leasehold Mortgagee unless consented to in writing by the Leasehold Mortgagee.

(2) Landlord, upon providing Tenant any notice of default under the Ground Lease, a termination of the Ground Lease, or a matter on which Landlord may predicate or claim a default, will at the same time provide a copy of the notice to every Leasehold Mortgagee of which Landlord has been provided notice in accordance with the Ground Lease. If Tenant fails to remedy any default or acts or omissions in the time provided to cure under the Ground Lease, the Leasehold Mortgagee will have the period of time specified in the paragraph below to remedy, or cause to be remedied, the defaults or acts or omissions which are specified in the notice. If there is more than one Leasehold Mortgagee, the cure period for all will run concurrently. Whether in connection with a default of the Ground Lease, a default of the Loan Documents, or a foreclosure of a Leasehold Mortgage (or conveyance, or assignment in lieu thereof), Landlord will accept the performance by or at the instigation of the Leasehold Mortgagee as if the same had been done by Tenant. Tenant authorizes each Leasehold Mortgagee to take any such action at such Leasehold Mortgagee’s option and authorizes entry upon the Premises by the Leasehold Mortgagee for such purpose.

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(3) Notwithstanding anything contained in the Ground Lease, Landlord will have no right to terminate the Ground Lease unless, following the expiration of the period of time given Tenant to cure the default or the act or omission which gave rise to the default, Landlord will notify every Leasehold Mortgagee of Landlord’s intent to so terminate at least thirty (30) days in advance of the proposed effective date of termination, if the default is capable of being cured by the payment of money, and at least ninety (90) days in advance if the default is not capable of being cured by the payment of money.

During such 30- or 90-day termination notice cure period described immediately above, any Leasehold Mortgagee may: (i) notify Landlord that the Leasehold Mortgagee intends to cure the default; (ii) if a monetary default exists, pay or cause to be paid all Rent, and other payments then due and in arrears and which may become due during such 30- or 90-day period as specified in the termination notice to such Leasehold Mortgagee; (iii) if a default other than a monetary default exists, comply in good faith, with reasonable diligence and continuity, with all non-monetary requirements of the Ground Lease then in default if possible of being complied with; provided, however, that the Leasehold Mortgagee will not be required to cure or commence to cure any default consisting of Tenant’s failure to satisfy and discharge any lien, charge or encumbrance against the Tenant’s interest in the Ground Lease or the Premises junior in priority to the lien of the Leasehold Mortgage held by the Leasehold Mortgagee, and any default of Tenant which by its terms is not capable of being cured by any Person other than Tenant. Any cure period of which a Leasehold Mortgagee is entitled under the Ground Lease will be extended by any period of time during which such Leasehold Mortgagee is stayed from curing by reason of bankruptcy or other insolvency proceedings involving Tenant.

If more than one party holding rights in the nature of a Leasehold Mortgagee seeks to cure pursuant to the Ground Lease, Landlord will permit a cure according to the rights under the Master Trust Indenture. Landlord, without liability to Tenant or any Leasehold Mortgagee with an adverse claim, may rely upon a mortgagee’s title insurance policy issued by a responsible title insurance company doing business within Clackamas County, Oregon and purchased at the expense of the party initiating the cure, as the basis for determining the rights of the party seeking to cure. The party which initiates the cure will, as a condition of being permitted to cure, indemnify and hold Landlord harmless against any claims by Tenant or other party with respect to the right of cure.

If the Leasehold Mortgagee follows the steps described above and cures the default, and if Tenant does not resume performance of its obligations under the Lease, the Leasehold Mortgagee may:

(1) Pay or cause to be paid the Rent and other monetary obligations of Tenant under the Ground Lease as the same become due, and continue to perform all of Tenant’s other obligations under the Ground Lease, excepting obligations of Tenant to satisfy or otherwise discharge any lien, charge or encumbrance against Tenant’s interest in the Ground Lease or the Leasehold Estate junior in priority to the lien of the mortgage held by the Leasehold Mortgagee, and any default by Tenant which by its terms is not capable of being cured by any Person other than Tenant; and

(2) Subject to Landlord’s rights to cure a default or breach of Tenant’s obligations under a Leasehold Mortgage, if not enjoined or stayed, take steps to acquire or sell Tenant’s interest in the Ground Lease by foreclosure of the Leasehold Mortgage or other appropriate means or otherwise take steps to compel Tenant to resume performance of Tenant’s obligations under the Ground Lease.

Any Leasehold Mortgagee or other Lender in Possession may, upon acquiring the Leasehold Estate, without further consent of Landlord, sell and assign the Leasehold Estate or sublease the

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Leasehold Estate on such terms and to such persons and organizations as chosen by the Leasehold Mortgagee or other Lender in Possession. After a sale or assignment of the Leasehold Estate, the Leasehold Mortgagee or other Lender in Possession will be relieved of all obligations arising under the Ground Lease, provided the assignee delivers to Landlord its written agreement to be bound by all of the provisions of the Ground Lease, from and after the date of acquisition.

Nothing in the Ground Lease will require any Leasehold Mortgagee as a condition to its exercise of rights under the Ground Lease to cure any default of Tenant which by its terms is not capable of being cured by any Person other than Tenant. The financial condition of any Leasehold Mortgagee or successor to Tenant’s interest under the Ground Lease will not be a consideration in the determination of the capability of cure of a default. No default, the cure of which, and no obligation of Tenant, the performance of which, requires possession of the Premises will be deemed capable of cure or performance by any Leasehold Mortgagee or successor to Tenant’s interest under the Ground Lease not in possession of the Premises, provided the Leasehold Mortgagee is complying with all other requirements described in the Ground Lease and summarized under this subheading, and provided that the Leasehold Mortgagee immediately commences cure of that obligation and diligently prosecutes cure of such obligation to completion upon the holder’s taking possession of the Premises; nor will any Leasehold Mortgagee be required to cure the bankruptcy, insolvency or any related or similar condition of Tenant.

