BOOK-ENTRY ONLY RATINGSt: NEW ISSUES In the opinion of Jones Day, Bond Counsel to the RHF Obligated Group, assuming compliance with certain covenants of each of the Governmental Entities and each Borrower, interest on the Governmental Bonds will not be includable in gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax preference for purposes of the federal alternative minimum tax imposed on indh•iduals and corporations. Interest on the Gol•ernmental Bonds will be taken into account, lwweuer, in computing an adjustment used in determining the corporate alternatwe minimum tax and the branch profits tax. Interest on the Corporate Taxable Bonds will Mf at any time be excludable from gross ineome for federal income tax purposes. See the caption "TAX MATTERS" for a more detailed discussion of some of the federal income tax consequences of owning the Series 2008 Bonds, and under certain tax laws of the States of California, Florida, Indiana, Kentucky and Missouri. $126,840,000 VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008 (RETIREMENT HOUSING FOUNDATION OBLIGATED GROUP) Dates, Maturities and CUSIP Numbers As Shown on Pages (i) and (ii} Hereto Price: Par
The California Statewide Communitie~ Development Authority (the "California Authority") is issuing 540,860.000 ofVariable Rate Demand Revenue Refunding Bonds, Series 2001\ (Retirement Housing Foundation Obligated Group) (the "California Bonds"). The Vol usia County Industrial Dcvulopment Authority (the "Volusia !~suer") is issuing $22.790,000 of Variable Rate Demand Revenue Rufunding Bonds, Suries 2008 (Retirument Housing Foundation Obligated Group- Bishop's Glen) (the "Volusi!l (Florida) Bonds"). The Brevard County Health Facihties Authority (the "'Brevard Issuer") is i~~umg $19,400,000 of Variable Ratu Demand Revenuu Refunding Bomh, S~Jries 2008 (Rutirement Housing Foundation Obhgated Group- Courtenay Springs Village) (the "Brevard (Florida) Bonds"). The Town of Clarksville, Indiana (the "Indiana Issuer") is issuing $4,115,000 of Variable Rate Demand Revenue J{efunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group- Wc..~tminst.e\" Villag\!. K.>ntuckiana) (the "Indiana Bonds"). The Kentucky Economic Developm~Jnt Finance Authority (the "Krmtucky issuer") is issuing $8,030,000 of Variable Rate Demand Revenu~ Refunding Bonds, Series 2008A (Retirement Housing Foundation Obligated Group- Colonial Hl!ights) (the "Colonial Heights Bonds") and $7,705,000 Variable Rate Demand Revenue Refunding Bonds, Series 2008B (Retirement Housing Foundation Obligated Group- Colonial Gardens) (the "Colonial Gardens Bonds," and together with the Colonial Heights Bonds, the "Kentucky Bonds"). The Industrial Development Authority of the City of Florissant, Missouri (the "Missouri Issuer" and collectively with the California Authority, the Volusia Issuer, the Brevard Issuer, the Indiana Issuer and the Kentucky Issuur, the "Governmental issuers") is issuing $13,645,000 of Variable Rate> Demand Revenue Refunding Bonds, Series 2008 (Retirement Hou.•ing Foundation Obligated Group- D~Smet and St. Catherine) (the "'Missouri Bonds" and collectively with the California Bond~. the Vol usia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds. and the Kentucky Bonds, the "Governmental Bonds"). Martin Luther Foundation, Inc., is issuing $5,910,000 of Variable Rate Demand Taxable Refunding Corporat~J Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) (the "ML Bonds"). Yellowwood Acrus, Inc., is issuing $4,385,000 of Variable Rate Demand Taxable Refunding Corporate ·Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) (the "YA Bonds" and collectively with lhe ML Bonds, the "Corporz..te Tax\l.b\e Bonds"). Collectively the Governmental Bonds and the Corporate Taxable Bonds ar~ referred to herein as the "'Series 2008 Bonds." The Series 2008 Bonds are issuable as fully registered securities without coupons in denominations of$100,000 and intl!gral multiples of $5,000 in excess thereof during a Weekly Rate Period und, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Series 2001\ Bonds. Purchases will be made only in book-entry form through DTC Participants and no physical delivery of the Series 2008 Bonds will be made to hereinafter described B The trustee for the California Bond~, the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds, the Missouri Bonds, the ML Bonds and the YA Bonds is The Bank of I\'ew York Trust Company, :>LA. (the '•California Trustee," th The Series 2008 Bonds are being marketed exclusively on the credit of KBC Bank N. V., New York Branch, the Initial Bank, and not 011 the credit of the RHF Obligated Group. This Official Statement only describes the Series 2008 Bonds while they bear interest at Weekly Rates. If any series of the Series 2008 Boncb! is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such .~eries of the Series 2008 Bonds will be remarketed pursuant to reoffering disclosure which will either supplement or replace this Official Statement. Any information about the members of the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit of the RHF Obligated Group. Thu Suries 2008 Bonds muture on the dates and in the amounts as described on pages (i) and (ii) which constitute the cover page of this Offieiul SWtement. The Series 2008 Bond~ are subject to optional, mandatory and extraordinary redemption prior to maturity as described herein. The Series 2008 Bonds arc offered when, as and 1fissued and received by the Underwriter, subject to prior sale, to withdrawal or modification of the offer without any notice, and to the approval of legality of the Governmental Bonds by Jones Day, Bond Counsel to the RHF Obhgated Group. Foley & Lardner LLP, Jacksonville, Florida, will act ru; Co· Bond Couns~l with respect to the Vol usia (Florida) Bonds. Certain legal nw.ttGrs will be passed upon for the California Authority by 1ts counsel, Orrick, Herrington & Sutcli!TLLP. c~rtain legal matters will be passed upon for thn Volusia Issuer by DouglaB A. Daniels, Esq., Daytona Beach, Florida. Certam legal matters will be passud upon for the Brevard issuer by its counsel, Angela Abbott, Esq., Titusville, Florida. Certain legal matters will he passed upon for the Indiana lssuet by its counsel, Chris Sturgeon, Esq., Clarksville, Indiana. Cortain legal matters will be passed upon for the Kentucky Issuur by Stites & Harbison PLLC, Louisville, l.{..,nt The 0[1te of this Official Statement i~ June 23, 2008. For an explanation, see "RATINGS"' herein GOVERNMENTAL BONDS MATURITY SCHEDULE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group) r:~ ::::>· Maturity Principal t" "I !3;: (September I) Amount CUSIPt 2030 $40,860,000 130795VH7 VOLUSIA COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group- Bishop's Glen) Maturity Principal (September I) Amount CUSIPt 2025 $22,790,000 92883TBG9 BREVARD COUNTY HEALTH FACILITIES AUTHORITY VARIABLE RATE DEMAND REVENUE BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group- Courtenay Springs Village) Maturity Principal (September I) Amount CUSIPt 2025 $19,400,000 107416NX3 TOWN OF CLARKSVILLE INDIANA VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group- Westminster Village Kentuckiana) Maturity Principal (September I) Amount CUSIPt 2017 $4,115,000 182394ACO KENTUCKY ECONOMIC DEVELOPMENT FINANCE AUTHORITY VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008A (Retirement Housing Foundation Obligated Group- Colonial Heights) Maturity Principal (September I) Amount CUSIPt 2021 $8,030,000 49126PCMO KENTUCKY ECONOMIC DEVELOPMENT FINANCE AUTHORITY VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008B (Retirement Housing Foundation Obligated Group- Colonial Gardens) Maturity Principal (September I) Amount CUSIPt 2028 $7,705,000 49126PCN8 No recourse shall be had for the payment of the principal of or premium or interest on any of the Kentucky Bonds or for any claim based thereon or upon any obligation, covenant or agreement therein contained against any past, present or future officer, member, employee or agent of the Kentucky Issuer or the Commonwealth of Kentucky or any agency or political subdivision thereof, as such, either directly or through the Kentucky Issuer or the Commonwealth of Kentucky or any agency or political subdivision thereof, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, members, employees or agents as such shall be expressly waived and released. Kentucky's name is on the Kentucky Bonds for the benefit and convenience of other entities within the Commonwealth of Kentucky. However, the only security which is pledged for each series of the Kentucky Bonds is the independent revenues and assets from the Kentucky Loan Agreement. The General Assembly of the Commonwealth of Kentucky does not intend to appropriate any funds of the Commonwealth of Kentucky to fulfill the financial obligation represented by the Kentucky Bonds. THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF FLORISSANT, MISSOURI VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group- DeSmet and St. Catherine) Maturity Principal (September 1) Amount CUSIPt 2028 $13,645,000 343299AE3 CORPORATE TAXABLE BONDS MATURITY SCHEDULE kiA.RtiN Lul'HEI{F-b'u'NoAnoJ..J.·iNc. VARIABLE RATE DEMAND TAXABLE REFUNDING CORPORATE BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group) Maturity Principal (September 1) Amount CUS!Pt 2011 $5,910,000 57327Pl00 YELLOWWOOD ACRES, INC. VARIABLE RATE DEMAND TAXABLE REFUNDING CORPORATE BONDS, SERIES 2008 (Retirement Housing Foundation Obligated Group) Maturity Principal (September l) Amount CUSIPt 2012 $4,385,000 98580MAAl t Copyright 2006, American Bankers Association. CUSIP numbers herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are provided for convenience and reference only. ·REGARDING. USE OF THIS OFFICIAL STATEMENT : ' The information contained herein under the heading "THE GOVERNMENTAL ENTITIES" and "LITIGATION - Governmental Entities"' has been furnished by the respective Governmental. Entity .. The information under the heading "BOOK-ENTRY- SYSTEM" has been obtained from The Depository Trust Company. The information contained in APPENDIX D hereto has been furnished by KBC Bank N.Y., New York Branch (the "Initial Bank"). All other information contained herein-has been obtained from the RHF Obligated Group and other sources which are believed to be reliable. Such other information is not guaranteed as to accuracy or completeness by; and is not to be relied upon as .or construed as a promise or representation by, the Governmental Entities or the Underwriter. The Underwriter has provided the following sentence for inclusion in the 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. No dealer, broker, salesperson or other person has been authorized by the Governmental Entities, the RHF Obligated Group or the Underwriter 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 any of the foregoing. This Official Statement shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be a sale of Series 2008 Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. 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 Governmental Entities, or the RHF Obligated Group since the date hereof The Governmental Entities have consented to the use of this Official Statement. The Governmental Entities do not assume any responsibility for the accuracy or completeness of any information contained in this Official Statement, except such information relating specifically to each respective Governmental Entity under the captions, "GOVERNMENTAL ENTITIES" and "LITIGATION- Governmental Entities." In making an investment decision, investors must rely upon their own examination of the terms of the offering, including the merits and risks involved. IN CONNECTION WITH THE OFFERJNG OF THE SERIES 2008 BONDS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRJCE OF THE SERIES 2008 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE SERIES 2008 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURJTIES ACT OF 1933 NOR HAVE THE BOND INDENTURES BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERJES 2008 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURJTIES LAWS OF THE STATES IN WHICH THE SERJES 2008 BONDS HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS RECOMMENDATIONS THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERJES 2008 BONDS OR THE ACCURACY OR COMPLETENESS OF THE OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRJMINAL OFFENSE. CAUTIONARY STATEMENTS, REGARDING FORWARD"LOOKING. STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated· by reference in this Official Statement constitute "forward-looking statements." Such statements are generally identifiable by the terminology used such·as "plan;" "expect," estimate," "budget"· or similar words. THE ACHIEVEMENT OF CERTAIN. RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE . OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT. FROM ·ANY FUTURE RESULTS,.· PERFORMANCE. OR ACHIEVEMENTS EXPRESSED OR . IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NO MEMBER OF THE RHF.OBLIGATED GROUP PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN THEIR EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR. TABLE OF CONTENTS INTRODUCTION ...... : ...... I Purpose of this Official Statement ...... I The RHF Obligated Group ...... : ...... 2 The Bond Trustees ...... '...... 3 Name Change of Bond Trustee and Master Trustee ...... : ...... 3 Security for the Series 2008 Bonds ...... 3 Risk Factors ...... 5 THE GOVERNMENTAL ENTITIES ...... 5 Certain State Securities Law Disclosure ...... 7 THE RHF OBLIGATED GROUP ...... 8 THE SERIES 2008 BONDS ...... 9 General ...... 9 The Series 2008 Bonds ...... 9 Terms and Conditions of the Series 2008 Bonds ...... I I Weekly Rate Periods ...... II Determination of Interest Rates ...... 12 Conversion to Other Rate Periods ...... 12 Tenders ...... 14 Letter of Credit Requirements ...... 16 Remarketing and Purchase of the Series 2008 Bonds ...... 18 Redemption of Series 2008 Bonds ...... 19 REMARKETING ...... 24 General ...... 24 Disclosure Concerning Tender Process and Sales of Series 2008 Bonds by Remarketing Agent ...... 25 ALTERNATE LETTERS OF CREDIT ...... : ...... : ...... 27 SECURITY FOR THE SERIES 2008 BONDS AND SOURCE OF PAYMENT...... 27 General ...... 27 Mortgages ...... 28 Gross Revenue Pledge ...... 29 The Loan Agreements ...... 31 Assignment of Loan Agreements ...... 31 The Corporate Taxable Bond Indentures ...... 31 The Series 2008 Bond Obligations ...... 31 Guaranties ...... 31 Additional Indebtedness ...... 32 THE INITIAL LETTERS OF CREDIT AND THE INITIAL REIMBURSEMENT AGREEMENTS .... 32 The Initial Letters of Credit ...... 32 The Initial Reimbursement Agreements ...... 34 BOOK-ENTRY SYSTEM ...... 38 PLAN OF FINANCE ...... 41 The Refundings ...... 41 Swap Agreements ...... 44 (i) SOURCES AND APPLICATIONS OF FUNDS ...... 45 RISK FACTORS ...... 46 General...... 46 Limited Obligations ...... 46 The Initial Bank ...... 47 Enforceability of the Initial Letters of Credit ...... 4 7 Interest Rate Swap Risks ...... ,.47 Matters Relating to Enforceability ...... A7 Taxation of interest on the Governmental Bonds ...... :: ...... A9 Certain Risks Associated with the Mortgages ...... ,...... 50 Environmental Matters ...... , ...... 54 Possible Future Federal Tax Legislation ...... , ...... 54 Internal Revenue Code Compliance ...... ·...... 55 Amendments to Documents ...... 56 RATINGS ...... , ...... 56 NO CONTINUING DISCLOSURE REQUIREMENTS WHILE THE SERIES 2008 BONDS ARE IN A WEEKLY RATE PERIOD ...... ,...... 57 ERISA CONSIDERATIONS ...... ' ...... 51 LITIGA TION ...... ::... 58 Governmental Entities ...... '...... 58 The RHF Obligated Group ...... 58 LEGAL OPINIONS ...... 58 TAX MATTERS ...... , ...... 59 Federal Income Taxation ...... 59 State Tax Law Treatment ... .'...... 60 Tax Matters Relating to the Corporate Taxable Bonds ...... :...... 61 uNDERWRITING ...... 63 VERIFJCATION OF MATHEMATICAL COMPUTATIONS ...... 64 MISCELLANEOUS .. .'...... · ...... 64 APPENDIX A - DESCRIPTION OF THE RHF OBLIGATED GROUP . APPENDIX B - SUMMARY OF PRINCIPAL DOCUMENTS APPENDIX C - PROPOSED TEXT OF BOND COUNSEL OPINION APPENDIX D - INFORMATION RE KBC BANK N.Y., NEW YORK BRANCH ' . • j. ' (ii) ·OFFICIAL STATEMENT $126,840;000 VARIABLE RATE DEMAND REVENUE REFUNDING BONDS, SERIES 2008 (RETIREMENT HOUSING FOUNDATION OBLIGATED GROUP) ·1 INTRODUCTION The .description and summaries of various documents in this Official Statement 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 are qualified in their entirety by reference to each document. See APPENDIX B for definitions. of certain words and terms. The statements contained in this introduction are oniy brief descriptions, and a full review should be made of this entire Official Statement. Purpose of this Official Statement The purpose of this Official Statement, including the cover page and the Appendices, is to set forth information in connection with the offering of the Series 2008 Bonds. This Official Statement presents certain information with respect to the offering of: (i) the $40,860,000 aggregate principal amount of California Statewide Communities Development Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) (the "California Bonds"); (ii) the $22,790,000 aggregate principal amount of Volusia County Industrial Development Authority Variable Rate Demand Revenue Refunding Bonds Series 2008 (Retirement Housing Foundation Obligated Group- Bishop's Glen) (the "Volusia (Florida) Bonds"); (iii) the $19,400,000 aggregate principal amount of Brevard County Health Facilities Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group - Courtenay Springs Village) (the "Brevard (Florida) Bonds"); (iv) the $4,115,000 aggregate principal amount of Town of Clarksville, Indiana Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group - Westminster Village Kentuckiana) (the "Indiana Bonds"); (v) the $8,030,000 aggregate principal amount· of Kentucky Economic Development Finance Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008A (Retirement Housing Foundation Obligated Group - Colonial Heights) (the "Colonial Heights Bonds"); (vi) the $7,705,000 aggregate principal amount of Kentucky Economic Development Finance Authority Variable Rate Demand Revenue Refunding Bonds, Series 20088 (Retirement Housing Foundation Obligated Group- Colonial Gardens) (the "Colonial Gardens Bonds," and together with the Colonial Heights Bonds, the "Kentucky Bonds"); (vii) the $13,645,000 aggregate principal amount of The Industrial Development Authority of the City of Florissant, Missouri Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group - DeSmet and St. Catherine) (the "Missouri Bonds"); (viii) the $5,910,000 aggregate principal.amount of Martin Luther Foundation, Inc. Variable Rate Demand Taxable Refunding Corporate Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) (the "ML Bonds"); and (ix) the $4,385,000 aggregate principal amount of Yellowwood Acres, Inc. Variable Rate Demand Taxable Refunding Corporate Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) (the "Y A Bonds" and collectively with the ML Bonds, the "Corporate Taxable Bonds"). The California Bonds, the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds and the Missouri Bonds are referred to collectively as the "Governmental Bonds" and together with the Corporate Taxable Bonds, are individually referred to as an "issue" or a "series" of Series 2008 Bonds and, collectively, as the "Series 2008 Bonds." -I- The California Statewide Communities Development Authority (the "California Authority"), the Volusia County Industrial Development Authority (the "Volusia Issuer"), the Brevard County Health Facilities Authority (the "Brevard Issuer"), the Town of Clarksville, Indiana (the "Indiana Issuer"), the· Kentucky Economic Development Finance Authority (the "Kentucky Issuer") and The Industrial Development Authority of the City of Florissant, Missouri (the "Missouri Issuer") are individually referred to as a "Governmental Entity" and collectively as the "Governmental Entities." The Governmental Bonds are being issued by the Governmental Entities described herein, the Corporate Taxable Bonds are being issued by nonprofit corporations for the purpose of providing funds along with trustee-held funds for the bonds and certiftcates being refunded and proceeds of the Series 2008 Bonds to refund various bonds issued to benefit 12 corporations that are affiliated with Retirement Housing Foundation, a California nonprofit public benefit corporation ("RHF") and Foundation Property Management, Inc., a California nonprofit public benefit corporation ("FPM"), II of which own and operate retirement facilities located in California, Florida, Indiana, Missouri and Kentucky. Proceeds of the Series 2008 Bonds will also be used to pay costs of issuance for the Series 2008 Bonds, as described more fully herein. For more information, see "PLAN OF FINANCE" and· "SOURCES AND APPLICATIONS OF FUNDS." THE CALIFORNIA BONDS, THE VOLUSIA (FLORIDA) BONDS, THE BREVARD (FLORIDA) BONDS, THE INDIANA BONDS, THE KENTUCKY BONDS, THE MISSOURI BONDS;' THE ML BONDS AND THE YA BONDS ARE SEPARATE ISSUES AND ARE BEING OFFEREB· TOGETHER IN THIS OFFICIAL STATEMENT FOR CONVENIENCE ONLY. The Series 2008 Bonds are being marketed exclusively on the credit of KBC Bank N. V., New York Branch, the Initial Bank, and not on the credit of the RHF Obligated Group. This Official Statement only describes the Series 2008 Bonds while they bear interest at Weekly Rates. If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such series of the Series 2008 Bonds will be· remarketed pursuant to reoffering disclosure which: will either supplement or replace this Official Statement. Any information about the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit ofthe RHF Obligated Group. The RHF Obligated Group · The California Obligated Group will consist of the five corporations affiliated with RHF · that own and operate five retirement facilities located in California (each a "California Member" and collectively, the "California Members"), more fully described in the "THE RHF OBLIGATED GROUP·- The Borrowers" and in APPENDIX A. The National Obligated Group· will consist of the seven corporations affiliated with RHF that own and·operate six retirement facilities in Florida, Indiana, Kentucky and Missouri (each a "National Member" and collectively the "National Members"), more fully described in "THE RHF OBLIGATED GROUP - The Borrowers" and in APPENDIX· A. · The California Obligated Group and the National Obligated Group are collectively referred to herein as the· "Obligated Groups" and each, individually, as an "Obligated Group," The California Members, the National Members (together with the California Members referred •to herein, collectively; as •. the, "Members" and each, individually, as a "Member"), RHF and FPM are ·collectively referred to herein as. the "RHF Obligated Group." "RHF Obligated Group" is a definition of convenience. There is no single master indenture signed by all these entities. See "Security for the Series 2008 Bonds" for more information. ....'.' -2-. Th~ Bond Trustees The trustee for the California Bonds, the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds, the Missouri Bonds, the ML Bonds and the YA Bonds is The Bank of New York Trust Company, N.A.· (respectively, the "California Trustee," the "Volusia Trustee," the "Brevard Trustee," the "Indiana Trustee," the "Kentucky Trustee," the "Missouri Trustee," the "ML Trustee" and the "YA Trustee"). Collectively, the California Trustee, the Volusia Trustee, the Brevard Trustee, the Indiana Trustee, the Kentucky Trustee, the Missouri Trustee, the ML Trustee and the YA Trustee are called the "Bond Trustees" and each individually, a "Bond Trustee." Name Change of Bond Trustee and Master Trustee It is-expected that the name of The Bank of New York Trust Company, N.A. will be changed on July I, 2008.to The Bank of New York Mellon Trust Company, N.A. Security for the Series 2008 Bonds The California Master Indenture. The California Bonds will be secured in part by a Series 2008 Direct Note Obligation issued pursuant to the California Master Trust Indenture dated as of July!, 2008 (the "Original California Master Indenture"), by and among the California Members, RHF, solely as Obligated Group Representative (as defined therein), and The Bank of New York Trust Company, N .A., as master trustee (the "California Master Trustee") as supplemented and amended from time to time including by the First Supplemental California .Master Trust Indenture .dated as of July 1, 2008 (the "California Supplemental Master Indenture" together with the Original California Master Indenture, the "California Master Indenture"). Pursuant to the California Master Indenture, RHF, in its capacity as Obligated Group Representative, will issue the Series 2008 Direct Note Obligation (the "California. Series 2008 Obligation") to the California Trustee to secure the California Bonds. The California Series 2008 Obligation is a joint and.several obligation of the California Members: The National Master Indenture. Each issue of the Series 2008 Bonds .other than 'th~· California Bonds will be secured in part by a related Series 2008 Direct Note Obligation issued pursuant to the National Master Trust Indenture; dated as of July I, 2008 (the "Original National Master Indenture''), by and among The Bank of New York Trust Company, N.A., as master trustee (the "National Master Trustee"), RHF, solely as Obligated Group Representative (as defined therein), and the National Members, as supplemented and al!lended from time to time, including by the First Supplemental National Master Trust Indenture, dated as of July I, 2008 (the "National Supplemental Master Indenture," together with the Original National Master Indenture, the "National Master Indenture"). Pursuant to the National Master Indenture, RHF, in its capacity as Obligated Group Representative, will issue a separate Series 2008 Direct Note Obligation (each a :'National Series 2008 Obligation" and collectively the "National Series.2008 Obligations") to the Volusia Trustee, the Brevard Trustee, the Indiana Trustee, the Kentucky Trustee, .the Missouri Trustee, the-ML Trustee and theY A Trustee in order to se~ure the related series of the Series 2008 Bonds. Each National Series 2008 Obligation is a joint and several obligation of the National Members. The California Master Indenture and the National Master Indenture are collectively referred to herein as the "Master Indentures" and each individually· as a "Master Indenture." The California Series 2008 Obligation and the National Series 2008 Obligations are collectively referred to herein as the "Series 2008 Bond Obligations" and each individually as a "Series 20Q8 Bond Obligation." Gross Revenue Pledge. Each.member of the RHF Obligated Group will enter into a Gross Revenue Pledge Agreement, dated as of July I, 2008 (the "Gross Revenue Pledge Agreement"), with The Bank of New York Trust Company, N.A., as collateral agent (the "Collateral Agent"), on behalf of the California Master Trustee, the National Master Trustee and Lehman Brothers Special Financing, -3- Inc., as swap counterparty, pursuant to which each member of the RHF Obligated Group will pledge and, to the extent permitted by law, grant a security interest in its Gross Revenues described therein to secure the payment, the principal of and interest on the Obligations issued under the Master Indentures and payments due under the hereinafter described Swap· Agreements. For more information, see "SECURITY FOR THE SERIES 2008 BONDS AND SOURCE OF PAYMENT- Gross Revenue Pledge." The Guarantees. RHF and FPM (the "Guarantors") will enter into a Guaranty Agreement (the "RHF/FPM California Guaranty"), dated as of July I, 2008, with the California Master Trustee, guarantying the Obligations issued under the California Master Indenture and the performance of the California Members thereunder. The Guarantors will enter into a Guaranty Agreement (the "RHF/FPM National Guaranty," together with the RHF/FPM California Guaranty, the "RHF/FPM Guaranties"), dated as of July I, 2008, with the National Master Trustee, guarantying the Obligations issued under the National Master Indenture and the performance of the National Members thereunder. Each of the California Members will enter into a Guaranty Agreement (individually, a "California Member Guaranty Agreement" and collectively the "California Member Guaranty Agreements") dated as of July I, 2008 in favor of the National Master Trustee, guarantying the Obligations issued under the National Master Indenture and secured by such California Member's hereinafter described Second DOT/Mortgage. Each National Member will enter into a Guaranty Agreement (individually, a "National Member Guaranty Agreement" and collectively the "National Member Guaranty Agreements'' and collectively with the California Member Guaranty Agreements, the "Members Guaranties") in favor of the· California Master Trustee, guarantying the Obligations issued under the California Master Indenture and, except for Martin Luther, secured by such National Member's hereinafter described Second DOT/Mortgage. See "SECURITY FOR THE SERIES 2008 BONDS ·AND SOURCE OF PAYMENT - Guaranties." Deeds of Trust/Mortgages. Each of the California Members and the National Members (other than Martin Luther Foundation, Inc., which does not own or operate a facility), referred to, for the purposes of this paragraph and related provisions herein, as an "Operator" and collectively the "Operators," will execute a deed of trust or mortgage (depending on the state in which the Operator's facilities are located) with respect to its respective facilities to secure the Obligations issued under the Master Indenture to which it is a party. Each Operator will also execute a second deed of trusi or mortgage (each a "Second DOT/Mortgage") with respect to its respective facilities to secure the Obligations issued under the Master Indenture to which it is not a party. See "SECURITY FOR THE SERIES 2008 BONDS AND SOURCE OF PAYMENT- Mortgages." The Letters of Credit. Concurrently with the issuance of the Series 2008 Bonds, the Obligated Groups will cause to be delivered to each Bond Trustee a direct pay irrevocable letter of credit with respect to its respective series of the Series 2008 Bonds (individually, an "Initial Letter of Credit" and, collectively, the "Initial Letters of Credit") issued by KBC Bank N.Y., New York Branch (the "Initial Baiik"). The Initial Letter of Credit with respect to the California Bonds will be issued pursuant to the terms of a Reimbursement, Credit and Security Agreement, dated as of July I, 2008"(the "Initial California Reimbursement Agreement"), among the California Obligated Group and the Initial Bank. The Initial Letters of Credit for the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds, the Missouri Bonds, the ML Bonds and the Y A Bonds will be "issued pursuant to the terms of a Reimbursement, Credit and Security Agreement dated as of July I, 2008 (the "Initial National Reimbursement Agreement," together with the Initial California Reimbursement Agreement,- ihe "Initial Reimbursement Agreements" and each, individually, an "Initial Reim.bursement Agreement"). · · ' · "· · · · .. ; '-4- Each Initial Letter of Credit will secure the payment of the principal of and interest on (computed for 4 7 days at the rate of I 0% per annum with respect to the Governmental Bonds and 12% per annum with respect to the Corporate Taxable Bonds) the related series of the Series 2008 Bonds until July 15, 201 I, subject to· prior expiration upon the occurrence of certain .events and to renewal and replacement as specified in each respective Initial Reimbursement Agreement. See "THE INITIAL LETTERS OF CREDIT AND THE INITIAL REIMBURSEMENT AGREEMENTS." To evidence and secure the obligations of the California Obligated Group and the National Obligated Group under the Initial Reimbursement Agreements, RHF, as Obligated Group Representative, on behalf of the California Obligated Group and the National Obligated Group, respectively, will issue to the Initial Bank Series 2008 Bank Obligations (individually, the "California Bank Obligation" and the "National Bank Obligation," and, collectively, the "Bank Obligations") each in an amount equal to those amounts which may become due and payable under each of the Initial California Reimbursement Agreement and the Initial National Reimbursement Agreement, respectively. RHF and FPM will enter into a Guaranty Agreement (the "Reimbursement Agreement Guaranty") dated as of July I, 2008 in favor of the Initial Bank, guarantying the prompt payment when due of all reimbursement amounts, principal, interest, fees and other amounts payable under the Initial Reimbursement Agreements. The Series 2008 Bonds are being marketed exclusively on the credit of KBC Bank N. V., New York Branch, the Initial Bank, and not on the credit of the RHF Obligated Group. This . Official Statement only describes the Series 2008 Bonds while they bear interest at Weekly Rates. If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such series of the Series 2008 Bonds will be remarketed pursuant to reoffering disclosure which will either supplement or replace this Official Statement. Any information about the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit of the RHF Obligated Group. Risk Factors There are risks associated with the purchase of the Series 2008 Bonds. See "RISK FACTORS" for a discussion of some of these risks. THE GOVERNMENTAL ENTITIES The Governmental Bonds ·will be issued by the respective Governmental Entities identified below. The Corporate Taxable Bonds will be issued by Yellowwood Acres, Inc. and Martin Luther Foundation, Inc. (collectively, the "Corporate Issuers") and not by any Governmental Entity. The Governmental Enti!ies and the Corporate Issuers are referred to as tpe "Issuers." California. The California Statewide Communities Development Authority (the "California Authority") is a public entity organized pursuant to a joint powers agreement among a number of california counties and· cities entered into pursuant to the provisions relating .to the joint exercise of powers contained in Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the California Government Code. The California- Authority is authorized to participate in financings for the benefit of ,organizations described under Section 50I(c)(3) of th~ Internal Revenue Code of 1986, as amended (the "Code"). ;. · · . . Florida. Volusia· County Industrial Development Authority. The Volusia County Industrial Development Authority '(the "Volusia Issuer") is a public body corporate and politic, duly organized and existing under the provisions of Chapter 159, Part Ill, Florida Statutes, as amended (the "Florida IDA Act"). '•-5- Brevard County Health Facilities Authority. The Board of County Commissioners of Brevard County, Florida, adopted Ordinance No. 77-16 on April 7, 1977 creating the Brevard County Health Facilities Authority (the "Brevard Issuer"), pursuant to the Florida IDA Act and the Florida Health Facilities Authorities Law, Chapter 154, Part III, Florida Statutes (the "Florida Health Facilities Act"; together with the Florida IDA Act, the "Florida Act"). Indiana. The Town of Clarksville, Indiana (the "Indiana Issuer"), is a municipal corporation created and existing under the constitution and the laws of the State of Indiana, specifically the Indiana Code, Title 36, Article 7, Chapters 11.9 and 12 and Title 5, Article I, Chapter 5. Kentucky. The Kentucky Economic Development Finance Authority (the "Kentucky Issuer") is an independent agency of the Commonwealth of Kentucky originally created in 1958 pursuant to Chapter 154, Section 154.020 of the Kentucky Revised Statutes ("KRS") as the Kentucky Development Finance Authority and reorganized as the Kentucky Economic Development Finance Authority by H.B. 89 adopted during the 1992 Regular Session of the General Assembly of the Commonwealth of Kentucky and codified as KRS Sections 154.20-010 to 154.20-180 (the "Kentucky Act"). The Kentucky Issuer is governed by a board of seven members who are appointed by a board known as the Kentucky Economic Development Partnership, which is in tum appointed by the Governor from lists of candidates submitted to the Governor by organizations· representing various business and labor interests in the Commonwealth of Kentucky. A member of the Kentucky Issuer continues to serve after his/her term has expired until his/her successor has been appointed or his/her term is extended. The Kentucky Issuer has the power to cooperate with local development agencies in their efforts to promote the expansion of business and job opportunities in the Commonwealth of Kentucky, and to issue revenue bonds under KRS Chapters 103 and 154. The present members of the Kentucky Issuer and their affiliations are as follows: Expiration of Name and Title Term Principal Occupation Jean R. Hale, Chairman December 17, 2007 Chairman, President and (expired) CEO, Community Trust Bank Pikeville, Kentucky Aubrey Hayden, Vice Chairman March 12, 2008 Senior Vic~ President, Chase (expired) . Bank, Louisville, Kentucky Ernest M. Pitt, Jr., Esq., Secretary December I 7, 2007 Holbrook and Pitt Treasurer (expired). Ashland, Kentucky Bruce W. Brooks, Assistant · October 20, 2009 Executive Vice President, Secretary-Treasurer Farmers Bank and Capital Trust Company .Frankfort, Kentucky · Jonathan Miller, Member Ex-Officio Secretary Finance and Administration Cabinet . ·Frankfort, Kentucky . -6- Richard J. Grana, Member October 27, 2008 President, lMPEX Paducah, Kentucky Michael T. Vogt, Member March 30, 20 lO VP, Human Resources & General Affairs Mazak Corporation Florence, Kentucky The Kentucky Bonds are special limited obligations of the Kentucky Issuer and do not constitute a ~ebt, general obligation; pledge of faith and credit or liability of the Kentucky Issuer, the Commonwealth of Kentucky or any agency or political subdivision thereof within the meaning of the Constitution or statutes of the Commonwealth of Kentucky, and the Kentucky Bonds are payable solely from the funds and property pledged therefor. The Kentucky Issuer has no taxing power. Missouri. The Industrial Development Authority of the City of Florissant, Missouri (the "Missouri Issuer") is a public corporation, duly organized and existing under the laws of the State of Missouri, including particularly Chapter 349 of the Revised Statutes of Missouri, as amended {the "Missouri Act"). The· Missouri Issuer is authorized under the Missouri Act, among other things, to (i) finance all or any part of the costs of certain projects (as defined in the Missouri Act); (ii) issue its revenue bonds to finance such projects and refund prior issues; and (iii) pledge the income and revenues to be received with respect to such projects sufficient for the payment of such bonds and the interest thereon. The Missouri Issuer may issue its bonds, notes or other obligations for any of its corporate purposes. Neither the directors of the Missouri Issuer nor any person executing either Missouri Bonds will be personally liable on either of such series of Series 2008 Bonds by reason of the issuance thereof The Missouri Issuer is authorized to issue and may issue other series of bonds and notes secured by instruments separate from the Bond Indentures with respect to the Missouri Bonds. The owners of such bonds and notes will have no claim on the assets, funds or revenues of the Missouri Issuer securing the Missouri Bonds. The holders of the Missouri Bonds will have no claim on the assets, funds or revenues of the Missouri Issuer securing such other bonds and notes. Certain State Securities Law Disclosure Section 517.051 Florida Statutes, 1987, as amended, provides for the exemption from registration of certain government securities, provided that, if an issuer of governmental securities has been in default at any time after December 31, 1975 as to principal and interest on any obligation, its securities may not be offered or sold in Florida pursuant to the exemption except by means of an offering circular containing full and fair disclosure, as prescribed in rules of the Florida Department of Banking and Finance (the "Department"). Under the rules of the Department, the prescribed disclosure is not required if the information is not an appropriate disclosure because the information would not be considered material by a reasonable investor. As described above, each Governmental Entity has the power to and bas issued bonds, or certificates of participation have been issued with respect to such Governmental Entity, for the purpose of financing projects for other facilities which are payable from the revenues of the particular projects involved. Revenue bonds or certificates of participation, issued by or with respect to a Governmental Entity for other projects, may have been, or may be, in default as to principal and interest. The source of payment, however, for any such defaulted bonds or certificates of participation is separate and distinct from the source of payment for the Series 2008 Bonds, and therefore, the default on such bonds or certificates of participation is not considered a material fact with respect to the payment of the Series 2008 Bonds. · · -7- THE RHF OBLIGATED GROUP General. The RHF Obligated Group consists of RHF, FPM and the twelve affiliated corporations (the "Borrowers," and each, individually, a "Borrower"), described below under "Borrowers." As of December 31,2007, the Borrowers owned and operated 1,768 residential apartment units, 546 assisted living units and 465 skilled nursing beds. APPENDIX A contains a brief description of the history, organization and operation of the RHF Obligated Group. The Series 2008 Bonds are being marketed exclusively on the credit of KBC Bank N. V., New York Branch, the Initial Bank, and not on the credit of the RHF Obligated Group. This Official Statement only describes the Series 2008 Bonds while they bear interest at Weekly Rates. lf any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such series of the Series 2008 Bonds will be remarketed pursuant to reojfering disclosure which will either supplement or replace this Official Statement. Any information about the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit of the RHF Obligated Group. RHF and FPM. RHF is a California nonprofit public benefit corporation organized in 1961 to manage and develop housing and health care for senior adults. RHF has grown to be one of the nation's largest nonprofit providers of shelter and services for senior adults with more than 14,750 living units under its control. There are about 17,000 residents in RHF sponsored facilities. FPM is a California nonprofit public benefit corporation formed in 1984 to provide management support to local property managers. FPM provides accounting, reporting and management training to 128 sites in 21 states_, Borrowers. The California Bonds are being issued for the benefit of the following five California Members: . Bixby Knolls Towers, Inc. ("Bixby Knolls") which owns and operates 168 congregate care units, 59 assisted living units and a 99-bed skilled nursing facility, housed in two high rise buildings in Long Beach, California ("Bixby Knolls Towers"); (ii) Gold Country Health Center, Inc. ("Gold Country") which owns and operates a 68-bed skilled nursing facility, 43 assisted living units and a !50-unit congregate care complex in El Dorado County, California ("Gold Country Retirement Community"); (iii) Mayflower Gardens Health Facility, hie. ("Mayflower Gardens") which owns and operates a 48-bed skilled nursing facility in unincorporated Los Angeles County, California ("Mayflower Health Center"); (iv) Mayflower RHF Housing, Inc. ("Mayflower Housing") which owns and operates a 494-unit senior apartment complex adjacent to the Mayflower Health Center in unincorporated Los Angeles County, California ("Mayflower Gardens"); and (v) Sun City RHF Housing, Inc. ("Sun City") which .owns and operates a 129-u~it senior apartment complex and 69 assisted living units in unincorporated Riverside County, California ("Sun City Gardens"). The Volusia (Florida) Bonds are being issued for the benefit of Holly Hill RHF.Housing, Inc. ("Holly Hill"), a Florida not-for-profit corporation, which owns and operates a multilevel retirement facility in Holly Hill, Florida, containing 206 one, two and three bedroom apartments, 57 assisted living apartments, 32 licensed extended congregate care beds, together with common areas and a 60-bed skilled nursing facility ("Bishop's Glen"), however, all 355 apartments or beds are licensed for assisted living. The Brevard (Florida) Bonds are being issued for the benefit of Merritt Island RHF Housing, Inc. ("Merritt Island") d/b/a Courtenay Springs Village, a Florida not-for-profit corporation, which owns and operates a multilevel retirement facility in Merritt Island, Florida, consisting of 158 residential apartments (apartments, penthouses, villas and townhouses), nine assisted living units, together with common areas, and a licensed 96-bed skilled nursing facility ("Courtenay Springs Village"). The Indiana Bonds and the Y A Bonds are being issued for the benefit of Yellowwood Acres, Inc. ("Yellowwood") d/b/a Westminster Village Kentuckiana, an Indiana nonprofit corporation, -8- which owns and operates a retirement community in Clarksville, Indiana, consisting of 256 dwelling units (of which 164 are congregate living units and 92 are assisted living units) and a 94-bed skilled nursing facility ("Westminster Village"). The Kentucky Bonds are being issued for the benefit of (i) Bluegrass RHF Housing, Inc., a Kentucky nonprofit corporation ("Bluegrass"), d/b/a Colonial Heights, which owns and operates a multilevel retirement facility in Florence, Kentucky, consisting of 177 independent living units together with common areas ("Colonial Heights"), and (ii) Bluegrass, d/b/a Colonial Gardens, which owns and operates 69 assisted living units in a contiguous building ("Colonial Gardens':). ·, . ·• The Missouri Bonds· are being issued for. the benefit of (i) DeSmet RHF. Housing, Inc. ("DeSmet"), a Missouri nonprofit corporation, which owns and operates a retirement community in Florissant, Missouri .consisting of 33 independent living ·units. and 56 assisted living· beds together with common areas ("DeSmet Retirement Community"), and (ii) St. Catherine RHF Housing, Inc. ("St. Catherine"), a Missouri nonprofit corporation, which ·owns and operates a retirement cormnunity consisting of 89 independent living apartments in Florissant, Missouri and common areas (the "St. Catherine Retirement Community~'). The ML Bonds are being issued for the benefit of Martin Luther Foundation, Inc. ("Martin Luther"), a Florida not,for-profit corporation, to refinance its outstanding debt with respect to a previously owned facility. THE SERIES 2008 BONDS General Certain capitalized terms used herein which are taken from the Bond Indentures have the meanings set forth in APPENDIX B hereto. Each series of the Series 2008 Bonds may bear interest at a Weekly Rate, an Adjustable Long-Term. Rate or Fixed Interest Rates. All the Series 2008 Bonds will initially bear interest at a Weekly Rate. This Official Statement describes the Series 2008 Bonds while they bear interest at a Weekly Rate. This Official Statement is not intended to provide information with respect to the Series .2008 Bonds when they bear interest at an Adjustable Lot:~g-Term Rate or Fixed Interest Rates. ' ' . If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, the owners of such series are required to tender their Series 2008 Bonds for purchase on a Proposed Fixed Interest Rate Conversion Date or Variable Rate Conversion Date and may not elect to retain such Series 2008 Bonds in connection. with such a mandatory tender. See "THE SERIES 2008 BONDS - Tenders :- Mandatory Tenders" herein. It is currently anticipated that if any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, an amendment .or supplement to 1his Official Statement will be distributed describing such Series ;!QO~ Bonds at the new rate. The Series 2008 Bonds The California Bonds will mature. on Septell]ber I, 2030. The Volusia (Florida) Bonds will mature on September I, 2025. The Brevard (Florida) Bonds will mature on September I, 2025. ~9- · The Indiana Bonds will mature on September I, 2017. The Colonial Heights Bonds will mature on September I, 2021 . The Colonial Gardens Bonds will mature on September I, 2028. The Missouri Bonds will mature on September I, 2028. The ML Bonds will mature on September I, 20 II. TheYA Bonds will mature on September I, 2012. The Series 2008 Bonds, as· initially issued, will be dated and will bear interest from the date of their initial issuance and delivery. Subsequently issued Series 2008 Bonds will be dated as of the most recent Interest Payment Date to which interest has been paid. The Series 2008 Bonds are issuable only as fully registered bonds in Authorized Denominations of $100,000 and integral multiples of $5,000 in excess thereof during any Weekly Rate Period. Any Series 2008 Bond may be transferred or exchanged for a new Series 2008 Bond of Authorized Denominations for the same aggregate principal amount and of like tenor at the designated corporate trust· office of the Bond Trustee, without charge except for applicable taxes, fees or other governmental charges. Interest will be paid on the following interest payment dates with respect to the Series 2008 Bonds while they bear interest at a Weekly Rate (each an "Interest Payment Date"): (a) the first Business Day·of each calendar month commencing August I, 2008 or the first such date occurring after the Variable Rate Conversion Date with respect thereto; (b) each Optional Tender Date; (c) each Mandatory Tender Date; and (d) for each Series 2008 Bond, the Maturity Date thereof When the Series 2008 Bonds are issued, The Depository Trust Company ("DTC") will act as securities depository. Thereafter, the Series 2008 Bonds will be registered in the book-entry only system (the "Book-Entry System") maintained by DTC. See "BOOK-ENTRY SYSTEM" herein. Payment of principal, premium, if any, and interest on the Series 2008 Bonds will be made to hereinafter described Beneficial Owners by DTC as described under "BOOK-ENTRY SYSTEM" herein. If the. Book-Entry System is discontinued, the provisions of the following two paragraphs would be applicable. The principal of, and premium, if any, on the Series 2008 Bonds will be payable at the designated corporate trust office of the applicable Bond Trustee upon presentation and surrender of such Series 2008 Bonds. Interest payments on Series 2008 Bonds (other than with respect to Defaulted Interest) will be payable on each Interest Payment Date to the registered owner thereof appearing on the registration books of the Governmental Entity kept by such Bond Trustee to evidence the registration and transfer of the Series 2008 Bonds (the "Bond Register") as of the close of business of the Bond Trustee on the Record Date (as hereinafter defined). "Record Date" means with respect to Series 2008 Bonds while in the Weekly Rate Period, the Business Day immediately preceding an Interest Payment Date. Interest on the Series 2008 Bonds shall, except as hereinafter provided, be paid by check or draft of the Bond Trustee mailed on the Interest Payment Date to such registered owner at the address of such owner as it appears on the Bond Register or at such other address furnished in writing by such registered owner to the Bond Trustee, or by wire transfer sent on the Interest Payment Date to the registered owner upon written notice to the Bond Trustee from the registered owner containing the wire transfer address (which shall be in the continental United States) to which the registered owner wishes to have such wire directed which written notice is received not later than the Business Day prior to· the Interest Payment Date, it being understood that such notice may refer to multiple interest payments. In the event of default in the payment of interest due on an Interest Payment Date, such defaulted interest shall be payable to the person in whose name such Series 2008 Bond is registered at the close of business on a special record date for the payment of such defaulted interest, which date shall be established by the Bond Trustee not more than 15 nor less than I 0 days prior to the date of the proposed -10- payment and not less than 10 days after receipt of the Bond Trustee of the notice of. the proposed payment from the related Borro~er. Terms and Conditions of the Series 2008 Bonds . , The Se~ies 2008 Bonds bear interest from their date of issue until payment of the principal thereof is made or provided for in accordance with the provisions of the Bond Indenture, whether at maturity (the "Maturity Date"), upon redemption, or otherwise. The Series 2008 Bonds shall bear interest from their date of issuance to and including July 9, 2008 at a rate determined by the initial purchaser of the Series 2008 Bonds. Thereafter, the Series 2008 Bonds shall bear interest at the Weekly Rate until converted. RHF, as Obligated Group Representative, may elect to convert all, and not less than all, of any series of the Series 2008 Bonds from a Weekly Rate to an Adjustable Long-Term Rate or Fixed Interest Rates. See "THE SERIES 2008 BONDS- Conversion to Other Rate Periods." During a Weekly Rate Period, the Series 2008 Bonds shall bear interest at the least of (i) the Interest Coverage Rate, (ii) the Weekly Rate, or (iii) the Maximum Rate. So long as the Series 2008 Bonds bear interest at a Weekly Rate, the related Borrower is required to cause to have on deposit with the Bond Trustee a Letter of Credit in accordance with its respective Loan Agreement or in connection with the ML Bonds and the Y A Bonds, the related Bond Indenture. See "THE SERIES 2008 BONDS - Letter of Credit Requirements" herein. While the Series 2008 Bonds are in the Weekly Mode, the principal of, premium, if any, and interest on such Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) are payable only from Eligible Moneys. The Series 2008 Bonds shall be dated as of the most recent Interest Payment Date to which interest has been duly paid or provided for next preceding its date of issue, unless issued on an Interest Payment Date on which interest has been paid or provided for, in which event it shall be dated as of such Interest Payment Date or, if issued prior to the first Interest Payment Date on which interest is paid, it shall be dated the date of initial issuance of the Series 2008 Bonds. The Obligated Groups anticipate that, should the Series 2008 Bonds be converted to an Adjustable Long-Term Rate or Fixed Interest Rates, additional reoffering disclosure which will either supplement or replace this Official Statement will be provided as necessary in connection with any such conversion. Weekly Rate Periods A Weekly Rate Period is an interest rate period from and commencing on Thursday of any calendar week and including and ending on Wednesday of the next calendar week; provided, however, that if the rate period is changed from a Weekly Rate Period to an Adjustable Long-Term Rate Period, the Weekly Rate Period next preceding such change shall end on the first day preceding the first Business Day of the next succeeding month, and may be of such duration between one and 13 days as the Remarketing Agent shall determine is necessary to effectuate such change in the Rate Period, and if the Rate Period is changed. from a Weekly Rate Period to the Fixed Interest Rate Period, the Weekly Rate Period next preceding such change shall end on the Proposed Fixed Interest Rate Conversion Date, and may be of such duration between one and 13 days as the Remarketing Agent shall determine is necessary to effectuate such change in the Rate Period. A W cekly Rate shall be determined by the Remarketing Agent for each Weekly Rate Period not later than 10:00 a.m., Chicago time, on the commencement date of the Weekly Rate Period to which it relates (or the preceding Business Day if such day is not a Business Day). Notice of each Weekly Rate shall be (i) given by Immediate Notice by the Remarketing Agent to the Bond Trustee, the Bank and RHF not later than 12:00 noon, Chicago time, on the date of -11- determination for each Weekly Rate Period; (ii) given by Immediate Notice by the Bond Trustee to the Bank and RHF not later than 5:00 p.m., Chicago time, on the Business Day preceding each Interest Payment Date, compiling the rates for each Weekly Rate Period in the current month; and (iii) available commencing on the Business Day immediately succeeding the date of determination during Weekly Rate Periods by telephone from the Bond Trustee upon request of any owner of a Series 2008 Bond. Interest accrued on the Series 2008 Bonds during a Weekly Rate Period will be computed on the basis of a 365/366-day year for the actual number of days elapsed and will be paid on each Interest Payment Date. During a Weekly Rate Period, owners of the Series 2008 Bonds may tender their· Bonds for purchase on any Business Day upon appropriate notice as described under "THE SERIES 2008 BONDS- Tenders- Optional Tenders During Weekly Rate Periods." · Determination of Interest Rates During any Weekly Rate Period the Remarketing Agent will set the interest rate for the Series 2008 Bonds at the lowest rate which, in the judgment of the Remarketing Agent, would enable the Series 2008 Bonds to be rcmarketed at the principal amount thereof, plus accrued interest thereon, if any, on the Weekly Rate Adjustment Date. If the Remarketing Agent fails for any reason to determine the Weekly Rate for any Weekly Rate Period when required hereunder, the Weekly Rate for such Rate Period shall be equal to the SIFMA Municipal Index (which the Remarketing Agent shall provide to the Bond Trustee and the Bank) until the Remarketing Agent next determines the Weekly Rate as required· under the Bond Indentures. All determinations of interest rates by the Remarketing Agent are conclusive and binding upon the applicable Governmental Entity, if any, the respective Obligated Group, the respective Bond Trustee, the Bank, if any, and the holders of the Series 2008 Bonds to which such rates are applicable. Failure by the applicable Bond Trustee to give any notice required by the Bond Indenture, any defect therein, and any failure by any Bondholder to receive any such notice (including without limitation any Immediate Notice) shall not extend the period for making elections, in any way change the rights of the owners of the Series 2008 Bonds to elect to have such Series 2008 Bonds purchased, in any way change the conditions which must be satisfied in order for such election to be effective or for payment of the purchase price to be made after an effective election or in any way change such owner's obligation to tender Series 2008 Bonds for purchase. Conversion to Other Rate Periods Optional Conversion to an Adjustable Long-Term Rate. At any time after the requirements set forth in the applicable Bond Indenture are met, at the option of RHF, all of any series of the Series 2008 Bonds may be converted from a Weekly Rate to an Adjustable Long-Term Rate. The conversion date shall be a Business Day. To exercise such option with respect to any series of the Series 2008 Bonds, RHF must (i) give written notice of the conversion it intends to effect and the date on which such conversion will occur (the "Variable Rate Conversion Date") to the Remarketing Agent, the related Governmental Entity, if any, the Bond Trustee and the Bank not less than seven Business Days prior to the date on which. the Bond Trustee is required to notifY Bondholders of the conversion; and (ii)·deliver certain approvals, certificates and opinions to· the Bond Trustee in accordance with the Bond Indenture. With respect to the California Bonds only; RHF ·must provide to the Bond Trustee an acknowledgement from the California Issuer that the rating on the California Bonds after the conversion is expected to meet the rating requirements under the California Issuer's then-current policy, if any, no later than the 80th day preceding any Stated Expiration Date. If on the 80th day preceding any Stated -12- Expiration Date RHF fails. to. furnish the Bond Trustee with such acknowledgement of the California Issuer; or if on the 25th day preceding any Stated Expiration Date RHF fails to furnish the Bond Trustee with such evidence, the California Bonds will continue to bear interest at a Weekly Rate.