NEW ISSUE RATING: Fitch “BBB-” BOOK-ENTRY ONLY (See “Rating” herein) In the opinion of Quarles & Brady LLP, Bond Counsel, assuming continuous compliance with the requirements of the Internal Revenue Code of 1986, as amended, under existing law interest on the Series 2018A Bonds is excludable from the gross income of the owners thereof for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. See “TAX EXEMPTION” herein for a more detailed description of the federal income tax consequences of owning the Series 2018A Bonds. The interest on the Series 2018A Bonds is not exempt from present Wisconsin income taxes. $83,725,000 Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project)

ISSUANCE...... The Wisconsin Health and Educational Facilities Authority (the “Authority”) will issue the Series 2018A Bonds through the book-entry system of The Depository Trust Company, New York, New York (“DTC”) under a Bond Trust Indenture, dated as of April 1, 2018, between the Authority and U.S. Bank National Association, as bond trustee. No physical delivery of the Series 2018A Bonds will be made to beneficial owners, except as described herein. Payments with respect to the Series 2018A Bonds shall be made through the DTC system. See “Book‑Entry Only System” herein.

PRICING AND PAYMENT Maturities, CUSIP numbers, interest rates, prices and yields and certain other information is TERMS...... set forth on the inside front cover.

DENOMINATIONS...... The Series 2018A Bonds will be issued in authorized denominations of $5,000 and any integral multiple of $5,000 in excess thereof.

REDEMPTION...... The Series 2018A Bonds are subject to mandatory sinking fund redemption, optional redemption, extraordinary optional redemption and purchase in lieu of redemption under certain circumstances. See “The Series 2018A Bonds – Redemption and Purchase” herein.

USE OF PROCEEDS...... The Authority will lend the proceeds from the sale of the Series 2018A Bonds to Saint John’s Communities, Inc. (the “Corporation”) to (i) finance or reimburse the Corporation for certain costs of the acquisition, construction renovation and equipping of an expansion project and other capital projects with respect to the Corporation’s continuing care retirement community located in Milwaukee, Wisconsin (the “Project”), (ii) fund a debt service reserve fund for the Series 2018A Bonds, (iii) finance certain capitalized interest on the Series 2018A Bonds and (iv) pay certain costs associated with the issuance of the Series 2018 Bonds (as defined herein). See “Plan of Financing” herein.

LIMITED THE SERIES 2018A BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY OBLIGATION...... AND ARE NOT A DEBT OR LIABILITY OF THE STATE OF WISCONSIN OR OF ANY POLITICAL SUBDIVISION OR AGENCY THEREOF OTHER THAN THE AUTHORITY. THE ISSUANCE OF THE SERIES 2018A BONDS SHALL NOT, DIRECTLY OR INDIRECTLY OR CONTINGENTLY, OBLIGATE THE STATE OF WISCONSIN OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION OR TO MAKE ANY APPROPRIATION FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2018A BONDS. THE SOURCE OF PAYMENT AND SECURITY FOR THE SERIES 2018A BONDS ARE MORE FULLY DESCRIBED HEREIN. THE AUTHORITY HAS NO TAXING POWER.

UNDERWRITING...... The Series 2018A Bonds are offered when, as and if issued 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 Series 2018A Bonds by Quarles & Brady LLP, Bond Counsel to the Authority. Certain legal matters will be passed upon for the Authority by Quarles & Brady LLP, as its general counsel. Certain legal matters will be passed upon for the Corporation by its special counsel Quarles & Brady LLP. Certain legal matters will be passed upon for the Underwriter by its counsel, Norton Rose Fulbright US LLP. It is expected that the Series 2018A Bonds will be available for delivery to the Underwriter via DTC on or about April 11, 2018.

Dated March 14, 2018

$83,725,000 Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project)

Pricing and Payment Terms

Maturities and Interest Rates. The Series 2018A Bonds mature on September 15 in the years and amounts and bear interest at the applicable rates per annum set forth in the following table.