Defaults

The occurrence of any of the following will constitute an Event of Default:

(1) Failure of Tenant to pay when due any payment owed to Landlord, or to pay any Imposition or any other payment required under the Ground Lease when due (except as and to the extent permitted under the Ground Lease), or the failure to maintain any of the insurance coverage required and the occurrence or failure continues for a period of thirty (30) days after written notice of such failure is given to Tenant by Landlord;

(2) Tenant being in breach of, or Tenant failing to perform, comply with, or observe any other term, covenant, warranty, condition, agreement or undertaking contained in or arising under the Ground Lease, other than a payment failure described in clause (1) above and Tenant fails to cure the default within ninety (90) days after written notice thereof is given by Landlord to Tenant. However, if the default cannot be cured (without regard to the availability of funds or the financial condition of Tenant) within such 90-day period, and Tenant proceeds promptly and thereafter prosecutes with due diligence the curing of the default, then the time for curing of the default will be extended for the period of time necessary to complete the cure so long as Landlord’s interest in the Premises will not be materially adversely affected by the delay in Tenant’s cure of such default;

(3) Tenant making an assignment for the benefit of creditors, filing a petition in bankruptcy, petitioning or applying to any tribunal for the appointment of a custodian, receiver or any trustee for it or a substantial part of its assets, or commencing any proceedings under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or if there will have been filed any petition or application, or any proceeding will have been commenced against Tenant, in which an order for relief is entered or which remains undismissed for a period of thirty (30) days or more; or Tenant by any act or omission indicating its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or

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any trustee for it or any substantial part of any of its properties, or suffering any such custodianship, receivership or trusteeship to continue undischarged for a period of thirty (30) days or more;

(4) Tenant being generally unable to pay its debts as such debts become due; or

(5) Tenant having concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder or defraud its creditors or any of them, or making or suffering a transfer of any of its property which is fraudulent under any bankruptcy, fraudulent conveyance or similar law; or suffering or permitting, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings or distraint which is not vacated within thirty (30) days from the date thereof.

Termination of Lease

In addition to all other rights and remedies available to Landlord by law or equity, Landlord may, at any time after the occurrence of any Event of Default by Tenant, terminate the Ground Lease by notice to Tenant, and Landlord may reenter upon and take possession of the Premises by self-help or other means, subject to the rights of a Leasehold Mortgagee pursuant to the Ground Lease.

Effect of Termination

Subject to the provisions of the Ground Lease relating to Residency Agreements, upon termination of the Ground Lease, all rights and privileges of Tenant and all duties and obligations of Landlord under the Ground Lease will terminate. Immediately upon the termination of the Ground Lease, and without further notice to any other party, Landlord has the right to assert, perfect, establish and confirm all rights to the Premises and the Project Improvements reverting to Landlord by reason of the termination by any means permitted by law, including the right to take possession of the Premises and to remove all personal property from the Premises and all persons occupying them except persons holding Residency Agreements. Landlord may in all respects take the actual, full and exclusive possession of the Premises, thereby wholly terminating any right, title, interest or claim of or through Tenant as to the Premises, the Project Improvements, and all Personal Property located on the Premises.

Damages and Remedies

For a breach during the Term, the exercise by either Landlord or Tenant of any remedy arising by virtue of an Event of Default will not be considered exclusive, but either Landlord or Tenant may exercise any and all other rights or remedies provided by the Ground Lease or by law or equity. Landlord or Tenant may elect to sue the other with or without terminating the Ground Lease. The termination of the Term does not extinguish the right of either Landlord or Tenant to collect damages including without limitation direct and consequential damages arising from the breach of the Ground Lease by the other party.

Tenant is liable for the continued payment of Rent and all other payments required of Tenant under the Ground Lease accruing up to the end of the Term specified in the Ground Lease notwithstanding the early termination of the Term due to an Event of Default and the reentry of Landlord before the normal expiration of the Term. Tenant will pay to Landlord all Rent and other sums which would be payable under the Ground Lease by Tenant if no such termination and reentry had occurred. Landlord may at any time after termination of the Ground Lease, recover from Tenant the worth at that time (discounted to present value at the time of termination) of the excess, if any, of the amount of the Rent reserved in the Ground Lease for the balance of the Term (had such termination not occurred) over the then reasonable rental value of the Premises for the same period. The “reasonable rental value” shall

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be the amount of rental which Landlord can reasonably be expected to obtain as rent for the remaining balance of the Term (to its normal expiration date, excluding an unexercised extension), had such termination and default not occurred.

Landlord will credit against sums owed by Tenant the net proceeds, if any, of any reletting or operation of the Premises after deducting Landlord’s reasonable expenses in connection with the reletting and operation of the Premises. Reasonable expenses include but not be limited to repossession costs, brokerage commissions, legal expenses, employee expenses, alteration costs reasonably incurred and other reletting expenses.

Nothing summarized under this subheading relieves Landlord of its duty to use reasonable efforts to mitigate its damages as required by law.

Amendment

The Ground Lease may be amended, or modified, only in writing, signed by both Landlord and Tenant. No amendment, modification, or surrender of the Ground Lease will be effective without the prior written consent required under a Leasehold Mortgage.

Right of First Refusal

If Landlord desires to sell the Premises (or any part thereof), Landlord will do so in accordance with certain conditions set forth in the Ground Lease which afford Tenant the right to exercise a right of first refusal to acquire the offered Property. However, at all times under the Ground Lease, Tenant will not be entitled to exercise its right of first refusal or acquire the offered property if Tenant is in material, uncured default or in breach of its obligations under the Ground Lease.

At closing, Tenant shall acquire the property on the basis that Landlord is fully released of any obligations under the Ground Lease. If a Leasehold Mortgage encumbers the offered property at the time Tenant acquires the property, such Mortgage shall either be assumed by Tenant or satisfied at closing, subject to the terms of such Mortgage. If Tenant acquires the property offered by Landlord pursuant to its right of first refusal, Tenant’s performance of obligations under the Ground Lease shall continue unaffected by the acquisition. Tenant, immediately upon the acquisition of the offered property, shall execute an amendment to any Leasehold Mortgage, encumbering the acquired property interest in the Leasehold Mortgagee’s favor, on the same terms and conditions as the Leasehold Mortgage. Such an amendment shall incorporate by reference all of Tenant’s performance obligations under the Ground Lease as Leasehold Mortgage covenants. No acquisition by Tenant under the Ground Lease will be effective until the conditions summarized in this subparagraph are met. In the event a party other than Tenant acquires the offered property, the acquisition shall be subject to the Ground Lease and to any Leasehold Mortgage. In such circumstances, Tenant’s obligations under the Ground Lease and the Leasehold Mortgage shall remain unchanged. Landlord and Tenant agree in the Ground Lease that the Leasehold Mortgagee shall be a third party beneficiary of the Ground Lease provisions summarized in this subparagraph and may enforce its rights by specific performance.

If Tenant does not exercise its right of first refusal but Landlord materially alters the terms of a prospective sale to another party beyond the written summary of terms provided to Tenant, then Tenant’s right of first refusal shall re-attach. Such reattachment of Tenant’s rights shall likewise apply if the prospective purchaser fails to close the purchase of the offered property.