· With respect to the Volusia (Florida) Bonds .only,RHF must provide to the Bond Trustee an approval from the Volusia Issuer to a conversion. If RHF fails to furnish the Bond Trustee with such evidence, the Volusia (Florida) Bonds will continue to bear interest at a Weekly Rate. Upon receipt of the written notice of RHF stating RHF's election to effect a conversion of the Series 2008 Bonds, the Bond Trustee will mail a written notice of the conversion to the holders of the Series 2008 Bonds not less than 15 days prior to the proposed Variable Rate Conversion Date. Such notice will state, among other things, (i) the proposed Variable Rate Conversion Date, and (ii) that the Series 2008 Bonds will be subject to mandatory tender for purchase _on the Variable Rate Conversion Date at the Tender Price and will specifY the time at which the Series 2008 Bonds are to be tendered for purchase. Conversion from a Weekly Rate to an Adjustable Long-Term Rate or Fixed Interest Rates Upon Failure to Maintain Letter of Credit. If on the 60th _day preceding any Stated Expiration Date RHF does not have a binding commitment for a Renewal Letter of Credit or an Alternate Letter of Credit, RHF shall inform the Bond Trustee that there is no such commitment and the Series 2008 Bonds shall convert to either an Adjustable Long-Term Rate or Fixed Interest Rates, at the election of RHF, on the Renewal Date, subject to the following. With respect to the California Bonds only, RHF must provide to th~ Bond Trustee. ~n acknowledgement from the California Issuer that the rating on the California Bonds after the conversion is expected to meet the rating requirements under the California Issuer's then-current policy, if any, no later than the 80th day preceding any Stated Expiration Date. If on the 80th day preceding any Stated Expiration Date RHF fails to furnish the Bond Trustee with such acknowledgement of the California Issuer, or-if on the 25th day preceding any Stated Expiration Date RHF fails to furnish the Bond Trustee with such evidence, the California Bonds will continue to bear interest at a Weekly Rate, . ' With respect to the Volusia (Florida) Bonds only, RHF must provide to the Bond Trustee an approval from the Volusia Issuer to a conversion. If RHF fails to furnish the Bond Trustee with such evidence, the Volusia (Florida) Bonds will continue to bear interest at a Weekly Rate. The conversion to an Adjustable Long-Term Rate or Fixed Interest Rates shall be a Mandatory Tender Date. Optional Conversion to the Fixed Interest Rate. At the option of RHF, all of the Series 2008 Bonds may be converted to bear interest at Fixed Interest Rates as hereinafter described. Any such conversion shall be made on a Business Day. With respect to the California Bonds only, RHF must provide to the Bond Trustee an acknowledgement from the California Issuer that the rating on the California Bonds after the conversion is expected to meet the rating requirements under the California Issuer's then~current policy, if any, no later than the 80th day preceding any Stated Expiration Date. If on the 80th day preced]ng any Stated Expiration Date RHF fails to furnish the Bond Trustee with such acknowledgement of the California Issuer, or ifon the 25th day preceding any Stated Expiration Date RHF fails to furnish the Bond Trustee with such evidence, the California Bonds will continue to bear interest at a Weekly Rate .. -13- With respect to the Volusia (Florida) Bonds only, RHF must provide to the Bond Trustee an approval from the Viilusia'Issuer' to a conversion. If RHF fails to furnish the Bond Trustee with such evidence, the Volusia (Florida) Bonds will continue to· bear interest at a Weekly Rate. The Bond Trustee will mail a notice of the propos.ed conversion to the holders of all Series 2008 Bonds riot less than 15 days prior to the Proposed Fixed Interest Rate Conversion Date in the case of a conversion from a· Weekly Rate. The notice will state, among other things, (i) the Proposed Fixed Interest Rate Conversion Date, and (ii) that such Series 2008 Bonds will be subject to mandatory tender for purchase on the Proposed Fixed Interest Rate Conversion Date. No conversion will take place unless RHF files with the related Governmental Entity, the Bond Trustee and the Bank, if any, a signed Opinion or Opinions of Bond Counsel dated the Fixed Interest Rate Conversion Date that conversion to the Fixed Interest Rate will not adversely affect the validity of the Series 2008 Bonds or any exemption from federal income taxation to which the Series 2008 Bonds would otherwise be entitled, together with a written consent of the related Governmental Entity of such conversion. Failed Conversions. If on a Variable Rate Conversion Date or a Proposed Fixed Interest Rate Conversion Date any condition precedent ·to such ·conversion required by the applicable Bond Indenture shall not be satisfied, such conversion will not occur and the ·mandatory tender shall remain effective. Furthermore, if any condition precedent to a conversion of any series of Series 2008 Bonds from the Weekly Rate to an Adjustable Long-Term Rate shall not be satisfied, such Series 2008 Bonds will not be converted to the Adjustable Long-Term Rate and the interest rate on such Series 2008 Bonds will be the Weekly Rate equal to the SIFMA Municipal Index. Furthermore, if any condition precedent to a conversion of any series of Series 2008 Bonds from the Weekly Rate to Fixed Interest Rates shall not be satisfied, such Series 2008 Bonds will not be converted to Fixed Interest Rates and will bear interest as if such conversion was revoked and shall continue to bear interest at the Weekly Rate: Tenders Optional Tenders During Weekly Rate Periods. Holders of Series 2008 Bonds bearing interest at a Weekly Rate may tender their Series 2008 Bonds or portions thereof for purchase in whole multiples of Authorized Denominations at the Tender Price of such Series 2008 Bonds (or portions thereof) on any Business Day upon written notice of tender to the Bond Trustee not later than 4:00 p.m., Chicago time, on a Business Day not less than seven days prior to the Optional Tender Date. Each notice of tender for Series 2008 Bonds in the Weekly Rate Period, which will be written and which may be by facsimile or other electronic means acceptable to the applicable Bond Trustee, must be delivered to the Bond Trustee at its designated corporate trust office and must be in form satisfactory to the Bond Trustee and must state the following: (A) the name and address of the holder of the Series 2008 Bon·d and the principal amount of the Series 2008 Bond to which the notice relates; (B) that the holder of the Series 2008 Bond irrevocably demands purchase of such Series 2008 Bond or a specified portion thereof in a whole multiple of an Authorized Denomination; (C) 'the Optional Tender Date on which such Series 2008 Bond or portion is to be purchased; and (D) the payment instructions with respect to the Tender Price. The determination of the Bond Trustee as to whether a notice of tender has been properly delivered is conclusive and binding upon the owner of such Series 2008 Bond delivering such notice. Delivery of a notice of tender to the Bond Trustee automatically constitutes ( l) an irrevocable offer to sell the Series 2008 Bond (or portion thereof) to which the notice relates on the Optional Tender Date to any' purchaser selected by the Remarketing Agent; at a price'equal to the Tender Price of such Series· 2008 Bonds (or portion'thercot), (2). an irrevocable·authoriiatiori and instruction to the Bond Trustee to effect a transfer of such Series 2008·Bond (or portion thereof) up'on payment of the Tender Price to the Bond Trustee on the Optional Tender Date, (3) an irrevocable authorization and instruction to the Bond Trustee to effect the exchange of the Series 2008 Bond to be purchased in whole or in part for other Series 2008 Bonds in an equal aggregate principal amount so as to facilitate the sale of such Series 2008 Bond (or portion thereof to be. purchased), and (4) an acknowledgment that such Series 2008 Bondholder will have no further rights with respect to such Series 2008 Bond (or portion thereof) upon payment of the Tender Price thereof to the Bond Trustee on the Optional Tender Date, except for the right of such Series 2008 Bondholder to receive such Tender Price upon surrender of such Series 2008 Bond to the Bond Trustee. Series 2008 Bonds tendered for purchase by the holder thereof will be paid in accordance with the. applicable Bond Indenture, as summarized below under "THE SERIES 2008 BONDS - Remarketing and Purchase of the Series 2008 Bonds. Mandatory Tenders. (i) Each series of the Series 2008 Bonds shall be subject to mandatory tender for purchase on a Proposed Fixed Interest Rate Conversion Date at a price equal to the Tender Price. (ii) Each series of the Series 2008 Bonds shall be subject to mandatory tender for purchase on the Variable Rate Conversion Date at the Tender Price. (iii) Each series of the Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) shall be subject to mandatory tender for purchase at a purchase price equal to the Tender Price on the Business Day immediately· preceding the effective date of any substitution of the related Letter of Credit with an Alternate Letter of Credit. (iv) Each series of the Series 2008 Bonds shall be subject to mandatory tender for purchase at a purchase price equal to the Tender Price on any Renewal Date if by the Renewal Date the Bond Trustee has not received a Renewal Letter of Credit, unless the Borrower is converting such Bonds to an Adjustable Long-Term Rate or Fixed Interest Rates. (v) Each series of the Series 2008 Bonds shall be subject to mandatory tender for purchase at a purchase price equal to the Tender Price on the fifth day (or the next preceding Business Day if such day is not a Business Day) after receipt by the Bond Trustee of notice from the Bank of the occurrence of a default under the related Initial Reimbursement Agreement or notice within the applicable period specified in the related Initial Reimbursement Agreement that the Bank is not reinstating the related Letter of Credit following a draw to pay interest on the Series 2008 Bonds and -directing a mandatory tender of the Series 2008 Bonds; provided that (i) such purchase date shall be at least one day prior to the termination of the Bank's obligation to honor draws under the related Letter of Credit and (ii) no such purchase shall be required if prior to the purchase date the Bond Trustee receives written notice from the Bank that the default has been rescinded in accordance with the provisions of the related Initial Reimbursement Agreement and the Bond Trustee has received written notice that the Bank has reinstated the related Letter of Credit following an interest draw, and the related Letter of Credit is, as of the date of such notice to the Bond Trustee, in full force and effect and will not terminate as a result of such termination notice from the Bank. If the Bond Trustee receives notice of reinstatement from the Bank, the Bond Trustee will give Immediate Notice of the reinstatement and that no mandatory tender will occur to the related Bondholders. Pursuant to the provisions of each Bond Indenture, upon the occurrence of an event of default under the related Initial Reimbursement Agreement, the Bank may direct the Bond Trustee to declare the related series of the· Series 2008 Bonds, immediately due and payable. See "Events of Default; Acceleration". under the headings "SUMMARY OF PRINCIPAL DOCUMENTS - Summary of Certain Provisions of the Bond Indentures" in APPENDIX B. -15- Upon the expiration or termination of a Letter of Credit under the circumstances described in (iv) and (v) above, the Series 2008 Bonds purchased pursuant to such Letter of Credit shall not be delivered upon remarketing by the Remarketing Agent or any other sale unless the Remarketing Agent and the Bond Trustee have been advised by the Bank by Immediate Notice that it has extended such Letter of Credit or elected to reinstate such Letter of Credit for the required amount.and the Bank notifies the Bond Trustee by Immediate Notice of such extension of reinstatement to deliver such Series 2008 Bonds to the purchaser. The Bond Trustee will mail notice to holders of the affected Series 2008 Bonds of any mandatory tender (a) in the case of (i) above, not less than 15 days prior to the purchase date, (b) in the case of (ii) above, not less than 15 days prior to the Variable Rate Conversion Date, (c) in the case of (iii) or (iv) above, not less than ten days prior to the purchase date, (d) in the case of (v) above, not later than the Business Day next succeeding receipt by the Bond Trustee of the notice from the Bank. Inadequate Funds for Tenders. If the funds available for purchases of Series 2008 Bonds pursuant to the applicable Bond Indenture are inadequate for the purchase of all Series 2008 Bonds required to be purchased on any purchase date, all Series 2008 Bonds of the related series shall bear interest from such date at the applicable Bond Trustee's Prime Rate until paid in full. In the event that the provisions of the Bond Indenture described under this paragraph become applicable, the Bond Trustee shall immediately: (i) return all tendered Series 2008 Bonds of the related series to the holders thereof; (ii) return all moneys received for the purchase of such Series 2008 Bonds to the persons providing such moneys; and (iii) notify all owners of Series 2008 Bonds of the related series in writing (A) that an event of default under the Bond Indenture has occurred and (B) of the interest rate to be effective pursuant to the immediately preceding sentence. •. Letter of Credit Requirements Pursuant to each Loan Agreement or in connection with the ML Bonds and the Y A Bonds, 'the related Bond Indenture, each Borrower covenants at1d agrees that at all times during the Weekly· Rate. Period, such Borrower will cause a Letter of Credit to be in full force and effect with respect to the related series of the Series 2008 Bonds. Draws on Letter of Credit. During such time as a Letter of Credit is in effect, the Bond Trustee shall draw upon the Letter of Credit in accordance with its terms in an amount which will be sufficient to pay, on any date on which it is due, principal of and interest on the related series of the Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) while the Series 2008 Bonds bear interest at a Weekly Rate, whether upon redemption, at Maturity, upon acceleration or otherwise or to purchase such Series 2008 Bonds in lieu of redemption. In no event shall the Bond Trustee draw upon the Initial Letter of Credit to make any payment of principal of Bank Bonds or Series 2008 Bonds bearing interest at an Adjustable Long-Term Rate or a Fixed interest Rate or Borrower· Bonds, or any payment of interest on any Interest Payment Date on Series 2008 Bonds which as of the Record Date for such Interest Payment Date were Bank Bonds or Series 2008 Bonds bearing interest at an Adjustable Long-Term Rate or a Fixed Interest Rate. The Bond Trustee shall draw moneys under the related Letter of Credit in accordance with its terms and in accordance with the. Bond Indenture to the extent necessary to pay to the Bondholders the purchase price of Tendered Series 2008 Bonds. Immediately following each drawing under each Letter of Credit, other than· one to pay principal of or interest on the Series 2008 Bonds on an Interest Payment Date, and not as a condition to such draw, the Bond Trustee shall use its best efforts to give ielephonic notice to RHF that such .a dniw under the Letter of Credit was made. The Bond Trustee shall return any moneys drawn under the Letter of Credit to the Bank as soon as reasonably practicable on -!6- or after the applicable purchase date to the extent such moneys exceed the amount necessary to pay the purchase price of Series 2008 Bonds tendered for purchase. Maintenance of Letter of Credit. So long as a series of Series 2008 Bonds is Outstanding and bears interest at a Weekly Rate, the related Borrower will cause a Letter of Credit to be in effect for such series. For the California Bonds, the California Borrowers have covenanted to at all times maintain a Letter of Credit securing the California Bonds which causes the California Bonds to be rated at least "A" or better by a Rating Agency and shall at any time the California Bonds are no longer rated at least "A" or better by a Rating Agency use its bests efforts to replace the existing Letter of Credit with an Alternate Letter of Credit pursuant to the Bond Indenture which will cause the California Bonds to be rated at least '.'A" or better by a Rating Agency. · Renewal Letter of Credit. The related Borrower may, subject to the provisions of the related Initial Reimbursement Agreement, at any time arrange for the deposit with the Bond Trustee of a Renewal Letter of Credit in substitution for the existing Letter of Credit A draft of such Renewal Letter of Credit, a draft of the related.Renewal Reimbursement Agreement, if any, and appropriate information concerning the Bank which will issue such Renewal Letter of Credit is required to be submitted by such Borrower to the Bond Tmstee and the related Governmental Entity at least 15 days prior to the date such Renewal Letter of Credit is to become effective. Alternate Letter of Credit. The related Borrower may, subject to the provisions of the related Initial Reimbursement Agreement, at any time arrange for the deposit with the Bond Trustee of an Alternate Letter of Credit in substitution for the existing Letter of Credit A draft of such Alternate Letter of Credit, a draft of the related Initial Reimbursement Agreement and a draft of any supplemental bond indenture required to. be executed in connection with the delivery of the Alternate Letter of Credit, and appropriate information concerning the entity which will issue such Alternate Letter of Credit are required to be submitted by the related Borrower to each Rating Agency then maintaining a rating on the Series 2008 Bonds, and each such Rating Agency must give notice, promptly confirmed in writing, to the related Governmental Entity and the Bond Trustee at least 15 days prior to the date such Alternate Letter of Credit is to become effective as to what rating the related series of the Series 2008 Bonds entitled to the benefit of the Alternate Letter of Credit will bear after such substitution. The Letter of Credit then in effect may be replaced by an Alternate Letter of Credit only if (i) the provisions for mandatory tender for purchase of the related series of the Series 2008 Bonds described in the Bond Indenture are complied with; (ii) prior to such replacement RHF shall have delivered to the Bond Trustee, the related Governmental Entity and the Bank an Opinion of Bond Counsel to the effect that such replacement will not adversely affect the validity or enforceability in accordance with their terms of the related series of the Series 2008 Bonds; (iii) prior to such replacement RHF shall have delivered to the Bond Trustee, the Governmental Entity, if any, and the Bank an Opinion of Bond Counsel to the effect that such replacement will not adversely affect any exemption from federal income taxation to which interest on the related series of the Series 2008 Bonds would otherwise be entitled; and (iv) the Bond Trustee shall receive an enforceability opinion and any other opinions required by each Rating Agency then rating the related series of the Series 2008 Bonds from counsel for the Bank issuing the Alternate Letter of Credit In addition, the Letter of Credit then in effect may not be replaced by an Alternate Letter of Credit unless all amounts owed to the existing Bank under the related Initial Reimbursement Agreement have been paid in full and no Bank Bonds are outstanding, if then required by the related Initial Reimbursement Agreement . Surrender of Letter of Credit. If at any time there shall have been delivered to the Bond Trustee, in substitution for any Letter of Credit then in effect, either an Alternate Letter of Credit or a Renewal Letter of Credit, then the Bond Trustee shall accept such Alternate Letter of Credit or Renewal -17- Letter of Credit and shall surrender such Letter of Credit then in effect to the Bank which issued the Letter of Credit in accordance with its terrns for cancellation as soon as such Letter of Credit is no longer required to be available to be drawn upon under the Bond Indenture unless such Renewal Letter of Credit is effected through an amendment to the prior Letter of Credit as perrnitted by the terrns of such Letter of Credit. If a series of the Series 2008 Bonds have been converted to an Adjustable Long-Terrn Rate or a Fixed Interest Rate, the Bond Trustee shall promptly surrender the Letter of Credit then in effect with respect to such series to the Bank which issued such Letter of Credit in accordance with the terrns thereof and of the Bond Indenture for cancellation. The Bond Trustee shall promptly surrender any Letter of Credit after it expires in accordance with its terrns. In the event of a partial optional redemption with respect to the Series 2008 Bonds, the Bond Trustee may take such actions as are required to reduce the amount which may be drawn under the related Letter of Credit so long as the requirements described below under the subcaption "Terms of Letter of Credit" continue to be satisfied. Terms of Letter of Credit. So long as any series of the Series 2008 Bonds bear interest at a Weekly Rate, the related Borrower is required· to cause to have on deposit with the Bond Trustee a Letter of Credit in accordance with the related Loan Agreement or in connection with the ML Bonds and the Y A Bonds, the related Bond Indenture. When a Letter of Credit is in effect, the related Borrower shall cause the Interest Component of the Letter of Credit to be maintained in an amount which shall not be less than the sum of the amount deterrnined by multiplying (A) the outstanding principal amount of the related series of the Series 2008 Bonds bearing interest at a Weekly Rate times (B) the Interest Coverage Rate for such Weekly Rate Period required to be used pursuant to this paragraph times (C) the quotient deterrnined by dividing (I) the Interest Coverage Period for such Weekly Rate Period required to be used pursuant to this paragraph by (2) 365. The Interest Coverage Rate utilized for each Weekly Rate Period in the above described calculation shall not be less than the .rate specified by the Remarketing Agent to the Bond Trustee for such Series 2008 Bonds in each· particular Weekly Rate Period as the maximum interest rate at which the Remarketing Agent will remarket the Series 2008 Bonds in such Weekly Rate Period, which may not be less than the current interest rate or rates borne by the Series· 2008 Bonds in such Weekly Rate Period. The Interest Coverage Period utilized for each Weekly Rate Period in the above described calculation shall not be less thari the sum of (i) 34 days, plus (ii) 7 days, so long as the Initial Letter of Credit is in effect and thereafter the maximum number of days the Bank is allowed pursuant to the provisions of the Letter of Credit then in effect to reinstate the Letter of Credit after a draw for interest, plus (iii) 5 days, representing the maximum number of days the Bond Trustee is allowed to call the Series 2008 Bonds for mandatory tender, plus (iv) any additional number of days then required by any Rating Agency then maintaining a rating on the Series 2008 Bonds entitled to the benefit of such Letter of Credit. Remarketing and Purchase of the Series· 2008 Bonds Pursuant to a Remarketing Agreement dated as of July I, 2008 (the "Remarketing Agreement") among the RHF Obligated Group and B.C. Ziegler and Company, d/b/a Ziegler Capital Markets as remarketing agent (the "Remarketing Agent"), the Remarketing Agent shall offer for sale and use its best efforts to find purchasers for all Series 2008 Bonds or portions thereof properly tendered, at a price of the principal amount thereof plus accrued interest, if any, of the Series 2008 Bonds which are subject to optional or mandatory. tender by the owners thereof pursuant to the Bond Indenture and to perforrn the other obligations of the Remarketing Agent as set forth in the Bond· Indenture. All Series 2008 Bonds to be purchased on any Optional Tender Date shall be required to be delivered to the designated corporate trust office of the Bond Trustee by 9:00 a.m., Chicago time, on the Optional Tender Date. If the owner of any Series 2008 Bond (or portion thereof) that is subject to purchase pursuant to the Bond Indenture fails to deliver such Series 2008 Bond to the Bond Trustee for purchase on the Optional Tender Date and if the Bond Trustee is in receipt of the Tender Price therefor, '-l8- such Series 2008 Bond (or portion thereof) shall nevertheless be deemed purchased on the day fixed for purchase thereof and ownership of such Series 2008 Bond (or portion thereof) shall be transferred to the purchaser thereof as provided in the Bond Indenture. Any Series 2008 Bondholder who fails to deliver a Series 2008 Bond for purchase as required above shall have no further rights thereunder except-the right to receive the Tender Price thereof upon presentation and surrender of said Series 2008 Bond to the Bond Trustee. Such delivery shall be a condition to payment of the Tender Price by the Bond Trustee on the Optional Tender Date. o · Each Bond Indenture provides that by 2:00 p.m., Chicago time, on the Optional Tender Date set for purchase of tendered Series 2008 Bonds and upon receipt by the Bond Trustee of l 00% of the aggregate Tender Price of the tendered Series 2008 Bonds, the Bond Trustee shall pay. the Tender Price of such Series 2008 Bonds to the holders thereof at its designated corporate trust office or by bank wire transfer. The Bond Trustee shall apply to the payment of the Tender Price in order: (a} moneys paid to the Bond Trustee by the Remarketing Agent or by the new purchaser of the tendered Series 2008 Bonds as proceeds of the remarketing of such Series 2008 Bonds by the Remarketing Agent, (b) if the Series 2008 Bonds 'are in a Weekly Mode, moneys paid to the ·Bond Trustee by the Bank for the purchase of Series 2008 Bonds pursuant to. the Letter of Credit, (c) if the Series 2008 Bonds are in a Weekly Mode, any other Eligible Moneys provided by the related Obligated Group, and (d) any other moneys provided by the related Obligated Group. If the funds available for purchases of the Series 2008 Bonds pursuant to the Bond Indenture are inadequate for the purchase of all Series 2008 Bonds required to be purchased on any purchase date: (i) return all tendered Series 2008 Bonds to the holders thereof; (ii) return all moneys received for the purchase of such Series 2008 Bonds to the Persons providing such moneys; and (iii) notify all Bondholders of the released series of Series 2008 Bonds that an event of default has occurred under the Bond Indenture and that all such Series 2008 Bonds will bear interest from such date at the Bond Trustee's Prime Rate until paid in full. Redemption of Series 2008 Bonds Optional Redemptio'/. Any series of the Series '2008 Bonds are callable for redemption prior to their Maturity in the event (i) of damage to or destruction of the Facilities of the Borrower of such series or any part thereof or condemnation or sale under threat of condemnation of such Facilities or any part thereof, to the extent of the proceeds of insurance or condemnation received in connection therewith exceed $1,000,000 and are applied to make prepayments pursuant to the Bond Indenture, or (ii) a Borrower exercises its option to prepay in an amount sufficient to redeem all or a portion of its Series 2008 Bonds then outstanding. ·. · If called for optional redemption, Series 2008 Bonds will be subject to redemption by the rel~tcd Governmental Entity, if any, at a'/y time, in who~e or in part, and, if iry part by redemption of the Bank Bonds first and thereafter any other Bonds by Mattjrity Date selected by the Borrower (less than all of the Bonds with the same Matl!fity Date to be selected by random method as selected by the Bond Trustee, at ihe principal amount th~reof pl~s. accrued intere~t to the redemption .date and without premium, but shall be redeemed first from the proceeds of a draw on the Letter of Credit, then from any other Eligible Moneys so long as such Series 2008 Bonds to be redeemed bear interest at a Weekly Rate. Series 2008 Bonds in a Weekly Rate Period will be subject to optional redemption upon the direction ofRHF and the written consent of the Bank in whole or in part at any time (if in part, by the redemption of any Bank Bonds first and thereafter by random method as determined by the Bond Trustee), at the principal amount of the Series 2008 Bonds to be redeemed and accrued interest to the redemption date and without premium. '19- No redemption of less than all of any series of the Series 2008 Bonds at the time Outstanding will. be made unless the aggregate' principal amount of such. Series 2008 Bonds to be redeemed is an Authorized Denomination of $100,000 or more, and the aggregate principal amount of such series of the Series 2008 Bonds outstanding after the redemption is an Authorized Denomination. In lieu of redeeming Series.2008 Bonds, the Bond Trustee may, at the request of RHF, use such funds otherwise available for redemption to purchase Series 2008 Bonds in the open market at a price not exceeding the redemption price then applicable under the Bond Indenture, such Series 2008 Bonds to be delivered to the Bond Trustee for the purpose of cancellation; provided, however, that with respect to Series 2008 Bonds bearing interest at a Weekly Rate, such purchases shall be made first from the proceeds of a draw on the Letter of Credit, then from any other Eligible Moneys. It is understood that in the case of any such redemption or purchase of Series 2008 Bonds, the Governmental Entity, if any, shall receive credit against its required Bond Sinking Fund deposits in the same manner as would be applicable if such Series 2008 Bonds were optionally redeemed. Mandatory Sinking Fund Redemption of the California Bonds. The California Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular California Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest. CALIFORNIA BONDS Mandatory Sinking Mandatory Sinking Fund Redemption Date Principal Fund Redemption Date Principal (September I) Amount (September I) Amount 2014 $3,700,000 2023 2015 2024 $ 7,080,000 2016 4,210,000 2025 1,260,000 ,,. 2017 2026 4,395,000 2018 2027 2019 2028 2020 2029 9,840,000 2021 2030 10,375,000* 2022 *Final Maturity. Mandatory Sinking Fund Rede'!'ption of the Volusia (Florida) Bonds. The Volusia (Florida) Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular Volusia (Florida) Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest. . . : -20- VOLUSIA (FLORIDA) BONDS Mandatory Sinking Mandatory Sinking Fund Redemption Date Principal . Fund Redemption Date Principal (September 1) Amount (September 1) Amount 2013 $3,465,000 2020 2014 2021 2015 3,950,000 2022 $6,205,000 2016 2023 2017 2024' 2018 2025 4,080,000* 2019 5,090,000 *Final Maturity. Mandatory Sinking Fund Redemption of the Brevard (Florida) Bonds. The Brevard (Florida) Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular Brevard (Florida) Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest BREVARD(FLORIDA)BONDS Mandatory Sinking Mandatory Sinking Fund Redemption Date Principal Fund Redemption Date Principal (September I) Amount (September 1) Amount 2012 $2,170,000 2019 2013 2020 2014 2021 $3,605,000 2015 '2022 2016 2023 6,630,000 2017 2024 2018 4,760,000 2025 2,235,000* '~ Mandatory Sinking Fund Redemption of the Indiana Bonds. The Indiana Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular Indiana Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest INDIANA BONDS Mandatory Sinking Fund Redemption Date Principal . (September 1) Amount 2017 $4, 115,000* *Final Maturity. . '. . -21- Mandatory Sinking Fund Redemption of the Colonial Heights Bonds. The Colonial Heights Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular Colonial Heights Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest. COLONIAL HEIGHTS BONDS Mandatory Sinking Fund Redemption Date Principal (September I) Amount 2017 $ 400,000 2018 2019 2020 5,425,000 2021 2,205,000* *Final Maturity . . Mandatory Sinking Fund Redemption of the Colonial Gardens Bonds. The Colonial Gardens Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular Colonial Gardens Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest. COLONIAL GARDENS BONDS Mandatory Sinking Fund Redemption Date Principal (September I) Amount 2028 $7,705,000· *Final Maturity. Mandatory Sinking Fund Redemption of the Missouri Bonds. The Missouri Bonds are subject to mandatory redemption in advance of their Maturity Date as provided in the table below, with the particular Missouri Bonds to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest. MISSOURI BONDS Mandatory Sinking Fund Redemption Date Principal (September I) Amount 2026 $3,695,000 2027 8,595,000. 2028 I ,355,000* *Final Maturity. . Mandatory Sinking Fund .. Redemption of the Corporate Taxable Bonds. The Corporate. Taxable Bonds are. subject. to mandatory redemption -in advance _of their Maturity Date as -22- ·· ..• - provided in the table below, with the particular Corporate Taxable Bonds.ofa.series.to be redeemed to be selected by lot at a redemption price equal to the principal amount thereof plus accrued interest. MLBONDS. Mandatory Sinking Fund Redemption Date Principal (September I) Amount .. 2009 $2,870,000 2010 . 3,025,000 2011 15,000* *Final Maturity. YABONDS Mandatory Sinking Fund Redemption Date Principal (September I) Amount 2008 $ 260,000 2009 2010 2011 3,055,000 2012 1,070,000* .. "'Final ~a~ity. Upon the Fixed Interest Rate Conversion Date, the amortizatio~· of principal described in any .of the charts above may change. · · . Payment or redemption of each series of the Series 2008 Bonds through the ~pplicable Bond Sinking Fund shall be without premium. Each series of the Series 2008 Bonds shall be subject to mandatory bond sinking fund redemption by the Bond Trustee pursuant to the provisions of the applicable Bond Indenture without any notice from or direction by the Governmental Entity, if any, or RHF. Notice of Redemption. Except with respect to Bank Bonds, a copy of the notice of the ~all for any such redemption identifying the Series 2008 Bonds to be redeemed shall be given by electronic means and by first class mail, postage prepaid, to the registered owners of Series 2008 Bonds to be redeemed at their addresses. as shown on the Bond Register not less than 15 days prior ·to the redemption ·date during a Weekly Rate Period. If only Bank Bonds are to be redeemed the Bond Trustee shall give the registered owner thereof Immediate Notice not less than one day prior to the redemption date. Except for mandatory Bond Sinking Fund redemptions or redemptions to be paid with the proceeds of a draw on the Letter of Credit, (a) prior to the date that the redemption notice is first given as aforesaid, funds shall be placed with the Bond Trustee to pay such Series 2008 Bonds and accrued interest thereon to the redemption date and premium, if any, and if such redemption is required to be accomplished with Eligible Moneys and the Bond Trustee cannot draw upon the Letter of Credit to effect such redemption, such moneys shall become Eligible Moneys prior to the giving of such notice, or (b) such notice shall state that the redemption is conditional on such funds being deposited on the redemption date and that . failure to make such a deposit shall not constitute an event of default under the Bond Indenture. If sufficient moneys are not on deposit with the Bond Trustee on the redemption date, and the Letter of · Credit cannot be drawn upon for redemption, no redemption of the Series 2008 Bonds shall oecur. · -23- Failure to give notice in the manner prescribed with respect to any Series 2008 Bond, or any defect in such notice, shall not affect the validity of the proceedings for redemption for any Series 2008 Bond with respect to which notice was properly given. Upon the happening of the above conditions described above, the Series 2008 Bonds thus called will not after the applicable redemption date bear interest, be protected by the Bond Indenture or be deemed to be outstanding under the provisions of the Bond Irtdenture. If any Series 2008 Bond is transferred or exchanged on the Bortd Register by the Bond Registrar after notice has been given of an optional or mandatory tender or call of such Series 2008 Bond for redemption, the Bond Registrar will attach a copy of such notice to the Series 2008 Bond issued in connection with such transfer. Mandatory Tender for Purchase. The Governmental Entity, if any, and, by their acceptance of the Series 2008 Bonds, the Bondholders, irrevocably grant to the Borrower and any assigns of the Borrower with respect to this right, the option to purchase, at any time and from time to time, any Series 2008 Bond which is subject to optional redemption as described above at a purchase price equal to the optional redemption price therefor. To exercise such option, RHF shall give· the Bond Trustee a Written Request exercising such option within the time period specified in the Bond Indenture as though such Written Request were a written request of the Governmental Entity, if any, for redemption, and the Bond Trustee shall thereupon give the holders of the Series 2008 Bonds to be purchased notice of such · mandatory tender and purchase in the same manner as a notice of redemption as described above. The purchase of such Series 2008 Bonds shall be mandatory and enforceable against the Bondholders and Bondholders will not have the right to retain their Series 2008 Bonds. On the date fixed for purchase pursuant to any exercise of such option, the Borrower shall pay or cause to be paid the purchase price of the Series 2008 Bonds then being purchased to the Bond Trustee in immediately available funds not later than I 0:00 a.m. Chicago time on the purchase date, and the Bond Trustee shall pay the same to the sellers of such Series 2008 Bonds against delivery thereof. If such Series 2008 Bonds are in the Weekly Mode, such purchase· shall be made with Eligible Moneys. Following such purchase, the Bond Trustee shall cause such Series 2008 Bonds to be registered in the name of the Borrower or its nominee or as otherwise directed by RHF and shall deliver them to RHF or its nominee or as otherwise directed by RHF. In the case of the purchase of less than all of the Series 2008 Bonds, the particular Series 2008 Bonds to be purchased shall be selected in accordance with the selection process for redemption of bonds as described above. No purchase of the Series 2008 Bonds shall operate as a redemption or to extinguish the indebtedness of the Governmental ·Entity, if any, evidenced thereby and the Bonds will remain outstanding with the Borrower named as the Beneficial Owner thereof. Notwithstanding the foregoing, no purchase shall be made unless RHF shall have delivered to the Bond Trustee and the Governmental Entity, if any, concurrently with such purchase an Opinion of Bond Counsel to the effect that such purchase and any resale thereof will not affect the validity of the Series 2008 Bonds or any exemption from federal income taxation to which the interest on the Series 2008 Bonds would otherwise be entitled and the written consent of the Bank. Pursuant to the Initial Reimbursement Agreement, the consent of the Initial Bank is required for RHF to exercise its option to purchase the Series 2008 Bonds described in this paragraph. REMARKETING General B.C. Ziegler and Company d/b/a Ziegler Capital Markets has been appointed as Remarketing Agent for the Series 2008 Bonds. The Remarketing Agent may be removed or replaced at any time upori 30 days' notice at the direction of RHF with the consent of the Initial Bank. The Remarketing Agent may also resign upon 30 days' written notice to RHF, the Bond Trustees, the Initial Bank and the Governmental Entity or Entities, if any. Upon delivery to the related Bond Trustee or. the Bond Trustee's Agent of Series 2008 Bonds for purchase, the Remarketing Agent shall use its best efforts to sell such Series 2008 Bonds. No assurance can be given that the Remarketing Agent will be successful in such endeavor. Under certain circumstances, there shall be no remarketing of .the Series 2008 Bonds. Anything in the related Bond Indentures to the contrary notwithstanding, the Remarketing Agreement contains a- number of circumstances in which the Remarketing Agent is not obligated to remarket the Series 2008 Bonds which include, but are not limited to, circumstances in which the related Obligated Group or the Initial Bank are in default of their obligations, an event has occurred adversely affecting the tax exempt status of the interest on a .series of the Series 2008 Bonds and the occurrence of certain material adverse changes in the properties, business or operations of the related Obligated Group. UNDER CERTAIN CONDITIONS, THERE SHALL BE NO PURCHASES, SALES OR REMARKET!NG OF THE SERIES 2008 BONDS. Anything in the related Bond Indenture to the contrary notwithstanding, (i) if at any time there is no Letter of Credit in effect, there shall be no purchases, sales or remarketing of the related series of Series 2008 Bonds, (ii) in no event shall Bank Bonds be remarketed prior to the reinstatement of the amount of principal of and interest, if any, paid on such Optionally Tendered Bonds or Mandatorily Tendered Bonds pursuant to a drawing under the related Letter of Credit, (iii) at any time· during which the Letter of Credit is in effect, there shall be no remarketing of Optionally Tendered Bonds or Mandatorily Tendered Bonds if there shall have occurred and be continuing an event. of default under the related Bond Indenture (see "SUMMARY OF PRINCIPAL DOCUMENTS- Summary of Certain Provisions of the Bond Indentures~ Events-of Default; Acceleration" in APPENDIX B) of which an authorized officer in the principal office of related Bond Trustee or an authorized officer in the principal office of such Bond Trustee's Agent has actual knowledge, and (iv) at any time during which the Letter of Credit is in. effect, there shall be no remarketing of Optionally Tendered Bonds or Mandatorily Tendered Bonds pursuant to the related Bond Indenture if there shall have occurred, and be continuing an event of default under the Reimbursement Agreement then in effect of which an authorized officer in the principal office of the Remarketing Agent or an authorized· officer in the ·principal corporate office of the related Bond Trustee or an authorized officer in the principal office of the Bond Trustee's Agent has actual knowledge. Disclosure Concerning Tender Process and Sales of Series 2008 Bonds by Remarketing Agent The Remarketing Agent is Paid by the RHF Obligated Group. .The Remarkcting Agent's responsibilities include determining. the interest rate from time to time and remarketing Series 2008 Bonds that are optionally or mandatorily tendered to it by the Beneficial Owners thereof (subject, in each case, to the terms of the Remarketing Agreement). The Remarketing Agent is appointed by the·RHF Obligated Group and is paid by the RHF Obligated Group for its services. As a result, the interests of the Remarketing Agent may differ from those of Beneficial Owners and potential purchasers of Series 2008 BondS.·· '• ' I Determination of Interest Rates· by the Remarketing Agent. On each date that .a .Weekly Rate ·is determined (a "Rate Determination Date"), the Remarketing Agent is required to determine the interest rate that will be effective with respect to the Series 2008 Bonds on the first day of each Weekly Rate Period (the "Effective Date"). That rate is required by each Bond Indenture to be the minimum interest -rate to remarket the Series 2008 Bonds at par, plus· accrued, interest on the Effective Date.· For. example, while the Series 2008 Bonds bear interest. at a Weekly Rate; by 10:00 a:m., Chicago . . . time on the Rate Determination Date, the Remarketing Agent will determine the interest rate that will be effective on the Effective Date. Tenders to the Bond Trustee. While the Series 2008 Bonds are in book entry form, a Beneficial Owner may give notice to elect to tender its Series 2008 Bonds, through its Participant, to the Bond Trustee, and may effect delivery of such Series 2008 Bonds by causing the Participant to. transfer the Participant's interest in the Series 2008 Bonds, on DTC's records, to the Bond Trustee. The requirement for physiCal delivery of Series 2008 Bonds in connection with an optional tender or a mandatory tender may be deemed satisfied when the ownership rights in the Series 2008 Bonds are transferred by Participants on DTC's records and followed by a book entry credit of tendered Series-2008 Bonds to the Bond Trustee's DTC account. Tendering Bondholders will receive par, plus accrued interest, if any, after the required number of days' notice have elapsed. Tendering Bondholders will be paid with the proceeds of the remarketing of the Series 2008 Bonds and, to the extent those proceeds are insufficient, from the proceeds of draws on the Letter of Credit by the Bond Trustee. The Remarketing Agent Routinely Purchases Series _2008 Bonds for its Own Account. The Remarketing Agent acts as remarketing agent for a variety of variable rate demand obligations issued by many issuers and, in its sole discretion, routinely purchases such obligations for its own account. The Remarketing Agent is permitted, but not obligated, to purchase tendered Series 2008 Bonds for its own account and, in it sole discretion, routinely acquires such tendered Series 2008 Bonds in order to achieve a successful remarketing of the Series 2008 Bonds (i.e., because there otherwise are not eiwugh buyers to purchase the Series 2008 Bonds) or for other reasons. However, the Remarketing Agent is not obligated to purchase Series 2008 Bonds, and may cease doing so at any time without notice, in which case it may be necessary for the Bond Trustee to draw on the related Letter of Credit to pay tendering Bondholders. The Remarketing Agent may also make a secondary market in the Series 2008 Bonds by routinely purchasing and selling Series 2008 Bonds other than_ in connection with an optional or mandatory tender and remarketing. Such purchases and sales must be at fair market value, which may be at, above, or below par. No notice period is required for such purchases. However, the Remarketing Agent is not required to make a secondary market in the Series 2008 Bonds. Thus, investors who purchase the Series 2008 Bonds, whether in a remarketing or otherwise, should not assume that they will be able to sell their Series 2008 Bonds other than by tendering the Series 2008 Bonds in accordance with the tender process. The Remarketing Agent may also sell any Series 2008 Bonds it has purchased to one or more affiliated investment vehicles for collective ownership or enter into derivative arrangements with affiliates or others in order to reduce its exposure to the Series 2008 Bonds. The purchase of Series 2008 Bonds by the Remarketing Agent may create the appearance that there is greater third party demand for the Series 2008 Bonds in the market than is actually the case. The practices described· above also may result in fewer Series 2008 Bonds being tendered in a remarketing. Series 2008 Bonds May be Offered at Prices Other Than Par. Pursuant to the Remarketing Agreement, on each Rate Determination Date, the Remarketing Agent is ·required to determine the interest rate that will be effective with respect to the Series 2008 Bonds on the Effective Date. Each Bond Indenture requires that rate to be the minimum interest rate to remarketthe Series '2008 Bonds at-par, plus accrued interest on the Effective Date. The interest rate will reflect, among other factors, the level of market demand for the Series 2008 Bonds (including whether the Remarketing Agent is willing to purchase Series 2008 Bonds 'for its own account).·. There ·may or may not be Series 2008 Bonds.tendered and rematketed on an-Effective Date, and the Remarketing Agent inay or may not be able to remarket any Series 2008 Bonds tendered for purchase on such date at par. The Remarketing Agent is ~2.6- not obligated to advise purchasers in a remarketing if it does not have third-party buyers for all of the Series 2008 Bonds at the remarketing price. If the Remarketing Agent owns Series 2008 Bonds for its own account, in. its sole discretion, it may sell those Series 2008 Bonds at fair market value, which may be at prices above or below par only on days other than Effective Dates and Rate Determination Dates after the interest rate for the succeeding Effective Date has been set. The Remarketing Agent may not agree in advance of the Effective Date to sell Series 2008 Bonds to a customer at a price below par. ALTERNATE LETTERS OF CREDIT RHF may, at any time, obtain an Alternate Letter of Credit to replace a Letter of Credit upon compliance with the conditions contained in the Bond Indentures and, where applicable, the Loan Agreements. The Series. 