$16,530,000 Serial Bonds

Maturity Principal Interest (September 15) Amount Rate Yield Price CUSIP(1)

2021 $ 955,000 4.000% 2.620% 104.494% 97712D J72 2022 1,005,000 4.000 2.890 104.580 97712D J80 2023 1,035,000 4.000 3.130 104.310 97712D J98 2024 1,090,000 4.000 3.320 103.350(c) 97712D K21 2025 1,140,000 4.000 3.530 102.301(c) 97712D K39 2026 1,185,000 4.000 3.690 101.510(c) 97712D K47 2027 1,240,000 4.000 3.850 100.726(c) 97712D K54 2028 1,290,000 5.000 3.520 107.251(c) 97712D K62 2029 1,365,000 5.000 3.620 106.742(c) 97712D K70 2030 1,435,000 5.000 3.730 106.185(c) 97712D K88 2031 1,515,000 5.000 3.830 105.682(c) 97712D K96 2032 1,595,000 5.000 3.910 105.281(c) 97712D L20 2033 1,680,000 5.000 3.960 105.031(c) 97712D L38

$67,195,000 Term Bonds

$3,615,000 4.250% Term Bond due September 15, 2035, Price: 98.784%, Yield: 4.350%, CUSIP 97712D L46(1)

$10,665,000 5.000% Term Bond due September 15, 2040, Price: 104.139%(c), Yield: 4.140%, CUSIP 97712D L53(1)

$11,700,000 5.000% Term Bond due September 15, 2045, Price: 103.892%(c), Yield: 4.190%, CUSIP 97712D L61(1)

$41,215,000 5.000% Term Bond due September 15, 2050, Price: 103.500%(c), Yield: 4.270%, CUSIP 97712D L79(1)

______(c) Priced to result in stated yield to the September 15, 2023, optional redemption date at par. (1) CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of the American Bankers Association. CUSIP numbers have been assigned by an independent company not affiliated with the Authority, the Underwriter or the Corporation and are included solely for the convenience of the holders of the Series 2018A Bonds. None of the Authority, the Underwriter or the Corporation is responsible for the selection or use of these CUSIP numbers and no representation is made as to their correctness on the Series 2018A Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the Series 2018A Bonds as a result of various subsequent actions including, but not limited to, a refund in whole or in part of such maturity or a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2018A Bonds.

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SUMMARY STATEMENT

The information set forth in this Summary Statement is subject in all respects to more complete information set forth elsewhere in this Official Statement, which should be read in its entirety. The Financial Feasibility Study included herein as APPENDIX D should be read in its entirety.

The offering of the Series 2018A Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this Summary Statement from this Official Statement or otherwise to use it without this entire Official Statement. For the definitions of certain words and terms used in this short statement, “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E and “SUMMARY OF THE BOND INDENTURE AND THE LOAN AGREEMENT” in APPENDIX F herein.

The Authority

The Wisconsin Health and Educational Facilities Authority (the “Authority”), proposes to issue $83,725,000 aggregate principal amount of Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project) (the “Series 2018A Bonds”). The Series 2018A Bonds will be subject to optional redemption, mandatory redemption, extraordinary optional redemption and purchase in lieu of redemption as described in this Official Statement. A description of the Series 2018A Bonds is contained in this Official Statement under the caption “THE SERIES 2018A BONDS”.

The Series 2018A Bonds will be issued pursuant to a Bond Trust Indenture, dated as of April 1, 2018 (the “Bond Indenture”), by and between the Authority and U.S. Bank National Association, as bond trustee (the “Bond Trustee”). The proceeds of the Series 2018A Bonds will be loaned to Saint John’s Communities, Inc., a Wisconsin nonstock nonprofit corporation (the “Corporation”) pursuant to a Loan Agreement dated as of April 1, 2018 (the “Loan Agreement”), by and between the Authority and the Corporation.

The Corporation and the Project

The Corporation is a Wisconsin nonstock nonprofit corporation and currently owns and operates a continuing care retirement community (the “Community”) which includes 200 independent living apartments, 24 assisted living units and 50 skilled nursing facility beds located in Milwaukee, Wisconsin. See APPENDIX A - “BACKGROUND – The Corporation,” APPENDIX B and APPENDIX C for more information about the Corporation and its operations. The Corporation is currently the sole member of the Obligated Group.