Tenant’s right of first refusal survives the term of the Ground Lease but terminates absolutely if a Ground Lease termination occurs based on Tenant’s breach or default under the Ground Lease. In any

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event, Tenant’s right shall terminate absolutely upon the conclusion of 99 years from the Effective Date of the Ground Lease.

Other than an assignment for collateral purposes to a Leasehold Mortgagee, Tenant shall have no right to sell, convey, transfer or in any way permit any other party to hold, exercise or benefit from, Tenant’s right of first refusal under the Ground Lease, except as permitted by Landlord. Landlord’s consent may be granted or withheld at Landlord’s sole discretion. Any such act by Tenant shall be void. If, after Tenant acquires the Premises (or any part thereof), Tenant wishes to sell or convey such property, Tenant shall first offer such property to Landlord for Landlord’s re-acquisition.

LEASEHOLD DEED OF TRUST

The following summarizes certain provisions of the Leasehold Deed of Trust. Such summary does not purport to be complete and reference is made to the Leasehold Deed of Trust for full and complete statements of all such provisions.

Mortgaged Property and Obligations Secured

In order to secure the (a) the prompt payment of all Leasehold Deed of Trust Indebtedness and (b) the prompt performance of, observance of and compliance with, by the Grantor, all of the terms, covenants, conditions, stipulations and agreements, express or implied, contained in the Leasehold Deed of Trust, or in any of the Bond Documents (the “Secured Obligations”), the Grantor will grant, bargain, sell and convey, with power of sale, to the Trustee, in trust, all of its right, title and interest in and to:

a) the Ground Leases, which create a leasehold estate in the Premises and grant certain other rights and interests to the Grantor in such real property (i.e. the Land Premises and Condominium Premises, collectively, the “Land”), whether said property is now owned, leased or hereafter acquired by the Grantor;

b) all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and description now or hereafter erected and placed thereon (collectively, the “Improvements”).

c) the beds of the ways, streets, avenues and alleys adjoining the Land (including any after- acquired title or reversion);

d) all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water rights, water courses, riparian rights, other rights, liberties and privileges thereof or in any way now or thereafter appertaining to the Property or any part thereof, including, but not limited to, any homestead or other claim at law or in equity, as well as any after-acquired title, franchise or license and reversion and reversions and remainder and remainders thereof and also all the estate, property, claim, right, title or interest now- owned or hereafter acquired by the Grantor in or to the Property or any part thereof;

e) all building materials, fixtures, machinery, equipment and tangible personal property of every kind and nature whatsoever (but not including consumable goods or trade fixtures or other personal property owned by any third parties occupying all or any portion of the Improvements), now or hereafter located or contained in or upon or attached to the Land or the Improvements or any part thereof, and used or usable in connection with any present or future use or operations of the Land or the Improvements or any part thereof, whether now owned or hereafter acquired by the Grantor, together with all Additions

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thereto (all of the foregoing being hereinafter sometimes referred to collectively as the “Equipment Collateral”). All of the Equipment Collateral, so far as permitted by law, shall be deemed to be fixtures and part of the Land and of the Improvements, and as to any part of the Equipment Collateral not deemed or permitted by law to be fixtures, the Leasehold Deed of Trust constitutes a security agreement under the Oregon Uniform Commercial Code, and pursuant thereto, and in order to secure the repayment of the Leasehold Deed of Trust Indebtedness and the performance of the obligations secured by the Leasehold Deed of Trust, the Grantor grants to the Beneficiary under the Leasehold Deed of Trust a continuing security interest under the Oregon Uniform Commercial Code in and to such part of the Equipment Collateral not deemed or permitted by law to be fixtures, and the proceeds thereof, including the proceeds of any and all insurance policies in connection therewith. With respect to such Equipment Collateral, Beneficiary shall have all the rights and remedies of a secured party under the Oregon Uniform Commercial Code; f) all of the rents, royalties, issues, profits, revenues, income and other benefits of the Property, or arising from the use or enjoyment of all or any portion thereof, or from any Residency Agreement, lease or agreement pertaining thereto (including, without limitation, all fees charged to each and every resident of the Property pursuant to a Residency Agreement, including, without limitation, all fees paid on a daily or monthly basis and all fees paid upon entering any part of the Property and any other fees payable by or on behalf of residents of the Property) and all right, title and interest of the Grantor in and to, and remedies under, any and all Residency Agreements, and any and all leases and subleases of the Property, or any part thereof, both now in existence or hereafter entered into, and all accounts, general intangibles and other rights growing out of or in connection with such Residency Agreements, leases and subleases, together with all proceeds thereof; and including, without limitation, all cash or securities deposited thereunder to secure performance by the residents or lessees of their obligations thereunder whether such cash or securities are to be held until the expiration of the terms of such Residency Agreements, leases and subleases or are to be applied to one or more of the purposes under such Residency Agreements or to one or more of the installments of rent coming due immediately pursuant to such leases or subleases prior to the expiration of such terms (all of the foregoing are sometimes referred to as “Rents”); and reserving in the Grantor a license terminable upon the occurrence of an Event of Default to collect and receive the Rents; provided, however, there shall be excluded from the property described in this subparagraph: (a) any moneys received by the Grantor from prospective residents or commercial tenants in order to pay for customized improvements to those Independent Living Units or other areas of the Facility to be occupied or leased to such residents or tenants, (b) all deposits made pursuant to Residency Agreements required by the State of Oregon, Department of Human Resources, Senior and Disabled Services Division, Continuing Care and Retirement Center Office to be held in escrow until construction of the Facility is completed, a certificate of occupancy has been issued, appropriate licenses have been issued by the Department and the Department has authorized their release, and (c) all deposits and/or advance payments made in connection with any leases of the Independent Living Units and received prior to receipt of such certificate and licenses; g) to any and all judgments, awards of damages (including but not limited to severance and consequential damages), payments, proceeds, settlements or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, in connection with, or in lieu of (a) any taking of the Property or any part