2008 Bonds will be subject to mandatory tender for purchase .on the effective date of an Alternate Letter of Credit for such series. See "THE SERIES 2008 BONDS - Tenders - Mandatory Tenders." SECURITY FOR THE SERIES 2008 BONDS AND SOURCE OF PAYMENT General The Series 2008 Bonds are being marketed exclusively on the credit of KBC Bank N.V., New York Branch, the Initial Bank, and not on the credit of the RHF Obligated Group. This Official Statement only describes the Series 2008 Bonds while they bear interest at Weekly Rates. If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such series of the Series 2008 Bonds will be remarketed pursuant to reoflering disclosure which will either supplement or replace this Official Statement. Any information about the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit of the RHF Obligated Group. The Series 2008 Bonds do not constitute a charge against the general credit or properties or taxing powers of the Governmental Entities or the State or Commonwealth, County or City in which any such Governmental Entity is located and do not grant to the Holders of the Series 2008 Bonds any right to have the Governmental Entities or the State or Commonwealth or, County or City in which any such Governmental Entity is located levy any taxes or appropriate any funds for the payment of the principal thereof or interest thereon, nor are the Series 2008 Bonds a general obligation of the Governmental Entity or the State or Commonwealth, County or City in which any such Governmental Entity is located or the individual officers or agents thereof. None of the Governmental Entities other than the Town of Clarksville, Indiana, has any taxing power. The Governmental Bonds and interest thereon are payable solely and only from the moneys received under the related Loan Agreement by the Governmental Entity or held by the Bond Trustee in a fund or account pledged to the payment of such series of Governmental Bonds under the related Bond Indenture, including loan payments to be made by the related Member or. Members of the Obligated Groups. Each Obligation is a JOint and several general obligation of each Member of the respective Obligated Group signing the Master Indenture pursuant to which that Obligation was issued. . With respect to each series of Governmental Bonds, certain investment earnings on monies held by the Bond Trustee may be transferred to a· Rebate Fund established pursuantto a Tax Exemption Agreemeni. Amounts held in such Rebate Fund will not b~ part of the "trust estate" pledged -27- to secure the related series of Governmental Bonds and consequently will not be available to make payments on the related series of Governmental Bonds. Similarly, amounts held in any Purchase Fund will not be part of the "trust estate" pledged to secure the related series of Series 2008 Bonds, and consequently will not be available to make payments on such Series 2008 Bonds other than to pay the Tender Price of Optionally Tendered Bonds and Mandatorily Tendered Bonds .. All or any portion of any series of the Series 2008 Bonds may be advance refunded through the deposit in escrow of cash or Government Obligations for the benefit of the owners of such refunded Bonds. See "SUMMARY OF PRINCIPAL DOCUMENTS - Summary of Certain Provisions of the Bond Indentures- Defeasance" in APPENDIX B. Each Bond Indenture permits certain amendments to be made to the Bond Indenture and each Loan Agreement,'upon the consent of the holders of a majority in aggregate principal amount of the Series :2008 Bonds. See "SUMMARY OF PRINCIPAL DOCUMENTS - Summary of Certain Provisions of the Bond Indentures - Supplemental Bond Indentures" and "Summary of Certain Provisions of the Loan Agreements - Supplements and Amendments to the Loan Agreements." Pursuant to the Bond Indentures, the Bank shall have the right to consent to amendments to each Bond Indenture and each Loan Agreement, so long as a Letter of Credit is in effect. Mortgages Each Operator will execute a deed of trust or mortgage with respect to its facility or facilities, including: (i) a first deed of trust or mortgage for the benefit of the Master Trustee of the Master Indenture to which such Operator is a party; and (ii) a second deed of trust or mortgage (each a "Second DOT/Mortgage") for the benefit of the Master Trustee of the Master Indenture to which· such Operator·is not a party. Each of the Operators located in California will execute and record a First Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July' I, 2008, on its facility to the deed of trust trustee, First American Title Insurance Company a California corporation (the "California Deed of Trust Trustee"), for the benefit of the California Master Trustee, and a Second Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July l, 2008, on its facility to the California Deed of Trust Trustee, for the benefit of the National Master Trustee (all such first and second Deeds of Trust collectively referred to herein as the "California Deeds of Trust"). Each of the Operators located in Missouri will execute and record a Deed of Trust, SecuritY Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July l, 2008, on its facility to the deed of trust trustee named therein (the "Missouri Deed of Trust Trustee"), for the benefit of the National Master Trustee, and a Second Deed of Trust, Assignment of Rents and Leases, Security- Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July l, 2008, on its facility to the Missouri Deed of Trust Trustee, for the benefit of the California Master Trustee (all such first and second Deeds of Trust collectively referred to herein as the "Missouri Deeds of Trust"). Each of the Operators located in states other than California and Missouri will execute and record a First Mortgage, Securicy Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facilicy or facilities in favor of the National Master Trustee, and a Second Mortgage, SecuritY Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facility or facilities in favor of the California Master Trustee (all such first and second Mortgages, together with the Missouri Deeds of Trust,, collectively referred to herein· as the -28- "National Mortgages," together with the California Deeds of Trust, collectively referred to herein as the "Mortgages" and each individually as a "Mortgage"). Pursuant to the related Mortgage, each Operator has granted a lien and security interest in its Trust.Property, as defined in the related Mortgage, subject to Permitted Encumbrances,.as defined in the related Master Indenture. Upon issuance of the Series 2008 Bonds, the beneficiary of each Mortgage will be the respective Master Trustee. Each Operator will also deliver one or more mortgagee title insurance policies for the mortgaged. Property, with ·each Master Trustee being the named insured. The title policies, when combined, will be for an amount equal to the combined amount of the Initial Letters of Credit. Martin Luther will not execute and deliver a mortgage because it no longer owns a facility. Gross Revenue Pledge Pursuant to the Gross Revenue Pledge Agreement, each member of the RHF Obligated Group has, to the extent permitted by law, pledged and granted a security interest in its Gross Revenues to The Bank of New York Trust Company, N.A., as collateral agent (the "Coll~teral Agent") to secure the payment of Required Payments and the performance by the Members of their other obligations under the Master Indentures, the Guaranties, this Pledge Agreement and the Swap Agreement. For purposes of the Gross Revenue Pledge Agreement, "Required Payments" means any payment whether at maturity, by acceleration, upon proceeding for redemption or otherwise, required to be made by any Member of the RHF Obligated Group under either Master Indenture, any of the Guaranties, the Gross Revenue Pledge Agreement, any Obligation or any loan agreement, reimbursement agreement or other agreement or instrument evidenced or secured by any Obligation, or otherwise in connection with indebtedness issued under the Master Indentures, including, but not limited to, the payment of principal, interest and premium, letter of credit reimbursement and fees, and means any payment, including any termination payment, due Lehman under the Swap Agreements. "Gross Revenues" are defined as all receipts, revenues, income and other money received or receivable by or on behalf of each member of the RHF Obligated Group from any source whatsoever, including, but not limited to, (a) revenues derived from the operation and possession of each member of the RHF Obligated Group's facilities, including accounts receivable, but excluding patient trust accounts and security deposit accounts, (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 (!) condemnation proceeds, (2) inventory and other tangible and intangible property, (3) private and governmental health care reimbursement programs and agreements, to the extent permitted by law, and (4) insurance proceeds, to the extent permitted by law. Each member of the RHF Obligated Group, to the extent permitted by law, agrees pursuant to the Gross Revenue Pledge Agreement that all of its Gross Revenues, with the exception of certain Segregated Gross Revenues, as such term is defined in the Gross Revenue Pledge Agreement, shall be deposited by daily transfer from the account into which they were originally received into one or more concentration accounts (in one or more concentration accounts at such banking institution or institutions ip the State of California as the Obligated Group Representative shall from time to time designate in writing to the Collateral Agent for such purpose (the "Depository Bank(s)")) each designated as a "Gross Revenue Fund" which the members shall establish and maintain in the name of RHF or FPM (which either shall hold in trust for the members of the RHF Obligated Group, respectively, as their -29- interests may appear). Amounts in each Gross Revenue Fund may be· used and withdrawn by any member of the RHF Obligated Group at any time for any lawful purpose; except as thereinafter provided. In the event that any member of the RHF Obligated Group is delinquent for more than one Business Day in the payment of any Required Payment, the Collateral Agent shall notify the Master Trustees, Lehman, the Obligated Group Representative and the Depository Bank(s) of such delinquency, and, unless such Required Payment is paid within two business days after receipt of such notice, the Collateral Agent shall cause the Depository Bank(s) to transfer each Gross Revenue Fund· to the name· and credit of the Collateral Agent by the Collateral Agent's delivery to the Depository Bank(s) of a notice of exclusive control (the "Notice of Exclusive Control"): However, the Collateral Agent hereby agrees not to give such Notice of Exclusive Control to the Depository Bank(s) unless and until the aforementioned delinquency in payment has occurred and is continuing under the Gross Revenue Pledge Agreement or unless there is a general exercise of remedies thereunder; provided however that it is understood and agreed upon that the Depository Bank(s) shall have no duty to investigate whether such delinquency has occurred or is continuing and shall rely exclusively on the Notice of Exclusive Control delivered to it by the Collateral Agent. The Collateral Agent shall continue to hold each 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 then due or provision deemed by the Collateral Agent in its sole discretion to be adequate shall have been made therefor. Upon such payment or provision, each 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 RHF or FPM, as applicable. During any period that each Gross Revenue Fund is held in the name and to the credit of the Collateral Agent, the Collateral Agent shall use and withdraw amounts in said accounts from time to time to make Required Payments ·as such payments become due (whether by maturity, redemption, acceleration o·r 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 Required Payments then due ratably, without any discrimination or preference, and to such other payments in the order which the Collateral Agent, in its discretion, shall determine to be in the best interests of the Holders and Lehman, without discrimination or preference. During any period that each Gross Revenue Fund is held in the name and to"the credit of the Collateral Agent, the members of the RHF Obligated Group shall not be entitled to use or withdraw any of the Gross Revenues unless and tci the extent that the Collateral Agent in its sole discretion directs for the payment of current or past due operating expenses of the RHF Obligated Group. Each member of the RHF Obligated Group further agrees in the Gross Revenue Pledge Agreement that a failure to comply shall cause irreparable harm to Lehman and the holders of the Obligations and shall entitle the Collateral Agent," with or without notice, to take immediate aCtion to compel the specific performance of the obligations ofthe RHF Obligated Group. · The pledge of Gross Revenues will be perfected to the extent and only to the extent that such security interest may be perfected by control as provided in the Uniform Commercial Code of the State of California. It may not be possible to perfect a security interest in any manner whatsoever in certain types of Gross Revenues (e.g., certain insurance proceeds, Medicare ·and Medicaid receivables) prior to actual receipt by each member of the RHF Obligated Group for deposit into each Gross Revenue Fund. The parties to the Gross Revenue Pledge Agreement acknowledge, and the third party beneficiaries of the Gross Revenue Pledge Agreement have been informed, that Gross Revenues from a state or governmental entity (Medi~are orMedi.caid proceeds) may not, by law, be.subject to the pledge of the Gros_s.Revenue Pledge Agreement. E~_ch m~mbe~ of the RHF Obligated" Group has ~greed to exe~ute.imd .·,deliver a depository account control agreement with the Depository ·Ban~(s) with respect to each Gross · · ~ ~- : I , , - . . ·.- ,._ :,. · '• -J • • • :•, -I"' Revenue Fund and any other documents necessary to perfect or maintam as perfected the secunty mterest in the Gross Revenues. The Loan Agreements Each issue of the California Bonds, the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds and the Missouri Bonds will be special limited obligations of the related Governmental Entity and will be payable from the loan payments made by the respective Borrower to the related Governmental Entity under the related Loan Agreement and certain other available moneys specified in the related Bond Indenture. Under such Bond Indenture, such Issuer will pledge and assign all of its right, title and interest in and to such Loan Agreement and all revenues and receipts payable thereunder (other than certain rights of such Issuer relating to indemnification, notices and payment of certain fees and expenses of such Issuer) to the applicable Bond Trustee for the benefit of the Holders of the related issue of Series 2008 Bonds. Assignment of Loan Agreements Pursuant to each California, Volusia, Brevard, Indiana, Kentucky or Missouri Bond Indenture, the related Governmental Entity will pledge and assign (i) its interest in the related Series 2008 Obligation and all sums payable in respect of the indebtedness evidenced thereby, (ii) the related Loan Agreement and the amounts payable to the Governmental Entity under the related Loan Agreement (except for certain unassigned rights), and (iii) any and all other property of every kind and nature from time to time hereafter conveyed, pledged, assigned or transferred as and for additional security under the related Bond Indenture to the related Bond Trustee to secure the related issue of Series 2008 Bonds (other than certain rights of such Issuer relating to indemnification, notices and payment of certain fees and expenses of such Issuer). The Corporate Taxable Bond Indentures The ML Bonds and the YA Bonds are payable from the payments made by Martin Luther and Yellowwood, respectively, under the related Bond Indenture as well as from certain other available moneys specified in the related Bond Indenture. The Series 2008 Bond Obligations Each issue of Series 2008 Bonds is also payable from (i) payments or prepayments to be made on the related Series 2008 Obligation and payments by the related Obligated Group on the Series 2008 Bond Obligations correspond to payments due on the Series 2008 Bonds and (ii) moneys. and investments held by the related Bond Trustee under, and to the extent provided in the related Bond Indenture (other than any such amounts held in the Purchase Fund, if any, and the Rebate Fund established pursuant to the related Bond Indenture) and in certain circumstances, proceeds from certain insurance and condemnation awards. Guaranties RHF and FPM are entering into each RHF/FPM Guaranty pursuant to which they guaranty the Obligations issued under the related Master Indenture and the performance of the Members under that Master Indenture. Each of the California Members is entering into a California Member Guaranty Agreement, secured by such California Member's Second DOT/Mortgage, pursuant to which it guaranties the Obligations issued under the National Master Indenture. Each of the National Members is entering into a National Member Guaranty Agreement, secured by such National Member's Second -31- DOT/Mortgage (with the exception of Martin Luther) pursuant to which it guaranties. the Obligations issued under the California Master Indenture. RHF and FPM will enter into the RHF/FPM Reimbursement Agreement Guaranty in favor of the Initial· Bank, guarantying the prompt payment when due of all reimbursement amounts, principal, interest, fees and other amounts payable under the Initial Reimbursement Agreements. Additional Indebtedness Upon the terms and conditions specified therein, each Master Indenture and the Guaranties permit any Member to incur additional indebtedness which may, but need not, be evidenced or secured by Additional Obligations issued under either Master Indenture. Additional Obligations issued under each Master Indenture may be issued to the Issuers and to Persons other than the Issuers. Additional Obligations need not be pledged under the Bond Indentures but will rank equally and ratably (except as described herein) with the related Series 2008 Bond Obligations pledged under the related Bond Indenture. Each Master Indenture and the Guaranties permit Additional Indebtedness (including Additional Obligations) to be secured by security in addition to that generally provided for all Obligations (including letters or lines of credit or insurance or security interests· in depreciation reserve, debt service or interest reserve or similar funds), which additional security need ·not be extended to secure any other Obligations (including the·Series 2008 Bond Obligations). During the period the Series 2008 Bonds bear interest at Weekly Rates and the Initial Bank provides the Letters of Credit, any Additional Indebtedness or Obligations under the Master Indentures may only be incurred with the consent of the Initial Bank. See APPENDIX B for a description of the terms of the Master Indentures. THE INITIAL LETTERS OF CREDIT AND THE INITIAL REIMBURSEMENT AGREEMENTS .The following is a summary of certain provisions of the Initial Letters of Credit and the Initial Reimbursement Agreements.· .Each Initial Letter of Credit will be issued pursuant to an Initial Reimbursement Agreement. This summary does not purport to be comprehensive or definitive and is su~ject to all of the terms and provisions of each of the Initial Letters of Credit and each of the Initial Reimbursement Agreements, to which reference is made hereby. Included as APPENDIX D is certain information with respect to the Initial Bank Prospective purchasers of the Series 2008 Bonds should review the information provided by the Initial Bank Capitalized terms used in this Section which are.not otherwise defined herein shall have the meanings given such terms in the Initial Letters of Credit and the Initial Reimbursement Agreements. The Initial Letters of Credit Each Initial Letter of Credit will be issued by the Initial Bank to the respective Bond Trustee with respect to its related series of the Series 2008 Bonds and will be in an amount not exceeding (i) an amount equal to the initial aggregate principal amount of such· series of Series 2008 Bonds, which may be drawn upon with respect to the payment of principal or the principal component of the Tender Price of such series of Series 2008 Bonds to the extent remarketing proceei:ls are not available to pay such Tender Price, ·and (ii) an amourit equal to 47 days' accrued interest on such series of the Series 2008 Bonds at a maximum rate of I 0% per annum with respect to the Governmental Bonds and 12% per -32, annum with respect to the Corporate Taxable Bonds that may be drawn upon to pay accrued interest on or the interest component of the Tender Price of such series of the Series 2008 Bonds to the extent remarketing proceeds are not available to pay such Tender Price. Each drawing honored by the Initial Bank under an Initial Letter of Credit shall immediately reduce the principal component and/or the interest component (as the case may be) of the amount available under such Letter of Credit by the amount of such drawing, and the aggregate amount available under such Letter of Credit shall be correspondingly reduced. The amount available under such Letter of Credit, as so reduced, shall be reinstated only as follows: (a) with respect to a drawing under an Initial Letter of Credit to pay interest, the interest component shall be· reinstated automatically at 5:00 p.m. on the seventh calendar day following the date such drawing is honored by an amount equal to the amount of such drawing for interest, unless the respective Bond Trustee shall have received notice from the Initial Bank before 5:00 p.m. on such seventh calendar day that an Event of Default has occurred under the related Initial Reimbursement Agreement and such reinstatement shall not occur; and (b) with respect to a drawing under an Initial Letter of Credit to pay the purchase price of Series 2008 Bonds, the principal component and the interest component shall be reinstated with respect to such drawing when and to the extent that the Initial Bank has received immediately available funds to reimburse the Initial Bank for such drawing pursuant to the related Initial Reimbursement Agreement and the respective Bond Trustee has delivered to the Initial Bank the reinstatement certificate in the form prescribed by such Letter of Credit. The amount available under each Initial Letter of Credit and the respective principal and interest components thereof shall also be reduced automatically following the payment of the principal of the related Series 2008 Bonds, as applicable, upon receipt by the Initial Bank from the respective Bond Trustee of a certificate in the form prescribed by such Letter of Credit, each such reduction to be in the amount necessary to reduce the amount available under such Letter of Credit and the principal and the interest components thereof to the respective amounts specified by such Bond Trustee in such certificate. Each Initial Letter of Credit will expire upon the earliest to occur of the following: (a) the Stated Expiration Date (as defined in such Letter of Credit and used herein); (b) the date on which the Initial Bank receives a certificate from the respective Bond Trustee in the form prescribed by such Letter of Credit to the effect that the related series of the Series 2008 Bonds are no longer Outstanding or that such series of the Series 2008 Bonds Outstanding are secured by an Alternate Credit Facility or bear interest at an Adjustable Long-Term Rate or Fixed Interest Rates; (c) the tenth calendar day after the respective Bond Trustee receives written notice from the Initial Bank stating that an Event of Default has occurred and is continuing under the related Initial Reimbursement Agreement, directing the respective Bond Trustee to declare the related series of the Series 2008 Bonds immediately due and payable or to call such Series 2008 Bonds for mandatory tender pursuant to the related Bond Indenture, and stating that such Letter of Credit will terminate on such tenth calendar day; or (d) the date on which the final drawing available under such Letter of Credit by a Redemption Draw Certificate (as defined in such Letter of Credit) is honored. The Stated Expiration Date of each Initial Letter of Credit is July 15, 201 I. Such Stated Expiration Date may be extended beyond the Stated Expiration Date then in effect at the sole discretion of the Initial Bank upon request of the Obligated Group Representative. The Initial Letters of Credit are irrevocable obligations of the Initial Bank, respectively. Additional information regarding the Initial Bank is contained in APPENDIX D. -33- The Initial Reimbursement Agreements The Initial Letter of Credit with respect to the California Bonds will be issued by the Initial Bank pursuant to the Initial California Reimbursement Agreement. The Initial Letters of Credit with respect to the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Colonial Heights Bonds, the Colonial Gardens Bonds, the Missouri Bonds, the ML Bonds and the YA Bonds will be issued by the Initial Bank pursuant to the Initial National Reimbursement Agreement. The provisions of the Initial Reimbursement Agreements are, in large part, similar to each other. General. Under the Initial Reimbursement Agreements, the Initial Bank agrees to issue the Initial Letters of Credit to the Bond Trustees, respectively, concurrently with the original issuance and delivery of each series of the Series 2008 Bonds, and the related Obligated Groups agree, among other things, to reimburse the Initial Bank, with interest, for each drawing under the Initial Letters of Credit and to pay certain fees to the Initial Bank, respectively. Security. The obligations of the related Obligated Groups to the Initial Bank under the Initial Reimbursement Agreements will be evidenced and secured by the related Obligated Group's Series 2008 Bank Obligation (the "Bank Obligations") issued to the Initial Bank, respectively, under the Master Indentures and will have the pro rata benefit and security of the Master Indentures and the Mortgages. In addition, the obligations of the related Obligated Groups to the Initial Bank under the Initial Reimbursement Agreements have the benefit and security of the Bond Indentures and the trust estates granted pursuant thereto, respectively. Series 2008 Bonds purchased with proceeds of drawings under the Initial Letters of Credit will be pledged'to, or with respect to the Corporate Taxable Bonds owned by, the Initial Bank pursuant to the Initial Reimbursement Agreements, respectively, until. such time as such Series 2008 Bonds are. remarketed and the Initial Letters of Credit, as applicable, are reinstated with respect. thereto. As used herein, (i) the term "Financing Documents" includes the Initial Reimbursement Agreements, the Bond Indentures, the Series 2008 Bonds, the Loan Agreements, the Guaranties, the Master Indentures, the Series 2008 Bond Obligations, the Bank Obligations, the Mortgages, the Gross Revenue Pledge Agreement, the RHF /FPM Guaranties, the Members Guaranties, the Reimbursement Agreement Guaranty and certain other documents, and (ii) the term "Obligors" includes the Members, RHF and FPM. ·Representations, Warranties and Covenants. The Initial Reimbursement Agreements set forth various representations, warranties and covenants of the related Obligated Groups, including, without limitation, representations, warranties and covenants relating to maintenance of corporate existence, maintenance of insurance, maintenance of properties, furnishing of financial reports. and other information, limitations on additional debt, limitations on additional liens, certain financial ratios and levels, payment of debt, ERISA matters and environmental matters. Events of Default. Each of the following events shall constitute an "Event of Default" under the respective Initial Reimbursement Agreement: · (a) Failure by the related Obligated Group to make or cause to be made to the Initial Bank when due under its. related Initial Reimbursement Agreement any payment as (i) reimbursement ·for a drawing· under a Letter of Credit, (ii) a Letter of Credit commitment fee, administration fee or· fronting fee, or (iii) interest on any. such drawing or commitment fee, . administnition fee or froriting'fee; . . ,., ·i. .. ·' . . . ., ;;; (b) Failure by the related Obligated Group to make any other payment_to the Initial · Bank under its related Initial ReimburSement Agreement within l 0 ·days of the date ."{hen it is .due; I' (c) Failure by the related Obligated Group to perform or comply with any of the terms or conditions conta.ined in Sections 6.01 (corporate existence, control and tax-exempt status), 6,06 (transfer of property), 6.07 (change of .business), 6.08 (visitation rights), 6.12 (financial covenants); 6.14 (additional debt), 6.16 (loans to other persons, transfers of cash and . marketable securities), 6.17 (arm's-length transactions), 6.20 (management), 6.22 (changes to Obligated Group), 6.23 (ERISA), 6.27 (proceeds of insurance), 6.28 (proceeds of condemnation), 6.31 .(consents under Financing Documents), 6.32 (amendments to documents) and 6.33 (limitation on optional calls), or the related Obligated Group shall grant or otherwise create any lien in violation of Section 6.15 (negative pledge), or the related Obligated Group to perform and comply with any of the terms and conditions contained in Section 6.11 (Pricing Schedules) and continuance of such failure for l 0 days after the earlier of written notice from the Initial Bank to the Obligated Group Representative or any Obligor has knowledge that such failure has occurred or the occurrence of an Event of Default as defined in the Swap Agreement in respect of which any Obligor or Lehman is the Defaulting Party as defined in the Swap Agreement; (d) Failure by the related Obligated Group to perform or comply with any of the terms or conditions contained in its related Initial Reimbursement Agreement and continuance of such failure for 30 days after written notice from the Initial Bank to the Obligated Group Representative or any Obligor or any Obligor has knowledge that sucl1 failure has occurred, or such longer period to .which the Initial Bank in its sole discretion may agree in the case of a failure not curable by the exercise of due diligence within such 30-day period, provided that the Obligors shall have commenced to cure such failure within such 30-day period and shall complete such cure as quickly as·reasonably possible with the exercise of due diligence; (e) Any of the representations or warranties of any of the Obligors set forth in such related Initial Reimbursement Agreement or any other Financing Document or in any other document furnished to the Initial Bank pursuant to the terms of such Initial Reimbursement Agreement proves to have been false or misleading in any material respect; (f) Any material provision of such related Initial Reimbursement Agreement or any other Financing Document shall at any time for any reason cease to be valid and binding, or shall be declared to be null and void, or shall be violative of any applicable law relating to a maximum amount of interest permitted to be contracted for, charged or received, or the validity or enforceability thereof shall be contested by any of the Obligors, a Bond Trustee, a Master Trustee or any governmental authority, or any of the Obligors shall deny that it has any or further liability or obligation unqer such related Initial Reimbursement Agreement or any of the other Financing Documents to which it is a party; (g) The occurrence of an Event of Default as defined in . the other Initial Reimbursement Agreement or any other Financing Document, without regard to any waiver of such Event of Default by any Person other than the Initial Bank; (h) Any of the Obligors shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of such Obligor or of property of such Obligor, or (ii) admit in writing the inability of such Obligor to, pay its debts generally as they become due, or (iii) make a general assignment for the benefit of creditors, or (iv) be adjudicated a bankrupt or insolvent, or (v) commence a voluntaty case under the United States Bankruptcy -35- Code, (the "Bankruptcy Code") or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against such Obligor in any bankruptcy, reorganization or insolvency proceeding, or take corporate action for the purpose of effecting any of the foregoing, or (vi) have instituted against it, without its application, approval or consent, a proceeding in any court of competent jurisdiction,. under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of such Obligor an· order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up or liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of such Obligor or of all or any substantial part of the assets of such Obligor or other like relief in respect thereof under any bankruptcy or insolvency law; and, if such proceeding is contested by such Obligor, the same shall (A) result in the entry of an order for relief or any such adjudication or appointtnent or (B) remain undismissed and undischarged for a period of 60 days, or (vii) take any action in furtherance of, or indicating its consent to, approval of or acquiescence in, any of the acts described in clauses (i) through (vi) above; (i) Any litigation or administrative proceeding ensues, and is not dismissed or resolved in favor of the Obligors within 180 days, involving any of the Obligors or any instrument, contract or document delivered to the Initial Bank in .compliance with the related Initial Reimbursement Agreement, and the adverse result of such litigation or proceeding could have, in the Initial Bank's reasonable opinion, a Material Adverse Effect, except for any action or proceeding in respect of which the Initial Bank has received from counsel for the Obligors acceptable to the Initial Bank an opinion in form and substance satisfactory to the Initial Bank to the effect that such action or proceeding is without merit; (j) Any of the Members of the related Obligated Group fails to maintain in full force and effect all fire and extended coverage insurance, business interruption insurance, general liability insurance imd professional liability insurance required pursuant to such Initial Reimbursement Agreement; (k) Any one or more judgments are entered against any of the Obligors aggregating $500,000 or more and within 30 days of such entry either (\) such judgments have not been satisfied and execution of such judgment has not been stayed pending appeal or (2) such judgments give rise to Liens aggregating at any time more than $500,000 which are not removed by a bond or other arrangement given or obtained on terms which do not violate any covenant under either Initial Reimbursement Agreement; (I) ·The occurrence of an·event of default in respect of·any Debt of any of the Obligors of $500;000 or more (after the lapse of any applicable grace period) that results in the acceleration or mandatory redemption of such Debt or enables the holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity or cause the mandatory redemption of such Debt; (m) Any governmental department (i) ·suspends or revokes the certificate of authority or any material license for any Member of the related Obligated Group or its Facilities or the • operation of any material portion thereof, or-does· not renew the certificate of authority or any such lice'nse ph or to' its then ·current expiration date, (ii) increases any reserve requirement as a "· sanction under any CCRC :Law, ·any Independent Living Law, any 'Assisted Living Law or any · ·"· Nursing· Home· Law with respect' to any·Member of the related Obligated Group or its Facilities, or.(iii) issues a cease and desist order or takes any other action or imposes·any otlier·requirement '· .... : 'as a sanction for f~ilure to meet any requirement of any. CCRC. Law, any Independent Living ., .. .Law, any Assisted Living Law, or.any.Nursing Home Law, any other Applicable Law or such governmental department with respect to any Member of the related Obligated .Group or its . Facilities; · , (n) . Any of the Facilities ·of any Member of the related Obligated· ,Group or any portion thereof is subjected to any condemnation or similar proceeding which is reasonably likely to have a Material Adverse Effect; .. (o)··· The Independent Public Accountant retained by the Obligors {i) delivers an opinion on the financial statements of the Obligors, which opinion states that such: financial statements do not fairly or accurately present the financial condition of the Obligors, or includes an explanatory paragraph that describes conditions raising a material concern about any Obligor's ability (other than Martin Luther) to. continue to operate as a going concern, or .(ii) fails to deliver an unqualified opinion on the annual financial statements of the Obligors. (other than as to a change in generally accepted accounting principals with which the Independent Public Accountant concur); and (p) The occurrence of an Event of Default or event of default as defined in any other credit agreement or interest rate swap agreement under which any Obligor is ·now or hereafter obligated to the Initial Bank. Remedies Upon an Event of Default. With ·respect. to· each Initial Reimbursement Agreement and each Initial Letter of Credit issued thereunder with respect to Series 2008 Bonds, if an Event of Default has occurred and is continuing, the Initial Bank may: (a) In the case of each or any of the Bond Indentures, give notice to the Bond Trustee stating that an Event of Default has occurred and is continuing under such Initial Reimbursement Agreement and that the related Initial Letter of Credit will.terrninate on the tenth calendar day after the Bond Trustee receives such notice and directing the. Bond Tf\)stee to call the related Series 2008 Bonds for immediate mandatory redemption, resulting in the Bond Trustee drawing under such Initial Letter of Credit by a Redemption.Draw Certificate pursuant to the Bond Indenture, whereupon all amounts drawn under such Initial Letter of Credit, all interest thereon and all other· amounts payable under such Initial Reimbursement Agreement ·or in respect thereof shall automatically be forthwith due and payable, without presentment, demand, protest, or further notice of any kind; all of which are expressly waived by the Members of the related Obligated Group; (b) In the. case of each or any of the Bond Indentures, give notice to. the Bond Trustee stating that an Event of Default has occurred and is continuing under such Initial Reimbursement Agreement and that the related Initial Letter of Credit will terminate on the tenth calendar day after the Bond Trustee receives such notice and directing the Bond Trustee to call the related series of the Series 2008 Bonds for immediate mandatory tender for purchase, resulting in the Bond Trustee (i) giving notice of a mandatory tender of such Series 2008 Bonds for·purchase, (ii) drawing on such 'Initial Letter of Credit by a Tender Draw Certificate pursuant to the Bmid ·Indenture, and (iii) delivering such Series 2008 Bonds so purchased to the Initial Bank or its designee, whereupon all amounts ·drawn under such Initial Letter of Credit, all interest thereon and all other amounts payable under such Initial Reimbursement Agreement or in respect thereof shall automatically be forthwith due and payable, without presentment, demand, protest, . or further notice of any kind, all of which are expressly waived by the Members of the related Obligated Group; -37- ·(c) Require the Members of the related Obligated Group to pay· interest and Initial Letter of Credit commitment fees at. higher rates ·as provided in stich Initial Reimbursement Agreement; (d) By written notice to the Members of the related Obligated Group, require immediate reimbursement for all draws on the Initial Letters of Credit issued under such Initial Reimbursement Agreement applied to purchase Series 2008 Bonds; · (e) Declare the obligations of the Members of the related Obligated Group under such Initial Reimbursement Agreement to be, whereupon the same shall become, immediately due and payable; (f) Direct the Bond Trustees and the Master Trustees to exercise remedies under and pursuant to the Financing Documents (including, without limitation, the specific remedial actions to be taken and the sequence thereof); (g) Take whatever action may be available at law or in equity to collect the due and payable obligations of the Members of the related Obligated Group under such Initial Reimbursement Agreement and to enforce the payment and performance of such Members' obligations under such Initial Reimbursement Agreement and the other Financing Documents; (h) By injunction or other writ, order, decree or decision of a court of competent jurisdiction in an action, suit or other proceeding at law or in equity, enjoin any acts or things which may be unlawful or in violation of the Initial Bank's rights under such Initial Reimbursement Agreement, any other Financing Document or any other agreement or instrument; and (i) Exercise, or cause to be exercised, any and all such remedies as it may have under such Initial Reimbursement Agreement, any other Financing Document or any other document or at law or in equity. ·BONDHOLDERS SHOULD NOTE THAT THE INITIAL BANK IS ENTITLED TO EXERCISE ANY OR ALL OF A BROAD RANGE OF REMEDIES AVAILABLE TO IT UNDER THE INITIAL REIMBURSEMENT AGREEMENTS AND OTHER FINANCING DOCUMENTS IF AN EVENT OF DEFAULT OCCURS THEREUNDER WITHOUT NOTICE TO OR CONSENT OF THE BONDHOLDERS AND WITH OR WITHOUT A RESULTING DECLARATION OF ACCELERATION OR MANDATORY TENDER OF THE SERIES 2008 BONDS. NO ASSURANCE CAN BE GIVEN THAT ANY SUCH EXERCISE OF REMEDIES WILL NOT RESULT IN ADVERSE CONSEQUENCES TO THE BONDHOLDERS AS A RESULT OF THE EFFECT OF ANY SUCH EXERCISE. BOOK-ENTRY SYSTEM The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Series 2008 Bonds. Each series of the Series 2008 Bonds will be issued as fully registered Bonds 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. ·The ownership of one fully-registered Series 2008 Bond for each maturity, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co. -38- DTC, the world's largest 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 Co!hmercial 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 cleating agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks; trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of the Series 2008 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2008 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2008 Bond (a "Beneficial Owner") is in turn to be recorded on the Direct and Indireci Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are 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 Series 2008 Bonds are to be accomplished by entries made on the books of Direct or Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2008 Bonds, except in the event that use of the book-entry system for the Series 2008 Bonds is discontinued. To facilitate subsequent transfers, all Series 2008 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 Series 2008 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 Series 2008 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2008 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 and regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2008 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to· the Series 2008 Bonds, such as redemptions, tenders, defaults, and proposed amendments to bond documents. For example, Beneficial Owners of Series 2008 Bonds may wish to ascertain that the nominee holding the Series 2008 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the -39- 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. Ifless than all of the Series 2008 Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2008 Bonds unless authorized by a Direct Participant in accordance with DTC's Money Market Instruments (MMI) Procedures. Under its usual procedures, DTC mails an "Omnibus Proxy" to the related Governmental Entity as soon as possible after the Record Date. The "Omnibus Proxy" assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2008 Bonds are credited on the Record Date (identified in a listing attached to the "Omnibus Proxy"). Principal and interest payments on the Series 2008 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 the Bond Trustee or the related Governmental Entity, 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, the Bond Trustee or the related Governmental Entity, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Bond Trustee or the related Governmental Entity. Disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Series 2008 Bonds purchased or tendered, through its Participant, to the Bond Trustee or the Remarketing Agent, and shall effect delivery of such Series 2008 Bonds by causing the Direct Participant to transfer the Participant's interest in the Series 2008 Bonds, on DTC's records, to the Bond Trustee or the Remarketing Agent. The requirement for physical delivery of Series 2008 Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Series 2008 Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Series 2008 Bonds to the Remarketing Agent's DTC .account. DTC may discontinue providing its services as depository with respect to the Series 2008 Bonds at any time by giving reasonable notice to the related Governmental Entity and the Bond Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2008 Bond certificates are required to be printed and delivered. THE INFORMATION PROVIDED ABOVE HAS BEEN PROVIDED BY DTC. NO REPRESENTATION IS MADE BY THE GOVERNMENTAL ENTITIES, THE RHF OBLIGATED GROUP OR THE UNDERWRITER AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION PROVIDED BY DTC OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF. For so long as the Series 2008 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 Series 2008 Bonds for all purposes, including payments, notices and voting. None of the Governmental Entities, the Underwriter, the members of the RHF Obligated Group nor the Bond Trustee will have any responsibility or obligation with respect to (i) the accuracy of -40- the records of DTC, its nominee or any Direct Participant or Indirect Participant with respect ·to ·any beneficial ownership interest in any Series 2008 Bond, (ii) the delivery to any Direct 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 Series 2008 Bond including, without limitation, any notice Of redemption, tender, purchase or any event which would or. could give·rise to a tender or purchase right or option with respect to any Series 2008 Bond, (iii) the payment of any Direct 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 Series 2008 Bond or (iv) any consent given by DTC as registered owner. Prior to any discontinuation of the book-entry only system described -above, the Governmental Entities and the Bond Trustee may treat DTC as, and deem DTC to be, the absolute owner of the Series 2008 Bonds for all purposes whatsoever, including, .without limitation, (i) the payment of principal of, premium, if any, and interest on the Series 2008 Bonds, (ii) giving notices of redemption and other matters with respect to. the Series 2008 Bonds, (iii) registering transfers with respect to the Series 2008 Bonds and (iv) the selection of Series 2008 Bonds for redemption. PLAN OF FINANCE The Refundings · · Proceeds from the sale of the Series 2008 Bonds will be applied to refund the various \Ybond issues benefiting various Members of the Obligated Group as. described more fully below. A'lj0 C\;b0i?l California. In 1998, the California Authority entered into various financing documents \ pursuant to which $50, I 00,000 Insured Certificates of Participation were issued evidencing proportionate interests of the holders thereof in installment payments to be paid by the California Authority to Gold Country, Mayflower Gardens, Mayflower Housing and Bixby Knolls (the "1998 COPs"). The 1998 COPs are currently outstanding in the amount of $42,850,000. -Proceeds of the California Bonds together with.certain trustee-held funds with respect to the 1998 COPs will be deposited under an Escrow Deposit Agreement dated as of July I, 2008 (the "1998 COPs Escrow Agreement") between the trustee for the 1998 COPs, as escrow agent (the "1998 COPs Escrow Agent") and the California Members. The amounts held by the 1998 COPs Escrow Agent will be sufficient to redeem the 1998 COPs on July 7, 2008 at a redemption price of l 00% of the principal amount due plus accrued interest to that date. Florida. Bishop's Glen, Holly Hill, Florida. In 1998, the Volusia County Industrial Development Authority issued $28,000,000 Revenue and Refunding Bonds Series 1998 (Retirement Housing Foundation Obligated Group- Bishop's Glen) (the "1998 Volusia (Florida) Bonds"). The 1998 Volusia (Florida) Bonds are currently outstanding in an aggregate principal amount of $23,900,000. Proceeds of the Volusia (Florida) Bonds together with certain trustee-held funds with respect to the 1998 Volusia (Florida) Bonds will be deposited under an Escrow Deposit Agreement dated as of July_!, 2008 (the "1998 Volusia Escrow Agreement") between the trustee for the 1998 Volusia (Florida) Bonds, as escrow agent (the "1998 Volusia Escrow Agent") and Holly Hill. The amounts held by the 1998 Volusia Escrow Agent will be sufficient to redeem the 1998 Volusia (Florida) Bonds on July 7, 2008 at a redemption price of 100% of the principal amount due plus accrued interest to that date. · Courtenay Springs Village, Merritt Island, Florida. In 1998, the Brevard County Health Facilities Authority issued $24,300,000 Revenue and Refunding Bonds (Retirement Housing Foundation Obligated Group - Courtenay Springs Village) Series 1998 (the "1998 Brevard (Florida) Bonds"), The 1998 Brevard (Florida) Bonds are currently outstanding in the amount of $20,350,000. Proceeds of the -41- Brevard (Florida) Bonds together with certain trustee-held. funds· with respect to the 1998 Brevard (Florida) Bonds will be deposited under an Escrow Deposit Agreement dated as of July I, 2008 (the "1998 Brevard Escrow Agreement") between the trustee for the 1998 Brevard (Florida) Bonds, as escrow agent (the "1998 Brevard Escrow Agent") and Merritt Island. The amounts held by the 1998 Brevard Escrow Agent will be sufficient to redeem the 1998 Brevard (Florida) Bonds on July 7, 2008 at a redemption price of I 00% of the.principal amount due plus accrued interest to that date. Martin Luther Foundation, Inc., St. Petersburg, Florida. In 1998, Martin Luther issued $7,900,000 Martin Luther Foundation, Inc. Taxable Corporate Taxable Bonds, Series 1998 (Retirement Housing Foundation Obligated Group- Swanholm Nursing and Rehabilitation Center Project) (the" 1998 Martin Luther Bonds"). The 1998 Martin Luther Bonds are currently outstanding in the amount of $5,500,000, Proceeds of the ML Bonds together with certain trustee-held funds with respect to the 1998 Martin-Luther Bonds will be deposited under an Escrow Deposit Agreement dated as of July·!, 2008 (the "1998 Martin Luther Escrow Agreement") between the trustee for the. 1998 Martin Luther Bonds, as escrow agent (the "1998 Martin Luther Escrow Agent") and Martin Luther. The amounts held by .the 1998 Martin Luther Escrow Agent will be sufficient to redeem the 1998 Martin Luther Bonds on July 7, 2008 at a redemption price of I 00% of the principal amount due plus accrued interest to that date. Indiana. Westminster Village· Kentuckiana, Clarksville, Indiana. In 1998, the Town of Clarksville, Indiana issued $5,500,000 Revenue and Refunding Bonds, Series 1998 (Retirement Housing Foundation Obligated Group -Westminster Village Kentuckiana Project) (the "1998 Indiana Bonds"). The 1998 Indiana Bonds remain outstanding in an aggregate principal amount of $4,350,000. Proceeds of the Indiana Bonds together with certain trustee-held funds with respect to the 1998 Indiana Bonds will be deposited under an Escrow Deposit Agreement dated as of July I, 2008 (the "1998lndiana Bonds Escrow'·::!.,. r Agreement") between the trustee for the 1998 Martin Luther Bonds, as escrow agent (the "1998 Martin:e •.. "·.:1 Luther· Escrow Agent") and Yellowwood. TI1e amounts held by the 1998 Indiana Escrow Agent will be-·-~,·,.