The Project (as defined herein) will include the addition to the Corporation’s existing continuing care retirement community of a 22-story, approximately 427,000 square foot tower built on the existing site of the health care center consisting of 79 new independent living apartments, an updated health care center comprised of 50 skilled nursing facility beds, 24 community-based residential facility units, and 16 new transitional assisted living residential care apartments. The construction will also include 122 Community underground parking spaces. See APPENDIX A – “THE PROJECT – Overview of the Project” for more information about the Project.

Plan of Financing

The Corporation will use the proceeds from the sale of the Series 2018A Bonds, together with other available funds to: (i) finance or reimburse the Corporation for certain costs of the acquisition, construction, renovation and equipping of an expansion project and other capital projects with the respect to the Corporation’s continuing care retirement community located in Milwaukee, Wisconsin (the “Project”), (ii) fund a debt service reserve fund for the Series 2018A Bonds, (iii) finance certain capitalized interest on the Series 2018A Bonds and (iv) pay certain costs associated with the issuance of the Series 2018 Bonds (as defined herein). See “THE PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

Security for the Series 2018A Bonds

The Series 2018A Bonds will be limited obligations of the Authority and will be secured in part by the Corporation’s obligations under the Loan Agreement. In consideration of the issuance of the Series 2018A Bonds by the Authority and the application of the proceeds thereof as provided in the Bond Indenture, the Corporation, has agreed to issue and cause to be delivered its Promissory Note, Series 2018A issued in the aggregate principal amount of $83,725,000 (the “Series 2018A Master Note”). The Series 2018A Master Note will be issued pursuant to the Amended and Restated Master Trust Indenture, dated as of December 1, 2015 (as supplemented and amended from time to time the “Master Indenture”), between the Corporation and U.S. Bank National Association, as master

i trustee (the “Master Trustee”). The Authority will pledge and assign the Series 2018A Master Note and certain of its rights under the Loan Agreement to the Bond Trustee as security for the Series 2018A Bonds. The terms of the Series 2018A Master Note will require payments by the Corporation which, together with other moneys available therefor (and interest earned thereon), will be sufficient to provide for the payment of the principal of and interest on the Series 2018A Bonds.

The Series 2018A Master Note will entitle the Bond Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations imposed upon the Corporation by the Master Indenture. The Corporation will be obligated on all Master Notes (as defined herein), including the Series 2018A Master Note, which are issued pursuant to the Master Indenture. All Master Notes issued by the Corporation will be equally and ratably secured under the Master Indenture by a security interest in (i) the Master Trust Estate (as defined in the Master Indenture), (ii) a Third Amended and Restated Mortgage, Security Agreement and Fixture Filing dated as of December 1, 2015, as supplemented and amended to the date hereof (the “Original Mortgage”) which is being further amended by a First Amendment to Third Amended and Restated Mortgage, Security Agreement and Fixture Filing, dated as of April 1, 2018 (the “Amended Mortgage,” and collectively with the Original Mortgage, the “Master Mortgage”) from the Corporation to the Master Trustee, which document creates a mortgage lien on, and security interest in, the land and buildings of the Community, including the Project, and other property and payments, including an assignment of rents and leases, as described in the Master Mortgage, subject only to certain Permitted Encumbrances identified therein. See “SECURITY FOR THE SERIES 2018A BONDS – General” and “– Master Mortgage” herein.

First American Title Insurance Company will issue a loan title insurance policy for the parcel of land upon which the Community is located (the “Mortgaged Property”), in favor of the Master Trustee. The policy insures against loss from any defects in the Corporation’s title to the Mortgaged Property and the liens of the Master Mortgage, or encumbrances (other than Permitted Encumbrances) on the Mortgaged Property existing as of the date of the policy, in the aggregate principal amount of the outstanding Master Notes, subject to the conditions, exclusions and exceptions described in the policy.

In certain circumstances, the Corporation may issue Additional Master Notes (as defined herein) under the Master Indenture that may be equally and ratably secured with the Master Notes outstanding under the Master Indenture or that may be entitled to the benefit of security in addition to that securing the Series 2018A Master Note. See “SECURITY FOR THE SERIES 2018A BONDS – Additional Master Notes.”