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thereof under the power of eminent domain, either temporarily or permanently, (b) any change or alteration of the grade of any street, and (c) any other injury or damage to, or decrease in value of, the Property or any part thereof (all of the foregoing being hereinafter sometimes referred to, collectively, as the “Condemnation Awards,” or singularly a “Condemnation Award”), to the extent of all Leasehold Deed of Trust Indebtedness which may be secured by the Leasehold Deed of Trust at the date of receipt of any such Condemnation Award by Beneficiary, and of the reasonable counsel fees, costs and disbursements, if any, incurred by Beneficiary in connection with the collection of such Condemnation Award;

h) any and all payments, proceeds, settlements or other compensation heretofore made (but not yet received by the Grantor) or hereafter made, including any interest thereon, and the right to receive the same, from any and all insurance policies covering the Property or any portion thereof;

i) all of the Grantor’s rights, options, powers and privileges in and to (but not the Grantor's obligations and burdens under) the any escrow agreement concerning deposits made pursuant to Residency Agreements;

j) all architectural, engineering and similar plans, specifications, drawings, reports, surveys, plats, permits and the like, contracts for construction, operation and maintenance of, or provision of services to, the Property (including the construction contract), contracts with the architect relating to the Property, and all sewer taps and allocations, agreements for utilities, bonds and the like, all relating to the Land and the Improvements);

k) all Gross Revenues pledged pursuant to the Master Trust Indenture; and

l) any moneys and securities from time to time on deposit in the funds and accounts required to be maintained under the Master Trust Indenture and any and all accounts and subaccounts in any of the foregoing.

There is, however, expressly excepted and excluded from the lien and operation of the Leasehold Deed of Trust, any item in which it is unlawful to grant a security interest or which is unlawful to use as collateral for a loan.

Events of Default; Rights and Remedies

Any of the following events shall be an “Event of Default” under the Leasehold Deed of Trust:

a) An Event of Default occurs under the Master Trust Indenture; or

b) The Grantor fails to fully and promptly perform, comply with or observe any of the terms, covenants or agreements contained in the Leasehold Deed of Trust; or

c) The Grantor fails to fully and promptly perform, comply with or observe any other term covenant or agreement herein contained, and such failure remains unremedied for 30 days after written notice thereof shall have been given to the Grantor by Beneficiary; provided, however, that if such failure is such that it cannot be corrected within 30 days, it shall not be an Event of Default under the Leasehold Deed of Trust if the Grantor is taking appropriate corrective action to cure such failure and if, in Beneficiary’s sole

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opinion, such failure will not impair the security for Secured Obligations and the Leasehold Deed of Trust.

Rights and Remedies on Default

Upon the occurrence of any Event of Default and at any time thereafter, Beneficiary may exercise any one or more of the following rights and remedies:

a) The right at its option by notice to the Grantor to declare Secured Obligations secured by the Leasehold Deed of Trust immediately due and payable.

b) With respect to all or any part of the Property, the right to foreclose by judicial foreclosure in accordance with applicable law.

c) The right to have the Trustee sell the Property in accordance with the Leasehold Deed of Trust Act of the State of Oregon and the Uniform Commercial Code of the State of Oregon where applicable, at public auction to the highest bidder. Any person except Trustee may bid at the Trustee's sale. The power of sale conferred by the Leasehold Deed of Trust and the law is not an exclusive remedy and, when not exercised, Beneficiary may foreclose the Leasehold Deed of Trust as a mortgage. Trustee is not obligated to notify any party to the Leasehold Deed of Trust of a pending sale under any other deed of trust or of any action or proceeding in which the Grantor, Trustee, or Beneficiary shall be a party, unless such action or proceeding is brought by Trustee.

d) With respect to all or any part of the Property that constitutes personalty, Beneficiary may exercise the rights and remedies of a secured party under the Oregon Uniform Commercial Code.

e) The right, without notice to the Grantor, to terminate the license granted to the Grantor to collect the Rents without taking possession, and to demand, collect, receive, sue for, attach and levy against such collateral in Beneficiary's name; to give proper receipts, releases and acquittances therefor; and after deducting all necessary and proper costs and expenses of operation and collection as determined by Beneficiary, including reasonable attorneys' fees, to apply the net proceeds thereof, together with any funds of the Grantor deposited with Beneficiary, upon any of Secured Obligations secured the Leasehold Deed of Trust and in such order as Beneficiary may determine. In furtherance of this right, Beneficiary may require any tenant or other user to make payments of Rent or use fees directly to Beneficiary, and payments by such tenant or user to Beneficiary in response to its demand shall satisfy the obligation for which the payments are made, whether or not any proper grounds for the demands existed.

f) The right to have a receiver appointed to take possession of any or all of the Property and Rents, with the power to protect and preserve the Property and to operate the Property preceding foreclosure or sale and apply the proceeds, over and above cost of the receivership, against the Secured Obligations secured the Leasehold Deed of Trust. The receiver may serve without bond if permitted by law. Beneficiary's right to the appointment of a receiver shall exist whether or not the apparent value of the Property exceeds the Secured Obligations secured by the Leasehold Deed of Trust by a substantial amount. The Grantor irrevocably consents to the appointment of a receiver on the terms set forth in the Leasehold Deed of Trust and waives any and all defenses to such an

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appointment. Employment by Beneficiary or Trustee shall not disqualify a person from serving as receiver.

g) Subject to any limitations imposed by law, the right to obtain a deficiency judgment in the event the net sale proceeds of any foreclosure sale are insufficient to pay the entire unpaid Secured Obligations secured by the Leasehold Deed of Trust.

h) Any other right or remedy provided in the Leasehold Deed of Trust the Master Trust Indenture and the related Bond Documents, or under law, in equity or otherwise.

Foreclosure by Power of Sale.

Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee the Leasehold Deed of Trust and such receipts and evidence of expenditures made and secured by the Leasehold Deed of Trust as Trustee may require.

Upon receipt of such notice from Beneficiary, Trustee shall cause to be given such Notice of Default as then required by law. Trustee shall, without demand on the Grantor, after lapse of such time as may then be required by law and after Notice of Sale having been given as required by law, sell the Property at the time and place of sale fixed by it in such Notice of Sale, either as a whole, or in separate lots or parcels or items as Trustee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, the Grantor or Beneficiary, may purchase at such sale.

After deducting all costs, fees and expenses of Trustee and of the Leasehold Deed of Trust, including costs of evidence of title and reasonable counsel fees in connection with sale, Trustee shall apply the proceeds of sale to payment of all sums expended under the terms hereof, not then repaid, with accrued interest, all other sums then secured by the Leasehold Deed of Trust and the remainder, if any, to the person or persons legally entitled thereto.

Remedies, Cumulative.

Each right, power and remedy of Beneficiary or the Trustee as provided for in the Leasehold Deed of Trust or in the Master Trust Indenture, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in the Leasehold Deed of Trust or in any of the other Bond Documents, and the exercise or beginning of the exercise by Beneficiary or the Trustee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or the Trustee of any or all such other rights, powers or remedies.

No Waiver, Etc.