~. sufficient to redeem the 1998 Indiana Bonds on July 7, 2008 at a redemption price of I 00% of the 1 principal amount due 'plus accrued interest to that date. In addition, proceeds of the Y A Bonds will be used to redeem taxable Corporate Taxable Bonds issued by Yellowwood in December ·1998 (the "1998 Indiana Notes") in the aggregate principal amount of $4,800,000. The 1998 Indiana Notes are still outstanding in an aggregate principal amount of $4,050,000. Proceeds of the YA Bonds together with certain trustee-held funds with respect to the 1998 Indiana Notes will be deposited under an Escrow Deposit Agreement dated as of July 1, 2008 (the "1998 Indiana Notes Escrow Agreement") between the trustee for the 1998 Indiana Notes, as escrow agent (the "1998 Indiana Notes Escrow Agent")· and Yellowwood. The amounts held by the 1998 Indiana Notes Escrow Agent will be sufficient to redeem the 1998 Indiana Notes on July 7, 2008 at a redemption price of 100% of the principal amount due plus accrued interest to that date. · Kentucky. Colonial Heights, Florence, Kentucky. In 1998, the Kentucky Authority issued $10,050,000 Revenue and Refunding Bonds (Retirement Housing Foundation Obligated Group - Bluegrass RHF Housing, Inc.) Series 1998 (the "1998 Kentucky Bonds"). The 1998 Kentucky Bonds are currently outstanding in an aggregate principal amount of $8,450,000. Proceeds of the Colonial Heights Bonds together with certain trustee-held funds with respect to the '1998 Kentucky Bonds will be deposited under an Escrow Deposit Agreement dated as of July l, 2008 (the "1998 Kentucky Escrow Agreement") between the trustee for the 1998 Kentucky Bonds, as escrow agent (the ''1998 Kentucky Escrow Agent") and Bluegrass. The amounts·held by the 1998 Kentucky Escrow Agent will be sufficient to redeem the 1998 Kentucky Bonds on July 7, 2008 at a redemption price of 100% of the principal amount due plus accrued interest to that date. -42- Colonial Gardens, Florence, Kentucky. In I 999, the City of Florence, Kentucky issued $8,825,000 Housing Facilities Revenue Bonds, Series I 999 (Bluegrass RHF Housing, Inc. Project) (the "I 999 Kentucky Bonds"). The 1999 Kentucky Bonds are currently outstanding in an aggregate principal amount of $7,815,000. Proceeds of the Kentucky Bonds together with certain trustee-held funds with respect to the 1999 Kentucky Bonds will be used to purchase certain Government Obligations that will be deposited under an Escrow Deposit Agreement dated as of July I, 2008 (the "1999 Kentucky Escrow Agreement") between the trustee for the 1999 Kentucky Bonds, as escrow agent (the "1999 Kentucky Escrow Agent") and Bluegrass. The Government Obligations will mature in such amounts and in such times as will be sufficient, together with the interest to accrue thereon and initial cash to be held by the 1999 Kentucky Escrow Agent to pay the principal of and interest on the 1999 Kentucky Bonds coming due on or before August 15, 2009 and to redeem the 1999 Kentucky Bonds maturing after that date on August 15, 2009 at a redemption price of 101% of the principal amount due plus accrued interest to that date. Missouri. In August 2000, The Industrial Development Authority of the City of Florissant, Missouri issued the following series of bonds: (i) $7,060,000 Mortgage Revenue Bonds Series 2000A (DeSmet Acquisition - RHF Obligated Group Guaranteed Project) which are currently outstanding in the aggregate principal amount of $6,505,000 (the "2000A DeSmet Bonds"); and (ii) $3,305,000 Mortgage Revenue Bonds Series 2000B (St. Catherine Acquisition - RHF Obligated Group Guaranteed Project) which are currently outstanding in the aggregate principal amount of $3,070,000 (the "2000B St. Catherine Bonds"). A portion of the proceeds of the Missouri Bonds together with certain trustee-held funds with respect to the 2000A DeSmet Bonds will be used to purchase certain Government Obligations that will be deposited under an Escrow Deposit Agreement dated as of July I, 2008 (the "2000A DeSmet Escrow Agreement") between the trustee for the 2000A DeSmet Bonds, as escrow agent (the "2000A DeSmet Escrow Agent") and DeSmet. The Government Obligations will mature in such amounts and in· such times as will be sufficient, together with the interest to accrue thereon and initial cash to be held by the 2000A DeSmet Escrow Agent to pay the principal of and interest on the 2000A DeSmet Bonds coming due on or before August 15, 2010 and to redeem the 2000A DeSmet Bonds maturing after that date on August 15, 20 I 0 at a redemption price of I 0 I% of the principal amount due plus accrued interest to that date. A portion of the proceeds of the Missouri Bonds together with certain trustee-held funds with respect to the 2000B St. Catherine Bonds will be used to purchase certain Government Obligations that will be deposited under an Escrow Deposit Agreement dated as of July I, 2008 (the "2000B St. Catherine Escrow Agreement") between the trustee for the 2000B St. Catherine Bonds, as escrow agent (the "2000B St. Catherine Escrow Agent") and St. Catherine. The Government Obligations will mature in such amounts and in such times as will be sufficient, together with the interest to accrue thereon and initial cash to be held by the 2000B St. Catherine Escrow Agent to pay the principal of and interest on the 2000B St. Catherine Bonds coming due on or before August 15, 2010 and to redeem the 2000B St. Catherine Bonds maturing after that date on August IS, 2010 at a redemption price of 101% of the principal amount due plus accrued interest to that date. In addition, a portion of the proceeds of the Missouri Bonds will be used to refinance a bank loan which was used to prepay a first-lien mortgage on the St. Catherine facility in the approximate amount $3,500,000. Hereinafter the 1998 COPS, the 1998 Volusia (Florida) Bonds, the 1998 Brevard (Florida) Bonds, the 1998 Martin Luther Bonds, the 1998 Indiana Bonds, the 1998 Indiana Notes, the I 998 Kentucky Bonds, the 1999 Kentucky Bonds, the 2000A DeSmet Bonds and the Series 2000B St. -43- Catherine Bonds are referred to collectively as the "Prior Bonds". The 1998 COPS Escrow Agreement, the 1998 Volusia Escrow Agreement, the 1998 Brevard Escrow Agreement, the 1998 Martin Luther Escrow Agreement, the 1998 Indiana Bonds Escrow Agreement, the 1998 Indiana Notes Escrow Agreement, the I 998 Kentucky Escrow Agreement, the I 999 Kentucky Escrow Agreement, the 2000A DeSmet Escrow Agreement and the 2000B St. Catherine Escrow Agreement are collectively referred to herein as the "Escrow Agreements" and individually as an "Escrow Agreement." Swap Agreements In December, 1998 the RHF Obligated Group in existence at that time (the "1998 RHF Obligated Group") bid out and entered into a variety of swap agreements with Lehman Brothers Special Financing, Inc. ("Lehman") in connection with the issuance of the Prior Bonds issued in 1998 (the "Series 1998 Bonds"). Under the terms of the swap agreements, the I 998 RHF Obligated Group agreed to pay the counterparty a fixed rate of interest and the counterparty agreed to pay the 1998 RHF Obligated Group a floating rate of interest, in each case based on a notional amount corresponding to the outstanding amount of one or more series of Series 1998 Bonds. Sirrmltaneously with the issuance of the Series 2008 Bonds, the 1998 RHF Obligated Group and Lehman are terminating the existing swaps, and the newly-created RHF Obligated Group and Lehman are entering into a new ISDA Master Agreement, Schedule and Credit Support Annex as well as four new Confirmations with respect to the Series 2008 Bonds (collectively, the "Swap Agreements"). The terms of the Swap Agreements will not alter any of the obligations of the RHF Obligated Group with respect to the payment of principal of or interest on any series of Series 2008 Bonds. Payments due under any Swap Agreement are not pledged to the payment of principal or interest with respect to the Series 2008 Bonds but will be made to the related Bond Trustee for the account of the RHF Obligated Group. Under certain circumstances, including at the option of the RHF Obligated Group, one or more or all of the Swap Agreements may be terminated prior to maturity of the Series 2008 Bonds, in which event the RHF Obligated Group may be obligated to make a substantial payment to Lehman. Also, the RHF Obligated Group bears the risk that if certain events occur, the cost of the fixed rate swaps could increase significantly because of the imposition of a higher fixed rate following such event or because of the modification of the variable rate formula payable by Lehman. Lehman will be secured by the Gross Revenue Pledge Agreement but not by the Mortgages or Obligations issued under the Master Indenture. -44- SOURCES AND APPLICATIONS OF FUNDS The estimated sources and applications of funds set forth below excludes interest on Bond Trustee-held funds. California Volusia Brevard Indiana Colonial Heights Colonial Missouri Bonds Bonds Bonds Bonds Bonds Gardens Bonds Bonds ML Bonds YA Bonds Totals Sources of Funds: Series 2008 Bonds $40,860,000 $22,790,000 $19,400,000 $4,115,000 $8,030,000 $7,705,000 $13,645,000 $5,910,000 $4,385,000 $126,840,000 Trustee-held Funds 4,068,408 2,273,219 1,939,690 445,707 831,127 968,890 1,493,593 614,749 369,904 13,005,286 Total Sources of Funds $44,928,408 $25,063,219 $21,339,690 $4,560,707 $8,861,127 $8,673,890 $15,138,593 $6,524,749 $4,754,904 $139,845,286 Applications ofFunds: Refunding(!) 43,468,164 24,244,787 20,643,574 4,412,754 8,571,902 8,396,964 14,649,163 5,640,074 4,115,730 134,143,110 Issuance Costs12 l 1,460,244 818,432 696,116 147,952 289,226 276,926 489,43 I 884,675 639,175 5,702,176 Total Application of Funds $44,928,408 $25,063,219 $21,339,690 $4,560,707 $8,861,127 $8,673,890 $15,138,593 $6,524,749 $4,754,904 $139,845,286 (1) The Missouri refunding includes the repayment of a line of credit with Comerica Bank which was used to prepay an outstanding mortgage associated with St. Catherine. Includes compensation to the Underwriter; amounts in excess of 2% of the principal amount of the Series 2008 Bonds will be paid from proceeds of the Corporate Taxable Bonds; amounts shown are net of or including '" additional proceeds as appropriate. -45- RISK FACTORS General Holders should assess the creditworthiness of any series of the Series 2008 Bonds solely on the basis of the financial condition of the Bank. The RHF Obligated Group anticipates that if any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or a Fixed Rate that such series of the Series 2008 Bonds will be remarketed pursuant to reoffering disclosure which will either supplement or replace this Official Statement. Any information about the members of the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit ofthe RHF Obligated Group. Each issue of Series 2008 Bonds is payable from the payments to be made by the related Member of the related Obligated Group pursuant to the related Loan Agreement or, in connection with the ML Bonds or the Y A Bonds, the related Bond Indenture, and to the related Series 2008 Obligation. No representation or assurance can be made that revenues, as presently estimated or otherwise, will be realized by the Obligated Groups in the amounts necessary to make payments in amounts sufficient to pay the principal and interest and purchase price with respect to the Series 2008 Bonds and to maRc other payments required pursuant to the Series 2008 Bond Obligations. The amount of the RHF Obligated Group's future revenues and expenses is subject to, among other things, the capabilities of the. management of the Members of the Obligated Groups and the Guarantors, receipt of grants and contributions, imposition of government wage and price controls, changes in social security eligibility or payments, changes or restrictions in the Medicare/Medicaid programs and future economic and other conditions which are unpredictable and which may affect the RHF Obligated Group's revenues and thereby payment of principal of and interest on the Series 2008 Bonds. Limited Obligations Each tssue of the Governmental Bonds and the interest thereon are special limited obligations of the related Governmental Entity and do not constitute general obligations of the Governmental Entities for which the full faith and credit of the Governmental Entities arc pledged. The California Authority, the Volusia Issuer, the Brevard Issuer, the Indiana Issuer, the Kentucky Issuer and the Missouri Issuer are obligated to make payments on the related issue of Series 2008 Bonds only to the extent of loan repayments received from the related Member of the Obligated Group as required under the related Loan Agreement. The Series 2008 Bonds are not an indebtedness or a pecuniary liability of the Governmental Entities and do not constitute a charge, lien or encumbrance, legal or equitable, against any of its property or its general credit or taxing powers. NONE OF THE GOYE~NMENTAL ENTITIES EXCEPT THE TOWN OF CLARKSVILLE, INDIANA, HAS ANY TAXING POWER. HOLDERS SHOULD ASSESS THE CREDITWORTHINESS OF ANY SERIES OF THE SERIES -2008 BONDS SOLELY ON THE BASIS OF THE FINANCIAL CONDITION OF THE BANK. The Master Indentures permit the incurrence of Additional Obligations on parity with the Series 2008 Bond Obligations and also permits the incurrence of Additional Indebtedness by the Members of the Obligated Group. See "Limitations on Additional Indebtedness" contained in "SUMMARY OF PRINCIPAL DOCUMENTS - Summary of Certain Provisions of the Master Indentures" in APPENDIX B hereto. The RHFIFPM Guaranties permit the incurrence of Additional Indebtedness by RHF and FPM. The issuance of Additional Obligations and the incurrence of Additional Indebtedness would increase debt service requirements and could adversely affect debt service coverage on the Series 2008 Bonds. ·•·•.· ,." · ·• ' ~ .. -46- The Initial Bank · There can be no assurance that the credit rating of the Initial Bank will" continue at its current level. A decline in the credit rating of the Initial Bank or the issuer of an Alternate Letter of Credit could result in a decline in any rating that may be assigned to the Series 2008 Bonds froin time to time. Such a decline could in tum affect the market price and marketability of the Series 2008 Bonds. For information concerning the Initial Bank, see APPENDIX D. Enforceability of the Initial Letters of Credit Section I 05 of the Bankruptcy Code empowers a bankruptcy court to issue such orders as are necessary or appropriate to carry out the provisions of the Bankruptcy Code. Court decisions discussing the enforceability of letters of credit indicate that it is possible that a bankruptcy court acting pursuant to Section I 05 or other equitable powers under the Bankruptcy Code could enjoin a drawing by the Bond Trustees under the Initial Letters of Credit or the payment by the Bond Trustees to Bondholders of amounts drawn under the Initial Letters of Credit under various circumstances, including the bankruptcy or insolvency of, or a similar event with respect to, RHF or an affiliate of RHF. The Initial Letters of Credit also will not, and are not intended to, protect Bondholders from events affecting the Initial Bank or its creditworthiness, including, without limitation, the bankruptcy or insolvency of the Initial Bank. Interest Rate Swap Risks The Swap Agreements are subject to periodic "mark-to-market" valuations. The Swap Agreements may, at any time, be valued such that, if then terminated, the RHF Obligated Group would owe an amount to Lehman, which amount, while not currently ascertainable, could be substantial. Lehman may terminate the Swap Agreements upon the occurrence of certain events, including but not limited to nonpayment by the RHF Obligated Group. See "PLAN OF FINANCE- Swap Agreements." The RHF Obligated Group may also terminate the Swap Agreements upon the occurrence of certain events. Lehman has no obligation to make payments to the Holders of the Series 2008 Bonds or to the Bond Trustees; the Holders of the Series 2008 Bonds have no contractual rights or other claims under the Swap Agreements or against Lehman for payment on the Series 2008 Bonds or otherwise. Matters Relating to Enforceability Enforceability of the Master Indentures, tlie Guaranties and the Gross Revenue Pledge Agreement. The obligation of the Members of each Obligated Group under the Series 2008 Bond Obligations and the Members Guaranties and RHF and FPM's obligations under the RHF/FPM Guaranties will be limited (i) 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 (ii). as additionally described below. The accounts of the RHF Obligated Group will be combined for financial purposes and will be used in determining whether various covenants and tests contained in each Master Indenture (including tests relating to the . incurrence of Additional Indebtedness), are met, notwithstanding uncertainties as to the enforceability of certain obligations of the RHF Obligated Group contained in the Master Indentures, the Guaranties and the Gross Revenue Pledge Agreement. Such uncertainties bear on the availability of the assets of the RHF Obligated Group for payment of debt service on the Obligations, -47- including the Series 2008 Bond Obligations, pledged under each Bond Indenture. The joint and several obligation described herein of the Members of each Obligated Group and on RHF and FPM to make payments of debt service on the Series 2008 Obligations are, in the opinion of counsel to each member of the RHF Obligated Group, anticipated _to be enforceable under the laws of the States of California, Florida, Indiana, Missouri and the Commonwealth of Kentucky, except to the extent enforceability of such Obligation may be limited as described under this caption. A Member may not be required to make any payment of any Obligation, or portion . thereof, the proceeds of which Obligation were not lent or otherwise disbursed to such Member and RHF and FPM may not be required to make any payment under the RHF/FPM Guaranties to the extent that such payments (i) are requested to be made with respect to any Obligations which are issued for a purpose which is not consistent with the charitable purposes of the Member, RHF or FPM from which such payment is requested or which are issued for the benefit of any entity other than a not-for-profit corporation which is exempt from federal income taxes under Sections 50l(a) and 50l(c)(3) of the Code and is not a "private foundation" as defined in Section 509(a) of the Code; (ii) are requested to be made from any monies or assets which are donor restricted or which are subject to a direct or express trust which does not permit the use of such monies 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, RHF or FPM from which such payment is requested; or (iv) are requested to be made pursuant to any loan (other than the loans under the Loan Agreement) violating applicable usury laws. Due to the absence of clear legal precedent in this area, the extent to which the assets of any future member fall within the category referred to in clause (ii) above cannot be determined. The amount of such assets which fall within such category could be substantial. A Member may not be required to make any payment of any Obligation, or portion thereof, the proceeds of which were not loaned or otherwise disbursed to such Member and RHF and FPM may not be required to make any payment under the RHF/FPM Guaranties to the extent that such payment would render the Member, RHF or FPM, as the case may be, insolvent or would conflict. with, not be permitted ·by or be subject to recovery for the benefit of other creditors of such Member, RHF or FPM, as the case may be, under applicable law. There is no clear precedent in the law as to whether such payments from a Member to pay debt service on Obligations or RHF or FPM to make payments under the RHF/FPM Guaranties may be voided by a trustee in bankruptcy in the event of a bankruptcy of such Member, RHF or FPM, as the case may be, and RHF and FPM may not be required-to-make any payment under the RHF/FPM Guaranties, 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, a creditor of a related guarantor, may avoid any obligation incurred by a related guarantor if, among other bases therefor, (i) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (ii) the guaranty renders the guarimtor insolvent, as defined in the United States Bankruptcy Code or California, Florida, Indiana, Missouri and Kentucky fraudulent conveyance statutes, or the guarantor is undercapitalized. · Application by courts of the tests of "insolvency," "reasonably equivalent value" and "fair· consideration" has re-sulted in a conflicting body of case law. It is possible that, iri" an actiori to force a Member of the Obligated Groups, RHF or FPM, as the case may be, to pay debt service on an Obligation for which it was not the direct beneficiary, a court might not enforce such obligation to make such a payme~t' in the event it is determined that the Member, RHF or FPM, as the case may be, is analogous to a guarantor of the debt of the Member who directly benefited from the borrowing and that fair consideration or reasonably equivalent value for such: Member's, RHF or FPM, as the case may be, guaranty'was 'hot received or thanhe incurrence oh;iich obligation. has -rendered· or- will render such Member, RHF's or FPM's, as the case may be; insolvent' or thai at-the time of incurrerice·ofsuch·guaranty the guaranior was undercapitalized. -48- ·Enforceability of. Credit Documents, Generally. The realization of rights upon any default will depend upon the exercise of various remedies. appearing in the Gross Revenue Pledge Agreement, the Guaranties, the Mortgages, the Master Indentures, the Loan Agreements and the Bond Indentures (collectively, the "Bond Financing Documents''). These remedies; in certain respects,. may require judicial action, which is often subject to discretion and delay. Under existing law, certain of the remedies specified .in any of the Bond Financing Documents may not be readily available or may be limited .. A court may. decide not to order the specific performance of the covenants contained in these documents .. The security interest in the Gross Revenues granted to the Collateral-Agent pursuant to the Gross Revenue Pledge Agreement may be subordinated to the interests and claims of others in several instances. Examples of cases of subordination· for prior claims are: (1) statutory liens; (2) rights arising in favor of the United States of America or any agency thereof; (3) present or future prohibitions against assignment in any Federal statutes or regulations; (4) constructive trusts, equitable liens or other rights impressed or conferred by any state or Federal court in the exercise of its equitable jurisdiction; (5) Federal bankruptcy laws that may affect the enforceability of any of the Financing Documents or assignments of revenues by any member of the RHF Obligated Group before or after any effectual institution of bankruptcy proceedings by or against any member of the RHF Obligated Group; (6) rights of third parties in the property converted to cash and not in the possession of the Master Trustees or the Issuers; and (7) claims that might arise if appropriate continuation statements are not filed in accordance with the Uniform Commercial Code as from time to time in effect in the various states in which the facilities are located. RHF shall execute a depository account control agreement with the Depository Bank(s), and shall execute and deliver such other documents as may be necessary or reasonably requested by the Collateral Agent in order to perfect or maintain as perfected· such security interest or give public notice thereof Federal bankruptcy law may have an adverse effect on the ability of each Master Trustee to enforce its claim to the security in certain property that may be secured under each Master .Indenture. Federal liankruptcy law permits adoption of a· reorganization plan, even though it has not been accepted by creditors, if they are provided with the benefit of their original lien or the "indubitable equivalent." In addition, if the bankruptcy court concludes that the Master Trustees have "adequate protection," it ·could under certain circumstances (I) substitute other security for the security provided by the Master Indentures, and (2) subordinate the lien and security interest of the Master Trustees to (a) claims by person supplying goods and services to the bankrupt after the bankruptcy and (b) the administrative expenses of the bankruptcy proceeding. In the event of the bankruptcy of a Member of either Obligated Group, the amount realized by the related Master Trustee might depend, among other factors, on the bankruptcy court's interpretation of "indubitable equivalent" and "adequate protection" under the then existing circumstances. Taxation of Interest on the Governmental Bonds Because the existence and coniinuation of the excludability of the interest on the Governmental Bonds from federal gross income of the owners thereof depends upon· events occurring after the date of issuance of the Governmental Bonds, the opinion of Bond Counsel described under the caption "TAX MATTERS" herein assumes the compliance by the RHF Obligated Group with the provisions of the Code and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect.to the excludability of the interest on the Governmental Bonds in the event of noncompliance with such provisions. The failure of the RHF Obligated Group to comply with the provisions of the Code and the regulations thereunder may cause the interest on the Governmental Bonds to become includable in gross income of the owners thereof as of the date of issuance. · -49- · The occurrence of one or more of the foregoing events;' or the occurrence of other unanticipated events, could adversely affect the RHF Obligated Group's financial· performance. Certain Risks Associated with the Mortgages· General. Each Operator has executed a Mortgage to secure its Obligations pursuant to the Master Indentures, and with respect to its Obligations to the Initial Bank. In the event that there is a default under either Master Indenture, the related Master Trustee has the right to foreclose on the related Trust Property under certain circumstances. All amounts collected upon foreclosure of the Trust Property pursuant to the Mortgages will be used to pay certain costs and expenses incurred by, or otherwise related to, the foreclosure, the performance of the related Master Trustee under the Mortgages, and then to pay amounts owing under the Obligations in accordance with the provisions of the related Master Indenture. Any valuation of the Trust Property is based on future projections of income, expenses, capitalization rates and the availability of the partial or total property tax exemption. Additionally, the value of the Trust Property will at all times be dependent upon many factors beyond the control. of the RHF Obligated Group, such as changes in general and local economic conditions, changes in the supply of or demand for competing properties in the same locality, and changes in real estate and zoning laws or other ·regulatory restrictions. A material change in any of these factors could materially change the value in use of the mortgaged Trust Property. Any weakened market condition may also depress the value of the Trust Property. Any reduction in the market value of the Trust Property could adversely affect the security available to the owners of the Series 2008 Bonds. There is no assurance that the amount available upon foreclosure of the Trust Property after the payment of foreclosure costs will be sufficient to pay the amounts owing by the RHF Obligated Group on the Obligations and with respect to the Series 2008 Bonds. In the event of foreclosure, a prospective purchaser of some or all of the Trust Property may assign less value to that Trust Property than the value of the Facilities while owned by the Operators since such .purchaser may not enjoy the favorable financing rates associated with the Series 2008 Bonds, real estate tax .exemption and.other benefits. To the extent that buyers whose income is not tax-exempt inay be willing to pay less for the Trust Property than nonprofit buyers, then the resale of either Trust Property after foreclosure may require more time to solicit nonprofit buyers interested in assuming· the financing now applicable to the Trust Property. In addition, there can be no assurance that any of the Facilities could be sold at one hundred percent (100%) of their fair market value in the event of foreclosure. Although the Holders of the Series 2008 Bonds will have available the remedy of foreclosure of the Mortgages in the event of a default (after giving effect to any applicable grace periods, and subject to any legal rights which may operate to delay or stay such foreclosure, such as may be applicable in the event of bankruptcy of the RHF Obligated Group), there are substantial risks that the exercise of such a remedy will not result in recovery of sufficient funds to pay amounts due on the Obligations and with respect to the Series 2008 Bonds and the Initial Bank. In .the event that some or all of the Mortgages are actually foreclosed, then, in addition to the customary costs and expenses of operating and maintaining the Trust Property, the party or parties succeeding to the interest of the related Operator in the Facilities could be required to bear certain associated costs and expenses, which could include: the cost of complying with federal, state or other laws, ordinances and regulations related-'to the removal or .remediation of.certain hazardous or toxic substances; ·the cost ·of complying with laws, ordinances and regulations related to health and safety, and 'the contimied·use and occupancy of the facilities such . ') .. : ) ... ,, . California Deeds of Trust. The California Deeds of Trust each will contain power of sale provisions and will be governed by California law. Under California law, the beneficiary of a deed of trust with power of sale may cause the instrument to be foreclosed either judicially, by a court proceeding (i.e., a lawsuit supervised and adjudicated by a court) or nonjudicially, by a .trustee sale pursuant to the contractual power of sale provisions in such deed of trust. California has certain statutory provisions that provide the framework for a beneficiary's enforcement of real estate secured debt or other real estate secured obligations after a debtor's default. These statutes limit the remedies of the beneficiary under a deed of trust. If a beneficiary with real property security located in California elects to pursue judicial rather than nonjudicial foreclosure, it must comply with the statute commonly referred to as the one action rule or the one form of action rule. This rule requires the beneficiary to pursue only one action for the enforcement or collection of the debt. The action is presumed to be a judicial foreclosure proceeding. Therefore, the beneficiary under a California deed of trust is prohibited from instituting any other type of action against the debtor, such as suing the debtor on the promissory note for the collection of the debt (subject to a few exceptions, such as a separate action for the appointment of a receiver). Accordingly, the beneficiary must bring all claims relating to the debt in a single judicial action for foreclosure. Following a judicial foreclosure, the beneficiary may not pursue an action against the debtor or on the promissory note other than to recover a deficiency judgment for the balance of the debt, which was not recovered as a result of the judicial foreclosure. Although a beneficiary is entitled to a deficiency judgment after a judicial foreclosure, another California statute limits any such judgment to the difference between the debt and the greater of the successful bid at foreclosure or the fair market value of the property at the. time of sale, thereby preventing a beneficiary from obtaining a large deficiency judgment against the debtor as a result of low bids at the judicial sale. One major component of the one action rule is commonly known as the "security first" rule. It requires the beneficiary in a judicial foreclosure to foreclose- on all the real property collateral (i.e., exhaust all the real property collateral) in one action prior to suing the debtor for any deficiency or other remedy. The security first rule requires the beneficiary in a nonjudicial foreclosure to foreclose on all the real property collateral before pursuing any other remedy against the debtor (other than a deficiency because, as noted below, deficiency judgments are not available in nonjudicial foreclosures). The other major component of the one action rule is commonly known as the "sanction aspect." Courts ·have sanctioned beneficiaries who have offset bank accounts or other ( unpledged or pledged) assets of the debtor prior to the completion of foreclosure of the lien on the real property collateral or a portion of it. These sanctions include the loss of the beneficiary's liens on the other collateral or assets pursued by the beneficiary (and/or in some cases, the loss of the underlying debt or portion of it) prior to the completion ofthe foreclosure. If a beneficiary with real property security located in California elects instead to exercise the power of sale in a deed of trust, and thereby, pursue a (nonjudicial) trustee sale (which is not considered an action as there is no court involvement), a California statute bars the beneficiary from subsequently obtaining a· deficiency judgment against the debtor. The beneficiary's recovery on the obligation will be limited to the proceeds of the trustee sale. While there is a narrow exception to this prohibition where the deed of trust secures the payment of bonds authorized or permitted to be issued by the California Commissioner of Corporations, that exception does not apply in this transaction. The collateral subject to the California Deeds of Trust includes both real and personal property. Each Master Trustee, as .the beneficiary thereunder, may conduct a unified judicial or nonjudicial foreclosure of the real and personal property or may choose to conduct a separate foreclosure sale of the personal property under their related Master Indenture and the California Deeds of Trust -51- pursuant to Article 9 of the California Commercial Code. A unified foreclosure will be subject to real property law (i.e., the statutes described above) and must comply with certai!}·additional requirements of the California Commercial Code with regard to the personal property, including that the beneficiary must conduct such a sale in a ''commercially reasonable" manner or risk invalidation of the sale or loss of the beneficiary's deficiency claim and its security interest in other collateral. Because there is no established market for deeds of trust comparable to the California Deeds of Trust, little guidance exists for conducting a "commercially reasonable" sale under these circumstances. Therefore, no assurance can be given that a foreclosure sale of either Master Trustee's interest in the ·California Deeds of Trust will not subsequently be held to be invalid and set aside or that a purchaser could be found for such interests . . IN ORDER TO UNDERSTAND IN FULL THE RISKS AND PROCEDURES INVOLVED IN FORECLOSURE OF THE DEEDS ·OF TRUST UNDER CALIFORNIA LAW, POTENTIAL HOLDERS OF THE SERIES 2008 BONDS ARE· ADVISED, AND EXPECTED, TO CONSULT WITH AN EXPERT IN THE FIELD BEFORE PURCHASING THE SERIES 2008 BONDS. Indiana Mortgages. The real estate mortgages to be recorded upon the. Clarksville, Indiana real estate (the "Indiana Mortgages") will be governed by Indiana law. Under Indiana law, the foreclosure sale of mortgaged property following a material event of default may only be made under a judicial proceeding, and powers of sale with respect to mortgaged real estate are not enforceable in the State of Indiana. Certain provisions of Indiana law limit the remedies available to a mortgagee with respect to a mortgage. For exampl<;, one Indiana statute provides that the owner of real estate subject to issuance of process under a judgment or decree of foreclosure may, with the consent of the judgment holder, file with the court clerk a waiver of the statutory three month waiting period on issuance of process; however, if the owner files such a waiver, the consideration for such waiver (whether or not expressly stated in the waiver) will be the waiver and release by the judgment holder of any deficiency judgment against the owner. Another Indiana statute provides that a mortgagee may not concurrently foreclose upon its mortgage and maintain a second action for the debt secured by the mortgage or a second action to execute on a judgment obtained in connection with the mortgage indebtedness. Also, certain Indiana court decisions suggest that, in appropriate circumstances, a judgment debtor could avoid the consequences of a deficiency in the collection of a judgment after foreclosure sale if the price paid at auction is so low as to be "shocking to the Court's sense of conscience and justice." THE FOREGOING DOES NOT AND IS NOT INTENDED· TO SET FORTH A COMPLETE DESCRIPTION OF THE PROVISIONS OF INDIANA LAW THAT MAY AFFECT THE ENFORCEMENT OF RIGHTS AND REMEDIES UNDER THE INDIANA MORTGAGES. IN ORDER TO UNDERSTAND IN FULL THE RISKS AND PROCEDURES INVOLVED WITH THE FORECLOSURE OF THE INDIANA MORTGAGES UNDER INDIANA LAW, POTENTIAL HOLDERS OF THE SERIES 2008 BONDS ARE ADVISED, AND EXPECTED, TO CONSULT WITH AN EXPERT IN THE FIELD BEFORE PURCHASING THE SERIES 2008 BONDS. Florida Mortgages. Thc.Florida mortgages (the "Florida Mortgages") will be governed by Florida law. Under Chapter 697, Florida Statutes, all instruments in writing conveying or selling either real or personal property for the purpose or with the intention of securing payment of. money, shall be deemed to be a mortgage and subject to the rules of foreclosure, regulations and restraints and forrns as prescribed in relation to mortgages. Further, a mortgage is a lien on the property and is not a conveyance of legaltitle or right of possession. The Chapter regulates-assignment of rents and provides that unless otherwise · agree'd to iri writing by the mortgagee and mortgagor, the assignment of rents shall be enforceable upon the.mortgagor~s default and written demand:for the:rents made by .the:mortgagee to. the mortgagor.• Upon application.by a·mortgagee-or mortgagor in. a foreclosuretaction, and notwithstanding -52- any defenses, the court may require the mortgagor to deposit collected rents into the registry of the court or such other depository as the court may designate. Chapter 702, Florida Statutes, governs foreclosure of mortgages. All mortgages shall be foreclosed in equity and the ·court shall sever for separate trial all counterclaims against the foreclosing mortgagee and the foreclosure action, if tried, is to be tried without a jury. The entry of a deficiency decree for any portion of a deficiency is within the sound discretion of the court and the complainant also has the right to sue at common law to recovery such deficiency. The court has the power to rescind, vacate and set aside a decree of foreclosure of a mortgage at any time before the sale thereof has been actually made pursuant to the terms of such decree and to dismiss the foreclosure action upon payment of all court costs. IN ORDER TO UNDERSTAND IN FULL THE RISKS AND PROCEDURES INVOLVED IN THE FORECLOSURE OF THE MORTGAGES UNDER FLORIDA LAW, POTENTIAL OWNERS OF THE SERIES 2008 BONDS ARE ADVISED, AND EXPECTED, TO CONSULT WITH AN EXPERT IN THE FIELD BEFORE PURCHASING THE SERIES 2008 BONDS. Kentucky Mortgages. The real estate mortgages to be recorded upon the real estate located in the Commonwealth of Kentucky (the "Kentucky Mortgages") will be governed by Kentucky law. Under Kentucky law, the foreclosure sale of mortgaged property following a material event of default may only be made under a judicial proceeding, and powers of sale with respect to mortgaged real estate are not enforceable in the Commonwealth of Kentucky. Kentucky law provides that the title-holder of foreclosed real property shall have a one year right of redemption for the real property unless the real property sells at public sale for at least two thirds of the amount of the appraised value, which is established by two disinterested fee-holders prior to the sale. THE FOREGOING DOES NOT AND IS NOT INTENDED TO SET FORTH A COMPLETE DESCRIPTION OF THE PROVISIONS OF KENTUCKY LAW THAT MAY AFFECT THE ENFORCEMENT OF RIGHTS AND REMEDIES UNDER THE KENTUCKY MORTGAGES. IN ORDER TO UNDERSTAND IN FULL THE RISKS AND PROCEDURES INVOLVED WITH THE FORECLOSURE OF THE KENTUCKY MORTGAGES UNDER KENTUCKY LAW, POTENTIAL OWNERS OF THE SERIES 2008 BONDS ARE ADVISED, AND EXPECTED, TO CONSULT WITH AN EXPERT IN THE FIELD BEFORE PURCHASING THE SERIES 2008 BONDS. Missouri Deeds of Trust. The Missouri Deeds of Trust each will contain power of sale provisions and will be governed by Missouri law. Under Missouri law,- the beneficiary of a Deeds of Trust with power of sale may cause the instrument to be foreclosed either judicially, by a court proceeding (i.e., a lawsuit supervised and adjudicated by a court) or nonjudicially, by a sale pursuant to the contractual power of sale provisions in such Deeds of Trust. The collateral subject to the Missouri Deeds of Trust includes both real and personal property. Each Master Trustee, as the beneficiary thereunder, may conduct a unified judicial or nonjudicial foreclosure of the real.and personal property or may choose to conduct a separate foreclosure sale of the Missouri Deeds of Trust and the personal property under its related Master Indenture pursuant to Article 9 of the Missouri Commercial Code. A unified foreclosure under the Missouri Deeds of Trust will be subject to applicable real property law and must comply with certain additional requirements of the Missouri Commercial Code with regard to the personal property, including that the beneficiary must conduct such a sale in a "commercially reasonable" manner or risk invalidation of the sale or loss of the beneficiary's deficiency claim and its security interest in other collateral. Little guidance exists for -53- conducting a "commercially reasonable" sale under these·circumstances: Therefore, no assurance can be given that a foreclosure sale of either Master Trustee's interest in the Missouri Deeds of Trust will not subsequently be held to be invalid and set aside or that a purchaser could be found for such interests. IN ORDER TO UNDERSTAND IN FULL THE RISKS. AND PROCEDURES INVOLVED IN THE FORECLOSURE OF THE MISSOURI DEEDS OF TRUST UNDER MISSOURI LAW, POTENTIAL OWNERS OF THE SERIES 2008 BONDS ARE ADVISED, AND EXPECTED, TO CONSULT WITH AN EXPERT IN THE FIELD BEFORE PURCHASING THE SERIES 2008 BONDS. Environmental Matters Health care facilities 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 the such facility or hospital; 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 Obligated Groups 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 Groups. Possible Future Federal Tax Legislation It is possible that·future tax le'gislation could require that the interest on the Governmental Bonds be included in the gross income ofthe holders for federal income tax purposes, and the value or marketability ·of the Governmental Bonds could be adversely affected by any such legislation. The Governmental Bonds are not required to be redeemed in the event that interest on the Governmental Bonds becomes includable in gross income for federal income tax purposes or becomes an item of tax preference for purposes of the federal alternative minimum tax applicable to individuals, and there is no provision in the Bond Indentures, the Governmental Bonds, or any document related to the issuance thereof, for an increase in the rate of interest payable on the Governmental Bonds in the event that interest on the Governmental Bonds becomes includable in gross income for federal income tax purposes or becomes an item of tax preference for purposes of the federal alternative minimum tax applicable to individuals. See "TAX MATTERS" herein. -54- Internal Revenue Code Compliance The Internal Revenue Service (the "IRS") has determined that each member of the RHF Obligated Group is a tax-exempt organization described in Section 50l(c)(3) of the Internal Revenue Code of !986, as amended (the "Code"), and exempt from taxation under Section 50l(a) of the Code. As a tax-exempt, charitable organization,. each member of the RHF Obligated Group and its operations is subject to various requirements specified by the Code and the regulations promulgated thereunder. Compliance with those requirements is necessary to maintain the tax-exempt status of each member of the RHF Obligated Group. If any member of the RHF Obligated Group should fail to meet any of the requirements specified by the Code and regulations thereunder as necessary to maintain its tax-exempt status, action could be initiated by Federal or state tax authorities to attempt to subject such member, its property and its revenues to taxation. If successful, such action could cause interest on the Series 2008 Bonds to be taxable to the holders thereof. Under the Code as amended to the date of this Official Statement, the failure of a Member of either Obligated Group to maintain its tax-exempt status could constitute a default under the related Loan Agreement or in connection with the ML Bonds and the Y A Bonds, the related Bond Indenture. Each Member of the Obligated Groups has covenanted in its related Loan Agreement or Bond Indenture (with respect to Martin Luther and Yellowwood only), as applicable, or in a Tax Agreement, and RHF and FPM have covenanted in the RHF/FPM Guaranties, that it will not take or omit to take any action, if such act or omission would cause the interest on the Series 2008 Bonds to be includable in the gross income of any holders of its respective series of the Series 2008 Bonds for Federal income tax purposes. However, there is no provision in the Bond Indentures, or any other document related to the issuance of the Series 2008 Bonds, which requires that the Series 2008 Bonds be redeemed or accelerated in the event that the interest on the Series 2008 Bonds becomes includable in gross income of the holders thereof for Federal income tax purposes. Loss of tax-exempt status by a Member of an Obligated Group or RHF or FPM could result in loss of tax-exemption of the Series 2008 Bonds and of other tax-exempt debt issued for the benefit of the RHF Obligated Group, and defaults in covenants regarding the Series 2008 Bonds and other related tax-exempt debt would likely be triggered. Such an event would have material adverse consequences on the financial condition of the RHF Obligated Group. The maintenance by each member of the of the RHF Obligated Group of tax-exempt status depends, in part, upon the maintenance of its status as an organization described in Section 50l(c)(3) of the Code. The maintenance of such status is contingent upon compliance with general mles promulgated in ·the Code and related regulations regarding the organization and operation of tax"exempt ent.ities, including their operation primarily for charitable purposes. The IRS has announced that it intends to closely scmtinize transactions between nonprofit corporations and for-profit entities, including transactions relating to the Anti-Kickback Law, and has issued revised audit guidelines for tax-exempt health care entities. Although specific activities of health care entities have been the subject of interpretations by the IRS in the form of Private Letter Rulings, many activities have not been addressed in any official opinion, interpretation or policy of the IRS. Because the RHF Obligated Group conducts large-scale and diverse operations involving private parties, there can be no assurance that certain of the RHF Obligated Group's transactions would not be challenged by the IRS. On July 31, 1996, the Federal Taxpayers Bill of Rights 2 (the "Taxpayers Act") was signed into law. The Taxpayers Act provides the IRS with an "intermediate" tax enforcement tool to combat violations by tax-exempt organizations of the private inurement prohibition of the Code. Prior to this "intermediate sanctions" law, the IRS could punish such violations only through revocation of an organization's tax-exempt status. -55- Intermediate sanctions may now be imposed where there is an "excess benefit transaction," generally defined to include a disqualified person (i.e., an insider) engaging in an economic transaction with a tax-exempt organization at other than fair market value. A disqualified person who benefits from an excess benefit transaction will be required to restore the excess benefit to the exempt organization and will be subject to a "first tier" penalty excise tax equal to 25% of the amount of the excess benefit. Organizational managers (e.g., directors) .who participate in an excess benefit transaction knowing it to be improper are subject to a "first-tier" penalty excise tax of 10% of the amount of the excess benefit, subject to a maximum penalty of $10,000. A "second tier" penalty excise tax of 200% of the amount of the excess benefit may be imposed on the disqualified person (but not the organizational manager) if the excess benefit transaction is not corrected in a specified time period. Amendments to Documents Certain amendments to the Financing Documents may be made without the consent of the Holders and other amendments may be made with the consent of the Holders of a majority in aggregate principal amount of all outstanding Series 2008 Bonds. Such amendments could affect the security for the Series 2008 Bonds. Certain amendments may be made without the consent of the Holders of the Series 2008 Bonds if the amendment does not materially adversely affect the interest of the Holders. Additionally, the Bank's consent shall be required for any amendments. See "SUMMARY OF PRINCIPAL DOCUMENTS - Summary of Certain Provisions of the Bond Indentures- Rights of Bank; Exceptions to Requirement of Bank Consent" in APPENDIX B. RATINGS The Series 2008 Bonds have received a long-term rating of"AA-" and a short-term rating of "A-1 +" from Standard & Poor's, a division of The McGraw Hill Companies, Inc. ("Standard & Poor's") based on and contingent upon the issuance of the Initial Letters of Credit. These ratings reflect each rating agency's current assessment of the credit-worthiness of the Initial Bank. Each such rating reflects only the view of such organization and an explanation of the significance of such rating may only be obtained from such rating agency. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely, if in the judgment of such rating agency circumstances so warrant. Any downward revision or withdrawal of either such rating may have an adverse effect on the market price of the Series 2008 Bonds. Such rating is not to he construed as a recommendation of such rating agency to huy, sell or own the Series 2008 Bonds. A further explanation of the significance of the ratings may be obtained from S&P. The Issuers, the RHF Obligated Group and the Underwriter have undertaken no responsibility either to bring to the attention of the Holders any proposed change in or withdrawal of such rating or to oppose any such proposed revision or withdrawal. Any such downward change in or withdrawal of the rating may have an adverse effect on the market price of the Series 2008 Bonds. -56- NO CONTINUING DISCLOSURE REQUIREMENTS WHILE THE SERIES 2008 BONDS ARE IN A WEEKLY RATE PERIOD Inasmuch as the Governmental Bonds are limited obligations of the respective Governmental Entities, each Governmental Entity has determined that no financial or operating data concerning it is material to any decision to purchase, hold or sell the Governmental Bonds, and the Governmental Entities will not provide any such information. The Obligated Groups have undertaken all responsibilities for any continuing disclosure to holders of the Governmental Bonds as described below, and the Governmental Entities shall have no liability to the holders or any other person with respect to such disclosures. · Offerings of municipal securities with minimum denominations of $100,000 or more and which, at the option of the holder thereof, may be tendered to the issuer of the municipal securities or its agent for redemption or purchase at par value or more at least as frequently as every nine months are exempt from Rule 15c2-12 (the "Rule") under the Securities Exchange Act of 1934, as amended, including the continuing disclosure requirements of the Rule. On the basis of this exemption, neither of the Obligated Groups nor any other person will enter into a continuing disclosure· undertaking under the Rule with respect to the Governmental Bonds while the Governmental Bonds are in the Weekly Mode. The Corporate Taxable Bonds are not municipal securities. ERISA CONSIDERATIONS In general, the Series 2008 Bonds· may be purchased by an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), an· individual retirement account or other plan to which Section 4975 of the Code applies, or an entity whose underlying assets are deemed to include the assets of such an employee benefit plan, account or other plan by reason of an investment in the entity. An employee benefit plan subject to ERISA, or an individual retirement account or other plan subject to Section 4975 of the Code, is referred to as a "Plan." A Plan fiduciary should determine whether the purchase (and holding) of the Series 2008 Bonds with Plan assets is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of the Code. In this connection, a Plan fiduciary should consider whether the Issuer, another Member of the Obligated Group or the Letter of Credit Provider, Tmstee, Servicer, Underwriters, or any of their respective affiliates is a fiduciary, disqualified person or party in interest (each as defined under ERISA and/or the Code) with respect to a Plan and, if so, whether the use of Plan assets to purchase (or the continued holding of) the Series 2008 Bonds is exempt from the prohibited transaction provisions of ERISA and the Code, taking into account any available exemption under ERISA. ' · In deterinining whether a Plan's purchase of the Series 2008 Bonds is consistent with its fiduciary duties under ERISA, a Plan fiduciary should consider, ·among other things, that under the so called "Plan Asset Regulations," 29 C.P.R. §2510.3-10 I, the assets of the Obligated Groups may be considered to be assets of the Plan if the Series 2008 Bonds constitute an interest other than an instrument that is treated as·indebtedness under "applicable local law" and which has no "substantial equity features" (as those_ t.e~ms.are used in the· Pian Asset Regulations). ANY PLAN FIDUCIARY WHICH PROPOSES TO CAUSE A PLAN TO ACQUIRE THE SERIES·2008.BONDS; AND ANY ENTITY WHOSE UNDERLYING ASSETS ARE DEEMED TO INCLUDE PLAN ASSETS WHICH PROPOSES TO ACQUIRE THE SERIES 2008 BONDS, SHOULD CONSULT WITH ITS LEGAL COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES. UNDER ERISA· AND THE CODE, OF THE PLAN'S OR THE ENTITY'S -57- ACQUISITION AND OWNERSHIP OF THE SERIES 2008 BONDS. Among other things, before purchasing any Series 2008 Bonds, a fiduciary of a Plan, or such an entity, should make its own determination as to whether the Series 2008 Bonds will constitute instruments treated as indebtedness under :'applicable local law" and which have no "substantial equity features," and the application of any exemptive relief provided in the Plan Asset Regulations and any prohibited transaction exemptions . . Employee benefit plans which are governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not subject to the fiduciary responsibility or prohibited transaction provisions of ERISA. However, such plans should consider the applicability of other federal and state laws, including the prohibited transaction rules of Section 503 of the Code, to their purchase of the Series 2008 Bonds, and should consult with their legal counsel concerning such issues. LITIGATION Governmental Entities To the knowledge of each Governmental Entity, there is not now pending or threatened any litigation seeking to restrain or enjoin the issuance or delivery of the related series of Series 2008 Bonds or questioning the validity of the Series 2008 Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization or existence, nor the title of the present members or other officers of each Governmental Entity to their respective offices is being contested. To its knowledge, there is no litigation pending or threatened which questions the right of each Governmental Entity to enter into the related Loan Agreement and Bond Indenture. The RHF Obligated Group The RHF Obligated Group has no material litigation or proceedings pending or, to its knowledge, threatened against it (i) which in any manner questions the right of any member of the RHF Obligated Group to enter into or secure the Series 2008 Bonds in the manner provided ill the Financing Documents, or (ii) except litigation in ..which the probable recoveries, and the estimated costs and expenses of defense, will be within the RHF Obligated Group's applicable insurance policy limits (subject to applicable deductibles) or will otherwise not be material_. LEGAL OPINIONS All legal matters incidental to the authorization and issuance and delivery of tlie Governmental Bonds by the Governmental Entities are subject. to the approval of Jones Day, Bond CoUI\sel to the RHF Obligated Group with respect to the California Bonds, the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the indiana Bonds, the Colonial Heights Bonds, the Colonial Gardens Bonds and the Missouri Bonds. Foley & Lardner LLP will act as Co-Bond Counsel.with respect to the Vol usia (Florida) Bonds. Certain. legal matters will be passed upon for the California Authority by its counsel, Orrick, Herrington & Sutcliff LLP. Certain legal matters will be passed upon for the Volusia Issuer by Douglas A. Daniels, Esq., Daytona Beach, Florida. Certain legal matters will be passed upon for the Brevard Issuer by its counsel, Angela Abbott, Esq., Titusville, Florida. Certain legal matters will be passed upon for the Indiana Issuer by its counsel, Chri~ Sturgeon, Esq., Clar~sville, Indiana. Certain legal matters will-be passed upon for the Kentucky Issuer by Stites ~ Harbison PLLC, Louisville, Kentucky. Certain legal matters will be passed upon for the Missouri Issue~ by its counsel, Le»'is, Rice & Fingersh, L.C., St. Louis, Missouri. Certain legal matters will be passed upon ~or. the RHF Obligated Group -and -58- with.respect to New York law and California·law;·by Latham'·&·Watkins LLP,.New:York, New York and Los Angeles, California, with respect to Florida law including the enforceability of the ML -Bondsi by Daniel J. Webster, P.A., Daytona Beach, Florida, with respect to Indiana law including enforceability of theY A Bonds; by Ice Miller LLP, Indianapolis, Indiana, with respect to Kentucky law, by Graydon Head & Ritchey LLP, Ft Mitchell, Kentucky and· with respect to Missouri law, by Thompson Coburn LLP; St. Louis, Missouri. Certain legal matters will be passed upon for the Missouri Jssuer·by its counsel, 'Lewis, Rice & Fingersh, L.C., St. Louis, Missouri. Certain legal matters with respect to the Initial Letters of Credit will be passed upon for the Initial Bank by its U.S. law counsel, Ballard Spahr Andrews and Ingersoll, LLP, Philadelphia; Pennsylvania, and its foreign .law counsel, Linklaters ·DeBandt, Brussels, Belgium. • Certain •legal matters will be:passed· upon for the Underwriter by its counsel, Katten· Muchin Rosenman LLP, Chicago, Illinois, and· Los Angeles, California, who may rely as to certain matters upon the opinions of tlie aforesaid colinsel. ''. TAX·MATTERS · ... Federal Income Taxation The Code contains several requirements and restrictions that apply to the Governmental Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States of America, requirements regarding the timing and the proper use of bond proceeds and the facilities financed or refinanced, and certain other ·matters. The Governmental Entities and the related Borrowers have covenanted to comply with all requirements of the Code that must be satisfied in order that interest on the Governmental Bonds be excludible from gross income for federal income tax purposes. Failure to comply with certain. Subject to compliance by the Governmental Entities and related Borrowers with the above-referenced covenants, under present law, in·the opinion of Jones Day, Bond Counsel to the RHF Obligated Group,- interest on the Governmental Bonds will not be includible in the gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax· preference in computing the alternative minimum tax for individuals and corporations. Interest on the Governmental Bonds will be taken into account, however, in computing an adjustment used in determining the alternative minimum· tax for certain corporations and in computing the "branch profits tax" imposed on certain foreign corporations. · In rendering its opinion; Bond Counsel will rely on certifications of the RHF Obligated Group with respect to certain material facts solely within the knowledge of the RHF Obligated Group relating to, among other things, the propertY financed or refinanced with the proceeds of the Governmental Bonds and the application of the proceeds of the Governmental Bonds, and will rely on the verification report of Chris D. Berens, CPA, P.C., described under the heading "VERIFICATION OF MATHEMATICAL COMPUTATIONS" with respect to certain mathematical computations. See APPENDIX C for the proposed text of Bond Counsel's opinions for the Governmental Bonds. ·The Code includes provisions for an alternative minimum tax ("AMT") on corporations. The AMT, if any, depends on a corporation's alternative minimum taxable income ("AMTJ'.'), which is a corporation's taxable income with certain adjustments. One of the. adjustment items used in computing AMTI of a corporation (excluding S corporations, Regulated Investment Companies, Real Estate Investment Trusts and REMICS) is an amount equal to 75% o'rthe excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative. tax -59- net operating loss deduction). "Adjusted current earnings" would include all tax-exempt interest, including interest on the Governmental Bonds. Under the. provisions of Section 884 of the Code, a branch profits tax is levied on the "effectively connected earnings and profits" (ECEP) of certain foreign corporations. ECEP includes tax exempt interest such as interest on the Governmental Bonds. Ownership of the Governmental Bonds may result in collateral federal income tax consequences to certain taxpayers, including without limitation, financial institutions, certain insurance companies, certain S corporations, individual recipients. of Social Security or Railroad Retirement benefits, and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry the Governmental Bonds. Prospective purchasers of the Governmental Bonds should consult their tax advisors regarding the applicability of any such collateral consequences. The market value and marketability of the Governmental Bonds may be adversely affected by future changes in federal or California, Florida, Indiana, Kentucky or Missouri tax treatment of interest on the Governmental Bonds or by future modifications of the Code or the regulations issued thereunder. State Tax Law Treatment Other than as set forth below with respect to taxation by the States of California, Florida, Indiana, Kentucky and Missouri, no opinion is expressed by Bond Counsel with respect to any other taxes imposed by such States or any political subdivisions thereof. Ownership of the Series 2008 Bonds may result. in other state law consequences to certain taxpayers and Bond Counsel expresses no opinion regarding any such consequences arising with respect to the Series 2008 Bonds. Owners of the Governmental Bonds should consult their own tax advisors regarding the tax consequences of owning Governmental Bonds. California. In the opinion of Jones Day, Bond Counsel, under the laws of the State of California as presently enacted and construed, interest on the California Bonds is exempt from the Personal Income Tax imposed by the State of California under Sections 17001 through 19802 of the California Revenue and Taxation Code. Florida. In the opinion of Jones Day, Bond Counsel, and Foley & Lardner LLP, Co Bond Counsel with respect to the Volusia (Florida) Bonds only, under the laws of the State of Florida, as presently enacted and construed, the Brevard (Florida) Bonds and Volusia (Florida) Bonds and interest therefrom are exempt from all Florida taxes, except taxes imposed by Chapter 220 of the Florida Statutes on or measured by income attributable to debt obligations owned by corporations, organizations, associations and other artificial entities and except for estate taxes imposed by Chapter 198, Florida Statutes. Indiana. In the opinion of Jones Day, Bond Counsel,. under the laws of the State of Indiana as presently enacted and construed, interest on the Indiana Bonds, when issued, will be exempt from taxation in Indiana for all purposes except the financial institutions tax imposed under IC 6-5.5 or a state inheritance tax imposed under IC 6-4.1. Indiana Code .6-5.5-2-l imposes a franchise tax on certain taxpayers (as defined in Indiana Code 6-5.5-1-17) which, in •general, are all corporations transacting the business of a financial institution in the State: The franchise. tax is measured in part by interest excluded from .gross income under .Section I 03, of the Code minus· as.sociated ·expenses disallowed under. Section 265 of the Code. Taxpayers should-consulftheir own tal\ advisers: regarding the•irilpact-of.this legislation on their ownership of the Indiana_ Bonds . . · · i'"'' · ·,- • ·: ·t!/l,} i .l· 1i · ; .· _,,: : .:1d .-Jf;:~ iJ~: ~b :..; .; .. · ; · ... -60- Kentucky. In the opinion of Jones Day, Bond Counsel, pursuant to Chapter 103 and Chapter 154, Sections 154.20-010 to 154.20-080 of the Kentucky Revised Statutes (as enacted and construed on the date of such opinion) pursuant to which the Kentucky Bonds·are issued, the Kentucky Bonds and interest on the Kentucky Bonds are exempt from taxation by the Commonwealth of Kentucky and any of its political subdivisions except as to estate, gift, and inheritance taxes. Missouri. In the opinion of Jones Day, Bond Counsel, pursuant to Section 349.090 of the Missouri Revised Statutes (as enacted and construed on the date of such opinion), the interest and income from the Missouri Bonds are exempt from taxation by the State of Missouri except as to death and · gift taxes on transfers. Tax Matters Relating to the Corporate Taxable Bonds INTEREST ON THE CORPORATE TAXABLE BONDS IS NOT EXCLUDED FROM THE GROSS INCOME OF BONDHOLDERS: . The following discussion is a summary of certain United States federal income tax considerations relevant to the purchase, ownership and disposition of the Corporate Taxable Bonds by holders thereof, based upon current provisions of the Code, judicial decisions and administrative interpretations. This summary does not purport to be a complete analysis of all the potential federal income tax effects relating to the purchase, ownership and disposition of the Corporate Taxable Bonds, and, without limiting the generality of the foregoing, it does not address the effect of any foreign, state or local tax laws, or the special rules applicable to certain types of purchasers (including dealers in securities, insurance companies, United States expatriates, financial institutions and tax-exempt entities). Each prospective purchaser of the Corporate Taxable Bonds is strongly urged to consult its own tax advisor with respect to its particular tax situation and possible changes in the tax laws. To ensure compliance with United States Treasury Department Circular 230, investors in the Corporate Taxable Bonds are hereby notified that: (a) any discussion of United Stated federal tax issues in this document is not intended or written to . be relied upon, and cannot be relied upon by investors in the Corporate Taxable Bonds, for the purpose of avoiding penalties that may be imposed on investors in the Corporate Taxable Bonds under the Code; (b) such discussion is written in connection with the promotion or marketing of the transactions or matters addressed· herein by the Corporation and the Underwriter; and (c) investors in the Corporate Taxable Bonds should seek advice based on their particular circumstances from their own independent tax advisors . . -. ~ Interest. Except in the case of a Holder who is a foreign person and who is not subject to federal income tax on income derived from a Corporate Taxable Bond (see the discussion below regarding foreign persons), the interest paid on a Corporate Taxable Bond should be included in the Holder's gross income for federal income tax purposes at the time that the interest is paid or accrued, in accordance with the Holder's method of accounting for federal income tax purposes. Sale or Exchange of Corporate Taxable Bonds. In the case of a sale or exchange (including a redemption) of a Corporate Taxable Bond, the Holder will recognize gain or loss equal to the difference, if any, between the amount received and the Holder's adjusted tax basis in the Corporate ·Taxable Bond. With respect to a Corporate Taxable Bond that is held as a "capital asset" within the meaning·of Section 1221 of the Code·and that it not held as part of a "conversion transaction" within the meaning of Section 1258 of the Code, any gain or loss will be treated as a capital gain or loss, except to the extent that any gain is treated as.ordinary.income under the "market discount" rules. Any capital gain or loss will be ·treated as' a long"terrn capital gain or loss if, at the time of the sale or exchange, the Corporate Taxable Bond has been held by the Holder for more than one year. · -61- Certain United States Tax Consequences to .Foreign Persons. The following is a general· discussion of certain United States federal income' and estate tax consequences of the ownership of Corporate Taxable Bonds by a nonresident alien, a foreign· corporation, a foreign trust ·or a foreign estate for purposes of the Code (a "foreign person"). Foreign partnerships are subject to special income and withholding tax rules. Holders· of Corporate Taxable Bonds who are foreign persons or foreign partnerships are urged to consult their own tax advisers regarding the specific tax consequences to them of owning Corporate Taxable Bonds. •.. ; Interest earned on a Corporate Taxable Bond by a Holder who is a foreign person will be considered "portfolio interest" and will not be subject to United States federal income tax or withholding if: (I) such foreign person is not (i) a "controlled foreign corporation" for purposes of the Code related to the· Corporation through stock ownership; (ii) a bank that is purchasing Corporate Taxable Bonds pursuant to an extension of credit made in the ordinary course of its trade or business; or (iii) an actual or constructive owner of I 0% or more of Corporation's voting stock;· (2) such foreign person provides the person who would otherwise be required to withhold tax from payments of such interest (the "withholding agent") with an appropriate statement, signed under penalties of perjury, identifYing the .Beneficial Owner and stating, among other things, that the Beneficial Owner of the Corporate Taxable Bond is a foreign person; and . (3) the interest is not (i) effectively connected with the conduct of a trade or business ·. within the United States -by. the foreign person;· or (ii) contingent interest for purposes of the Code. · . Any interest (other than '.'portfolio interest") earned .on a Corporate Taxable Bond by a foreign person will' be subject to United States federal withholding tax at a rate of 30% (or at a lower rate under an applicable tax treaty) if this interest is not effectively ·connected with the conduct of a trade or business within the United States by this foreign person. All interest .earned on a Corporate Taxable Bond, and any gain realized on a sale or exchange (including a redemption) of a Corporate Taxable. Bond, that is effectively connected with the conduct of a trade or business within the United States by a foreign person will be subject to United States federal income tax at regular graduated rates (and, if the foreign person is a corporation, may also be subject to a United States branch profits tax). Such income will not be subject to United States income tax' withholding; however, if the foreign person furnishes the proper certificate· to the withholding agent. Any gain realized by a foreign person on a sale or exchange (including a redemption) of a Corporate Taxable Bond will be subject to United States federal income tax (but not withholding tax)' if either (i) the gain is effectively connected with the conduct of a trade or business within the United States, or (ii) in the case of a nonresident alien, such individual is present in the United States for 183 days. or more in the taxable year of the· sale or exchange and certain other conditions are met. . For. United States estate tax purposes, the gross estate of a·. nonresident alien•individual who holds a·. debt. obligation of a United States .person is. generally .not deemed to include· such .debt obligation if, all of the interest on·the.obligation constitutes·~:portfolio. interestY , ·:· ,. .. · ,., ; ' ; l' , II''",. ' Backup Withholding. A 28% backup withholding can apply to .payments of interest and principal on, and any proceeds of a sale or exchange (including a redemption) of the Corporate Taxable -62- Bonds. In the case of a Holder that is-not a foreign ;person, backup withholding generally will apply only if such Holder-fails to furnish its correct-taxpayer .identification number, is notified by the IRS that such Holder has failed properly to report payments of interest· or dividends, or fails to provide a required certification under penalties of perjury. In the case of a Holder that is a foreign person, backup withholding generally will not apply to payments made on the Corporate Taxable Bonds if such Holder has provided the required certification under penalties of perjury that it is a foreign person,. as defined above, or has. otherwise established an exemption, provided in each case that the Borrower does not .have actual knowledge that the payee is a U.S, person who is not an exempt recipient.. ·. Any amounts withheld from payment under the backup withholding rules will be allowed as a credit against a Holder's United States federal income tax liability and may entitle such Holder to a refund, provided that the required information is furnished by the Holder to the IRS. UNDERWRITING The Underwriter has agreed to purchase the California Bonds at an aggregate purchase price of $40,584,195 (representing $40,860,000 aggregate. principal amount of the California Bonds less an. Underwriter's discount in the amount. of $275,805), pursuant to an agreement to be entered into by and a111ong the California Obligated Group, the California Authority and the Underwriter (the "Califo\'tlia Bond Purchase Agreement"), for reoffering by the Underwriter.. The California Bond Purchase Agreement provides that the Underwriter will purchase all of the California Bonds, if any are Purchased. The obligation of the Underwriter to accept delivery of the California Bonds is subject to various conditions contained in- the California Bond Purchase Agreement. . The Underwriter has agreed to purchase the Volusia (Florida) Bonds at an aggregate purchase price of $22,636,167.50 (representing $22,790,000 aggregate principal amount of the Volusia (Florida) Bonds less an Underwriter's discount in the amount of $153,832.50) pursuant to an agreement to be entered into by.and among Holly Hill, the Volusia Issuer and the Underwriter (the "Volusia Bond Purchase Agreement"). The Underwriter has agreed to purchase the Brevard (Florida) Bonds at an aggregate purchase price of Underwriter's $19,269,050 (representing $19,400,000 aggregate principal amount of the Brevard (Florida) Bonds less an Underwriter's discount in the amount of $130,950), pursuant to an agreement entered into by and among the Brevard Issuer, Merritt . Island. and the Underwriter (the "Brevard Bond Purchase Agreement") . .The Underwriter has agreed to purchase the Indiana-Bonds at an aggregate purchase price of$4,087,223.75 (representing $4,115,000 aggregate principal amount of the Bonds less an Underwriter's discount in the amount of $27,776.25) pursuant to an agreement to be entered into by and among the Indiana Issuer, Yellowwood and the Underwriter (the "Indiana Bond Purchase Agreement"). The Underwriter has agreed to purchase the Colonial Heights Bonds at an aggregate purchase price of $7,975,797.50 (representing $8,030,000 aggregate principal amount of the Colonial Heights Bonds less an Underwriter's discount in the amount of $54,202.50), -pursuant to an agreement by and among the Kentucky Issuer, Bluegrass and. the Underwriter (the -'-'Colonial Heights Bond Purchase Agreement"). ·, ., .... -63- The Unde!Writer has agreed to purchase the Colonial Gardens Bonds at an aggregate purchase price of $7,652,991.25 (representing $7,705,000 aggregate principal amount of the Colonial Gardens Bonds less an Underwriter's discount in the amount of $52,008.75), pursuant to·an agreement by and among the Kentucky Issuer, Bluegrass and the Underwriter (the "Colonial Gardens -Bond Purchase Agreement"). The Underwriter has agreed to purchase the Missouri Bonds at an aggregate purchase price of $13,552,896.25 (representing $13,645,000 aggregate principal amount of the Missouri Bonds less an Underwriter's discount in the amount of $92,103.75), pursuant to an agreement by and among the Missouri Issuer, DeSmet, St. Catherine and the Underwriter (the "Missouri Bond Purchase Agreement").· The Underwriter has agreed to purchase the ML Bonds at an aggregate purchase price of $5,870,107.50 (representing $5,910,000 aggregate principal amount of the ML Bonds less an Underwriter's discount in the amount of $39,892:50), pursuant to an agreement by and among Martin Luther and the Underwriter (the "ML Bond Purchase Agreement"). The Underwriter has agreed to purchase the YA Bonds at an aggregate purchase price of $4,355,401.25 (representing $4,385,000 aggregate principal amount of the Y A Bonds less an Underwriter's discount in the amount of $29,598.75), pursuant to an agreement by and among Yellowwood and the Underwriter (the "YA Bond Purchase Agreement," together with the California · Bond Purchase Agreement, the Volusia Bond Purchase Agreement; the Brevard Bond Purchase Agreement, the Indiana Bond Purchase Agreement; the Colonial Heights Bond· Purchase Agreement, the Colonial Gardens Bond Purchase Agreement, the Missouri Bond Purchase Agreement and the ML Bond Purchase Agreement, the "Bond Purchase Agreements"). The RHF Obligated Group has agreed to indemnity the Underwriter and each Governmental Entity against certain liabilities. The obligation of the Underwriter to accept delivery of the Series 2008 Bonds is subject to various conditions contained in the Bond Purchase Agreements. ' VERIFICATION OF MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedule provided by the Underwriter on behalf of the Issuers relating to (a) computation of forecasted receipts of principal of and interest on the Government Obligations held pursuant to each Escrow Agreement and the forecasted payments of principal and interest-to redeem each series of Prior Bonds and (b) the computation of the yields of each series of the Prior Bonds and the securities held pursuant to each Escrow Agreement was examined by Chris D. Berens, CPA, P.C. Such computations were based solely upon assumptions and information supplied by the Underwriter on behalf of the Issuers. Chris D. Berens, CPA, P.C. has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based. MISCELLANEOUS The reference herein to the Bond Indentures, the L~an Agreements, the Mortgages, the Initial Reimbursement· Agreements, the Gross Revenue Pledge Agreement, the Guaranties, the Master Indentures and the Escrow Agreements are brief outlines ·of certain provisions thereof. These outlines do not purport to be complete and for full and complete statements of such provisions reference is ·made to the Acts, the Bond Indentures, the Loan Agreements, the Mortgages, the Initial Letters of Credit, the -64~ Initial Reimbursement Agreements, the Gross Revenue Pledge Agreement, the Guaranties and the Master Indentures. Neither·any advertisement of the Series 2008 Bonds nor this Official Statement· is·to be construed as constituting an agreement with the purchasers of the Series 2008 Bonds. So far as any statements are niade in this Official Statement involving matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. Copies of the documents mentioned under this heading are on file at the offices of the respective Issuers and following delivery of the Series 2008 Bonds will be on file at the offices of the Master Trustees. It is anticipated that CUSIP identification numbers will be printed on the Series 2008 . Bonds, but neither the failure to print such numbers on any Series 2008 Bond nor any error in the printing of such numbers shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for any Series 2008 Bonds. ' The attached APPENDICES A, B, C, and D are integral parts of this Official Statement and must be read together with all of the foregoing statements. The RHF Obligated Group has reviewed the information contained herein which relates to it, and has approved all such information for use within the Official Statement. The Governmental-Entities and each State or Commonwealth, County or City in which any such Governmental Entity is located have not participated in the preparation of or reviewed, and will not participate in the preparation-of or review, this Official Statement and the Governmental Entities and each State or Commonwealth and each County and City in which any such Government Entity is located have made no independent investigation of the facts and statements provided herein and assume and shall have no liability or responsibility for the accuracy, completeness, or sufficiency hereof. The Series 2008 Bonds are being marketed exclusively on the credit of KBC Bank N. V., New York Branch, the Initial Bank, and not on the credit of the RHF Obligated Group. This Official Statement only describes the Series 2008 Bonds while they bear interest at Weekly Rates. If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such series of the Series 2008 Bonds will be remarketed pursuant to reoffering disclosure which will either supplement or replace this Official Statement. Any information about the members of the RHF Obligated Group is included only for the convenience of the reader and should not be interpreted to imply that the Series 2008 Bonds are being offered on the credit of the RHF Obligated Group. ~: --.. '' .' The execution and delivery of this Official Statement has been duly authorized by the RHF Obligated Group. This Official Statement is approved: . RETIREMENT HOUSING FOUNDATION FOUNDATION PROPERTY MANAGEMENT, INC. BIXBY KNOLLS TOWERS, INC. GOLD COUNTRY HEALTH CENTER, INC. MAYFLOWER RHF HOUSING, INC. MAYFLOWER GARDENS HEALTH FACILITIES, INC. SUN CITY RHF HOUSING, INC. BLUEGRASS RHF HOUSING, INC. DESMET RHF HOUSING, INC. HOLLY HILL RHF HOUSING, INC. MERRITT ISLAND RHF HOUSING, INC. ST. CATHERINE RHF HOUSING, INC. YELLOWWOOD ACRES, INC. MARTIN LUTHER FOUNDATION, INC. By: lsi Rev. Laverne R. Joseph. D.O. President By: lsi Deborah J. Stouff Secretary -66- APPENDIX A DESCRIPTION OF RETIREMENT HOUSING FOUNDATION, FOUNDATION PROPERTY MANAGEMENT, INC. THE CALIFORNIA OBLIGATED GROUP AND THE NATIONAL OBLIGATED GROUP TABLE OF CONTENTS History and Mission ...... A-1 General ...... A-1 The RHF Obligated Group ...... A-2 The California Obligated Group ...... A-5 The National Obligated Group ...... A-5 Other Debt Guaranteed by RHF ...... A-6 Future Plans ...... A -6 .l. .I (i) History and Mission Retirement Housing Foundation ("RHF"), a California nonprofit public benefit corporation, was incorporated in 1961 as a nonprofit management and development corporation. It is a member of the Council of Health and Human Services Ministries of the United Church of Christ. The activities of RHF include developing, operating and maintaining housing and related facilities for senior adults, persons with disabilities, and low-income families; providing certain . services in connection with the facilities including nursing, rehabilitation, dietary, educational and recreational services; and assisting other organizations in undertaking any of the foregoing. The original objectives of RHF are reflected in its mission statement: ''The mission of Retirement Housing Foundation, a national nonprofit organization, is to provide a range of housing options and services for senior adults, low-income families, and persons with disabilities, according to their needs, in an environment reinforcing the quality of life as it relates to their physical, mental and spiritual well-being. Retirement Housing Foundation is committed to serving its residents and their local communities." General Since the opening of its first facility in 1965, RHF and its affiliated corporations have grown to be one of the nation's largest nonprofit providers and managers of affordable housing, skilled nursing and assisted living services for the disabled and senior adults. As of December 31, 2007, RHF and its affiliates have expanded to 155 facilities controlled and/or managed in 24 states, Puerto Rico and the Virgin Islands. In total, they serve approximately I 7,000 residents with approximately 14,750 units and beds. The properties controlled or managed by RHF are divided into two groups. Nineteen "market rate" projects comprise the first group of RHF facilities, twelve of which are members of either the hereinafter described California Obligated Group or the National Obligated Group (the "Obligated Groups"). A separate single-purpose nonprofit corporation of which RHF is the sole member owns each of these facilities, with the exception of the Mayflower Gardens project, in which the skilled nursing facility and the housing facilities are owned by separate single purpose corporations-Mayflower Gardens Health Facilities, Inc. and Mayflower Gardens RHF Housing, Inc. The market rate portfolio consists of 2,403 apartments, I 002 assisted living .units and 651 skilled nursing beds for senior adults. RHF classifies as "market rate" all of the facilities in the Obligated Groups. SEVEN MARKET RATE FACILITIES ARE NOT INCLUDED IN THE OBLIGATED GROUPS AND ARE NOT OBLIGATED TO MAKE ANY PAYMENTS WITH RESPECT TO THE MASTER INDENTURES OR THE SERIES 2008 BONDS. The second group consists of 136 facilities providing low-and-moderate income apartments for senior .adults (9,812 units), for those with special needs (276 units) and for families· (606 units). RHF and its nonprofit affiliates own 134 of these facilities. Either community-based nonprofits or partnerships, which have contracted for management with RHF affiliates, own the balance. NONE OF THE ENTITIES IN TillS SECOND GROUP ARE MEMBERS OF THE OBLIGATED GROUPS NOR ARE THEY OBLIGATED TO MAKE A-I ANY PAYMENTS WITH RESPECT TO THE MASTER INDENTURES OR THE SERIES 2008 BONDS. . ·;. ;',. RHF has formed two property management companies that manage the communities for a fee,. RHF and its management companies provide a wide range of services to communities in both the low-and-moderate income and market rate portfolios. Services provided by the management companies and RHF include property management, consulting, quality · assurance, accounting, financial, .. legal, human• . resources, public relations, risk management and administrative services. Foundation Property Management, Inc., a California nonprofit public benefit corporation ("FPM"), of which RHF is the sole member, manages all of the RHF-controlled nonprofit communities; irichiding all ofthb comm'uriities owned by members of the Obligated Groups. FPM is not a member of either Obligated Group, but has pledged its gross revenues as security for the obligations under 'the Master indentures and the Guaranties. . . . . ' ·.. . •. •, RHF Management, Inc. is a California corporation and all ·of its stock is owned by RHF. 'RHF Management, Inc. manages 'tWo communities (198 units), which are owned by unaffiliated corporations or by partnerships in which ·RHF or an affiliate is a general partner. RHF MANAGEMENT, INC. IS NOT A MEMBER OF EITHER OBLIGATED GROUP AND IS NOT OBLIGATED TO MAKE ANY PAYMENTS WITH RESPECT TO EITHER MASTER INDENTURE OR THE SERIES 2008 BONDS. . ,• ' ' All membe~s of both the heremafter described California Obligated Group and the hereinafter described Natimi.al 'Obligated Group, RHF and FPM· have received determinations ·from the Internal Rev'enue ·service that they are exempt froin federai income taxation under Section 50l(c)(3) of the Internal·Reveriue Code of 1986 (the "Code") as organizations described in Section 50I(a) of the Code. · '·''·'- ··· . ·: The.RHF Obligated Group The "RHF Obligated Group"· is a definition of convenience used herein to refer to RHF, FPM, the members ·of the California Obligated Group· and the members of the National Obligated Group, collectively. There is·no single master indenture signed by all these entities. Neither RHF nor FPM will be members of either the· California Obligated GroujJ'or the National Obligated Group. ·: •· ' · · · · ·· ' RHF and FPM will each sign a Guaranty Agreement with each Master Trustee in which each will guarantee the payment and performance of the membeis of the California Obligated Group and the National Obligated Group, respectively. RHF, FPM, the members of the .California Obligated Group and the members of the National Obligated Group will all enter into the Gross Revenue Pledge Agreement, pledging and granting a security interest in· their Gross Revenues to secure any Obligations issued under the Master Indentures and to secure their payment- obligations to Lehman pursuant to the Swap Agreement.'• Each: member of the California Obligated Group ·will execute and deliver. (i) a Deed of Trust• to a trustee for.. the benefit of the California Master Trustee, (ii) ·a Second Deed of Trust to a trustee and (iii) a Guaranty Agreement guarantying the Obligatioris·issued under the National Mastedndenture for the benefit of the National Master Trustee. Each member of the National Obligated Group will execute ancl deliver: (i) a Mortgage to the National'Master Trustee, (ii) a Second Mortgage and A-2 (iii)· a Guaranty Agreement guarantying the Obligations issued under the California Master Indenture to the California Master Trustee. The following page provides an organizational chart of RHF and its controlled affiliates, including the National ObligatediGroup, the California Obligated Group and FPM. A-3 ORGANIZATION CHART FOR RETIREMENT HOUSING FOUNDATION AND RELATED CORPORATE ENTITIES 128 Not-for-Profit RHF Corporations RHF Man·agement, Inc. Providing Low-to Foundation, Inc. Moderate Income Housing Other Foi-Profit SUbsidiaries 0 = Entities Pledging Gross Revenues liiiiD = California Obligated Group 1<~(:- A-4 The California Obligated Group ... The California Obligated · Group, established under the California Master Indenture, consists of the following members: Bixby Knolls Towers, Inc. (Bixby Knolls Towers) Gold Country Health Center, Inc. (Gold Country Retirement Community) Mayflower Gardens Health Facilities, Inc. (Mayflower Convalescent Hospital) Mayflower RHF Housing, Inc. (Mayflower Gardens) Sun City RHF Housing, Inc. (Sun City Gardens) The California Obligated Group's communities provide a total of941 independent living units, 171 assisted living units and 215 skilled nursing beds. Each site, its location, year opened. or acquired and the number of. units or beds is as follows:. Number of Units/Beds( I) Year Total Nan:.e of Facility Location Opened/Acq' d ILU ALU SNF Units/Beds Bixby Knolls Towers Long Beach, CA 1970 168 59 . 99 326 Gold County Retirement Community Placerville, CA 1984186 150 43 68 261 Mayflower Gardens Quartz Hill, CA 1965170 . 494 0 48 542 Sun City Gardens Sun City, CA 1970 129 69 0 198 Total 941 171 215 1,327 {I) ILU: Independent Living Units ALU: Assist~d Living Facility Units SNF: Skilled Nursing Facility Beds A map indicating the location of the California Obligated Group's communities is provided in A-6. The National Obligated Group . The National Obligated Group, established under the National Master Indenture, consists of the f()llowing members: . . . Holly Hill RHF Housing, Inc. (Bis~op's Glen) Merritt Island RHF Housing, Inc. (Courtenay Springs Village) · Martin Luther Foundation, Inc. Yellowwood Acres, Inc. (Westminster Village) 'Bluegrass RHF Housing, Inc. (Colonial Heights and Colonial Gardens) DeSmet RHF Housing, Inc. (DeSmet Retirement Community) St. Catherine RHF Housing, Inc. (St. Catherine Retirement Community) A-5 The National Obligated Group's commumhes are located· on· six sites in· four states and provide a total of 827 independent living units, 315 assisted living units and 250 skilled nursing beds. Martin Luther Foundation, Inc. does 'not currently operate a community. Each site, its location, year opened or acquired, and number of units or beds is as follows: · '' Number of Units/Beds(!) Year Total Name of Facility LoCation Opened/Acq' d ILU ALU· SNF Units/Beds Bishop's Glen Holly Hill, FL 1984 '206 89 60 355 Courtenay Springs Village Merritt Island, FL 1987 !58 9 96 263 Westminst_er Village Clarksville, IN 1983 164 92 94 350 Colonial Heights and Colonial Gardens Florence, KY 1987,2001 177 69 0 246 DeSmet Retirement Community Florissant, MO 2000 33 56 0 89 St. Catherine Reti~ement Community Florissant, MO 2000 89 0 0 89 Total 827 315 250 1,392 01 ILU: Independent Living Units ALU: AssiSted Living Facility Units SNF: Skilled Nursing Facility Beds A map indicating the location of the National Obligated Group's communities is provided on page A-6. Other Debt Guaranteed by RHF RHF guarantees limited amounts of the debt of a number of its affiliates that are not members of either Obligated Group. Such guaranteed debt ·totals $6.55 Million, all unsecured ..Additional detail regarding RHF's guarantees can be found in the most recent RHF Obligated Group audited' combined financial siatement, available upon request. Future Plans . . While RHF has no immediate plans to add members to either of the Obligated Group·s; it is anticipated that corporations that provide the same types of services may be added to one of the Obligated Groups in the future. See APPENDIX B - "SUMMARY. o·F PRINCIPAL DOCUMENTS- Summary of the Master Indentures- The Obligated Group - Membership in.,Obligated Group" and "- withdrawal from Obligated Group" for a description of the provisions of the Master Indentures regarding members' addition to and withdrawal from either Obligated Group. A-6 OBLIGATED GROUP LOCATIONS AND RHF CREDIT SUPPORTED ENTITY Indiana Kansas City lndianapolis* St.louis ) Sacramento Missouri * 0 California Ortand~ .~ ~ampa ' ~- ,~:J California Obligated Group Locations National Obligated Group Facilities 1. Bixby Knolls Towers A. Westminster Village Long Beach, CA Clarksville, IN 2. Gold Country Health Center B. Colonial Heights and Colonial Gardens Placerville, CA Florence, KY 3. Mayflower Gardens Health Facilities, Inc. c. Bishop's Glen Mayflower RHF Housing, Inc. Holly Hill, FL Quartz Hill, CA D. Courtenay Springs Village 4. Sun City Gardens Merritt Island, FL Sun City, CA E. DeSmet Retirement COmmunity OtlutLLOCiltkm Florissant, MO 1. RHF Office Building F. .st. Catherine Retirement Community Long Beach, CA Florissant, MO A-7. lTHIS PAGE INTENTIONALLY LEFT BLANKj APPENDIXB Summary of Principal Documents [THIS PAGE INTENTIONALLY LEFr BLANK/ DEFINITIONS OF CERTAIN TERMS ...... ! SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES ...... l8 Funds ...... l8 Investment of Funds ...... 22 Arbitrage; Compliance with the Tax Exemption Agreements ...... , ...... 23 Supplemental Bond Indentures ...... :...... 23 Defeasance ...... 25 Letter of Credit...... 26 Events of Default; Acceleration ...... :...... 28 Waiver of Events of Default ...... 30 Direction of Proceedings ...... 31 Application of Moneys ...... 31 Removal of the Bond Trustee ...... 33 Rights of Bank; Exceptions to Requirements of Bank Consent ...... 33 SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS ...... 34 Representations by the Borrowers: ...... 34 Assignment and Pledge of Issuer's Rights ...... 35 Payments in Respect of the Series 2008 Bond Obligation and the Loan Agreement ...... 35 The Borrower's Obligations Unconditional...... 35 Certain Covenants of the Borrower Relating to the Use and Operation of Certain of Its Property ...... 36 Indemnification of the Issuers and the Bond Trustee ...... 36 Maintenance of Corporate Existence and Status ...... 37 Amendments to the Letter of Credit ...... 3 8 Licensure ...... 38 Financial Statements ...... 39 Supplements and Amendments to the Loan Agreements ...... 39 Defaults and Remedies ...... 40 Exceptions to Requirements of Bank Consen\...... 42 SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURES ...... 42 General ...... 42 Authorization of Obligations ...... 43 Particular Covenants of the Obligated Group Representative and Each Member ...... 43 Covenants as to Maintenance of Properties, Etc ...... 43 The Obligated Group ...... 44 TABLE OF CONTENTS (continued) Page Defaults ...... :...... 45 Supplements and Amendments ...... :...... 48 Satisfaction and Discharge of Master Indenture ...... ::.... ·...... 49 SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES ... :...... : ..... :..... ,...... 49 General ...... 49 After-Acquired Trust Property ...... '...... :...... 50 Conditions for Release ...... :...... ' ...... :.... :.: ...... :...... 50 -n- APPENDIXB SUMMARY OF PRINCIPAL DOCUMENTS This Official Statement only describes the Series 2008 Bonds while they bear interest at a Weekly Rate. If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, such series of the Series 2008 Bonds will be remarketed pursuant to reoffering disclosure which will either supplement or replace this Official Statement. DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in the Bond Indentures, the Loan Agreements, the Master Indentures, the Mortgages, the Guaranties and this Official Statement. "Act" means, individually and as applicable, the California Act, the Brevard Act, the Vol usia Act, the Indiana Act, the Kentucky Act or the Missouri Act. "Adjustable Long-Term Mode" means the aggregate of the characteristics which apply to the Bonds bearing interest at the Adjustable Long-Term Rate .. "Adjustable Long-Term Rate" means, with respect to the Bonds, the interest rate in effect while the Bonds are in the Adjustable Long-Term Mode, including the initial Adjustable Long-Term Rate and any Reset Rate applicable thereto, determined in accordance with the Bond Indenture. "Adjustable Long-Term Rate Period" means an interest rate period during which the Bonds bear interest at an Adjustable Long-Term Rate, which Period shall be one year or any multiple ~f one year, except when such multiples are less than one year by reason of the Maturity Date. "Alternate Credit Facility" means a credit facility provided in accordance with the Loan Agreement (other than the Initial Letter of Credit or a Renewal Letter of Credit), including, without limitation, a letter of credit of a commercial bank or a letter of credit from a financial institution, or a combination thereof, which provides security for payment of the principal of and interest on the Bonds when due (referred to in this definition as "credit support") and for payment of the purchase price of Bonds delivered or deemed delivered in accordance with the Bond Indenture (referred to in this definition as "liquidity support"); provided that an Alternate Credit Facility may be issued to provide only credit support or liquidity support so long as a separate Alternate Credit Facility or Renewal Letter of Credit provides at all times while such Alternate Credit Facility is in effect complementary credit support or liquidity support, as the case may be, so that at all times while any of the Bonds bear interest at a Weekly Rate such Bonds shall be entitled to credit support and liquidity support. "Alternate Credit Facility Agreement" means the agreement between the provider of an Alternate Credit Facility and the Borrower and/or one or more other Members of the RHF Obligated Group, as such agreement may from time to time be amended or supplemented, pursuant to which such Alternate Credit Facility is issued and outstanding. "Authorized Denomination" means during a Weekly Rate Period, $100,000 and integral multiples of $5,000 in excess thereof. "Bank" means the Initial Bank for the period during which the Initial Letter of Credit is in effect, and thereafter shall mean the provider of the Letter of Credit then in effect. B-1 "Bank Bond" means any Series 2008 Bond purchased pursuant to a draw on the Letter of Credit until remarketed pursuant to the Remarketing Agreement. ' "Bond Indenture" means individually and as applicable, the California Bond Indenture, the Brevard Bond Indenture, the Indiana Bond Indenture, the KentUcky Bond Indenture, the Missouri Bond Indenture, theVolusia Bond Indenture, theY A Bond Indenture or the ML Bond Indenture. · "Bond Register" means individually and as applicable, the registration books of the Issuers kept by the Bond Trustee to evidence the registration and transfer of Series 2008 Bonds. "Bond Registrar" means the Bond Trustee, as keeper of the Bond Register. "Bond Trustee" means The Bank of New York Mellon Trust Company, N.A:, as ·bond trustee, or any successor trustee under the Bond Indenture. "Bonds" means the Series 2008 Bonds. "Bondholder," "holder" and "owner of the Bonds" means any registered owner of any Series 2008 Bond, provided that for the purpose of giving consent to ~r voting on the modification or amendment to the Bond Indenture or the Loan Agreement, while the Initial Bank is providing the Letter of Credit, and subject to the provisions of the Bond Indenture, the Initial Bank shall be deemed the holder of the Series 2008 Bonds. · "Borrower" means, individually and as applicable, the California Borrowers, the Brevard Borrower, :the ·Indiana Borrower, the Kentucky Borrower, the Missouri Borrowers, the Volusia Borrower, y elloWwood and Martin Luther...... "Borrower Bonds" means any Series 2008 Bonds owned by any Borrower, RHF or any other Member of the RHF Obligated Group, other than Bank Bonds. . "Brevard Act" means the Health Facilities Authorities Law, Chapter 154, Part Ill, Florida Statutes, as amended from time to time. "Brevard Bond Indenture" means the Bond Trust Indenture dated as of July I, 2008, from the Brevard Issuer to the Bond Trustee, as it may from time to time be amended or supplemented. "Brevard (Florida) Bonds" means the $19,400,000 aggregate principal amount of Brevard County Health Facilities Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group~ Courtenay Springs Village) authorized to be issued pursuant to the terms and conditions of the Brevard Bond Indenture. "Brevard Borrower" means Merritt Island RHF Housing, Inc., a Florida nonprofit corporation and its successors and assigns and any surviving, resulting or transferee corporation. "Brevard Issuer" means the Brevard County Health Facilities Authority, a public body corporate and politic of the state of Florida, created and existing under the laws of the state of Florida and its successors and assigns. "Brevard Loan Agreement" means the Loan Agreement dated as of July I, 2008 between the Brevard Issuer and the Brevard Borrower relating to the Brevard (Florida) Bonds, as it may from time to time be amended and supplemented. B-2 "Business Day'? means any day other than (i) a Saturday, Sunday or legal holiday or a day on which banks in the state of California or in any city in which the designated corporate trust office of the Bond Trustee is located are required or authorized by law to remain closed, (ii) a day on which the New York Stock Exchange is closed, (iii) a day on which the Federal Reserve Bank of New York is closed or (iv) a day on which banks in the city (New York City in the case of the Initial Bank) in which the operations of the Bank used to process payments on the Letter of Credit are required or authorized by law to remain closed. "California Act" means the Joint Exercise of Powers Act, constituting Title.], Chapter 5 of the Government Code of the state of California, as now in effect and as it may from time to time hereafter be amended or supplemented. "California Bank Obligation" means the Series 2008 Bank Obligation issued pursuant to the California First Supplemental Master Indenture by RHF as Obligated Group Representative to the Initial Bank to evidence and secure the obligations of the California Obligated Group under the Initial California Reimbursement Agreement. "California Bond Indenture" means the Bond Trust Indenture dated as of July I, 2008, from the California Issuer to the Bond Trustee, as it may from time to time be amended or supplemented. "California Bonds" means the $40,860,000 aggregate principal amount of California Statewide Communities Development Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) authorized to be issued pursuant to the terms and conditions of the California Bond Indenture .. "California Borrowers" means, collectively, Bixby Knolls Towers, Inc., Gold Country Health Center, Inc., Mayflower RHF Housing, Inc., Mayflower Gardens Health Facilities, Inc., and Sun City RHF Housing, Inc., each a California nonprofit public benefit corporation, and their successors and assigns and any surviving, resulting or transferee corporations. "California First Supplemental Master Indenture" means the California First Supplemental Master Trust Indenture, pursuant to which the California Series 2008 Obligation and the California Bank Obligation are being issued. "California Issuer" means the California Statewide Communities Development Authority and its successors and assigns. "California Loan Agreement" means the Loan Agreement dated as of July I, 2008 between the California Issuer and the California Borrowers, as it may from time to time be amended and supplemented. '.'California Master Indenture" means the California Master Trust Indenture dated as of July I, 2008, from the Members of the California Obligated Group to the California Master Trustee, as supplemented and amended by the California First Supplemental Master Indenture, and as it may from time to time be further amended or as supplemented in accordance with the terms thereof. "California Master Trustee" means The Bank of New York Mellon Trust Company, N.A., or any successor trustee under the California Master Indenture "California Obligated Group" means the Obligated Group identified in the California Master Indenture. · B-3 "California Series 2008 Obligation" means the Series 2008 California Direct Note Obligation issued by RHF to the Bond Trustee under the California Master Indenture. "Closing Date" means the date of original issuance of the Series 2008 Bonds. "Code" means the Internal Revenue Code of 1986, as amended from time to time. Each reference to a Section of the Code in the Bond Indenture shall be deemed to include the United States Treasury Regulations, including temporary and proposed regulations, relating to such Section which are applicable to the Bonds or the use of the proceeds thereof. "Corporate Taxable Bonds" means collectively and as applicable, the YA Bonds and the ML Bonds. "Defaulted Interest" means interest on any Bond which is payable but not duly paid on the date due. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns appointed pursuant to the Bond Indenture. "DTC Participants" means those broker dealers, banks and other financial institutions reflected on the books ofDTC. "Eligible Account" means an account that is either (a) maintained with a federal or state-chartered depository institution or trust company that has a Standard & Poor's short-term debt rating of at least 'A- 2' (or, if no short-term debt rating, a long-term debt rating of 'BBB+'); or (b) maintained with the corporate trust department of a federal depository institution or state-chartered depository institution subject to regulations regarding fiduciary funds on deposit, which, in either case, has corporate trust powers and· is acting in its fiduciary capacity. In the event that an account required to be an "Eligible Account" no longer complies with the requirement, the Bond Trustee should promptly (and, in any case, within not more than 30 calendar days) move such account to another financial institution such that the Eligible Account requirement will again be satisfied. "Eligible Moneys" means (a) Bond proceeds deposited with the Bond Trustee contemporaneously with the issuance and sale of the Bonds and which are continuously thereafter held subject to the lien of any Bond Indenture in a separate and segregated fund, account or subaccount established under any Bond Indenture in which no moneys which are not Eligible Moneys are at any time held, together with investment earnings on such Bond proceeds; (b) moneys (i) paid or deposited by the Borrowers to or with the Bond Trustee, (ii) continuously held in any fund, account or subaccount established under any Bond Indenture which is subject to the lien of any Bond Indenture and in which no other moneys which are not Eligible Moneys are held .and (iii) which have so been on deposit with the Bond Trustee for at least 367 days from their receipt by the Bond Trustee, during and prior to which period no petition by or against any 'Issuer, any Borrower or any guarantor to which such moneys are attributable under any bankruptcy or similar law now or hereafter in effect shall have been filed and no bankruptcy or similar proceeding otherwise initiated (unless such petition or proceeding shall have been dismissed and such dismissal be final and not subject to appeal), together with investment earnings on such moneys; (c) moneys received by the Bond Trustee from any draw on any Letter of Credit which are held in any fund, account or subaccount established under any Bond Indenture in which no other moneys which are not Eligible Moneys are held, together with investment earnings on such moneys; (d) proceeds from the remarketing of any Bonds pursuant to the provisions of any Bond Indenture to any Person other than the Borrowers, any affiliate thereof or any guarantor or any Issuer; (e) proceeds from the issuance and sale of refunding bonds, together with the investment earnings on such proceeds, if there is delivered to the Bond Trustee at B-4 the time of issuance and sale of such bonds an optmon of bankruptcy counsel whose opm10ns are recognized nationally and to each Rating Agency then maintaining a rating on the Bonds bearing interest at a Weekly Rate (which opinion may assume that no Bondholders are "insiders" within the meaning of Title ll of the United. States Code) to the effect that the use of such proceeds and investment earnings to pay the principal of, premium, if any, or interest on the Bonds would not be avoidable as preferential payments under Section 547 of the United States Bankruptcy Code recoverable under Section 550 of the United States Bankruptcy Code should any of the Issuers, the Borrowers, any affiliate thereof or any guarantor become a debtor. in a proceeding commenced thereunder; and (f) moneys which are derived frorn any other source, together with the investment earnings on such moneys, if the Bond Trustee has received an unqualified opinion of nationally recognized bankruptcy counsel and to each Rating Agency then maintaining a rating on the Bonds bearing interest at a Weekly Rate (which opinion may assume that no Bondholders are "insiders" within the rneaning of Title 11 of the United States Code) to the effect that payment of such amounts to bondholders would not be avoidable as preferential payments under Section 547 of the United States Bankruptcy Code recoverable under Section 550 of the United States Bankruptcy Code should any of the Issuers, the Borrowers, any Affiliate thereof or any guarantor become a debtor in a proceeding commenced thereunder; provided that such proceeds, moneys or income shall not be deemed to be Eligible Moneys or available for payment of the Bonds if, among other things, an injunction, restraining order or stay is in effect preventing such proceeds, moneys or income from being applied to make such payment. For the purposes of this definition, the term "moneys" shall include cash and any investment securities including, without limitation, Government Obligations. "Environmental Regulations" means any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants, Hazardous Substances or chemical waste, materials or substances applicable to the Borrowers. "Escrow Agreement" means, individually and as applicable, the various Escrow Deposit Agreements each dated as of July l, 2008, each between a Borrower and The Bank of New York Mellon Trust Company, N.A., as escrow· agent, and each establishing tlie Securities Trust Fund for the prepayment of a series of the Prior Bonds. "Facilities" means the facilities of the Borrowers, as applicable. "First Supplemental National Master Indenture" means the First Supplemental National Master Trust Indenture; pursuant to which the National Series 2008 Obligations and the National Bank Obligation are being issued. "Fiscal Year" means that period adopted by the Obligated Group Representative as its annual accounting period. Initially, the Fiscal Year is the period from October I of a year to September 30 of the nexryear. · "Fitch" means Fitch Ratings, a corporation organized and existing under the laws of the state of New York, and its successors and assigns. "50J(c)(3) Organization'? means an organization described in Section 50l(c)(3) of the Code. "Fixed Interest Rate Conversion· bate" means the date on which the. Bonds begin to bear interest ~t the Fixed Interest Rates. ,. .. ,;Fixed lntere~t Rate Mode" nieans 'the 'aggreg~f~ of:the characteristics which apply t~ the Bonds . • •' . . " •; I, . . • •· .. • J.J , • • . '.' ' • ; :' •' , . ' , . , bearing interest at.the Fi'!'ed Ipte.re,st 1Rate,,", , , ·:·", _. ,, · · •···.