No failure or delay by Beneficiary or the Trustee to insist upon the strict performance of any term, condition, covenant or agreement of the Leasehold Deed of Trust or of any of the other Bond Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant or agreement or of any such breach, or preclude Beneficiary or the Trustee from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any amount payable under the Leasehold Deed of Trust or the Master Trust

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Indenture, Beneficiary or the Trustee shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the Leasehold Deed of Trust or under the Master Trust Indenture, or to declare a default for failure to effect such prompt payment of any such other amount. Neither the Grantor nor any other person now or hereafter obligated for the payment of the whole or any part of the Secured Obligations now or hereafter secured by the Leasehold Deed of Trust shall be relieved of such obligation by reason of the failure of Beneficiary to comply with any request of the Grantor or of any other person so obligated to take action to foreclose the Leasehold Deed of Trust or otherwise enforce any of the provisions of the Leasehold Deed of Trust or of any obligations secured by the Leasehold Deed of Trust, or by reason of any agreement or stipulation between any subsequent owner or owners of the Property or any part thereof, or by Beneficiary extending the time of payment or modifying the terms of the Leasehold Deed of Trust or the Master Trust Indenture without first having obtained the consent of the Grantor or such other person, and in the latter event, the Grantor and all such other persons shall continue to be liable to make such payments according to the terms of any such agreement of extension or modification unless expressly released and discharged in writing by Beneficiary. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate lien on the Property, Beneficiary may release the obligation of any person at any time liable for any of the Secured Obligation secured by the Leasehold Deed of Trust or any part of the security held for the Secured Obligation and may extend the time of payment or otherwise modify the terms of the Leasehold Deed of Trust and the Master Trust Indenture (upon compliance with any terms and conditions pertaining to such modifications which may be contained in any of such documents) without, as to the security or the remainder thereof, in anyway impairing or affecting the lien or security interest of the Leasehold Deed of Trust or the priority of such lien or security interest, as security for the payment of the Secured Obligation as it may be so extended or modified, over any subordinate lien. The holder of any subordinate lien shall have no right to terminate any lease affecting the Property whether or not such lease is subordinate to the Leasehold Deed of Trust. Beneficiary may resort for the payment of the Secured Obligations secured by the Leasehold Deed of Trust to the Property or to any other security or collateral therefor held by Beneficiary in such order and manner as Beneficiary may elect.

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APPENDIX F

FORM OF BOND COUNSEL OPINION

[THIS PAGE INTENTIONALLY LEFT BLANK]

May __, 2018

Hospital Facility Authority of Clackamas County, Oregon Oregon City, Oregon

$______Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project)

$______$______$______$______$______Series 2018A Series 2018B-1 Series 2018B-2 Series 2018B-3 Series 2018C Tax Exempt Tax Exempt Tax Exempt Tax Exempt Taxable Fixed Rate Mandatory Mandatory Mandatory Mandatory Paydown Securities Paydown Securities Paydown Securities Paydown (TEMPS – [__]SM) (TEMPS – [__]SM) (TEMPS – [__]SM) Securities

(Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the Hospital Facility Authority of Clackamas County, Oregon (the “Issuer”) in connection with the issuance of $______aggregate principal amount of Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018A (Tax Exempt) (the “Series 2018A Bonds”), $______aggregate principal amount of Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-1 (Tax Exempt Mandatory Paydown Securities (TEMPS-[__]SM) (the “Series 2018B-1 Bonds”), $______aggregate principal amount of Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018-2 (Tax Exempt Mandatory Paydown Securities (TEMPS-[__]SM) (the “Series 2018B-2 Bonds”), $______aggregate principal amount of Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018-3 (Tax Exempt Mandatory Paydown Securities (TEMPS-[__]SM) (the “Series 2018B-3 Bonds” and together with the Series 2018A Bonds, the Series 2018B-1 Bonds and the Series 2018B-2 Bonds, the “Tax-Exempt Bonds”) and $______aggregate principal amount of Hospital Facility Authority of Clackamas County, Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018C (Taxable Mandatory Paydown Securities) (the “Series 2018C Bonds and together with the Tax-Exempt Bonds, the “Bonds”), issued pursuant to an Indenture of Trust, dated as of May 1, 2018 (the “Indenture”), between the Issuer and U.S. Bank National Association, as trustee (the “Trustee”). The Indenture provides that the Bonds are issued for the stated purpose of making a loan of the proceeds thereof to Mary’s Woods at Marylhurst, Inc. (the

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Hospital Facility Authority of Clackamas County, Oregon May __, 2018 Page 2

“Borrower”) pursuant to a Loan Agreement, dated as of May 1, 2018 (the “Loan Agreement”), between the Issuer and the Borrower. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Loan Agreement, the Tax Certificate and Agreement, dated the date hereof (the “Tax Certificate”), between the Issuer and the Borrower, opinions of counsel to the Issuer and the Borrower, certificates of the Issuer, the Trustee, the Borrower and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

We have relied on the opinion of Ball Janik LLP, counsel to the Borrower, regarding, among other matters, the current qualification of the Borrower as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”). We note that the opinion is subject to a number of qualifications and limitations. We have also relied upon representations of the Borrower regarding the use of the facilities financed with the proceeds of the Tax-Exempt Bonds in activities that are not considered unrelated trade or business activities of the Borrower within the meaning of Section 513 of the Code. We note that the opinion of counsel to the Borrower does not address Section 513 of the Code. Failure of the Borrower to be organized and operated in accordance with the Internal Revenue Service’s requirements for the maintenance of its status as an organization described in Section 501(c)(3) of the Code, or use of the bond- financed facilities in activities that are considered unrelated trade or business activities of the Borrower within the meaning of Section 513 of the Code, may result in interest on the Tax- Exempt Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Tax-Exempt Bonds.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second and third paragraphs hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, the Loan Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Tax- Exempt Bonds to be included in gross income for federal income tax purposes. In addition, we have assumed that actions of the Borrower and other persons will not cause any of the Bonds to exceed the $150,000,000 limitation on qualified 501(c)(3) bonds that do not finance hospital

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Hospital Facility Authority of Clackamas County, Oregon May __, 2018 Page 3

facilities set forth in Section 145(b) of the Code. We call attention to the fact that the rights and obligations under the Bonds, the Indenture, the Loan Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against hospital facility authorities in the State of Oregon. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set- off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the real or personal property described in or as subject to the lien of the Indenture or the Loan Agreement or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such property. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute the valid and binding limited obligations of the Issuer.

2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Issuer. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Trust Estate and any other amounts held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture.

3. The Loan Agreement has been duly executed and delivered by, and constitutes a valid and binding agreement of, the Issuer.

4. Interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Code. Interest on the Tax-Exempt Bonds is not a specific preference item for purposes of the federal alternative minimum tax. Interest on the Bonds is exempt from State of Oregon personal income taxes. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

per

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APPENDIX G

BOOK-ENTRY ONLY SYSTEM

This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by DTC while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The Authority believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof.

The Authority cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC.

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. 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 of 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each 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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect 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 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Authority 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Authority or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing 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, Agent, or Authority, 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 Authority or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to Authority or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

Authority 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 Authority believes to be reliable, but Authority takes no responsibility for the accuracy thereof.

USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT

In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry Only System, and (ii) except as described above, notices that are to be given to registered owners under the Indentures will be given only to DTC.

Information concerning DTC and the Book-Entry Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the Authority or the Underwriter.

EFFECT OF TERMINATION OF BOOK-ENTRY ONLY SYSTEM

In the event that the Book-Entry Only System is discontinued by DTC or the use of the Book-Entry Only System is discontinued by the Authority, the following provisions will be applicable to the Bonds. The Bonds may be exchanged for an equal aggregate principal amount of

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the Bonds in Authorized Denominations and of the same maturity upon surrender thereof at the principal office for payment of the Bond Trustee. The transfer of any Bond may be registered on the books maintained by the Bond Trustee for such purpose only upon the surrender of such Bond to the Bond Trustee with a duly executed assignment in form satisfactory to the Bond Trustee. For every exchange or transfer of registration of Bonds, the Bond Trustee and the Authority may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer. The Authority shall pay the fee, if any, charged by the Bond Trustee for the transfer or exchange. The Bond Trustee will not be required to transfer or exchange any Bond after its selection for redemption. The Authority and the Bond Trustee may treat the person in whose name a Bond is registered as the absolute owner thereof for all purposes, whether such Bond is overdue or not, including for the purpose of receiving payment of, or on account of, the principal of, premium, if any, and interest on, such Bond.

LIMITATIONS

For so long as the Bonds are registered in the name of DTC or its nominee, Cede & Co., the Authority and the Bond Trustee will recognize only DTC or its nominee, Cede & Co., as the registered owner of the Bonds for all purposes, including payments, notices and voting.

Under the Bond Indenture, payments made by the Bond Trustee to DTC or its nominee will satisfy the Authority’s respective obligations under the Bond Indenture and the Corporation’s respective obligations under the Loan Agreement to the extent of the payments so made.

None of the Authority, the Underwriter nor the Bond Trustee will have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, its nominee or any DTC Participant or Indirect Participant with respect to any beneficial ownership interest in any Bond, (ii) the delivery to any DTC Participant or Indirect Participant or any other Person, other than an owner, as shown in the Bond Register, of any notice with respect to any Bond including, without limitation, any notice of redemption, tender, purchase or any event that would or could give rise to a tender or purchase right or option with respect to any Bond, (iii) the payment to any DTC Participant or Indirect Participant or any other Person, other than an owner, as shown in the Bond Register, of any amount with respect to the principal of, premium, if any, or interest on, or the purchase price of, any Bond or (iv) any consent given by DTC as registered owner.

Prior to any discontinuation of the book entry only system described above, the Authority and the Bond Trustee may treat DTC as, and deem DTC to be, the absolute owner of the Bonds for all purposes whatsoever, including, without limitation, (i) the payment of principal of, premium, if any, and interest on the Bonds, (ii) giving notices of redemption and other matters with respect to the Bonds, (iii) registering transfers with respect to the Bonds, and (iv) the selection of Bonds for redemption.

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APPENDIX H

FORM OF CONTINUING DISCLOSURE AGREEMENT

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CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”) is executed and delivered by Mary’s Woods at Marylhurst, Inc., a nonprofit corporation incorporated under the laws of the State of Oregon (the “Borrower”), on behalf of itself and the Obligated Group (as defined below), as of May __, 2018. As of the date of this Disclosure Agreement, the Borrower is the sole Member of the Obligated Group. The Borrower covenants and agrees as follows:

Section 1. Definitions. Any capitalized terms used herein but not defined herein shall have the meanings assigned to them in the hereinafter described Master Indenture, and the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Obligated Group pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Authority” shall mean the Hospital Facility Authority of Clackamas County, Oregon.

“Bond Indenture” shall mean the Indenture of Trust dated as of May 1, 2018, between the Authority and the Bond Trustee, pursuant to which the Series 2018 Bonds are issued.

“Bond Trustee” shall mean U.S. Bank National Association, as bond trustee.

“Bondholders” shall mean the owners and beneficial owners from time to time of the Series 2018 Bonds.

“Borrower” shall mean Mary’s Woods at Marylhurst, Inc., a nonprofit corporation incorporated under the laws of the State of Oregon.

“Budget Summary” shall mean any Budget Summary provided by the Obligated Group pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Business Day” shall have the meaning set forth in the Bond Indenture.

“Days Cash on Hand” shall have the meaning set forth in the Master Indenture.

“Debt Service Coverage Ratio” shall have the meaning set forth in the Master Indenture.

“Disclosure Agreement” shall mean this agreement.

“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB accessible at http://emma.msrb.org or such other information repository as may be determined by the SEC from time to time.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

H-1 “Loan Agreement” shall mean the Loan Agreement dated as of May 1, 2018, between the Borrower and the Authority relating to the Series 2018 Bonds.

“Master Indenture” shall mean the Master Trust Indenture dated as of April 1, 2017, between the Borrower and the Master Trustee, as amended and supplemented from time to time.

“Master Trustee” shall mean U.S. Bank National Association, as master trustee.

“Member” shall have the meaning set forth in the Master Indenture.

“Monthly Report” shall mean any Monthly Report provided by the Borrower pursuant to Sections 3 and 4 of this Disclosure Agreement.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any successor entity as described in the Rule.

“Obligated Group” shall have the meaning set forth in the Master Indenture.

“Obligated Group Representative” shall have the same meaning set forth in the Master Indenture.

“Obligated Person” shall have the meaning set forth in the Rule.

“Offering Document” shall mean the Official Statement dated _____, 2018 describing the Series 2018 Bonds.

“Project” shall have the meaning set forth in the Bond Indenture.

“Quarterly Report” shall mean any quarterly report provided by the Borrower pursuant to Sections 3 and 4 of this Disclosure Agreement.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“SEC” shall mean the United States Securities and Exchange Commission.

“Series 2018 Bonds” means, collectively, the Series 2018A Bonds, the Series 2018B Bonds and the Series 2018C Bonds.