· .•. : :h' B-5 .. _, -· "Fixed Interest Rate Period" means the period of time commencing on the Fixed Interest Rate Conversion Date and ending on the final Maturity Date of the Bonds. "Fixed Interest Rates" means the rates of interest to be borne by the Bonds from and ·after the conversion date to a fixed interest rate. "FPM" means Foundation Property Management, Inc., a California ·nonprofit· public benefit corporation, and its successors and assigns and any surviving, resulting or transferee corporation. "General Refunding Certificate" means the Certificate Regarding the Expenditure of Funds dated the Closing Date delivered by the Borrowers. "Government Obligations': means securities which consist of (a) United States Government Obligations, or (b) evidences of a direct ownership in future interest or principal payments on United States Government Obligations, which obligations are held in a custody account by a custodian satisfactory to the Bond Trustee pursuant to the terms of a custody agreement. "Governmental Bonds" means the Brevard (Florida) Bonds, the Volusia (Florida) Bonds, the California Bonds, the Indiana Bonds, the Missouri Bonds and the Kentucky Bonds. "Governmental Unit" shall have the meaning set forth in Section 150 of the Code. "Guaranty" means all loan commitments and all obligations of any Member guaranteeing in any manner whatever, whether directly or indirectly, any obligation of any other Person which would, if. such other Person were a Member, constitute Indebtedness. "Hazardous Substances" means (a) any oil, flammable substance, explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances or any other wastes, materials or pollutants which (i) pose a hazard to the Facilities or to persons on or about the Facilities or (ii) cause the Facilities to be in violation of any Environmental Regulation; (b) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon gas; (c) any chemical, material or substance defmed as or included in the definition of "waste," "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or words of similar import under any Environmental Regulation including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 USC §§ 9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"}, 42 USC §§ 6901 et seq.; the Hazardous Materials Transportation Act, 49 USC §§ 1801 et seq.; the Federal Water Pollution Control Act, 33 USC§§ 1251 et seq.; and, as pertains to the California Facilities, the California Hazardous Waste Control Law ("HWCL"}, Cal. Health & Safety Code§§ 25100 et seq.; the Hazardous Substance Account Act ("HSAA"}, Cal. Health & Safety Code §§ 25300 et seq.; the Underground Storage of Hazardous Substances Act, Cal. Health & Safety Code §§ 25280 et seq.; the Porter-Cologne Water Quality Control Act (the "Porter-Cologne Act"), Cal. Water Code §§ 13000 et seq., the Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65); and Title 22 of the California Code of Regulations, Division 4, Chapter 30; (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or agency or may or could pose a hazard to the health and safety of the occupants of the Facilities or the owners and/or occupants of property adjacent to or surrounding the Facilities, or any other person coming upori the ·Facilities or adjacent property; or (e) any other chemical, materials or substance which may or could pose a hazard to the environment...... 'I ':Immediate Notice" means notice by telephone, telecopier or electronic mail to such address as the ~ddressee shall have directed in writing, promptly followed by written notice by first class mail, post~ge prepaid; provided, however, that if any Person required to give an Immediate Notice shall not have been provided with the necessary information as to the telephone, telecopier number or electronic mail address of an addressee, Immediate Notice shall mean written-notice by .first class mail, postage prepaid. "Indebtedness" means any Guaranty (other than any Guaranty by any Member of Indebtedness of any other Member) and any indebtedness or obligation for repayment of borrowed money of any Member (other than accounts payable and accruals); as determined in accordance with generally accepted accounting principles, including, without limitation, obligations under conditional sales contracts or other title retention contracts, rental obligations under leases which are considered capital leases under generally accepted accounting principles and obligations of a Member to another Member; provided, however, that if more than one Member shall have incurred or-assumed a Guaranty of a Person other than a Member, or if more than one Member shall be obligated to pay any obligation, for purposes of any computations or calculations under the Master Indenture such Guaranty or obligation shall be included only one time. "Independent Counsel" means an attorney, acceptable to the Bank, duly admitted to practice law before the-highest court-of any state and, without limitation, may include independent legal counsel for the Issuers, the Borrowers, the Bond Trustee or the Remarketing Agent · "Indiana Act" means collectively, Indiana Code, Title 36, Article 7, Chapters I 1.9 and 12 and Title 5, Article I; Chapter 5, as amended from time to time. "Indiana Bond Indenture" means the Bond Trust Indenture dated as of July I, 2008, from the Indiana Issuer to the Bond Trustee, as it may from time to time be amended or supplemented. "Indiana Bonds" means the $4,115,000 aggregate principal amount of Town of Clarksville, Indiana Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group - Westminster Village Kentuckiana) authorized to-be issued pursuant to the terms and conditions of the Indiana Bond Indenture. · "Indiana Borrower" means Y ellowwood. "Indiana Issuer" means the Town of Clarksville, Indiana and its successors and assigns. "Indiana Loan Agreement" means the Loan Agreement dated as of July I, 2008 between the Indiana Issuer and the Yellowwood relating to the Indiana Bonds, as it may from time to time be amended and supplemented. "Indirect Participant" means a Person on behalf of whom a DTC Participant directly or indirectly holds an interest in the Bonds. "Initial Letter of Credit" means the irrevocable letter of credit delivered by the Initial Bank to the Bond Trustee. on the date of issuance of the Bonds . .. . "Initial Bank" me.ans KBC Bank N.V., ~cling through its New York Branch.. · .. 1 ·~· :· .,: > ')J :: ;: '.;;(,I ;,f \ '• ' .. ' 0 .., • •• • ~.;: I "Interest Component" means the maximum amount stated in the Letter of Credit (as reduced and reinstated from time to time in accordance with the terms thereol) which may be drawn for the payment of accrued interest on. the Bonds or for the payment of the portion of the purchase price of Tendered Bonds corresponding to interest accrued on the Tendered Bonds. '' '. ·.. . "Interest Coverage Period" means the number of days wiJich is used to determine the Interest Component; as described more fully in the Bond Indenture·. "Interest Coverage Rate" means the rate which is used to determine the Interest Component, initially I 0% per annum for the Governmental Bonds, and 12% per annum for the Taxable Corporate Bonds, which shall be specified for each subsequent Weekly Mode by the Remarketing Agent in writing to the Bond Trustee, as such rate may be changed from-time to time by the Remarketing Agent subject to compliance with the Bond Indenture. In no case shall the Interest Coverage ·Rate be greater than the rate of interest secured by the Letter of Credit. · "Interest Payment Date" means, with respect to a Weekly Rate Period, the first Business Day of each calendar month commencing August I, 2008. "Issuer" means the California Issuer, the Brevard Issuer, the Indiana Issuer, the Kentucky Issuer, the Missouri Issuer or the Volusia Issuer, as applicable. ·"Issuers" means, collectively, the California Issuer, the Brevard Issuer, the Indiana Issuer, the Kentucky Issuer, the Missouri Issuer and the Volusia Issuer. "Joint Powers Agreement" means the Amended and Restated Joint Exercise of· Powers Agreement, dated June I, 1998, relating to the formation of the ·California Issuer, among certain cities, counties and special districts in the state of California, including the Program Participants, as defined in the California Bond Indenture. "Joint Written Request" means a Written Request of any of the Issuers and RHF. "Kentucky Act" means collectively, Sections 154.20-010 to 154.20-150, inclusive, Sections I 03.200 through 103.285, inclusive, Section 154.10-035(2) and Section 154.20-035(1) of the Kentucky Revised Statutes, as amended from time to time. "Kentucky Bond Indenture" means the Bond Trust Indenture dated as of July I, 2008, from the Kentucky Issuer to the Bond Trustee, as it may from time to time be amended or supplemented. "Kentucky Bonds" means, collectively, the Series 2008A Kentucky Bonds and the Series 2008B Kentucky Bonds. "Kentucky Borrower" means Bluegrass RHF Housing, Inc., a Kentucky nonprofit corporation and its successors and assigns and any surviving, resulting or transferee corporation. · "Kentucky Issuer" means the Kentucky Economic Development Finance Authority and its successors and assigns. "Kentucky Loan Agreement" means the Loan Agreement dated ·as of July I, 2008 between the Kentucky Issuer and the Kentucky Borrower relating to the Kentucky Bonds, as it may from time to time be amended and supplemented. "Letter of Credit" means the Initial Letter of Credit, Renewal Letter of Credit or Alternate Credit Facility at the time in effect. B-8 "Loan Agreement" means, individually and as applicable, the Brevard Loan Agreement, the California Loan Agreement, the Indiana Loan Agreement, the Kentucky Loan Agreement, the Missouri Loan Agreement or the Volusia Loan Agreement. "LOC Interest Account" means the separate account in the Interest Fund which-is created and established pursuant to the Bond Indenture. "LOC Principal Account" means the separate account in the Bond Sinking Fund which is created and established pursuant to the Bond Indenture. "LOC Redemption Account" means the. separate account m the Redemption Fund which IS created and established pursuant to the Bond Indenture. "Mandatorily Tendered Bonds" means the Bonds required to be tendered for purchase on a Mandatory Tender Date. "Mandatory Tender Date" means any date on which a Bondholder is required to tender any Bond for purchase in accordance with the Bond Indenture. , ','Martin Luther" means Martin Luther Foundation, Inc., a Florida nonprofit corporation and its successors and assigns and any surviving, resulting or transferee corporation. "Master Indenture" means, individually and as applicable, the California Master Indenture or the National Master Indenture. "Master Trustee" means The Bank of New York Mellon Trust Company, N.A., or any successor trustee under the National Master Indenture or the California Master Indenture, as applicable. "Maturity" or "Maturity Date" for each series of Series 2008 Bonds means the date identified under "THE BONDS- General" in the forepart oftjlis Official Statement. "Maximum Rate" means the lesser of (a) 12% per annum, (b) the· maximum interest rate permitted by law, and (c) if the Series 2008 Bonds are in the Weekly Mode, the maximum interest rate stated in .the Letter of Credit, known as the Interest Component. The maximum interest rate stated in the Letter of Credit is I 0% per an'!Uill for the Governmental Bonds and 12% per annum for the Taxable Corporate Bonds . ."Member" or. "Member of the Obligated Group" means any Person who is a Member of the National Obligated Group and any· Person who is a Member of the California Obligated Group, as applicable, pursuant to the terms of the Master Indenture. "Missouri Act" means Title XXIII, Chapter 349 of the Missouri Revised Statutes, as now in effect and as it may from time to time hereafter be amended or supplemented, "Missouri Bond Indenture" means the Bond Trust Indenture dated as of July I, 2008, from the Missouri Issuer,to the Bond Trustee, as it may from time to time be amended. or supplemented, ·'I . ',. . . !, • . ' "Missouri Bonds" means the means. the. $13,645,000 aggregate principal amount. of. Ind!Jstrial Development Authority of the City of Florissant, Missouri Variable Rate Demand Revenue 'Refunding Bonds,· Series 2008 .(~etirement_ H<;Jusi'!g Fou'!gation Obligat,d .Qroup -; DeSmet and St. Catherine) authorized to be issued pursuant to the terms and conditions of the Missouri Bond Ind~nl)lr~.'"·•' , . ,. ' "Missouri Borrowers': means, collectively, DeSmet RHF Housing, Inc. and St. Catherine RHF Housing, Inc., each a Missouri nonprofit "corporation, and their successors and assigns and any surviving, resulting or transferee corporations. "Missouri General Refunding Certificate" means the Certificate Regarding the Expenditure of Funds dated the Closing Date delivered by the Missouri Borrower. ' "Missouri Issuer." means"the Industrial Development Authority of the City of Florissant, Missouri and its successors and assigns. "Missouri Loan Agreement" means the Loan Agreement dated as of July I, 2008 between the Missouri Issuer and the Missouri Borrowers relating to the Missouri Bonds, as it may from time to time be amended and supplemented. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing .under the laws of the state of Delaware, and its successors and assigns. "Mortgages" is defined below under "SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES GENERAL." "ML Bond Indenture" means the Bond Trust Indenture dated as of July I, 2008, from Martin Luther to the Bond Trustee, as it may from time to time be amended or supplemented. "ML Bonds" means the $5,910,000 aggregate principal amount of Martin Luther Foundation, Inc. Variable Rate Demand Taxable Refunding Corporate Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) authorized to be issued pursuant to the terms and conditions of the ML Bond Indenture. "National Bank Obligation" means the Series 2008 Bank Obligation issued pursuant to the National First Supplemental Master Indenture by RHF as Obligated Group Representative to the Initial Bank to evidence and secure the obligations of the National Obligated Group under the Initial National Reimbursement Agreement. ''National First Supplemental Master Indenture" means the National First Supplemental Master Trust Indenture, pursuant to which the National Series 2008 Obligations and the National Bank Obligation are being issued. "National Master Indenture" means the National Master Trust Indenture dated as of July I, 2008, from the Members of the National Obligated Group to the National Master Trustee, as supplemented and amended by the National First Supplemental Master Indenture, and as it may from time to time be further amended or as supplemented in accordance with the terms thereof. "National Obligated Group" means the Obligated Group identified m the National Master Indenture. "National Series 2008 Obligations" means the various Series 2008 Direct Note Obligations issued by RHF as Obligated Group Representative to the Bond Trustee with respect to the Volusia (Florida) Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds, the Missouri Bonds, the ML Bonds and the Y A Bonds. B-IO "Obligated Group" means the National Obligated Group and the California Obligated Group, as applicable: "Obligated Group Representative" means RHF or such other Member as may be designated as such pursuant to the Master Indenture. "Official. Statement" means this Official Statement. "Opinion of Bond Counsel" means an opinion of municipal bond counsel whose opinions arc nationally recognized, ,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, are acceptable to the applicable Issuer .. "Optional Tender Date" means with respect to the Bonds in the Weekly Mode, the date specified by a Bondholder in a Tender Notice for purchase in accordance with the Bond Indenture. "Optionally Tendered Bonds" means the Series 2008 Bonds tendered or deemed tendered for purchase on an Optional Tender Date. "Outstanding Bonds" or "Bonds outstanding" means all Series 2008 Bonds which have been duly authenticated.and delivered by the Bond Trustee under the Bond Indenture, except: (a) Series 2008 Bonds canceled after purchase in the open market or because of payment at or redemption prior to Maturity; .(b) Series 2008 Bonds for the payment. or redemption of which cash or Government Obligations shall have been tlie'retofore deposited with th~ Bond Trustee (whether upon or prior to Maturity or redemption date of any such Series 2008 Bonds) in accordance with the Bond Indenture; provided that if such Series 2008 Bonds are to be redeemed prior to 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; (c) Series .2008 Bonds in. lieu of which. others have been authenticated under the Bond Indenture; (d) For the purpose of determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent, or »'aiverunder the provisions of the Bond Indenture, Series 2008 Bonds (other than Bank Bonds) which are owned or held by a Member; in determining whether the Bond Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver only Series 2008 Bonds (i) which are registered in the name of a Member or (ii) which the Bond Trustee knows to be so owned shall be disregarded; . (e) after any Optional Tender Date, any Series 2008 Bond for which a Tender Notice was given· in accordance with the Bond Indenture. and' which was not so tendered.and for which amounts are on deposit with the Bond Trustee to pay the purchase price therefor; and (t) ,after .. any Mandatory Tender Date, any Series. 2008 Bond which was ,required to be tendered on such a Mandatory Tender Date in accordance with the Bond Indenture and which was !JOt so tendered and for which amounts are on deposit with the Bond Trustee to pay the purchase price therefore. B-1'1 " "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. "Placement Date" means any date on which a Bank Bond is purchased by a Person designated by the Remarketing Agent pursuant to the Remarketing Agreement. The interest rate on the Bank Bonds remarketed and purchased on a Placement Date shall be re.set by the Remarketing Agent on the Placement Date in accordance with the provisions setting the interest rate in such Rate Period. "Prior Bonds" means the 1998 COPs, the 1998 Volusia (Florida) Bonds, the :1998 Brevard (Florida) Bonds, the 1998 Indiana Bonds, the 1998 Indiana Notes, the 1998 Kentucky Bonds, the 1999 Kentucky Bonds, the Series 2000A DeSmet Bonds, the 2000B St. Catherine Bonds and/or the 1998 Martin Luther Bonds, as applicable, each as defined under the heading "PLAN OF FINANCE" in the forepart of this Official Statement. "Property" means any and all rights, titles and interests in and to any and all assets of the National Obligated Group and the California Obligated Group, whether real or personal, tangible or intangible and wherever situated, as shown on the most recent audited financial statements for the RHF Obligated Group for the most recent Fiscal Year for which they are available. "Proposed Fixed Interest Rate-Conversion Date" means the date indicated in the written notice of RHF given pursuant to the Bond Indenture on which RHF intends to effect a conversion of the interest rate on the Bonds to the Fixed Interest Rate. "Purchase Contract" means, individually and as applicable, the various Bond Purchase Agreements, each between B.C. Ziegler and Company, d/b/a Ziegler Capital Markets and the applicable Issuer and approved by the applicable Borro~er, and as to the California Bonds, also approved by RHF andFPM. . "Qualified Investments" means 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 Ratrng 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 Federar Home Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal Farm Credit Bank or the Student Loan Marketing Association) which is either (i) rated in the highest rating category by any Rating Agency, or (ii) backed by the full faith and credit of the United States of America; (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 Bond Trustee or its 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 ratrng 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 360 days after the date of purchase; B-12 (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 ofrating category by numerical modifier or otherwise); (g) investment agreements with banks that at the time such agreement is executed are 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 (1) 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 such 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 (2) if such 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 such non-bank financial institution is 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 such non-bank financial institutions 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 Bond Trustee), a trust company, financial services firm or a broker dealer which is a member of the Securities Investors Protection Corporation, provided that (i) the Bond Trustee or a custodial agent of the Bond Trustee has possession of the collateral and that the collateral is, to the knowledge of the Bond Trustee, 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, and (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 (as applicable) in the custody of the Bond Trustee or Bond Trustee's Agent; (i) investments in a money market fund, which may be funds of the Bond Trustee or an affiliate thereof, rated (at the time of purchase) in the highest rating category for this type of investment by any Rating Agency including money market mutual funds from which the Bond Trustee or its affiliates derive a fee for investment advisory or other services to the fund; and (i) 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 the majority of whose investments consist solely of Permitted Investments as defined in paragraphs (a) through (i) above, including money market mutual funds from which the Bond Trustee or its affiliates derive a fee for investment advisory or other services to the fund. B-13 The Bond Trustee shall be entitled to assume that any investment which at the .time of purchase is a Qualified Investment remains a Qualified 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 Bond Trustee (or in the name of any of the Issuers and payable to the Bond Trustee) in bookcentry form on the books of the Department ofTreasury of the United States shall be deemed to be deposited with the.Bond Trustee. "Rating Agency" means Moody's, Standard & Poor's or Fitch and their respective successors and assigns. ';Rebate Fund" means the Rebate Fund created by the applicable Tax Exemption Agreement to comply with Section 148(t) of the Code. "Record Date'' means while the Bonds are inthe Weekly Mode, the Business Day immediately preceding each Interest Payment Date. "Reimbursement Agreement" means, individually or as applicable, (a) initially the California ' ' Reimbursement, Credit and Security Agreement dated as of July .1, 2008 between RHF, the California Obligated Group and the Initial Bank, or the National Reimbursement, Credit and Security Agreement dated as of July I, 2008 between RHF, the Nationai Obligated Group, and the Initial Bank, as such agreement may from time to time be amended or supplemented, and (b) thereafter means the Renewal Reimbursement Agreement or the Alternate Credit Facility Agreement with respect to any Renewal Letter of Credit or Alternate Credit Facility at the time in effect, as such agreement may from time to time be amended and supplemented. "Related Supplement" means an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master !nd~nture. "Remarketing Agent" means th-e placement or remarketing agent at, the time serving as such under the Remarketing Agreement and designated as the Remarketing Agent for purposes of the Bond Indimt~e .. The initial Remarketing Agent is B.C. Ziegler and Company d/b/a Ziegler Capital Markets. ' ' "Remarketing Agreement"·means the Remarketing Agreement dated as ofJuly I, 2008 among each of the Members of the RHF Obligated Group and the Remarketing Age1H as from time to time amended and supplemented, or if such Remarketing Agreement shall be terminated, then such other agreemeni which may from time to time be entered into with any RemarketingAgent with respect to the remarketing or placemeni of the Bonds.. · · · · · "Renewal Date" means a date which is five days prior, to the Stated Expiration Date of the Letter of Credit at the ~ime in effect (or the next prec~ding Business Day if such day is not a Business Day). ''Renewal' Letter of Credit" means a Letter. of Credit, provided .in accorda,rice with the Loan Agreement which has been· issued with terms and conditions substantiaily' similar to, and by the same provider of, the Letter of Credit in substitution for which the Renewal Letter of Credit is to be provided, . • . I . • , ' . except for: · (a) an extension of the Stated Expiration Date; ' ._,. '(b) · an ·incre~se or decrease in the Iriter~st Coverage Rate or the· Interest Coverage Period; ' ' . B-14 (c) an increase or decrease in the Interest Component; or (d) any combination of(a), (b) and (c). provided, however, that any changes to the Letter of Credit described in clauses (b) and (c) above shall be accompanied by a written confirmation that the rating on the Bonds would not be lowered or withdrawn as a result of such changes by each Rating Agency then maintaining a rating on. the Bonds. "Renewal Reimbursement Agreement" means, with respect to any Renewal Letter of Credit, the agreement between the Bank and RHF, the Borrowers and/or one or more of the other Members of the Obligated Group pursuant to which the Bank agrees to issue such Renewal Letter of Credit or allow the prior Letter of Credit to be renewed; a Renewal Reimbursement Agreement may consist of a supplement or amendment to the existing Reimbursement Agreement. "Required Payment" means, solely for purposes of the Master Indenture, 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 any loan agreement, reimbursement agreement or other agreement or instrument evidenced or secured by any Obligation, or otherwise in connection with a financing, including, but not limited to, the payment of principal, interest and premium, letter of credit reimbursement and lease payments. "RHF" means Retirement Housing Foundation, Inc., a California nonprofit public benefit corporation, and its successors and assigns and any surviving, resulting or transferee corporation. RHF is the Obligated Group Representative under the National Master Indenture and the California Master Indenture. "RHF Obligated Group" means, collectively, the Members of the California Obligated Group, the Members of the National Obligated Group, RHF and FPM. "Series 2008 Bond Obligation" means, individually and as applicable, the California Series 2008 Obligation or the applicable National Series 2008.0bligation. "Series 2008 Bond Obligations" means, collectively, the California Series 2008 Obligations and the National Series 2008 Obligations. "Series 2008 Bonds" means the California Bonds, the Brevard (Florida) Bonds, the Indiana Bonds, the Kentucky Bonds, the Missouri-Bonds, the Volusia (Florida) Bonds, theY A Bonds.and the ML Bonds. "Series 2008A Kentucky Bonds" or "Colonial Heights Bonds" means the $8,030,000 aggregate principal amount of Kentucky Economic Development Finance Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008A (Retirement Housing Foundation Obligated Group - Colonial Heights) authorized to be issued pursuant tp the terms and conditions of the Kentucky Bond Indenture. "Series 2008B Kentucky Bonds" or "Colonial Gardens Bonds" means the $7,705,000 aggregate principal amount of Kentucky· Economic Development Finance Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008B (Retirement" Housing Foundation Obligated Group - Colonial Gardens) authorized to be issued pursuant to the terms and conditions of the Kentucky Bond Indenture. "SIFMA Municipal Index" means the Securities Industry and Financial Markets Association (formerly The Bond Market Association™), Municipal Swap Index as disseminated by Municipal Market B-15 Data, a Thomson Financial Services Company, or its successor, for the most recently preceding Business Day; provided, however, that, if such index is no longer produced by Municipal Market Data, or its successor, then "SlFMA Municipal Index" shall mean such other reasonably comparable index selected by the Remarketing Agent, with the consent of the Bank and approved by the Issuers. "Special Record Date". means the date fixed by the Bond Trustee pursuant to the' Bond Indenture for the payment of Defaulted Interest. "Standard & Poor's" means. Standard & Poor's Rating Service, a· division of The McGraw-Hill Companies, Iric., a corporation organized and existing under the laws of the state of New York, and its successors and assigns. "Stated Expiration Date" means the stated date of expiration of the Letter of Credit, as such date may be extended from time to time. "Substitution Date'? means the date specified pursuant to the Bond Indenture, which shall be a Business Day, upon which an Alternate Credit Facility is to be substituted for the Letter of Credit then in effect. "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 50 l (c )(3) of the Code, which is exempt from federal income taxes under Section 50 l (a) of the Code and which is not a "private foundation" within the meaning of Section 509(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect. 'Tax Exemption Agreement" means, individually and as applicable, the various Tax Exemption Agreements, each dated the Closing Date, .among the applicable Issuer, the Bond Trustee and the applicable Borrower. "Tender Agent" ineans the corporation or banking entity designated to act as the Tender Agent pursuant to the terms of the Bond Indenture. The Issuers have initially appointed the Bond Trustee as Tender Agent. "Tender Notice" means the written notice from a Bondholder to the Bond Trustee of an Optional Tender Date in accordance with the provisions set forth in the Bond Indenture. "Tender Price" means ·J 00% of the principal amount of any Bond plus, if an Optional Tender Date or Mandatory Date is not an Interest Payment Date, interest accrued and unpaid thereon to, but not including, the Optional Tender Date or Mandatory with respect to such Bond. "Tendered Bonds" means Optionally Tendered Bonds and Mandatorily Tendered Bonds. "Trust Property" means the real property and personal property of the Borrowers which is subject to the lien and security interest of the Mortgage. "Unassigned Rights" means the right of each-Issuer to receive payment of its fees and expenses, each Issuer's right to indemnification in certain circumstances, the California Issuer's right to enforce the special services covenant in the California Loan Agreement, each Issuer's right to receive notices under the Bond Indenture, the Loan Agreement, the Purchase Contract, the Tax Exemption Agreement or any other Bond document and each Issuer's right to execute and deliver supplements and amendments to the Loan Agreement.. B-16 "United States Government Obligations" means noncallable direct obligations of, or obligations the timely payment of the principal of and interest on which is fully guaranteed by, 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. "Unrelated Trade or Business" means an activity which constitutes an "unrelated trade or business" within the meaning of Section 513(a) of the Code without regard to whether such activity results in unrelated trade or business income subject to taxation under Section 512(a) of the Code. "Variable Rate Conversion Date" means a date on which the Bonds begin to bear interest at an Adjustable Long-Term Rate after a Weekly Rate Period. "Volusia Act" means Chapter 159, Parts II and III, Florida Statutes, as amended from time to time. "Volusia Bond Indenture" means the Bond Trust Indenture dated as of July 1, 2008, from the Volusia Issuer to the Bond Trustee, as it may from time to time be amended or supplemented. "Volusia (Florida) Bonds" means the $22,790,000 aggregate principal amount ofVolusia County Industrial Development Authority Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group- Bishop's Glen) authorized to be issued pursuant to the terms and conditions of the Volusia Bond Indenture. "Vol usia Borrower" means Holly Hill RHF Housing, Inc., a Florida nonprofit corporation and its successors and assigns and any surviving, resulting or transferee corporation. "Volusia Issuer" means the Volusia County Industrial Development Authority, a public body corporate and politic of the state of Florida, created and existing under the laws of the state of Florida and its successors and assigns. "Vol usia Loan Agreement" means the Loan Agreement dated as of July I, 2008 between the Volusia Issuer and the Volusia Borrower relating to the Volusia (Florida) Bonds, as it may from time to time be amended and supplemented. "Weekly Mode" means the aggregate of the characteristics which apply to the Bonds bearing interest at the Weekly Rate. "Weekly Rate" means the rate of interest on the Bonds during a Weekly Rate Period. "Weekly Rate Period" means a rate period from and commencing on Thursday of any calendar week and including and ending on Wednesday of the next calendar week. "Written Request" with reference to any Issuer means a request in writing (which may be by electronic means acceptable to the Bond Trustee) signed by a member or an officer of that Issuer, and with reference to the Borrowers or RHF means a request in writing signed by the President, a Vice President, Secretary or Assistant Secretary of such Borrower, or any other officers designated by the Issuer or the Borrowers or RHF, as the case may be. "Y A Bond Indenture" means the Bond Trust Indenture dated as of July I, -2008, from Yellowwood to the Bond Trustee, as it may from time. to time be amended or supplemented. "Y A Bonds" means the $4,385,000 aggregate principal amount of Yellowwood Acres, Inc. Variable Rate Demand Taxable Refunding Corporate Bonds, Series 2008 (Retirement Housing Foundation Obligated Group) authorized to be issued pursuant to the terms and conditions of the Y A Bond Indenture "Yellowwood" means Yellowwood Acres, Inc., an Indiana nonprofit corporation and its successors and assigns and any surviving, resulting or transferee corporation. SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES The Bond Indentures contain various covenants, terms and conditions, certain of which are summarized below. All the Bond Indentures contain substantially similar provisions and therefore have been summarized together. Reference is made to each Bond Indenture for a full and complete statement of its provisions. FUNDS Interest Fund. At the direction of the Issuer, the Bond Trustee shall establish and maintain so long as any of the Bonds are Outstanding a separate account, for the benefit of the Bondholders, to be known as the "Interest Fund" (the "Interest Fund"). The Bond Trustee shall also establish and maintain a separate and segregated account in each Interest Fund designated as the ."LOC Interest Account" (the "LOC Interest Account"), which shall be an Eligible Account. During a Weekly Rate Period, on or before each Interest Payment Date the Bond Trustee shall deposit in the Interest Fund moneys received from the Borrower in an amount which, together with any moneys already on deposit in the Interest Fund and available to make such payment, other than in· the LOC Interest Account, is not less than the amount of interest to become due on the Bonds on such Interest Payment Date. On or before each Interest Payment Date the Bond Trustee shall take such actions as are necessary to draw funds under the Letter of Credit in accordance with its terms in an amount equal to the amount of interest due arid payable on each Bond (other than Bank Bonds or Borrower Bonds) on such Interest Payment Date. All proceeds of draws under the Letter of Credit to pay interest on the Bonds on an Interest· Payment Date shall be deposited in the LOC Interest Account and shall not be commingled with any other moneys, but shall be held by -the Bond Trustee as agent and bailee for the sole benefit and security of the owners of the Bonds (other than Bank Bonds or Borrower Bonds) until applied as provided · in the Bond Indenture. Except as specifically provided otherwise in the Bond Indenture and the Tax Exemption Agreement, moneys in the Interest Fund shall be used solely to pay interest on the Bonds when due or to reimburse the Bank for draws on the Letter of Credit. The Bond Trustee shall at all times maintain accurate records of deposits into the Interest Fund (including the LOC Interest Account), and the sources and dates of such deposits. Notwithstanding any other provisions of the Bond Indenture, payments of interest on Bonds (other than Bank Bonds or Borrower Bonds) bearing interest at a Weekly Rate shall be made from Eligible Moneys on deposit in the LOC Interest Account of the Interest Fund. Payment of interest on. Bank Bonds or Borrower Bonds shall be made from any moneys on deposit in the Interest Fund other than the LOC Interest Account. On each Interest Payment Date after payment in full of all interest due on the Bonds (other than Bank Bonds or Borrower Bonds), funds remaining on deposit in the Interest Fund shall be transferred.by the Bond Trustee to the Bank in the amount necessary to.reimburse the Bank for the interest portion of the draw on the Letter of Credit made on such date. On each Interest Payment Date after payment in full of all interest due on the Bonds (other than Bank Bonds or Borrower B-18 Bonds), and payment of all amounts owed to the Bank pursuant to a draw on the interest portion of the Letter· of Credit made on such date, funds remaining on deposit in the Interest Fund (other than in the LOC Interest Account) shall be used to pay interest due on .Bank Bonds or Borrower Bonds; provided, how·ever; that no interest shall be paid on Borrower Bonds on any date unless and until interest due on any Bank Bonds shall be paid on such date. In connection with any partial redemption or defeasance prior to Maturity of the Bonds, the Bond Trustee may, at the request of RHF, use any amounts on deposit in the Interest Fund in excess of the amount needed to pay the interest on the Bonds remaining outstanding on the first Interest Payment Date occurring.on or .after the date of such redemption or defeasance to pay the principal of and interest on the Bonds to be redeemed or defeased. Upon the Written Request of RHF (which request may refer to multiple payment dates) the Bond Trustee· may use funds on deposit in the Interest Fund to make interest payments to the provider of a "qualified hedge" as defined in Section 1.148-4(h)(3), United States Treasury Regulations. The Bond Trustee shall be entitled to rely upon, and shall not be obligated to seek independent verification of, the representations of RHF in any Written Request submitted pursuant to this paragraph; provided, however, that the Bond Trustee shall be entitled to request verification from RHF of the amounts to be paid to the provider of any qualified hedge. In addition, RHF or a counterparty under such qualified hedge or other interest rate agreement may pay to the Bond Trustee for deposit in the Interest Fund any amounts due under such a qualified hedge or other interest rate agreement. The Bond Trustee may pay any funds so deposited to RHF or to the counterparty, as the case may be, pursuant to the provisions of the interest rate hedge agreement. . Bond Sinking Fund. At the direction of the Issuer, the Bond Trustee shall establish and maintain so long as any of the Bonds are outstanding a separate account, for the benefit of the Bondholders, to be known as the "Bond Sinking Fund", (the "Bond Sinking Fund"). The Bond Trustee shall establish a separate account within the Bond Sinking Fund to.be known as the "LOC Principal Account," which shall be an Eligible Account. On or before the 20th day of each calendar month commencing with July 20, 2008, after making the required deposits into the Interest Fund, the Bond Trustee shall deposit in the Bond Sinking Fund moneys received from the Borrower an amount which is not less than the amount of principal to become due on the Bonds on September l, 2008; and on or before the 20th day of each calendar month thereafter, an amount which is not less than one-twelfth (l/12) of the principal of the Bonds to become due on the next September l by Maturity or mandatory Bond Sinking Fund redemption. No such deposit need be made, however, to the extent that there is a sufficient amount already on deposit and available for such purpose in the Bond Sinking Fund, other than in the LOC Principal Account, to be applied to such next Maturity or mandatory Bond Sinking Fund redemption payment. If the 20th day of any calendar month is not a Business Day, the deposit required to be made shall be made on the next succeeding Business Day. The Bond Trustee shall take such actions as are necessary to draw funds under the Letter of Credit in accordance with its terms in an amount equal to the amount of principal due and payable on each Bond (other than Bank Bonds or Borrower Bonds) on each September I by Maturity or mandatory Bond Sinking Fund redemption. All proceeds of draws under the Letter of Credit to pay the principal of the Bonds upon Maturity or mandatory Bond Sinking Fund redemption shall be deposited in the LOC Principal Account and shall not be commingled with any other moneys, but shall be held by the Bond Trustee as agent and bailee for the sole benefit and security of the owners of Bonds (other than Bank Bonds or Borrower Bonds), until applied as provided in the Bond Indenture. B-19 -Except· as provided in the Bond Indenture and' in the- Tax Exemption Agreement, moneys in the Bond Sinking Fund shall be used solely for the payment of. principal of the Bonds as. the same. shall become due and payable at Maturity: and to redeem the Bonds· in accordance with the mandatory. Bond Sinking Fund redemption schedule' or to reimburse the Bank for draws on the Letter of Credit.: The Bond Trustee shall at all times maintain accurate records of deposits into the Bond Sinking Fund (including the LOC Principal Account), and the sources and dates of such deposits. Payments of principal on Bonds (other -than Bank-Bonds or Borrower Bonds) bearing interest at a Weekly Rate shall be made from Eligible Moneys on deposit in the LOC Principal Account. Notwithstanding any other provisions of the Bond· Indenture, payments of principal on Bank Bonds or Borrower· Bonds shall be. made from -any moneys on deposit in the Bond Sinking· Fund other- than the LOC Principal Account.. On each principal payment date, after payment in full of all principal due on the Bonds (other than Bank Bonds or Borrower Bonds), funds remaining on deposit in the Bond Sinking Fund shall be transferred by the Bond Trustee to the Bank in the amount necessary to reimburse the Bank for the principal portion of the draw on the Letter of Credit made on such date. On each principal payment date, after payment in full of all principal due on the Bonds (other than Bank Bonds or Borrower Bonds), and payment of all amounts owed to the Bimk pursuant to a draw on ·the principal portion of the Letter of Credit made on such date, funds remaining on deposit in the Bond Sinking Fimd (other than the LOC Principal Account) shall be used to pay interest due on Bank Bonds or Borrower Bonds; provided, however, that no principal shall be paid on Borrower Bonds on any date unless and until all principal due on 'any Bank Bonds shall be paid on such date. In ·lieu of mandatory Bond Sinking Fund redemption, the Bond Trustee may, at the request, of RHF, purchase an equal principal amount of Bonds in the open market at prices not exceeding the. principal amount of the Bonds being purchased plus accrued interest. In addition, the amount of Bonds to be 'redeemed on any date pursuant to the mandatory Bond Sinking Fund redemption schedule shall be reduced by the principallimoimt of· Bonds assigned to -such mandatory Bond Sinking Fund redemption daie i:ir'to the period during which such Bond Sinking Fund redemption date occurs which are acquired by the Borrower and delivered to the Bond Trustee fot cancellation .. · . .: In connection with any partial redemption or defeasance prior to Maturity of the Bonds, the Bond Trustee may, at the re'quest of RHF, use any amounts on deposit in the Bond Sinking Fund in excess of the amount needed to pay principal on the Bonds remaining outstanding on the first principal or mandaiory sinking fund payment date occurring on· or ·after the date of. such redemption or defeasance ·to pay the principal of and interest on the Bonds to be redeemed or defeased. ·Redemption Fund. At the direction of the Issuer, the Bond Trustee shall establish and maintain so long as any of the Bonds are Outstanding a separate account, for the benefit of the Bondholders, to be known as the "Redemption Fund" (the "Redemption Fund"). The Bond Trustee.shall·also establish a separate accourit within each Redemption Fund to be known as the "LOC Redemption Account?' (the "LOC Redemption Account"), which shall be an Eligible Account. In the event of (a) prepayment by or on behalf of the Borrower of amounts payable on the Loan Agreement, (b) receipt by the Bond Trustee of condenmation awards or insurance proceeds for ·purposes of redeeming Series 2008 Bonds or (c) deposit with the Bond Trustee by the Borrower or the Issuer of moneys from any other source for redeeming Series 2008 Bonds, such nioneys shall be deposited -in the Redemption Fund (other than the LOC Redemption Account). Moneys drawn ·under the Letter of Credit for payment of the principal of, premium, if any, and interest· on the Series 2008 Bonds upon-redemption shall be deposited into. the LOC Redemption Account of the Redemption Fund and shall not be commingled-with any other moneys (other than: moneys in such Account) held by the Bond Trustee. ·,, ,:., ... . . ' . . ' All proceeds of draws under the Letter of Credit to make timely redemption payments shall be deposited in the LOCo Redemption Account and shall be held by the Bond Trustee as agent and bailee for B-20 the sole benefit· and security of the. Bondholders (other than the owners of Borrower· Bonds and Bank Bonds);bearing interest at·a Weekly Rate until applied as provided in the Bond Indenture .. While the Series 2008 Bonds bear interest at a Weekly Rate, payments of the redemption price of the Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) to be redeemed pursuant to the Bond Indenture shall be made, to the .extent available, from Eligible Morieys on deposit in the LOC Redemption Account.. · Moneys on deposit in the Redemption Fund shall be used first to make up any deficiencies existing in the Interest Fund and the Bond Sinking Fund (in the order listed) and second for. the purchase or redemption of Series 2008 Bonds in accordance with the provisions of the Bond Indenture; provided, however, that moneys on deposit in the LOC Redemption Account shall not be used to make up deficiencies in the Interest Fund and the Bond Sinking Fund other than in the LOC Interest Account and the LOC Principal Account. On any date on which Series 2008 Bonds are redeemed from amounts. on deposit in the Redemption Fund, after payment in full of the redemption price ofall Series 2008 Bonds redeemed on such date from amounts on deposit in the Redemption Fund, funds remaining on deposit in the Redemption Fund shall be transferred by the Bond Trustee to the Bank in the amount necessary to reimburse the Bank for the draw made on the Letter of Credit to pay such redemption. price. No redemption price of Bank Bonds or Borrower Bonds shall be paid unless and until the redemption price of all· other Bonds due on such date shall be paid and the Bank shall be reimbursed for the draw made on the Letter of Credit to pay such redemption price. No redemption price shall be paid on Borrower Bonds on any date unless and until all redemption price due on any Bank Bonds shall be paid on such date. Funds transferred to the Bond Trustee pursuant to the provisions of the Bond Indenture shall be deposited in the Redemption Fund and used to optionally redeem Series 2008 Bonds on the earliest date practicable in accordance with the provisions of the Bond Indenture without further request from the Issuer, RHF or the existing-Bank. · Expense· Fund. At the direction of the Issuer, the Bond Trustee shall establish a separate account, for the benefit of the Bondholders, to be known as the "Expense Fund" (the "Expense Fund"). Moneys in the Expense Fund will be disbursed upon receipt of a Written Request for the payment of expenses for any recording, Bond Trustee's and depositary's fees and expenses,. accounting and legal fees, financing costs and other fees and expenses incurred or to be incurred by or on behalf of the Issuer or the Borrower in connection with or incident to the issuance and sale of the Series 2008 Bonds. At such time as the Bond Trustee is furnished with a Written Request stating that all such fees and expenses have been paid, and in no event later than July I, 2009, the Bond Trustee shall· transfer any moneys remaining in the Expense Fund to the Interest Fund. ··. Purchase Fund. At the direction of the Issuer, the Bond Trustee ·shall establish and maintain a separate account to be known as the. Purchase Fund (the "Purchase Fund"), which shall be an Eligible Accoimt. Upon receipt ofthe proceeds of a remarketing or placement of Optionally Tendered Bonds on an Optional Tender Date or Mandatorily Tendered Bonds on a Mandatory Tender Date, the receipt. of proceeds from the sale or placement of Mandatorily Tendered Bonds on the conversion date to another interest rate, or the receipt of moneys for. the purchase of Series 2008 Bonds pursuant to the Letter of Credit on any Optional Tender.Date or Mandatory Tender Date, the Bond Trustee shall deposit such money in the Purchase Fund for• application to the Tender Price or purchase price, as the case may be, of the Series 2008 Bonds. Upon the receipt of the proceeds of a remarketing or placement of Bank Bonds or Borrower Bonds on a Placement Date, the Bond Trustee shall promptly pay such proceeds to the Bank on behalf of.the Borrower in.immediately available funds. On any Optional Tender Date or Mandatory Tender Date, the Bond Trustee shall transfer on the Bond· Register(lwnership ·of all of the Series 2008 Bonds tendered•or, required to be tendered to the name of the .purchaser.tl!ereof;·incltiding• without :limitation, .the. registration. of Bank Bonds in the name .of the Bank as pledgee· of the·Borrower. ·Unless otherwise 'directed by.the Bank, the•Bond·Trustee shall take such. actions· as are necessary to cause !he: Bank,'as· pledgee of the· Borrower; to .be reflected as the beneficial -owner of Bank Bonds in the records of DTC, including, if requested by !he Bank, the assignment of separate CUSIP numbers for such· Bank Bonds. On any Placement Date, the Bond Trustee shall transfer on the Bond Register:ownership of all_Bank Bmids remarketed.on such· Placement Date to the name of the purchaser !hereof Any holder of an Optionally Tendered Bond required to tender such Series 2008 Bond foqiurchase on an Optional Tender Date with respect to such Series 2008 Bond and any holder of a Mandatorily ·Tendered Bond required to tender-such Series 2008 Bond for purchase on a Mandatory Tender Date with respect to such Series 2008 Bond shall be entitled solely to. payment of the Tender·Price for such Series' 2008 Bonds and• shall not be entitled to the payment of any principal thereon or any 'i!lterest accrued' thereon on or after such- Optional or Mandatory Tender Date provided that the Tender Price has been deposited wilh the' Bond Trustee. Any such Series 2008 Bond deemed ·to be tendered shall no longer be considered to be an Outstanding Bond. ' .' . ' Amounts held by the Bond Trustee to pay the Tender Price of the Series 2008 Bonds shall be held uninvested or shall upon the direction of RHF ·be invested only in United States Government Obligations having a maturity date no later than the date or dates !hat moneys therefrom are anticipated to. be required, but which may be liquidated at the original principal amount thereof on no more than one Business Day's prior notice. Amounts held to pay the Tender Price for more than six years shall be applied as provided iri the Bond Indenture. INVESTMENT OF FUNDS- . .