“Series 2018A Bonds” means the Authority’s Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018A Tax-Exempt.

“Series 2018B Bonds” means the Authority’s Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-1 Tax Exempt Mandatory Paydown Securities (TEMPS-__SM), Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-2 Tax Exempt Mandatory Paydown Securities (TEMPS-__SM) and Senior Living

H-2 Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018B-3 Tax Exempt Mandatory Paydown Securities (TEMPS-__SM).

“Series 2018C Bonds” means the Authority’s Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project), Series 2018C Taxable Mandatory Paydown Securities.

“Stable Occupancy” shall have the meaning set forth in the Master Indenture.

“Underwriter” shall mean B.C. Ziegler and Company, or any additional purchaser of the Series 2018 Bonds required to comply with the Rule in connection with an offering of the Series 2018 Bonds.

Section 2. Purpose of the Disclosure Agreement. The purpose of this Disclosure Agreement is to assist the Underwriter in complying with the Rule in connection with the Series 2018 Bonds. The Borrower represents that the Borrower is the only Obligated Person with respect to the Series 2018 Bonds at the time the Series 2018 Bonds are delivered to the Underwriter.

Section 3. Provision of Annual Reports, Quarterly Reports, Monthly Reports and Budget Summaries. (a) The Obligated Group Representative shall, not later than 120 days after the completion of each fiscal year of the Borrower (beginning with the fiscal year ending June 30, 2018), provide or cause to be provided to the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB) an Annual Report that is consistent with the requirements of Section 4(a) of this Disclosure Agreement.

(b) Beginning with the fiscal quarter ending June 30, 2018, the Obligated Group Representative shall, not later than 45 days after the completion of each fiscal quarter of the Borrower or 60 days after the completion of the fiscal quarter in the case of a fiscal quarter ending on June 30, provide or cause to be provided to the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB) a Quarterly Report that is consistent with the requirements of Section 4(b) of this Disclosure Agreement.

(c) The Obligated Group Representative shall, not later than 45 days after the end of each month (beginning with the month ending May 31, 2018 continuing until the end of the month in which the Obligated Group achieves Stable Occupancy with respect to the Project), provide or cause to be provided to the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB) a Monthly Report that is consistent with the requirements of Section 4(c) of this Disclosure Agreement.

(d) The Obligated Group Representative shall, not later than 45 days after the end of each month, during the period of time any Monthly Report is required under Section 4(d) hereof, provide or cause to be provided to the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB), a Monthly Report that is consistent with the requirements of Section 4(d) of this Disclosure Agreement.

H-3 (e) The Obligated Group Representative shall, not later than 45 days after the end of each Fiscal Year, provide or cause to be provided to the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB), a Budget Summary that is consistent with the requirements of Section 4(e) of this Disclosure Agreement.

(f) If the Obligated Group Representative is unable to provide to the MSRB an Annual Report, Quarterly Report, Monthly Report or Budget Summary by the dates required in this Section 3, the Obligated Group Representative shall send or cause to be sent a notice of such fact to the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB).

(h) In each case the Annual Report, the Quarterly Report, the Monthly Report and the Budget Summary may be submitted as a single document or as a package comprising separate documents. Any or all of the items constituting the Annual Report, the Quarterly Report, the Monthly Report or the Budget Summary may be incorporated by reference from other documents that have been submitted to the MSRB or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Obligated Group Representative shall clearly identify each such other document so incorporated by reference.

Section 4. Content of Annual Reports, Quarterly Reports, Monthly Reports and Budget Summaries. (a) The Annual Report to be delivered under Section 3(a) shall provide the following financial and operating data:

(1) Audited financial statements of the Obligated Group for the fiscal year immediately preceding the due date of the Annual Report. Such financial statements shall be prepared in accordance with generally accepted accounting principles and shall be audited by an independent certified public accountant, and shall include a combined balance sheet as of the end of such fiscal year and a combined statement of changes in fund balances for such fiscal year and a combined statement of revenues and expenses and statement of cash flows for such fiscal year, showing in each case in comparative form the financial figures for the preceding fiscal year (the annual financial report may include combined or combining schedules as required by GAAP), prepared in accordance with generally accepted accounting principles; provided, however, that if such audited financial statements are not available by the deadline for filing the Annual Report, they shall be provided when and if available, and unaudited financial statements shall be included in the Annual Report.

(2) To the extent not otherwise provided, an update of the financial and operating data included in the tables and charts under the headings “THE EXISTING COMMUNITY - Existing Independent Living Apartment Pricing,” “THE EXISTING COMMUNITY - Existing Health Care Center Pricing,” “THE EXISTING COMMUNITY - Occupancy,” “THE EXISTING COMMUNITY – Entrance Fee Turnover,” “THE EXISTING COMMUNITY - Payor Source,” “THE PROJECT - Expansion Independent Living Apartments,” “THE PROJECT – Stage 1 Assisted Living Apartments and Suites,” “THE PROJECT - Expansion Independent Living Apartment Pricing,” “FINANCIAL INFORMATION

H-4 OF THE CORPORATION - Summary Financial Information,” “FINANCIAL INFORMATION OF THE CORPORATION - Debt Service Coverage,” and “FINANCIAL INFORMATION OF THE CORPORATION - Historical Days Cash on Hand” contained in APPENDIX A to the Official Statement.

(3) A separate written statement of the accountants preparing the financial statements described in subparagraph (1) above containing (A) calculations of the Obligated Group’s Debt Service Coverage Ratio for such fiscal year and of the Obligated Group’s Days Cash on Hand as of the last day of such fiscal year and (B) a statement that such accountants have no knowledge of any default under the Master Indenture, insofar as such default relates to accounting matters, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof, insofar as such default or defaults relate to accounting matters.

(b) The Quarterly Report to be delivered under Section 3(b) shall contain the following financial and operating data:

(1) Management-prepared financial statements, including a combined or combining statement of revenues and expenses and statement of cash flows of the Obligated Group during such period and a combined or combining balance sheet as of the end of each such fiscal quarter, all prepared in reasonable detail and certified, subject to year-end adjustment, by an officer of the Obligated Group Representative.

(2) A calculation of the Days Cash on Hand, for the second and last fiscal quarters of each year, and a calculation of the Debt Service Coverage Ratio for each fiscal quarter of each year.

(3) Information with respect to the occupancy levels of all of the facilities operated by the Obligated Group by level of care as of the end of each fiscal quarter.

(4) An Officer’s Certificate of the Obligated Group Representative stating that the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or, if not, specifying all such defaults and the nature thereof.