\ ·. Moneys in the Interest Fund, Bond Sinking. Fund, Redemption Fund and Expense Fund shall be invested in Qualified Investments upon a Written Request of RHF filed with the Bond Trustee; provided, however, that moneys deposited into the LOC Interest Account, the LOC Principal Account, the Purchase Fund and the· LOC Redemption Account shall only be invested in United 'States Government Obligations with a term not exceeding the earlier of 3(1-days from the date of investment of such moneys or the date such moneys are. anticipated to be required. In the absence of written investment instructions; !he Bond Trustee·is directed-to invest available funds in Qualified Investments described in paragraph (i) of the definition thereof Such investments shall be made so as to mature on or prior to the date or. dates that moneys therefrom are anticipated to be require& No investment earnings shall be deposited into !he LOC Interest Account, LOC ·Principal Account, LOC Redemption Account and Purchase Fund, other than investment earnings from moneys on deposit in each such account' The Bond Trustee; when authorized by RHF, may purchase or sell securities authorized through itself or a related subsidiary as principal or agent, in the purchase and sale of securities for such investments; provided, however, that in no case shall any investment ·be. otherwise than in accordance with the investment limitations contained in the Bond Indenture and in accordance with the Written Request of RHF which shall comply with the requirements of the Tax Exemption· Agreement The Bond Trustee shall not be liable :or responsible for any loss resulting from any such investments. · All income derived from the investment of moneys on deposit in any such funds in excess of the requirements ofthe funds held under the Bond Indenture shall be deposited in: (a) The Bond Sinking Fund (other than in the LOC Principal Account) to the extent of the amount required to be deposited therein to make the next required principal payment on the Series 2008 Bonds occurring wilhin 13 monlhs of the date of deposit, or to reimburse the Bank for a draw on the Letter of Credit applied for such purpose; (b) The Interest Fund (other than in the I;OC Interest Account) to the extent of !he estimated amount required to be deposited therein to make any interest payment on the Series 2008 Bonds occurring B-22 within 13 months of the date of deposit, or to reimburse the Bank for a draw on the Letter of Credit applied for such purpose; and (c) The balance, if any, m the Redemption Fund (other than m the LOC Redemption Account). The Issuer and the Borrower, by their execution of the Loan Agreement, acknowledge that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Issuer and the Borrower the right to receive brokerage confirmations of security transactions as they occur, the Issuer and the Borrower specifically waive receipt of such confirmations to the extent permitted by law. The Bond Trustee will furnish RHF (and the Issuer to the extent requested by the Issuer) periodic cash transaction statements which include detail for all investment transactions made by the Bond Trustee. ARBITRAGE; COMPLIANCE WITH THET AX EXEMPTION AGREEMENTS The Issuer, in reliance upon the Borrower, and the Borrower covenant and agree that they will not take any action or fail to take any action with respect to the investment of the proceeds of the Bonds or with respect to the payments derived from the Loan Agreement or any other moneys regardless of source or .where held which may, notwithstanding compliance with the other provisions of the Bond Indenture, the Loan Agreement and the· Tax Exemption Agreement, result in constituting the Bonds "arbitrage bonds" within the meaning of such term as used in Section 148 of the Code. The Issuer, in reliance upon and at the sole cost of the Borrower and RHF, further covenants and agrees that it will comply with and take all actions required by the Tax Exemption Agreement. SUPPLEMENTAL BOND INDENTURES . ' ' . The .Issuer and the Bond Trustee may with the consent of the Bank, without the consent of, or notice to, any of the Bondholders, enter into an indenture or indentures supplemental to the Bond Indenture, as shall not. be inconsistent with the terms and provisions thereof, for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in the Bond Indenture; . (b) to grant to or confer upon the Bond T~stee for the benefit ofthe Bondholders any additional rights, remedies, powers 'or authority that may lawfuliy be granted to or conferred upon the Bondholders and the Bond Trusiee, "or either of them;. · · (c) t~ assign and .. pledge under the Bond Indenture additional revenues, properties or ~~ihiteral; (d) to evidence the appointment of a separate bond trustee or the succession of a new bond trust~e; . , ~ (e) to permit the qualification of the Bond Indenture under the Trust Indenture Act of 1939, as then,amended, or.ariy similar feder~l statute hereafter in effect or to permit the qualification of the 13onds for,sale.under .the.securities laws of any state of the Uni,ted States of America; . • ' ' .~. - - • • v -· • • • ' ... , ~: .; 111:r. ) •l ~- : · ~... If,_ • · ' ''·r (g) to provide for the refunding or advance refunding of the Bonds, including the right to establish and administer an escrow fund ~nd to take related actiori ih c8rinection therewith; .•.. ·;.i·l_.,'t' •.·i .. ,!• '.' \H;,,,·, . .',·.·,·.·i! ,:<. /·,_;_.;.,· ':::tfl• •• •J ·,., '1. 11 ~ \J::.J:._.·J,.~: -~.:;:.(-_: ',.!·~ -''_., I• ··.ti.~ ii• 1'>JI:''(I.·: -~~'.J,:fl1 ~.1Ci',.).-•tllj 'H':",'·i!C\.•J:I/,'' :.·'J·- i j l_"_,:.~,·.'• :t '8-23 (h) to provide. for an Alternate Credit Facility which may be a direct pay or stand-by letter of credit, a line of credit or standby bond purchase agreement; or (i) in any other way which the Bond Trustee has determined does.not materially adversely affect the rights or interests of any Bondholder. · The Issuer and the Bond Trustee may·not enter into an indenture or indentures supplemental to the Bond Indenture pursuant to paragraph (f) of the provisions ·of the Bond Indenture summarized under this heading unless they shall have received an Opinion of Bond Counsel to the effect.that the issuance of coupon Series 2008 Bonds will not adversely. affect the validity of such Series 2008 Bonds or any exemption from federal income tax to which the interest on the Series 2008 Bonds would otherwise be entitled. In addition to supplemental indentures covered by the section of the Bond Indenture summarized above under this heading and subject to the terms and provisions contained in the Bond Indenture as summarized in this paragraph, and not otherwise, the holders of a majority in aggregate principal amount of the Series 2008 Bonds which are outstanding under the Bond Indenture at the time of the execution of such indenture or supplemental indenture shall, with the consent of the Bank, have the right, from time to time, anything contained in the Bond Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Bond Trustee of such other indenture or indentures supplemental thereto as shall ·be deemed necessary and 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 or any supplemental indenture; provided, however; that nothing summarized under this heading shall permit, or be construed as permitting, (a) an extension of the stated Maturity or reduction in the principal amount of, or reduction in the rate or extension of the time of paying of interest on, or reduction of any premium payable on the redemption of, any Series 2008 Bonds, without the consent of the holders of such Series 2008 Bonds, (b) a reduction in the amount or extension of the time of any payment required to be made to or from the Interest Fund or the Bond Sinking Fund provided in the Bond Indenture, without the consent of the holders of all the Series 2008 Bonds at the time outstanding, (c) the creation of any lien prior to or on a parity with the lien of the Bond Indenture, without the consent of the holders of all the Series 2008 Bonds at the time outstanding, (d) a reduction in the aggregate principal amount of Series 2008 Bonds the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all the Series 2008 Bonds at the time outstanding, (e) the modification of the rights, duties or immunities of the Bond Trustee, without the written consent of the Bond Trustee, (t) a reduction in the Tender Price payabl~ upon any Optional or Mandatory Tender Date, without the consent of the holders of such Series 2008 'Bonds, of' (g) a modification of the tender rights of any holder of Series 2008 Bonds or the mandatory tender provisions applicable to the Series 2008 Bonds, which would adversely affect the rights of any holder of Series 2008 Bonds, without the consent of the holders of all Series 2008 Bonds at the time outstanding. If at any time the Issuer shall request the Bond Trustee to enter into any such supplemental indenture for any of the purposes of the Bond Indenture summarized under this heading, the Bond Trustee shall, upon being satisfactorily indemnifted with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed by first class mail or an overnight delivery service, postage prepaid, to the registered owners of the Series 2008 ·Bonds at their addresses as the same shall appear on the Bond Register. 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 corporate trust office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee .shall· not, however, be subject to any liability to any Series2008 Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such supplemental indenture when consented to and approved as provided by the provisions of the Bond Indenture summarized under this heading. If the holders of not less than a B-24 majority in aggregate principal amount of the Series 2008 Bonds which are outstanding under the Bond Indenture 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 holder of any Series 2008 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 Upon the execution of any such supplemental indenture as the provisions of the Bond Indenture summarized under this heading permitted and provided, the Bond Indenture shall be and be deemed to be modified and amended in accordance therewith. Anything in the Bond Indenture to the contrary notwithstanding, so long as the Borrower is not in default under the Loan Agreement, a supplemental indenture under the Bond 'Indenture which adversely affects the rights of the Borrower under the Loan Agreement shall not become effective unless and until the Borrower shall have consented .in writing to the execution and delivery of such supplemental indenture. In this regard, the Bond Trustee shall cause notice of the proposed execution and delivery of any such supplemental indenture to which the Borrower has not already consented, together with a copy of the proposed supplemental indenture and a written consent form to be signed by. the Borrower, to be sent by first class mail or an overnight delivery service, postage prepaid, to the Borrower at least 30 days prior to the proposed date of execution and delivery of any·such supplemental indenture. Anything.in the Bond Indenture to the contrary notwithstanding, any such supplemental indenture which is to become effective during a Weekly Rate Period shall not become effective unless and until the Bank shall have consented in writing to the execution and delivery of such supplemental indenture. In this regard, the Bond Trustee shall cause notice of the proposed execution and delivery of any such supplemental indenture to which the Bank has not already consented, together with a copy of the proposed supplemental indenture and a written consent form to be signed by the Bank, to be sent by first class,mail or an overnight delivery service, postage prepaid, to the Bank at least 30 days prior to the proposed date of execution and delivery of any such supplemental indenture. DEFEASANCE If the Issuer shall pay or provi,Ie for the payment of the entire indebtedness on all Bonds Outstanding (including, for the purpose of the Bond Indenture, any Borrower Bonds) in any one or more of the following ways: · (a) by paying or causing to be paid the principal of( including redemption premium, if any) and interest on all Bonds Outstanding, as and when the same become due and payable; (b) by depositing with the Bond Trustee, in trust, at or before Maturity, moneys, which shall be Eligible Moneys except in the case of moneys deposited for the payment of Bank Bonds or Borrower Bonds, in an amount sufficient to pay or redeem (when redeemable) all Bonds Outstanding (including the payment of premium, if any, and interest payable on such Series 2008 Bonds to Matu~ity or redemption date thereof at the Maximum Rate if the Series 2008 Bonds are in the Weekly Mode), provided that such moneys, if invested, shall be invested in Government Obligations in an amount, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the, indebtedness on all ·Bonds Outstanding. at or before their respective Maturity Dates; . it being understood· that the investment income on such United States Government Obligations may be used for any other purpose under the Act; l ~ '' '.(c) , by delivering !o·th.e Bond Trustee, for 'cancellation by it, all ,Bonds Outsianding, if purchased wit!} Eligible Moneys (except in the case of !'lank Bonds or Borrower B<;mds); or 8,25 (d) by depositing with the Bond Trustee, in trust, United States Government Obligations (purchased with Eligible Moneys except in the case of securities deposited to provide for the payment of Bank Bonds or Borrower Bonds) in such amount as the Bond Trustee shall determine, in reliance on a certified public accountant's verification ·report, will, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof and any uninvested cash, be fully sufficient to pay or redeem (when redeemable) and discharge all the Bonds Outstanding (including the payment of premium, if any, and interest payable on such Series 2008 Bonds to Maturity or redemption date thereof at the Maximum Rate if the Series 2008 Bonds are in the Weekly Mode), at or before their respective Maturity Dates; and if the Issuer shall also pay or cause to be paid all other sums payable under the Bond Indenture by the Issuer, and the Borrower shall pay all obligations of the Borrower under the Reimbursement Agreement and any fees and expenses of the Bond Trustee in connection with the Bonds or the Letter of Credit, then and in that case the Bond Indenture and the estate and rights. granted thereunder shall cease, determine and become null and void, and thereupon the Bond Trustee shall, upon Written Request of the Issuer, and upon receipt by the Bond Trustee of an Officer's Certificate and an opinion oflndependent Counsel, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of the Bond Indenture have been complied with, forthwith execute proper instruments acknowledging satisfaction of and discharging the Bond Indenture and the lien thereof The satisfaction and discharge of the Bond Indenture shall be without prejudice to the rights of the Bond Trustee to charge and be reimbursed by the Issuer and the Borrower for any expenditures which it may thereafter incur in connection with the Series 2008 Bonds. Prior to the satisfaction and discharge of the Bond Indenture, no Bank Bonds shall be outstanding and all amounts owed to the Bank under the Reimbursement Agreement in connection with the Bonds or the Letter of Credit shall be paid in full. All moneys, funds, securities, or other property remaining on deposit in the Interest Fund, Bond Sinking Fund, Expense Fund, Redemption Fund, or in any other fund or investment under the Bond Indenture (other than said Government Obligations or other moneys deposited in trust as above provided, amounts in the Purchase Fund held for the payment of the Tender Price of Series 2008 Bonds which have not been tendered as required under the Bond Indenture and amounts held pursuant to the Bond Indenture) shall, upon the full satisfaction of the Bond Indenture, forthwith be transferred, paid over and distributed to the Issuer and the Borrower, as their respective interests may appear; provided that if the Issuer shall have no further interest in such moneys and if the Bank presents to the Bond Trustee a certificate to the effect that the Borrower owes any amounts to the Bank under the Reimbursement Agreement, then the Bond Trustee shall pay such excess moneys to the Bank until all amounts due to the Bank have been paid in full and there are no Bank Bonds outstanding. The Issuer or the Borrower may at any time surrender to the Bond Trustee for cancellation by it any Series 2008 Bonds previously authenticated and delivered which the Issuer or the Borrower may have acquired in any manner whatsoever, and such Series 2008 Bonds; upon such surrender and cancellation, shall be deemed to be paid and retired. LETTER OF CREDIT During such time as a Letter of Credit is in effect, the Bond Trustee shall draw upon the Letter of Credit in accordance with its terms in an amount which will be sufficient to pay, on any date on which due, principal of and interest on Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) while the Series 2008 Bonds bear interest at a Weekly Rate or are otherwise secured by a Letter of Credit, whether upon redemption, at Maturity, upon acceleration or otherwise or to purchase such Series 2008 Bonds in lieu of redemption. In no event shall the Bond Trustee draw upon the Initial Letter of Credit to make any payment of principal of Bank Bonds or Borrower Bonds, or any payment of interest on any Interest B-26 Payment Date on Series 2008 Bonds which as of the Record Date for such· Interest Payment Date were Bank Bonds. The Bond Trustee shall draw moneys under the Letter of Credit in accordance with its terms and in accordance with the Bond Indenture to the extent necessary to pay to the Bondholders the purchase price of Tendered Bonds. Immediately following each draw under the Letter of Credit, other than one to pay principal of or interest on the Series 2008 Bonds on an Interest Payment Date, and not as a condition to such draw, the Bond Trustee shall use its best efforts to give telephonic notice to RHF that such a draw under the Letter of Credit was made. Subject to the Bond Indenture, the Bond Trustee shall return any moneys drawn under the Letter of Credit to the Bank as soon as reasonably practicable on or after the applicable purchase date to the extent such moneys exceed the amount necessary to pay the purchase price of Series 2008 Bonds tendered for purchase. So long as the Bonds are Outstanding and bear interest at a Weekly Rate, the Borrower will cause a Letter of Credit to be in effect. .The Borrower may, subject to the prov1s1ons of the Reimbursement Agreement, at any time arrange for the deposit with the Bond Trustee of a Renewal Letter of Credit in substitution for the existing Letter of Credit. A draft of such Renewal Letter of Credit and a draft of the related Renewal Reimbursement Agreement, if any, shall be submitted by the Borrower to the Bond Trustee and the Issuer at least 15 days prior to the date such Renewal Letter of Credit is to become effective. Any Renewal Letter of Credit must have an adequate interest component to comply with the provisions of the Bond Indenture summarized in the last paragraph under this heading. The Borrower may, subject to the provisions of the Reimbursement Agreement, at any time arrange for the deposit with the Bond Trustee of an Alternate Credit Facility in substitution for the existing Letterof Credit. A draft of such Alternate Credit Facility, a draft of the related Alternate Credit Facility Agreement and a draft of any supplemental bond indenture required to be executed in connection with the delivery of the Alternate Credit Facility, and appropriate information concerning the entity which ·will issue such Alternate Credit Facility shall be submitted by the Borrower to each Rating Agency then maintaining a rating on the Series 2008 Bonds, and each such Rating Agency shall give notice, promptly confirmed·in writing, to the Issuer and the Bond Trustee aUeast 15 days prior to the date such Alternate Credit.. Facility is to become effective as to what rating the Series 2008 Bonds will bear after such substitution. The Letter of Credit then in effect may be replaced by an Alternate Credit Facility only if (i) the provisions for mandatory tender for purchase of the Series 2008 Bonds described in the Bond Indenture are complied with, (ii) prior to such replacement RHF shall have delivered to the Bond Trustee, the Issuer .and the existing Bank an Opinion of Bond Counsel to the effect that such replacement will not adversely affect the validity or enforceability in accordance with their terms of the Series 2008 Bonds, (iii) prior to such replacement RHF shall have delivered to the Bond Trustee, the Issuer and the existing Bank an Opinion of Bond Counsel to the effect that such replacement will not adversely affect any exemption from federal income taxation to which interest on the Series 2008 Bonds would otherwise be entitled, and (iv) the Bond Trustee shall receive an enforceability opinion and any other opinions required by each :Rating Agency then·rating the Series 2008 Bonds from counsel for the Bank issuing the Alternate Credit Facility. In addition, the Letter of Credit then in effect may· not be replaced by an Alternate Credit Facility. unless all amounts-owed .to.the existing· Bank under the Reimbursement Agreement have been paid :in full any Outstanding Bank Bonds held by the existing Bank are remarketed or purchased by the ·new Bank at par. • 'J • : •. '' :·, . ' I '>• ·,,;· ... ,, - ! , Ifat any time there shall have been delivered to the Bond Trustee, in substitution for the Letter of Credit then in effect, either an Alternate Credit Facility or a Renewal Letter of Credit, then the Bond Trustee shall accept such Alternate Credit Facility or Renewal Letter of Credit and shall surrender the Letter of Credit then in effect to the Bank which issued the Letter of Credit in accordance with its terms for cancellation as soon as such Letter of Credit. is no longer required to be available. to be drawn upon under· the Bond Indenture unless such Renewal Letter of Credit is effected through an amendment to such prior Letter of Credit as permitted by the terms thereof. The Bond Trustee shall promptly surrender any Letter of Credit after it expires or is otherwise terminated in accordance with its terms. In the event of a partial optional redemption, the Bond Trustee shall· take such actions as are required to reduce the amount which may be drawn thereunder so long as the requirements of Bond Indenture summarized in the last paragraph of this heading continue to be satisfied. The Bond Trustee shall not sell, assign or otherwise transfer the Letter of Credit except to a successor Bond Trustee under the Bond Indenture and in accordance with the terms of the Letter of Credit. So long as the Series 2008 Bonds bear interest at a Weekly Rate, the Borrower is required to cause to have on deposit with the Bond Trustee a Letter· of Credit in accordance· with the Loan Agreement; When a Letter of Credit is in effect, the Borrower shall cause the Interest Component of the Letter of Credit to b'e maintained in an amount which shall not be less than the sum of (i) the amount determined by multiplying {A) the outstanding principal amount of Series 2008 Bonds bearing interest at a Weekly Rate times (B) the Interest Coverage Rate for such Weekly Rate Period required to ·be used pursuant to this paragraph times (C) the quotient determined by dividing {I) the Interest Coverage Period for such Weekly Rate Period required to be used pursuant to this paragraph by (2) 365. The Interest Coverage Rate utilized for each Weekly Rate Period in the above described calculation shall not be less than the rate specified by the Remarketing Agent to the Bond Trustee for the Series 2008 Bonds in each particular Weekly Rate Period as the maximum interest rate at which the Remarketing Agent will remarket the Series 2008 Bonds in such Weekly Rate Period, which may not be less than the current interest rate or rates borne by the Series 2008 Bonds in such Weekly Rate Period. The Interest Coverage Period utilized for each Weekly Rate Period in the above described calculation shall not be less than the sum of (i) 34 days, plus (ii) seven days, so long as the Initial Letter of Credit is in effect and thereafter the maximum number of days the Bank is allowed pursuant to the provisions of the Letter of Credit then in effect to reinstate the Letter of Credit after a draw for interest, plus (iii) five days, representing the maximum number of days the Bond Trustee is allowed pursuant to the Bond Indenture to call the Series 2008 Bonds for mandatory tender, plus (iv) any additional number of days then required by any Rating Agency then maintaining a rating on the Series 2008 Bonds entitled to the benefit of such Letter of Credit. EVENTS OF DEFAULT; ACCELERATION Each of the following events is an "event of default" under each Bond Indenture, that is to say, if: . (a) payment of any installment of interest on any of the Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) shall not be made when the same shall become due and payable; or (b) payment of the principal of or the redemption premiums, if any, on any of the Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) shall not be made when the same shall become due and payable, whether such payment is at maturity or by proceedings for redemption, and whether such payment is expected to be paid from a draw on the Letter of Credit or from any Fund under the Bond Indenture or otherwise; or B-28 (c) ·payment of any amount due in respect of the purchase price of Tendered Bonds delivered to the Bond Trustee pursuant to the provisions of the Bond Indenture shall not be made when the same shall become due and· payable; or (d) all Series 2008 Bonds (other than Bank Bonds or Borrower Bonds) bearing interest at a Weekly Rate have not been purchased by mandatory tender by the fifth day after receipt by the Bond Trustee of (i) notice frorn· the Bank of the occurrence of a default under the Reimbursement Agreement and directing a mandatory tender of the Series 2008 Bonds, or (ii) notice within the applicable period specified in the Reimbursement Agreement that the Bank is not reinstating the Letter of Credit with respect to a draw honored thereunder to pay interest on the Bonds; or (e) the Bond Trustee receives notice frorn the Bank of the occurrence of a default under the Reimbursement Agreement and directing an acceleration of the Series 2008 Bonds; or (f) the occurrence of an event of default as defined in the Loan Agreement; or (g) the Issuer shall for any reason be rendered incapable of fulfilling its obligations under the Bond Indenture; or (h) the Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Series 2008 Bonds or in the Bond Indenture or in any agreement supplemental thereto on the part of the Issuer to be performed, and such default shall continue for 30 days after written notice specifying such default and requiring the same .to be remedied shall have been given to the Issuer and the Borrower by the Bond Trustee; provided that the Bond Trustee may give notice in its discretion and shall give such notice at the written request of the holders of not less than 25% in aggregate principal amount of the Series 2008 Bonds then outstanding under the Bond Indenture; or (i) the Issuer, the Borrower or the Bond Trustee shall default in the performance of any covenant, condition, agreement or provision of the Tax Exemption Agreement, and such default shall continue for a period of 30 days after written notice specifying such default and requiring the same to be remedied shall have been given to the party in default and the Borrower by the other party; provided that if such default cannot with due diligence and dispatch be wholly cured within 30 days but can be wholly cured, the failure of the Issuer, the Borrower or the Bond Trustee to remedy such .default within such 30- day period shall not constitute a default under the Bond Indenture if any of the foregoing shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or (j) any event of default as defined in the Master Indenture shall occur and such event of default shall be continuing from and after the date the Issuer is entitled to request that. the Master Trustee declare the Series 2008 Bond Obligation to be immediately due and payable, or such event of default shall be continuing from and after the date on which the Master Trustee is entitled under the Master Indenture to declare any Obligation immediately due and payable, or the Master Trustee s_hall declare any Obligation immediately due and payable. Any notices delivered by the Bond Trustee to the Issuer, RHF or the Borrower pursuant to the provisions of the provisions of the Bond Indenture summarized under this heading shall also be delivered to the Bank. .. '' '•' 8-29 Upon (i) the happening of any event of default specified in the provisions of the Bond Indenture summarized under subparagraph (f), (g), (h), (i) or U) above and the continuance of the same for the period, if any, specified in said paragraph, the Bond Trustee may, with the consent of the Bank, if any, and without any action on the part of the Bondholders, or (ii) upon the happening of an event of default specified in paragraph (a), (b), (c), (d), or (e) above, the Bond Trustee may at the direction of the Bank, if any, the Bond Trustee shall, or (iii) upon the happening and continuance of an event of default specified in subparagraph (f), (g), (h), (i) or (j) above and the written request of the Bank or the written request of the owners of not Jess than 25% in aggregate principal amount of the Series 2008 Bonds then outstanding under the Bond Indenture exclusive of Borrower Bonds and the consent of the Bank, if any, the Bond Trustee shall, declare the entire principal amount of the Series 2008 Bonds then outstanding under the Bond Indenture and the interest accrued thereon, immediately due and payable, and the entire principal and interest shall thereupon become and be immediately due and payable, subject, however, to the provisions of the Bond Indenture summarized herein under the heading "SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES- WAJVER OF EVENTS OF DEFAULT" with respect to waivers of events of default and to the Bond· Trustee being indemnified to its satisfaction. Upon acceleration of the Series 2008 Bonds, during the period any Letter of Credit is in effect, the Bond Trustee shall without indemnification, immediately draw moneys under the Letter of Credit to the extent available thereunder in an amount sufficient to pay principal of and accrued interest to the date payment of such draw is made. Upon the acceleration of the Series 2008 Bonds after an event of default, interest on the Series 2008 Bonds shall cease to accrue on the date notice of acceleration. Notice of any acceleration of the Series 2008 Bonds pursuant ·to the provisions of the Bond Indenture shall also be given by the Bond Trustee to the Bank and the Remarketing Agent, if any, and any rating agency maintaining a rating on the Series 2008 Bonds as provided in the Bond Indenture. WAIVER OF EVENTS OF DEFAULT The Bond Trustee may, with the consent of the Bank, in its discretion waive any event of default under the Bond Indenture and its consequences and rescind any declaration of maturity of principal, and shall do so upon written request of the Bank or the holders of (I) at least a majority in aggregate principal amount of all the Bonds outstanding in respect of which default in the payment of principal and/or interest exists with the consent of the Bank, ·or (2) at least a majority in aggregate principal amount of all the Bonds outstanding in the case of any other event of default under the Bond Indenture with the consent of the Bank; provided, however, that there shall not be waived (a) any event of default in the payment of the principal of any outstanding Bonds when due whether by mandatory redemption or tender or at maturity speCified therein, (b) any default in the payment when due of the interest on any such Bonds or (c) any failure to have moneys drawn under the Letter of Credit on deposit in the LOC Interest Account, the LOC Principal Account or the LOC Redemption Account and available for the payment hereinafter referred to on any date on which interest, premium, if any, or principal is payable on the Bonds (other than Bank Bonds and Borrower Bonds) bearing interest at a Weekly Rate in an amount sufficient to make all payments of principal, premium, if any, and interest becoming due on such date on such Bonds, unless prior to such waiver or rescission all arrears of interest, with interest thereon (to the extent permitted by Jaw) at the rate borne by the Bonds in respect of which such default shall have occurred or all arrears of payments of principal when due, as the case may be, and all expenses of the Bond Trustee and the Issuer in connection with such default, shall have been paid or provided for, and· if the Letter of Credit is then 'in effect, such payment or provision for payment of principal and interest on Bonds bearing interest at a Weekly Rate is made with Eligible Moneys. The provisions of the foregoing paragraph are further subject to the condition that any waiver by the Bank of any Event of Default under the Reimbursement Agreement and a rescission and annulment of its notice and consequences, and a reinstatement of the Letter of Credit by the Bank, shall constitute a B-30 waiver of the event of default under :subparagraphs (d) and (e) of the provisions of the Bond Indenture summarized herein under the heading "SUMMARY OF CERTAIN PROVISIONS.OF THE BOND INDENTURES EVENTS OF DEFAULT"; and a rescission and annulment of the notice and consequences thereof without the consent of the owners. of the Series 2008 Bonds. If notice of such Event of Default or· non reinstatement under the Reimbursement Agreement or the Letter of Credit shall have been given as provided under the Bond Indenture and if the Bond Trustee shall thereafter have received written notice from the Bank that such event of default under the Reimbursement Agreement shall have been waived or the Letter of Credit has been reinstated, the Bond Trustee, if it has not already drawn on the Letter of Credit in connection with such Event of Default, shall promptly give written notice of such waiver, rescission or annulment to the Issuer, the Bank, RHF and the Remarketing Agent, and shall give notice thereof by first class mail, postage prepaid, to all owners of outstanding Series 2008 Bonds. Anything in the Bond Indenture to the contrary notwithstanding, there shall be no waiver of an event of default under subparagraphs (d) or (e) of the provisions of the Bond Indenture summarized herein under the heading "SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES- EVENTS OF DEFAULT" unless the Bond Trustee shall have received written notice from the Bank that the Letter of Credit has been reinstated to an amount equal to the principal amount of all then outstanding Series 2008 Bonds bearing interest at a Weekly Rate, plus the applicable Interest Component required by provisions of the Bond Indenture summarized herein under the heading "SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES- LETTER OF CREDIT", and the Bond Trustee has been directed in writing by the Bank to grant such a waiver. In case of any such waiver or rescission or in case any proceeding taken by the Bond Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Bond Trustee and the Bondholders shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Bond Indenture respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon. DIRECTION OF PROCEEDINGS The Bank or holders of a majority in aggregate principal amount of the Series 2008 Bonds then outstanding with the consent of the Bank shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Bond Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Bond Indenture, including enforcement of the rights of the Issuer under the Loan Agreement and the rights of the Bond Trustee as the holder of the Series 2008 Obligation, the appointment of a receiver and any other proceedings thereunder; provided, that such direction shall be in accordance with the provisions of law and of the Bond Indenture. APPLICATION OF MONEYS · Subject to the provisions of the Bond Indenture and the Tax Exemption Agreement, all moneys received by the Bond Trustee, by any receiver or by any Bondholder pursuant to any right given or action taken under the provisions of the Bond Indenture shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the fees of and the expenses, liabilities and advances incurred or made by the Bond Trustee, including reasonable attorneys fees and expenses (provided that moneys received under a Letter of Credit for the payment of principal, or interest on Bonds shall be used only for payment of the Bonds other than Bank Bonds or Borrower Bonds), be deposited in the Bond Sinking Fund or, in the case of amounts received as a result of draws on the Letter of Credit or otherwise realized under an Altemate.Credit Facility, in the. LOC Principal Account of the Bond Sinking Fund·or, in.the case of amounts received as a result of draws on the Letter of Credit or otherwise realized B-31 under an Alternate Credit Facility, in the LOC Interest Account of the Interest Fund, as the case may be, and all moneys so deposited during the continuance of an event of default under the Bond Indenture (other than moneys for the payment of Bonds which have previously matured or otherwise become payable prior to such event of default or for the payment of interest. due prior to such event of default under the Bond Indenture), together with all moneys in the funds maintained by the Bond Trustee under the Bond Indenture other than the Purchase Fund, shall be applied as follows: (i) Unless the principal of all the Series 2008 Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: FIRST: To the payment of amounts, if any, payable. pursuant to the Tax Exemption Agreement, if the Bond Trustee is notified by the Issuer or. the Borrower that such amounts are due and payable pursuant to the Tax Exemption Agreement; SECOND: To the payment to the Persons entitled thereto of all installments of interest then due on the Series 2008 Bonds, including Bank 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 THIRD: To the payment to the Persons entitled thereto of the unpaid principal of any of the Series 2008 Bonds, including Bank Bonds, which shall have become due (other than the Series 2008 Bonds called for redemption for the payment of which moneys are held pursuant to the. provisions of the Bond Indenture), and, if the amount available shall not be sufficient to pay in full the Series 2008 Bonds, then to the payment ratably, according to the amount of principal due to the Persons entitled thereto, without any discrimination or privilege; (ii) If the principal of all the Series 2008 Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied: FIRST: To the payment of amounts, if any, payable pursuant to the Tax Exemption Agreement, if the Bond Trustee is notified by the Issuer or the Borrower that such amounts are due and payable pursuant to the Tax· Exemption Agreement; and· . , · ·SECOND: To the payment ofthe.principal and interest then due and unpaid upon the Series .2008 Bonds, -including Bank Bonds, without preference or priority of principal over interest or of interest oyer any other installment of interest, or of any Series 2008 Bond over any other Bond; ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege. (iii) lf the principal of all the Series 2008 Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded ·and annulled under the provisions of the Bond Indenture, then, subject to the provisions of the next paragraph in t)le event that the principal· of all the .Series 2008 Bonds shall later become due or be declared due and payable, the. moneys.s,hall be applied in accordance with the provisions of the first paragraph under this heading. ' ' Whenever moneys are to be applied by the Bond Trustee pursuant to the provisions summarized under this heading, such moneys shall.be applied by it at such times,. and from time to time, as the Bond Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date B-32 unless it shall deem another·date more suitable or unless the acceleration is due to the failure of the Bank to reinstate the Letter of Credit, in which case the application of funds shall be prim to the termination of the Letter of Credit) 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 notice of the deposit with it of any such moneys and of the fixing of any such date and of the Special Record Date iri·accordance with the B·ond Indenture ten days prior to the Special Record Date. The Bond Trustee shall not be required to make payment to the holder of any unpaid Bond until such Bond shall be presented to the Bond Trustee. for appropriate. endorsement or for. cancellation if fully paid. Whenever all Series 2008 Bonds and interest thereon have been paid under the provisions of the Bond Indenture summarized under this heading· and all expenses and charges of the Bond Tnistee have been paid, any balance remaining shall be paid to the Bank to the extent it is owed any amount pursuant to the Reimbursement Agreement; then the balance, if any, shall be paid to RHF for distribution to the Borrower. REMOVAL OF THE BOND TRUSTEE The Bond Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Hond Trustee; the Issuer and the Bank and signed by the owners of a majority in aggregate principal amount of Bonds then outstanding. The foregoing notwithstanding, so long as no default has occurred and is continuing under the Bond Indenture or the Loan Agreement and so long as no event has occurred which would, with the giving of notice or the passage of time become an event of default under the Bond Indenture or the Loan Agreement, the Bond Trustee may be removed at any time upon the written request of'RHF, and delivered to the Bond Trustee, the Issuer and the Bank. The foregoing notwithstanding, the Bond Trustee may not be removed by RHF unless written notice of the delivery of such instrument or instruments signed by RHF is mailed to the owners of all Bonds outstanding under the Bond Indenture, which notice indicates the Bond Trustee will be removed and replaced by the successor trustee named in such notice, such removal and replacement to become effective upon the later of the acceptance of the appointment by the successor Bond Trustee, or the 60th day next succeeding the date of such notice, unless the Bank or the owners of I 0% or more in aggregate principal amount of such Bonds then outstanding under the Bond Indenture shall object in writing to such removal and replacement. Such notice shall be mailed by first class mail postage prepaid to the owners of all such Bonds then outstanding at the ·address of such owners then shown on the Bond Register, and to the Issuer and the Bank. RIGHTS OF BANK; EXCEPTIONS TO REQUIREMENTS OF BANK CONSENT Notwithstanding any provision of the Bond Indenture to the contrary other than as provided in the next paragraph, (i) no' acceleration shall be permitted, and no Event of Default shall be waived, without the Bank's consent; (ii) the Bank shall have the right to direct all remedies pursuant to the Bond Indenture; and (iii) the Bank shall be deemed the Bondholder within the definition of that term, and shall be deemed the holder of the Series 2008 Bond Obligation for purposes of voting amendments or modifications to the Master Indenture. Except as specifically provided otherwise in the Bond Indenture, notwithstanding the immediately preceding paragraph or any other provision of the Bond Indenture to the contrary, the Bank shall not have any right to consent to, direct or control any actions, restrictions, rights, remedies, wmvers or accelerations· pursuant to any provision of the Bond Indenture during any time which: (a) ·the Bank. is in default of its obligation to honor draws made under and m strict compliance with the terms of the Letter of Credit; B-33 (b) . any payment on. the Letter of Credit by the Bank, has been recovered from the Bond Trustee or any Bondholder, or is the subject of any claim for recovery not.dismissed within 30 days after the making thereof; due to any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt; dissolution, liquidation or other similar law proceeding with respect to the Bank; or. (c) the Bank is dissolved or confiscated by action.of government due. to .war or peace time emergency or the .U.S. government declares a moratorium on the Bank's activities. SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS .Th~ following is . a summary of certain provisions of the Loan Agreements. .All the Loan Agreements contain substantially similar provisions and therefore have been summarized together. For purposes of the y A Bonds and the ML Bonds;' the .covenants summarized below may appear in the applicable Bond Indenture. Reference is made to the Loan Agreements for a full and complete statement of its provisions. REPRESENTATIONS BY THE BORROWERS: The ·Borrower is a nonprofit public benefit corporation duly incorporated and in good standing under the la~s of the State of. its incorporation, has the requisite legal right, power and authority to enter into the National Master Indenture or the California Master Indenture, the Loan Agreement, the Series 200.8 Bond Obiigation, the .Official Statement, the Tax Exemption Agreement, the General Refunding Certificate, the R~marketing Agreement, the Mortgages, the Purchase Contract, the Escrow Agreement, the Reimbursement Agreement and the California Bank Obligation or the National Bank Obligation, and to carry, out all of its obligations under and consummate all transactions contemplated by the Loan Agreement. and by the .other agreements of the Borrower, and by proper corporate . action has duly authorized the execution, delivery and performance of the agreements of the Borrower. · . . . . There is no action, suit, proceeding, inquiry or investigation, before or by any court or federal, state, municipal or othergovemmental authority' pending (pursuant to proper service of process), or to the knowledge of the Borrower, after reasonable investigation, threatened, against or affecting the Borrower or the assets, properties or operations of the Borrower that, if determined adversely to such Borrower or its interests, would have a material adverse effect upon the consummation of the transactions contemplated by, or the validity of, the Master Indenture, the Loan Agreement, the Series 2008 Bond Obligation, the Official Statement, the Tax Exemption Agreement, the General Refunding Certificate, the Remarketing Agreement, the Mortgages, the Purchase Contract, the Escrow Agreement, the Reimbursement Agreement and the California Bank Obligation or the National Bank Obligation, or upon the financial condition, assets, properties or operations of such . Borrower, and the Borrower is not in default (and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute a default) with n:spect to any order or decree of.any court or any order, · regulation or demand of any federal, state, municipal or pther governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by ·the Master Indenture, the Loan Agreement, the Series. 2008 Bond Obligation, the Official Statement, the Tax Exemption Agreement, the General Refunding Certificate, the Remarketing Agreement, the Mortgages, the Purchase· Contract, the Escrow Agreement, the Reimbursement Agreement and. the California Bank Obligation or the National Bank Obligation, or ·the financial condition, assets, properties or operations of the Borrower. All tax returns (federal, s'tate and local) required to be filed by or on behalf of the Borrower })ave been filed,. and all taxes shown thereon to be due, including interest and penalties, except such, if any, as are being actively contested by the Borrower in good faith, have been paid or adequate reserves have been made for the payment thereof which reserves, if any,. are reflected in the audited financial statements described therein. The Borrower. enjoys the peaceful and undisturbed possession of all of the premises upon which it is operating its Facilities. ASSIGNMENT AND PLEDGE OF ISSUER'SRIGHTS As security for the payment of the Bonds and the Borrower's obligations under the Reimbursement Agreement in connection with the Bonds or the Letter of Credit, the Issuer will assign and pledge to the Bond Trustee all right, title and interest of the Issuer in and to the Loan Agreement and the Series 2008 Bond Obligation, including the right to receive payments thereunder (except its Unassigned Rights), and directs the Borrower to make said payments directly to the. Bond Trustee. The Borrower assents to such assignment and pledge and will make payments directly to the Bond Trustee without defense or set-off by reason of any dispute between the Borrower and the Issuer or the Bond Trustee, and agrees that. its obligation to make payments and to perform the other agreements contained in the Loan Agreement are absolute and unconditional. Until the principal of and interest on the Bonds shall have been fully paid or provision for the payment of the Bonds made in accordance with the Bond Indenture, and the Borrower has paid all of its obligations under the Reimbursement Agreement in connection with the Bonds or the Letter of Credit, the Borrower (a) will not suspend or discontinue any payments provided for in the Loan Agreement, (b) will perform all· its other duties and responsibilities called for by the Loan Agreement, and (c) will not terminate the Loan Agreement for any cause including any acts or circumstances that may constitute failure of consideration, destruction of or damage to the facilities, commercial frustration of purpose, any change in the laws of the United States or of the State or any agency or political subdivision of either or any failure of the Issuer to perform any of its agreements, whether express or implied, or any duty, liability or obligation arising from or.connected with·the Loan _Agreement. · PAYMENTS IN RESPECT OF THE SERIES 2008 BOND OBLIGATION AND THE LOAN AGREEMENT · The Borrower will duly and punctually pay the principal of, premium, if any, and interest ·due under the Loan Agreement at the dates and the places and in the manner mentioned in the Loan Agreement according to the true intent and meaning thereof. The Borrower also acknowledges that the California Obligated Group or the National Obligated Group, as applicable, will make payment of the principal of, premium, if any, and interest on the Series 2008 Bond Obligation at the dates and the places and in the manner mentioned in the Series 2008 Bond Obligation, according to the true intent and meaning thereof. Notwithstanding any schedule of payments under the Loan Agreement or on the Series 2008 Bond Obligation, the Borrower agrees to make payments at such times and in such amounts (including principal, interest and premium, if any) so as to provide for payment of the principal of, premium, if any, and interest on the Bonds outstanding under the Bond Indenture when due whether upon a ·scheduled Interest Payment Date, at Maturity or by mandatory or optional redemption, tender, . acceleration or otherwise. The Borrower also agrees to make any payments as required under the Tax Exemption Agreement. Any payment or prepayment made by the Borrower of amounts due under the Loan Agreement shall be a credit against amounts due on the Series 2008 Bond Obligation; and any payment or prepayment by the RHF Obligated Group on the Series 2008 Bond Obligation shall be a credit against amounts due under the Loan Agreement. THE BORROWER'S OBLIGATIONS UNCONDITIONAL . The Issuer and the Borrower agree that the Borrower shall bear all risk of damage or destruction in,;.v,ho)~. or in part to its Facilities or a!ly paj'\ thereof including without limit~tjon any loss, ~omplete or partial, or interruption 'in the use, occupancy or operation of such Facilities, or any manner or thing which for any reason interferes with, prevents or renders burdensome, the use or occupancy of such Facilities or the compliance by the Borrower with any of the terms of the Loan Agreement. In furtherance of the foregoing, but without limiting any of the other provisions of the Loan Agreement, the Borrower agrees that its obligations to pay the principal, premium, if any, and interest on the amounts due under the Loan Agreement and on the Series 2008 Bond Obligation, to pay the other sums provided for in the Loan Agreement and to perform and observe the other agreements contained therein shall be absolute and unconditional and that the Borrower shall not be entitled to any abatement or diminution thereof nor to any termination of the Loan Agreement for any reason whatsoever. · CERTAIN COVENANTS OF THE BORROWER RELATING TO THE USE AND OPERATION OF CERTAIN OF ITS PROPERTY No portion of the proceeds of the Bonds shall. be used to finance or refinance any facility, place or building tc, be used (I) primarily for sectarian instruction or study or as a place for devotional activities or religious worship or (2) by a Person that is not an organization described in Section 50l(c)(3) of the Code or a governmental· unit (as described in the Code), or by an organization described in Section 50l(c)(3) of the Code (including the Borrower) in an "unrelated trade or business" (as set forth in Section 513(a) of the Code), in such a manner or to such· extent as would result in any of the Bonds being treated as an obligation not described in Section 103(a) of the Code. INDEMNIFICATION OF THE ISSUERS AND THE BOND TRUSTEE To the fullest extent permitted by law, the Borrower agrees to indemnify, hold harmless and defend the Issuer, the Bond Trustee, and each of their respective officers, governing members, directors, officials, employees, attorneys and agents (collectively, the "Indemnified Parties"), against any and all losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind or character (including, without limitation, reasonable attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) to which thelndemnified·Parties, or any of them, may become'subject under or any statutory law (including federal or state .securities laws) or at common law or otherwise, arising out of or based upon or in any way relating to: (i) ·the documents executed by the Borrower in· connection with the issuance of the Series 2008 Bonds or the execution or amendment of the aforementioned documents or in connection with transactions contemplated by the aforementioned documents, including the issuance, sale or resale of the Series 2008 Bonds; (ii) any act: or om1sswn of the Borrower or any of its agents, contractors, servants, employees, tenants) or licensees in connection with the Facilities, the operation of the Facilities, or the condition, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Facilities or any part thereof; (iii). any lien or charge upon payments by the Borrower to the Issuer and the Bond Trustee under ·the' Loan Agreement, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges imposed on the Issuer.or the Bond Trustee in respect of any portion of the Facilities; (iv) any violation of any Environmental Regulations with respect to, or the release of any Hazardous Substances from, the Facilities or any part thereof;· (v) the defeasance and/or redemption, in whole or in part, of the Series 2008 Bonds; B-36 (vi) any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in any offering statement or disclosure or continuing disclosure document for the Series 2008 Bonds or any of the documents relating to the Series 2008 Bonds, or any omission or alleged omission from any offering statement or disclosure or continuing disclosure document for the Series 2008 Bonds of any material fact necessary to be stated therein in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (vii) any declaration of taxability of interest on the Series 2008 Bonds, or allegations that interest on the Series 2008 Bonds is taxable or any regulatory audit or inquiry regarding whether interest in the Series 2008 Bonds is taxable; or (viii) the Bond Trustee's acceptance or administration of the trust of the Bond Indenture, or the exercise or performance of any of its powers or duties thereunder or under any of the documents relating to the Series 2008 Bonds to which it is a party; except ·(t) in the case of the foregoing indemnification of the Bond Trustee or any of its respective officers, members, directors, officials, employees, attorneys and agents, to the extent such damages are caused by the negligence or willful misconduct of such Indemnified Party; or (2) in the case of the foregoing indemnification of the Issuer or any of its officers, members, directors, officials, employees, attorneys and agents, to the extent such damages are caused by the willful misconduct of such Indemnified Party. ln the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought under the Loan Agreement, the Borrower, upon written notice from the Indemnified Party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Indemnified Party may only employ separate counsel at the expense of the Borrower if in the reasonable judgment of such Indemnified Party an actual conflict of interest exists by reason of common representation or if all parties commonly represented do not agree as to the action (or inaction) of counsel. (b) The rights of any persons to indemnity under the Loan Agreement and rights to payment of fees and reimbursement of expenses pursuant to the Loan Agreement and the portions of the Loan Agreement summarized under this heading shall survive the final payment or defeasance of the Series 2008 Bonds and in the case of the Bond Trustee any resignation or removal. The provisions of the Loan Agreement summarized under this heading shall survive the termination of the Loan Agreement. MAINTENANCE OF CORPORATE EXISTENCE AND STATUS The Borrower agrees that as long as any Bonds are outstanding, the Borrower will maintain its existence, will not dissolve, liquidate or otherwise dispose of all or substantially all of its assets, and will not consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it. Any dissolution, liquidation, disposition, consolidation or merger of the Borrower shall be subject to the following conditions: (a) the Borrower provides a certificate to the Issuer and the Bond Trustee, in form and substance reasonably satisfactory to such parties, to the effect that no event of default exists under the B-37 Loan Agreement or under the'· Bond Indenture and that no event of default will be caused by the dissolution, liquidation, disposition, consolidation or merger; · · (b) the entity surviving the dissolution, liquidation, disposition, consolidation or nierger assumes in writing and without condition or qualification the obligations of the Borrower under the Loan Agreement and the Tax Exemption Agreement; (c) the Borrower or the entity survlVlng the dissolution, liquidation, disposition, consolidation or merger, within 10 days after execution thereof, furnishes to the Issuer and the Bond Trustee a· true and complete copy of the instrument of dissolution, liquidation, disposition, consolidation or merger; (d) neither the validity nor the enforceability of the Series 2008 Bonds or the Bond Indenture is adversely affected by the dissolution, liquidation, disposition, consolidation or merger; (e) the dissolution, liquidation, disposition, consolidation or merger will not adversely affect any·exemption from federal income taxation to.which interest on the Series 2008 Bonds would otherwise be entitled; ... ' .c.( t) evidence that no rating on the Series 2008 Bonds, if the Series 2008 Bonds are then rated, is reduced or withdrawn as a result of the dissolution, liquidation, disposition, consolidation or merger; .(g) (i) neither. the validity or enforceability of the Loan Agreement or the Tax Exemption Agreement will be adversely affected by the dissolution, liquidation, disposition, consolidation or merger and (ii) the provisions of the Bond Indenture and ·the Tax· Exemption Agreement are complied ·with concerning· the dissolution, liquidation, disposition, consolidation or merger. ., As of the effective date of the dissolution, liquidation, disposition,.consolidation or merger, the Borrower (at its cost) shall furnish to the Issuer and the Bond Trustee (i) an opinion of Bond Counsel, in form and substance.satisfactory to such ·parties, as to items {d) and (e) above, and (ii) an opinion of Independent Counsel,. in form and substance satisfactory Sl!Ch parties, as to the legal, valid and binding .nature of item (c) above, · The Borrower further agrees that it will not act or fail to act in any other manner which would adversely affect any ex emptiO!)· from federal income taxation of the interest earned by the owners of the .Series 2008 Bonds to which such Series 2008 Bonds would otherwise be entitled. AMENDMENTS· TO THE LETTER OF CREDIT .. · . ... •'·' . '. The Borrdwer covenants and agrees that it will not take any action or permit any action to be taken which will impair its rights or the rights of any other party thereto under the Letter of Credit. LICENSURE .. ' . . . ' The Borrower warrants that its Facilities have all material state and local licenses required for the operation thereof The Borrower will obtain and.maintain or cause to. be obtained and maintained all such licenses required for the operation of its Facilities and will use its best efforts to obtain and maintain or cause to be obtained and maintained such licensure so long as it is in the best interests of the Borrower ·and the Bondholders, as determined.bythe governing body·of.the Borrower. ,,, ., ' :C·. . B-38 FINANCIAL STATEMENTS· The Borrower covenants in the Loan Agreement that it will keep 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 Borrower in accordance with generally accepted principles of accounting consistently applied (except as stated in the notes thereto), and will furnish the materials and notices required to be delivered to the Master Trustee under the applicable Master Indenture to the Issuer, to the Bond Trustee, the Bank and to any requesting holder-or holders of the Bonds. SUPPLEMENTS AND AMENDMENTS TO THE LOAN AGREEMENTS Subject to the terms and provisions of the Bond Indenture, the Issuer and the Borrower may, with the prior written consent of the Bond Trustee and the Bank, amend or modify the Loan Agreement, or any provision thereof, or may consent to the amendment or modification thereof, in any manner not inconsistent with the terms and provisions of the Bond Indenture, for any one or more of the following purposes: (a) to cure any ambiguity or formal defect in the Loan Agreement; (b) to grant to or confer upon the Issuer or Bond Trustee, for the benefit of the Bondholders, any additional rights, remedies, powers or authorities that lawfully may be granted to or conferred upon the Issuer or the Bond Trustee; (c) to amend or modify the Loan Agreement, or any part thereof, in any manner specifically required or permitted by the terms thereof, including, without limitation, as may be necessary to maintain the exclusion from gross income for purposes of federal income taxation of the interest on the Bonds; (d) to modify, amend or supplement the Loan Agreement, or any part thereof, or any supplement thereto, in such manner as the Bond Trustee and Borrower deem necessary in order to comply with any statute, regulation, judicial decision or other law relating to secondary market disclosure requirements with respect to tax-exempt obligations of the type that includes the Bonds; (e) to provide that Bonds may be secured by a Letter of Credit or other additional security not otherwise provided for in the Bond Indenture or the Loan Agreement; (t) to provide for the appointment of a successor securities depository; (g) to provide for the availability of certificated Bonds; (h) to provide for the addition of any interest rate mode or to provide for the modification or deletion of any interest rate mode so long as no Bonds will be operating in the interest rate mode when it is to be so modified or deleted, or to amend, modify or alter the interest rate setting provisions, tender provision or conversion provisions for any then existing interest rate mode so long as no Bonds will be operating in the interest mode when such provisions are to be so amended, modified or altered; provided that, in each case, there is delivered to the Bond Trustee an opinion of Bond Counsel stating that any such addition, deletion, amendment, modification or alteration will not adversely affect any exclusion from gross income for purposes of federal income taxation of interest on the Bonds; (i) while the 'Bonds bear interest at a Weekly Rate, to provide for the utilization of an Alternate Credit Facility; and (j) to make any other change which does not, in the opinion of the Bond Trustee, have a material adverse effect upon the interests of the Bondholders. In addition, subject to the terms and provisions contained in "EXCEPTIONS TO REQUIREMENTS OF BANK CONSENT" below; the Bond Trustee may grant such waivers of compliance by the Borrower with the provisions of the Loan Agreement as to which the Bond Trustee may deem necessary or desirable to effectuate the purposes of the intent of the Loan Agreement and which, in the opinion of the Bond Trustee, do not have a material adverse effect upon the interests of the Bondholders. Except for the amendments, changes or modifications summarized in the preceding paragraph, neither the Issuer nor the Bond Trustee shall consent to any other amendment, change or modification of the Loan Agreement without the written approval or consent of the holders of a majority in aggregate principal amount of the Bonds· which are Outstanding at the time of execution of any such amendment, change or modification. If at any time the Issuer or RHF 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 mailed in accordance with the Bond Indenture. 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 principal office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such amendment, change or modification when consented to and approved as summarized under this heading. If the holders of a majority in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution thereof as therein provided, no holder 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. DEFAULTS AND REMEDIES Each of the Loan Agreements provides that the occurrence and continuance of any of the following events shall constitute an "event of default" thereunder: (a) failure of the Borrower to pay any installment of principal, interest or premium on, or any other payment required by the Loan Agreement, and failure of the California Obligated Group or the National Obligated Group io pay any installment of principal, interest or premium on the Series 2008 Bond Obligation when the same shall become due and payable, whether upon a scheduled Interest Payment Date, at maturity, upon any date fixed for prepayment or by acceleration or otherwise; or· (b) failure by the Borrower to perform or comply with any of the covenants, conditions or provisions of the Loan Agreement or of the Tax Exemption Agreement and to remedy such default within 30 days after notice thereof from the Issuer to the Borrower; provided, however, that if failure to comply or perform with such covenants, conditions or provisions cannot be remedied within 30 days, but can be remedied, no "event of default" shall be deemed to have occurred or to exist if the Issuer and the Bank, in their discretion, shall consent to the Borrower commencing corrective action and the Borrower diligently pursues such corrective action until it shall have complied with or performed such covenants, conditions or provisions; or (c) if any representation or warranty made by the Borrower in the Loan Agreement or in any statement or certificate furnished to the Issuer, the Initial Bank or the Bond Trustee or the purchaser of any Series 2008 Bonds in connection with the sale of Series 2008 Bonds or furnished by the Borrower pursuant to the. Loan Agreement including, without limitation, statements in the Official Statement, proves untrue in any material respect as of the date of the issuance or making thereof and shall not be made good within 60 days after notice thereofto the Borrower by the Issuer, the Bond Trustee or the Bank; provided, however, that if such default cannot be remedied within 60 days, but can be remedied, no "event of default" shall be deemed to have occurred or to exist if the Issuer in its sole discretion, shall consent to the Borrower commencing corrective action and the Borrower diligently pursues such corrective action until such default has been cured; or (d) any event of default shall occur under the Bond Indenture which would permit the acceleration of any obligation; or (e) if the Borrower admits insolvency or bankruptcy or its inability to pay its debts as they mature, or is generally not paying its debts as such debts become due, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for the Borrower or for the major part of its Facilities; or (f) if a trustee, custodian or receiver is appointed for the Borrower or for the major part of its Facilities and is not discharged within 60 days after such appointment; or (g) if bankruptcy, reorganization, arrangement, insolvency or liq~idation proceedings, proceedings under Title II of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors are instituted by or against the Borrower (other than bankruptcy. proceedings instituted by the Borrower against third parties), and if instituted against the Borrower are allowed against the Borrower or are consented to or are not dismissed, .stayed or otherwise nullified within 60 days after such institution; or· (h) if payment of any installment of interest, principal or premium on any Bond shall not be made when the same shall become due and payable under the provisions of the Bond Indenture; or (i) while the Series 2008 Bonds are in a Weekly Mode, failure by the Borrower to cause to be made any payment of principal of or interest on any Series 2008 Bonds when the same shall become due and payable with Eligible Moneys. Whenever any event of default shall have occurred and be continuing under the Loan Agreement: (i) Acceleration of Maturitv; Waiver of Event of Default and Rescission of Acceleration. The Issuer may at its discretion, by written notice to the Borrower, and with the consent of the Bank, or at the direction of the Bank, request that the Bond Trustee declare the principal due under the Loan Agreement and the Series 2008 Bond Obligation (if not then due and payable) to be due and payable immediately and such principal shall thereupon become immediately due and payable as if all of the sums of money payable thereunder were originally stipulated to be paid on such accelerated payment date, anything in the Loan Agreement or the Series 2008 Bond Obligation to the contrary notwithstanding. The Issuer shall, with the consent of the Bank, or at the direction of the Bank, request that the Bond Trustee declare the principal due under the Loan Agreement and on the Series ·2008 Bond Obligation due and payable immediately upon the occurrence of any of the defaults described in (a), (e), (f), (g), (h) of (i) above. This provision of the Loan Agreement, however, is subject to the condition that if, at any time after the principal shall have been so declared and become due and payable, all arrears of interest, if any, upon the amounts due under the Loan Agreement and ·on the Series 2008 Bond Obligation and the expenses of the Issuer shall be paid by the Borrower, and every other default 'in the observance or performance of any covenant, condition or agreement in the Loan Agreement or in the Series 2008 Bond Obligation contained shall be made good, or be secured, to the satisfaction of the Issuer, or provision deemed by the Issuer to be adequate shall- be mad~ therefor, then and ·in every ·such case the Issuer, by written notice to the Borrower ·may waive the event of default by reason of which the principal due under the Loan Agreement and on the Series 2008 Bond Obligation shall have been so declared and become due and payable and may rescind and annul such declaration and ·its consequences; provided, however, that there shall not be waived any event of default in the payment of the principal payable on the Bonds when due whether by mandatory or optional redemption or tender or at the date of maturity specified therein; and provided further that no such waiver, rescission or annulment shall extend to or affect any subsequent event of default or impair any right consequent thereon. . . (ii) . · Right to Bring Suit, Etc. Tlie Issuer,· personally' or by attorney, may in its ·discretion, proceed to protect and eriforce)ts rights by pursuing any available .. remedy including a·suit or suits in equity or at law, whether for damages or for the specific performance· of any obligation, covenant or agreement contained in the Series 2008 Bond Obligation, in the Loan Agreement or in the Bond Indenture, or in aid of the execution of any power granted in the Loan Agreement, or for the enforcement of any other appropriate legal or equitable remedy, as the Issuer shall deem most effectual to collect the payments then due and thereafter to become due under the Loan Agreement or on the Series 2008 Bond B-41 Obligation, to enforce performance and observance of any obligation, agreement or covenant of the Borrower under the Loan Agreement, the Series 2008 Bond Obligation or the Bond Indenture or to protect and enforce any of the Issuer's rights or duties under such documents. EXCEPTIONS TO REQUIREMENTS OF BANK CONSENT No consent of the Bank shall be required under any provision of the Loan Agreement (other than consents to amendments or supplements to the Loan Agreement) nor shall the Bank have any right to consent to, direct or control any actions, restrictions, rights, remedies, waivers or accelerations pursuant to any provision of the Loan Agreement during any time which: (a) the Bank is in default of .its obligation to honor draws made under and m strict compliance with the terms of the Letter of Credit; ·(b) · any payment on the Letter of Credit by the Bank has been recovered from the Bond Trustee or any Bondholder, or is the subject of any claim for recovery not dismissed within 30 days after the making thereof due to any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or other similar law proceeding with respect to the Bank; or (c) the Bank is dissolved or confiscated by action of government due to war or peace time emergency or the United States government declares a moratorium on the Bank's activities. SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURES GENERAL ."'•:!: ,, The California Master Indenture and the National Master . Indenture, as supplemented (individually and . as applicable, the "Master Indenture"), authorize RHF, as Obligated Qroup Representative, and each Member to issue Obligations, including the Series 2008 Bond Obligations, the California Bank Obligation and the National Bank Obligation, which are full and unlimited obligations of the respective Obligated Group .. The Obligations are joint and several obligations of the current and future Members of the Obligated Group. Both the Master Indentures contain substantially similar provisions and therefore have been summarized together. • • , I Set forth below is a summary of certain provisions of the Master Indentures which will be effective during the period the Series 2008 Bonds are Outstanding and bear interest at a Weekly Rate. There are other covenants and provisions of the Master Indentures, primarily relating to restrictions imposed on the Obligated. Group with respect to debt service coverage requirements, the incurrence of additional indebtedness imd certain other matters, which are not summarized here .. The summary is not comprehensive al!d refer,nce is made to the applicable Master Indenture for a complete recital of its terms . . ' This Official Statement only describes the Series 2008 Bonds while they bear int~rest ,at a Weekly Rate and are secured by Letters of Credit issued by a single Bank. If any series of the Series 2008 Bonds is converted to an Adjustable Long-Term Rate or Fixed Interest Rates, or more than one Bank,provides Letters of Credit on the Series 2008 Bonds, the Series 2008 Bonds must be remarketed purs~ant to reoffering .disclosure which will either supplement or ,replace this Official Statement. - ~ .. ' ' AUTHORIZATION OF OBLIGATIONS ' . ~ .... '• . ; Each Member authorizes to be issued from time to time Obligations or series of Obligations, without limitation as to amount, except as provided in the Master Indenture or as may be limited by law. The issuance of any additional Obligation or series of Obligations requires that the Obligated Group Representative and· the Master Trustee· enter into a Related Supplement providing for the terms and conditions of such Obligations and the repayment thereof, and is subject ·to the terms, conditions and limitations established in the Master Indenture and in any Related Supplement. PARTICULAR COVENANTS OF THE OBLIGATED GROUP REPRESENTATIVE AND EACH MEMBER Payment of Principal and Interest. Each Member jointly and severally covenants and agrees to pay or cause to be paid promptly all Required Payments at the place, on the dates and in the manner provided in the Master Indenture, 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 the time of such ·payment and performance is of the essence concerning the obligations in the Master Indenture. COVENANTS AS TO MAINTENANCE OF PROPERTIES, ETC. Each Member, respectively, covenants and agrees: (a) That it will operate and maintain its real 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 contest the validity thereof. Each Member, respectively, further covenants and agrees that it will maintain and operate its real 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 real 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) Thatit.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 California Obligated Group's or the National Obligated Group's Teal Property and will make such payments or cause such payments to be made, nispectively, in due time to-prevent any delinquency thereon or any forfeiture or sale of the real 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 ofoany .Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness noncompliance with-which would hiiVe a• material adverse effect on the operations of the RHF 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 real 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, respectively, 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 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. Against Encumbrances. Each Member covenants not to create, assume or· suffer to exist any Lien upon the 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. ' Limitations on Additional Indebtedness. Each Member, respectively, agrees not to incur .any Additional Indebtedness except as permitted under·the Reimbursement Agreement ·There are limitations on 'the incurrence of additional indebtedness in the Master Indenture, but those limitations will only become 'effective upon remarketing of the Series 2008 Bonds. Rates and Charges: Debt Coverage. Each Member, respectively, covenants and agrees to fix, charge and collect, or cause to be fixed, charged and collected, in accordance with covenants in the Reimbursement Agreement There are required Debt Service Coverage Ratios in the Master Indenture, but such covenants will only become effective upon remarketing of the Series 2008 Bonds. Sale, Lease or Other Disposition of Property. Each Member, respectively; covenants and agrees that it will not sell, lease or otherwise dispose of any of· its Property except as permitted under the Reimbursement Agreement There are limitations on the sale, lease or disposition of property in the Master Indenture, but those limitations will only become effective upon remarketing of the Series 2008 Bonds: THE OBLIGATED GROUP . ' Membership in 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;.(2) agrees to be bound by the terms and restrictions imposed by the Master Indenture and Indebtedness represented by B-44 the Obligations; and (3) 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; (c) an Opinion of 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, the Master Indenture will be enforceable against the proposed new Member; (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 (accompanied by a written report of an Independent Consultant if required by the Master Indenture) meeting the requirements of specified portions of the Master Indenture, 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; (f) an Opinion of Bond Counsel to the effect that the addition of such Member: (I) will not result in the inclusion of interest on any Related Bonds in gross income for purposes of federal income taxation; and (2) will not cause the Master Indenture or the Obligations issued under the Master Indenture to be subject to registration under federal or state 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) such additional documentation as may be required by the Related Supplements. Withdrawal from 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: (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 Primary Obligor with respect to any Outstanding Obligations; (c) an Officer's Certificate (i) (accompanied by a written report of an Independent Consultant if required by the Master Indenture) meeting the requirements of the Master Indenture 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 (d) an Opinion of Bond Counsel to the effect that the withdrawal of such Member will not result in the inclusion of interest on any Related Bonds in gross income for purposes of federal income taxation. DEFAULTS Events of Default. Each of the following events ts 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, interest on or other amount due on or under 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 Related Supplement or 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 except that, if such failure can be remedied but not within such 60 day period, such· failure shall not become an Event of Default for so long as the Obligated Group Representative shall'diligently proceed to remedy same in accordance with and subject to any directions or limitation's·oftiine established by the' Master Trustee: . ' '· '• " . :..:~··l·jl ...•. ~.,.l 'lj.,_-_:·•_1,!- •. ·••'!•:· t'.· ~. ·_, B-45 (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 Master Indenture 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 ( l) 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. (d) Entry by a court having jurisdiction of a decree or order for (l) 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: ( l) 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 a Mortgage. Acceleration; Annulment of Acceleration. Upon the occurrence and during the continuationof an Event of Default, the Master Trustee may and, upon ( l) 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· summarized under subsection (a) above 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: (1) 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); (2) 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; (3) the Obligated B-46 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 (4) 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. 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 provisions of the Master Indenture, 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, 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 and any other amount then due on or under the Obligations, whether at maturity, by call for redemption or otherwise, in the order of their due dates, and, if the amount available is not sufficient to pay in full all amounts due on the same date, then to the payment thereof ratably, according to the amounts 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 summarized under this heading), to the payment of the principal, interest and other amounts then due and unpaid on or under 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 or other amount, of il)terest or other amount 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 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 Obligated Group Representative on behalf of the Members 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 B-47 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. Holders' Control of Proceedings. If an Event of Default shall have occurred and be continuing, the Holders ·Of at least a majority in aggregate principal amount of Obligations then Outstanding shall have the right to direct the method and place·of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions of the Master Indenture or any other guaranty or security instrument held by or for the benefit of the Master Trustee or for the appointment of a receiver or any other proceedings thereunder, so long as such direction is not in conflict with any applicable law or the provisions of the Master Indenture and is not unduly prejudicial to the interests of Holders not joining in such· direction. · Waiver of Event of Default. 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 thereunder. 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 and its consequences; provided, however, that, except under the circumstances set forth in the Master Indenture, a default in the payment of the principal of, premium, if any; or interest' on or any other amount due one or under any Obligation when due may not be waived without the written consent of the Holders of all Outstanding Obligations. SUPPLEMENTS AND AMENDMENTS Supplements Not Requiring Consent of Holders. The Obligated Group Representative, acting for itselLind 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 of the ·Master Indenture 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 thereunder; (f) to obligate a successor to any Member as permitted in the Master Indenture; or (g) to add· a new Member or have a Member withdraw as permitted in the Master Indenture. ·Supplements Requiring Consent of Holders. (a) Other than Related Supplements and subject to the terms and provisions and limitations contained in the Master Indenture, the Holders of not less a majority in aggregate principal amount of the Outstanding Obligations shall 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 in the Master Indenture. No Related Supplement shall be permitted however, that would: (1) 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; (2) Modify, alter, amend, add to or rescind any of the terms or provisions 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 B-48 Obligations to be due and payable, without the consent of the Holders of all Obligations then Outstanding; or (3) 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 if the Master Trustee receives: (l) a Request of the Obligated Group Representative to enter into such Related Supplement; (2) a certified copy of the resolution of the Governing- Body of the Obligated Group Representative approving the execution of such Related Supplement; (3) the proposed Related Supplement; and (4) an instrument or instruments eJ SAT! SF ACTION AND DISCHARGE OF MASTER INDENTURE. If (I) the Members shall deliver to the Master Trustee for cancellation all Obligations previously authenticated (other than any Obligations which shall have been mutilated, destroyed, lost or stolen and which shall 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 acceptable to the Master Trustee pursuant to an agreement between a Member and such bank or trust company in form acceptable to the -Master Trustee) 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 under the Obligations and the agreements and instruments evidenced and secured thereby 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 and under the Mortgages by the Members, then the Master Indenture shall cease to be of further effect. SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES GENERAL Each of the Borrowers located in· California will execute and record a First Deed- of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facility to the deed of trust trustee, First American Title Insurance Company a California corporation (the "California Deed .of Trust Trustee"); for the benefit of the California Master Trustee, and a Second Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facility to the California Deed of Trust Trustee, for the benefit of the National Master Trustee (all such first and second Deeds of Trust collectively referred to herein as the "California Deeds of Trust"). Each of-the Borrowers located in Missouri will execute and record a Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its· facility to the deed of trust trustee named therein (the "Missouri Deed of Trust Trustee" and, together with· the California Deed of Trust Trustee, the "Deed of Trust Trustee"), for the benefit of the National Master Trustee, and a Second Deed of Trust, Assignment of- Rents and Leases, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facility to the Missouri Deed of Trust Trustee, for the benefit of the California Master Trustee (all such first and second Deeds of Trust collectively referred to herein as the "Missouri Deeds of Trust"). 8-49 Each of the Borrowers that owns and operates a facility or facilities located in states other than California and Missouri will execute and record a·First Mortgage, Security Agreement and Fixture Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facility or facilities in favor of the National Master Trustee, and a Second Mortgage, Security Agreement and Fixture·· Filing with Assignment of Rents and Leases, dated as of July I, 2008, on its facility or facilities in favor of the California Master Trustee (all such first ·and second Mortgages, together with the Missouri Deeds of Trust, collectively referred to herein as the "National Mortgages,". together with the California Deeds of Trust collectively referred to herein as the "Mortgages" and each individually as a "Mortgage"): .. The following information summarizes certain provisions· of the various Mortgages. All the Mortgages contain substantially similar provisions and therefore have been summarized together. Reference is made to the Mortgages for a full and complete statement of their provisions. · AFTER-ACQUIRED TRUST PROPERTY To the extent permitted by applicable law, all right, title and interest of the Borrower in and to all improvements, betterments, renewals, substitutions and replacements ofthe Trust Property or any part thereof hereafter constructed or acquired by the Borrower, immediately upon such construction or acquisition, and without any further mortgaging, conveyance or assignment, shall become and be part of the Trust Property and shall be subject to the lien and security interest of the Mortgage as fully and completely and with the same effect as though now owned by the Borrower, buf at any and all times the Borrower will execute and deliver to the Master Trustee all such further assurances, deeds of trust, . conveyances or assignments therefor and other instruments with respect thereto as the Master Trustee may reasonably require for the purpose of expressly and specifically subjecting the same to the lien and security interest of the Mortgage. CONDITIONS FOR RELEASE So long as no Event of Default shall have occurred and be continuing under the Mortgage or under the Master Indenture, the Master Trustee shall release, or shall cause the Deed of Trust Trustee to release: (a) Machinery and Equipment in accordance with the Mortgage; and (b) Trust Land upon receipt by the Master Trustee of the following: (A) A Written Request of the Borrower for such release, describing the Trust Land to be released (referred to under this heading as the "Released Property"); (B) A certificate of the Borrower to the Master Trustee certifying: I. The fair market value of the Released Property and of the Trust Property (referred to under this heading as the "Substituted Property") other than cash to be substituted for the Released Property pursuant to the terms of the Mortgage 2. The disposition to be made of the Released Property and the consideration (which may include cash) to be received for the Released Property and the fair market value of consideration (other than money); B-50 3. That the disposition· of the Released Property and the substitution therefor of the Substituted Property will not materially adversely affect the operations of the Borrower's elderly housing or health care facilities or any other Property of the Borrower; 4. That the Substituted Property other than cash or investment securities is necessary or useful to the operation of the Borrower's elderly housing or health care facilities; 5. That the cash or the fair market value of the Substituted Property together with cash, if any, to be received is at least equal to the fair market value of the Released Property; 6. That the execution and delivery of the request for reconveyance by the Master Trustee or the release by the Deed of Trust Trustee and the subjection of the Substituted Property to the lien of the Mortgage will not result in a default under the Mortgage or under the Master Indenture or any other Financing Document; , 7. That all permits and authorizations of all federal, state and local governmental bodies and agencies have been granted to effect such disposition or that no such permits or authorizations are required; and 8. No default or Event of Default shall exist and be continuing under the Mortgage and no event shall have occurred which would become an Event of Default upon the giving of notice and/or passage of time. : (C) An appraisal of the fair market value of the Released Property by a member of the American Institute of Real Estate Appraisers (an "MAl Appraiser") if the Released Property is real property, or by another expert acceptable to the Master Trustee if the Released Property is not real property; provided, however, that no such appraisal shall be required for the release of real or personal Released Property with an aggregate value of $100,000 or less; (D) An appraisal of the fair market value of the Substituted Property by an MAl Appraiser if the Substituted Property is real property, or by another expert acceptable to the Master Trustee if the Substituted Property is not real property; provided, however, that no such appraisal shall be required for the substitution of real or personal Substituted PropertY with an aggregate value of $100,000 or less; (E) A supplement to the Mortgage and to the Master Indenture (if necessary) and other documents reasonably requested by, and in form satisfactory to, the Master Trustee necessary to subject the Substituted Property to the lien of the Mortgage and, if the Substituted Property is real property, an endorsement to the existing ALTA mortgage loan policy or an additional loan insurance policy in form satisfactory to the Master Trustee or the Deed of Trust Trustee, as applicable, evidencing that the Substituted Property is subject to the lien of the Mortgage subject only to Permitted Encumbrances; (F) If the fair market value of the Released Property when added to the fair market value of other Trust Property released pursuant to the provisions of the Mortgage within the same 12- month period is in excess of $500,000, a certificate of a Consultant acceptable to the Master Trustee to the effect set forth in paragraph (b)(ii) of this heading; and B-51 (G) (a) An opmton addressed to the Master Trustee from Independent Counsel satisfactory to the Master Trustee to the effect that: I. The release of the Trust Property requested by the Borrower is authorized under the Mortgage; 2. The Substituted Property is subject to the lien of the Mortgage subject only to Permitted Encumbrances; 3. The execution and delivery of the requested release and the acceptance of the Substituted Property will not violate any provisions of the Mortgage or of the Master Indenture or any other Financing Document; all necessary action required to be taken by the Borrower, the Master Trustee and the Deed of Trust Trustee to effect the release of the Released Property and the conveyance of the Substituted Property has been taken; 4. The supplemental amendment hereto, the supplemental indenture to the Master Indenture, if required, and all other documents required to effect the release of the Released Property and substitution therefor of the Substituted Property have been duly authorized, executed and delivered and are binding upon the parties executing and delivering the same in accordance with their respective terms (subject to customary exceptions for laws affecting creditors' rights and the applicability of equitable principles); and 5. To the knowledge of such Independent Counsel, all permits and authorizations of all federal, State and local governmental bodies and agencies have been granted, or that no such permits or authorizations are required; or (b) upon receipt by the Master Trustee of a written consent to the release of the Trust Land of a majority in aggregate principal amount of the holders. of the outstanding . Obligations. The foregoing notwithstanding, upon defeasance of the Master Indenture and Obligations thereunder in full, the Master Trustee shall, or shall cause the Deed of Trust Trustee to, reconvey all Trust Property under the Mortgage and the Master Trustee shall cooperate with the Borrower to take any and all action appropriate to evidence such reconveyance. B-52 APPENDIXC Proposed Text of Bond Counsel Opinion [Form of Approving Bond Counsel Opinion for Governmental Bonds] [Closing Date] Ladies and Gentlemen: We have acted as bond counsel to Retirement Housing Foundation, Inc., a California nonprofit public benefit corporation ("RHF"), in connection with the issuance by the [Issuer] (the "Issuer") of$ in aggregate principal amourit of its Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group), initially dated the date hereof (the "Bonds"). The Bonds are issued under the provisions of [the Act] (the "Act"), and under and pursuant to that certain Bond Trust Indenture dated as of July I, 2008 (the "Bond Indenture") between the Issuer and The Bank of New York Trust Company, N.A., as bond trustee (the "Bond Trustee"). The proceeds from the sale of the Bonds will be loaned by the Issuer to [Borrower], a not for profit corporation incorporated under the laws of the State of [State] (the "Borrower"), under that certain Loan Agreement dated as of July I, 2008 (the "Loan Agreement") between the Issuer and·the Borrower. Such loan will be evidenced by the Direct Note Obligation dated the date hereof (the "Series 2008 Bond Obligation") of the Obligated Group created under the Master Trust Indenture dated as of July I, 2008, as supplemented and amended (the "Master Indenture") among the Borrower and certain affiliated corporations (collectively, the "Obligated Group"), RHF, solely as Obligated Group Representative, and The Bank of New York Trust Company, N.A., as master trustee. Pursuant to the terms of the Loan Agreement and the Series 2008 Bond Obligation, the Borrower is obligated to make payments sufficient to pay the principal of, premium, if any, and interest on the Bonds. Pursuant to the terms of the Master Indenture, the Borro~er and the other members of the Obligated Group agree to be jointly and severally liable on all Obligations issued under the Master Indenture, including the Series 2008 Bond Obligation. The proceeds from the sale of the Bonds will be used, together with certain other moneys, to (i) refund the [Prior Bonds], currently outstanding in the amount of$ , and (ii) pay certain expenses of refunding the Prior Bonds and issuing the Bonds. RHF and each of the members of the Obligated Group, including the Borrower, has informed us that it is an organization described in Section 50l(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), that it is exempt from federal income taxation under Section 501 (a) a!ld 50 I ( c)(3) of the Code, and that it is not a "private foundation" as defined in Section 509(a) of the Code. We note that the tax exempt status of the members of RHF and the [Closing Date] Page 2 Obligated Group, including the Borrower, is addressed in the opinion of Latham & Watkins LLP, counsel to the Borrower and the. Oblig~ted Group, dated'this date and provided to the addressees hereof and we express no opinion with respe.ct to such status. Simultaneously with the issuance and delivery of the Bonds, the [other Issuers] will issue their [Variable Rate Demand Revenue Refunding Bonds, Series 2008 (Retirement Housing Foundation Obligated Group)] (collectively with the Bonds, the "RHF Combined Bonds"). The Borrower, RHF, the other Members of the Obligated Group and certain affiliates of the. Borrower and RHF who are borrowing portions of the RHF Combined Bonds are collectively referred to as the "RHF Obligated Group"). In our capacity as . bond counsel, we have examined, among other things, certified proceed.ings of the members of the Issuer authorizing, among other things, the execution and delivery of the Bond Indenture, the Loan Agreementand-the Tax Exemption Agreement dated the date hereof among the Issuer, the Borrower and the Bond Trustee, and the issuance of the Bonds, a specimen Bond, a certificate 9f the Bond Trustee regarding the authentication of the Bonds, executed counterparts of the . above-referenced documents, executed opinions of ------~' counsel to the Issuer, Latham & Watkins LLP, counsel to the Borrower, RHF and the Obligated Group, . , counsel to the Borrower, Ballard Spahr Andrews and Ingersoll, LLP, U.S.law counsel to KBC Bank N.Y., New York Branch, Linklaters DeBandtand, foreign law counsel, to KBC Bank N.Y., New York Branch, Katten Muchin Rosem_nan LLP, counsel to the initial purchaser of the Bonds, each dated this date, the report (the "Verification Report") of Chris D. Berens, CPA, P.C., verifying certain mathematical computations relating to the Bonds and the Prior Bonds, and such other documents, showings and related matters as we have deemed necessary in order to render this opinion. Based upon the foregoing and in reliance up()n certain documents and showings hereinafter referred to, we are of the opinion that: . I. The Bond Indenture has been duly authorized by the Issuer, has been duly executed and oelivered by authorized officers of the Issuer and, assuming due authorization, execution and delivery thereof by the Bond Trustee, constitutes a valid and binding instrument of the Issuer, enforceable against the Issuer in accordance with its terms, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights and by the availability of equitable remedies. . ' 2. The Bonds and the loan by the Issuer to the Borrower of the proceeds from the sale thereof as evidenced by the Series 2008 Bond Obligation and secured by the Loan Agreement have be\)n duly authorized by the Issuer, the Bonds have been duly executed by authorized officers qf the Issuer and have been validly issued by the Issuer and, assuming due authentication thereof by the Bond Trustee, constitute the valid and binding limited obligations C-2 [Closing Date] Page 3 of the Issuer payable solely from. payments and prepayments received by the Issuer upon the Series 2008. Bond Obligation and from other amounts payable under the Loan Agreement and pledged under the Bond Indenture and the Bonds are enforceable in accordance with their terms mid are entitled to the benefit and security of the Bond Indenture, subject to the qualification that the enforcement thereof ma:y be limited by ·laws relating to bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights and by the availability of equitable remedies. 3. The Loan Agreement has been duly authorized by the Issuer, has been executed and delivered by authorized officers of the Issuer and, assuming due authorization, execution and delivery thereof by the Borrower, constitutes a valid and binding instrument of the Issuer enforceable against the Issuer in accordance with its terms, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights and by the availability of equitable remedies. In rendering the foregoing opinion, we have not attempted to verify the correctness of the assumptions made therein regarding the due authorization, execution and delivery of the Loan Agreement by the Borrower, including without limitation whether the Borrower has the power or authority to take such actions or whether such actions violate existing corporate articles of the Borrower or bylaws, agreements or court decisions or are the subject of or may be affected by any litigation. 4. Interest on the Bonds is not, under current law, includable in gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax preference in computing the alternative minimum tax for individuals and corporations. Interest on the Bonds will be taken into account, however, in computing an adjustment used in determining the alternative minimum tax for certain corporations and in computing the "branch profits tax" imposed on certain foreign corporations. The foregoing opinions assume compliance with certain covenants made by the Issuer, the Borrower and the other members of the RHF Obligated Group to satisfy pertinent requirements of the Code with respect to the RHF Combined Bonds. Failure to comply with certain of these covenants could cause the interest on the Bonds to be included in gross income and be subject to federal income taxation retroactive to the date of issuance of the Bonds. Ownership of the Bonds may result in other federal tax consequences to certain taxpayers, including, without limitation, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. We express no opinion regarding any su.ch collateral consequences arising with respect to the Bonds. 5. [State law tax opinion. See "TAX MATTERS" in the forepart of this Official Statement."] C-3 [Closing Date] Page4 In rendering this opinion, we have relied on· the Verification Report, the certificates of even date herewith of the Borrower, RHF and the other members of the RHF Obligated Group with respect to certain material facts solely within the knowledge of the RHF Obligated Group relating to the property financed and refinanced with the proceeds of the RHF Combined Bonds, and the application of the proceeds of the RHF Combined Bonds, the Prior Bonds and· certain other bonds refinanced with the proceeds of the RHF Combined Bonds. Respectfully submitted, C-4 APPENDIXD KBC BANK N.Y. KBC Bank N.V .• New York Branch ("KBC NYB") is an unincorporated branch ofKBC Bank N.Y., a naamloze vennootschap (public company of limited liability) organized under the laws of Belgium, whose principal office is located in Brussels, Belgium. KBC Bank N.Y. conducts operations thro\lgh additional offices and agencies in the United States and around the world. Created on June 4, 1998. through the combination of two predecessor Belgian banks, Kredietbank N. V. and CERA Bank C.Y., KBC Bank N.Y. is subject to regulation by the Belgium Banking Commission and to Belgian banking and accounting law. KBC Bank N. V. maintains its records and prepares its financial statements in accordance with accounting principles generally accepted in Belgium. Such records and financial statements are maintained and prepared in Eurocurrency (EUR). One of the largest commercial banks in Belgium, KBC Bank N.V. operates as a universal bank, engaged in commercial and investment banking, and offers comprehensive financial services. In contrast with the two other major Belgian banks, KBC Bank N.Y.'s branches in Belgium are located exclusively in Flanders and Brussels. KBC Bank N.Y. is indirectly represented through CBC Banque S.A., a majority-owned subsidiary with branches in the Walloon region and Brussels. KBC NYB was originally established in 1977 as a New York Branch of Kredietbank N.Y., and has been relicensed by the Banking Department of the State of New York as a New York Branch of KBC Bank N.V. to provide a full range of services in New York. In addition to handling foreign exchange transactions, KBC NYB is active in international payment transactions and the clearing of commercial payments and professional transactions in U.S. Dollars. KBC NYB is also involved in providing financial services, particularly credit, for European (including Belgian) companies operating in the United States, as well as for United States corporations. Selected Consolidated Financial Data of KBC Bank N.Y. Year Ended December 31. 2007 (EUR Millions) Total Assets EUR 355,597 Amounts Owed to Customers 192,135 Loans and Advances to Customers 147,051 Total Equity 17,348 Net Income 3,281 Conversion Rate: As of December 3!, 2007, EUR 0.679 = US$1 .00 KBC NYB will provide, upon written request and without charge, a copy of KBC Bank N.Y.'s Annual Report for the year ended December 31, 2007. Written requests should be directed to: KBC Bank N.Y., New York Branch, 1177 Avenue of the Americas, New York, New York 10036, Attention: Controller. The delivery of this Official Statement shall not create any implication that there has been no change in the affairs of KBC Bank N.V. since December 31, 2007 or that information contained or referred to in this APPENDIX D is current as of any time subsequent to such date. D-1