(1) (A) a calculation of the marketing levels for the Project as of the end of such month, including the number of independent living units that have been sold or cancelled during that month and on an aggregate basis; (B) occupancy levels of the Project as of the end of such month including the number of independent living units that were Occupied and vacated during that month and on an aggregate basis, as applicable; (C) a summary statement on the status of construction since the prior month; (D) unaudited financial reports on the development costs incurred during that month and on an aggregate quarterly basis; (E) an unaudited statement of revenues and expenses and

H-5 statement of cash flows of the Obligated Group for such month with a comparison to the operating budget and an unaudited balance sheet of the Obligated Group as of the end of such month; and (F) statements of the balances in each fund and account required to be held under the Master Indenture or any Related Bond Indenture as of the end of such month (obtained from the applicable trustee), all in reasonable detail and certified by an officer of the Obligated Group Representative.

(d) A Monthly Report to be delivered under this Section 4(d) shall be required in any month in which the Debt Service Coverage Ratio for any Fiscal Year is less than 1.00:1, and shall be required for each month thereafter until the Debt Service Coverage Ratio is at least 1.00:1. The Monthly Report to be delivered under this Section 4(d) shall contain the same information as that required by Section 4(b) hereof but the calculation of the Debt Service Coverage Ratio of the Obligated Group shall be calculated on a year-to-date basis each month.

(e) The Budget Summary delivered pursuant to Section 3(e) shall consist of a summary of the operating and capital budgets for the Fiscal Year then started.

Section 5. Reporting of Listed Events. (a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events with respect to the Series 2018 Bonds:

(1) principal and interest payment delinquencies;

(2) non-payment related defaults, if material;

(3) unscheduled draws on debt service reserves reflecting financial difficulties;

(4) unscheduled draws on credit enhancements reflecting financial difficulties;

(5) substitution of credit or liquidity providers, or their failure to perform;

(6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series 2018A Bonds or the Series 2018B Bonds, or other material events affecting the tax status of the Series 2018A Bonds or the Series 2018B Bonds;

(7) modifications to rights of security holders, if material;

(8) bond calls, if material, and tender offers (except for mandatory scheduled redemptions not otherwise contingent upon the occurrence of an event);

(9) defeasances;

H-6 (10) release, substitution, or sale of property securing repayment of the Series 2018 Bonds, if material;

(11) rating changes;

(12) bankruptcy, insolvency, receivership or similar event of an Obligated Group Member;

(13) the consummation of a merger, consolidation, or acquisition involving an Obligated Group Member or the sale of all or substantially all of the assets of an Obligated Group Member, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(14) appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) In the occurrence of a Listed Event, the Obligated Group Representative shall promptly file a notice of such occurrence with the MSRB (in an electronic format by transmission to EMMA and accompanied by identifying information as prescribed by the MSRB). Such notice shall be filed within 10 Business Days after the occurrence of the Listed Event. If the Obligated Group Representative determines that it failed to give notice as required by this Section, it shall promptly file a notice of such occurrence in the same manner.

Section 6. Termination of Reporting Obligation. The Obligated Group’s obligations under this Disclosure Agreement with respect to the Series 2018 Bonds shall terminate upon the defeasance, prior redemption or payment in full of all the Series 2018 Bonds or if the Rule shall be revoked or rescinded by the SEC or declared invalid by a final decision of a court of competent jurisdiction.

Section 7. Amendment; Waiver; Modification. The Obligated Group may amend or waive any provision of this Disclosure Agreement, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule or adjudication of the Rule by a final decision of a court of competent jurisdiction. The Obligated Group may modify from time to time the specific types of information provided in an Annual Report, Quarterly Report or Monthly Report to the extent necessary as a result of a change in legal requirements, change in law or change in the nature of any Member of the Obligated Group or its businesses, provided that any such modification will be done in a manner consistent with the Rule and will not, in the opinion of the Master Trustee or another party unaffiliated with the Authority or the Obligated Group Members, materially impair the interests of the Bondholders.

Section 8. Additional Information. The Obligated Group Members may from time to time choose to disseminate other information, using the means of dissemination set forth in this

H-7 Disclosure Agreement or any other means of communication, or include other information in any Annual Report, Quarterly Report, Monthly Report, Budget Summary or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If such Member of the Obligated Group chooses to include any information in any Annual Report, Quarterly Report, Monthly Report, Budget Summary or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, such Member shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Quarterly Report, Monthly Report, Budget Summary or notice of occurrence of a Listed Event.

Section 9. Default. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Master Indenture, the Bond Indenture or the Loan Agreement, and the sole remedy of Bondholders under this Disclosure Agreement in the event of any failure of the Obligated Group or the Obligated Group Representative, on behalf of the Obligated Group, to comply with this Disclosure Agreement shall be an action to compel performance.

Section 10. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Borrower, the Underwriter and the Bondholders, and shall create no rights in any other person or entity.

Section 11. Responsible Officer. The Obligated Group Representative’s Chief Financial Officer shall be the officer, agency, or agent of the Obligated Group Representative responsible for providing Annual Reports, Quarterly Reports, Monthly Reports and Budget Summaries and giving notice of Listed Events, to the extent required hereunder, and any inquiries regarding this Disclosure Agreement should be directed to the Obligated Group Representative, to the attention of its Chief Financial Officer.

Section 12. Future Changes to the Rule. As set forth in Section 2 of this Disclosure Agreement, the Borrower has executed and delivered this Disclosure Agreement solely and only to assist the Underwriter in complying with the requirements of the Rule. Therefore, notwithstanding anything in this Disclosure Agreement to the contrary, in the event the SEC, the MSRB or other regulatory authority shall approve or require changes to the requirements of the Rule, the Obligated Group shall be permitted, but shall not be required, to unilaterally modify the covenants in this Disclosure Agreement, without complying with the requirements of Section 7 of this Disclosure Agreement, in order to comply with, or conform to, such changes. In the event of any such modification of this Disclosure Agreement, the Obligated Group shall file a copy of this Disclosure Agreement, as revised, on EMMA in a timely manner.

[Signature appears on the following page]

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IN WITNESS WHEREOF, the Borrower caused this Disclosure Agreement to be executed by its duly authorized officer as of the date first set forth above.

MARY’S WOODS AT MARYLHURST, INC.

By: ______Chief Executive Officer

[Signature Page to Continuing Disclosure Agreement]

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Hospital Facility Authority of Clackamas County • Oregon Senior Living Revenue Bonds (Mary’s Woods at Marylhurst Project) Series 2018A, Series 2018B and Series 2018C