Debt Service Reserve Fund for the Series 2018A Bonds

The Bond Indenture establishes a Debt Service Reserve Fund for the Series 2018A Bonds (the “Series 2018A Debt Service Reserve Fund”). An amount equal to the lesser of (i) the maximum amount of principal and interest due on the outstanding Series 2018A Bonds in the then current or any succeeding bond year, (ii) 10% of the face amount of the Series 2018A Bonds if the original issue discount on the Series 2018A Bonds is less than 2% of the stated redemption price of the Series 2018A Bonds at maturity or 10% of the issue price of the Series 2018A Bonds net of accrued interest if the original issue discount on the Series 2018A Bonds exceeds that amount, or (iii) 125% of the average annual principal and interest requirements on the Series 2018A Bonds (the “Debt Service Reserve Fund Requirement”) will be deposited into the Series 2018A Debt Service Reserve Fund at the time the Series 2018A Bonds are issued. Funds on deposit in the Series 2018A Debt Service Reserve Fund will be used to make up deficiencies in the Interest Account and the Principal Account (in that order). See “SECURITY FOR THE SERIES 2018A BONDS – Bond Indenture and Debt Service Reserve Fund” herein.

Certain Covenants of the Obligated Group

For definitions of words and terms used in this section, see APPENDIX E – “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE.”

Rate Covenant. The Corporation and any future members of the Obligated Group shall set rates and charges for their facilities such that the Historical Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.10:1. If the Historical Debt Service Coverage Ratio, as calculated at the end of any Fiscal Year is below 1.10:1, the Corporation shall retain an Independent Consultant at the end of each such Fiscal Year to make recommendations to increase the Historical Debt Service Coverage Ratio for the subsequent Fiscal Years to at least 1.10:1; provided, however, that in the event that an Independent Consultant shall deliver a report to the Master Trustee to the effect that state or federal laws or regulations or administrative interpretations of such laws or regulations then in existence do not permit or by their application make it impracticable for the Obligated Group to produce a Historical Debt Service Coverage Ratio of 1.10:1, then the required Historical Debt Service Coverage Ratio shall be reduced to the highest practicable ratio permitted by the law or regulations then in effect but in no ii event less than 1.00 for such subsequent Fiscal Year. So long as the Corporation shall retain an Independent Consultant at the end of each Fiscal Year in which the Historical Debt Service Coverage Ratio of the Obligated Group is below 1.10:1 and each Obligated Issuer shall follow such Independent Consultant’s recommendations for the subsequent Fiscal Year to the extent feasible, and so long as the Historical Debt Service Coverage Ratio of the Obligated Group is not less than 1.00 for the subsequent Fiscal Year, the rate covenant shall be deemed to have been complied with for such subsequent Fiscal Year, and those circumstances will not constitute an Event of Default under the Master Indenture. Prior to issuance of the Series 2018A Bonds, the Master Indenture was amended to clarify that initial entry fees received in relation to construction of new projects, including the Project, by the Corporation and used for the payment of principal on debt issued, in whole or in part, to finance such new project, shall be excluded from the calculation of the Historical Debt Service Coverage Ratio. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Historical Debt Service Coverage Ratio” in APPENDIX E hereto.

Liquidity Covenant. The Obligated Group covenants in the Master Indenture that it will calculate the Days Cash on Hand of the Obligated Group as of December 31 of each Fiscal Year (a “Testing Date”).

The Master Indenture requires that each Obligated Issuer conduct its business so that on each Testing Date the Obligated Group shall maintain no less than 180 Days Cash on Hand on each Testing Date (the “Liquidity Requirement”).

If the amount of Days Cash on Hand as of any Testing Date is less than the Liquidity Requirement, the Obligated Group Representative shall, within 45 days after delivery of the Officer’s Certificate disclosing such deficiency, deliver an Officer’s Certificate approved by a resolution of the Governing Body of the Obligated Group Representative to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to raise the level of the Days Cash on Hand to the Liquidity Requirement for future periods.

If the Obligated Group has not raised the level of the Days Cash on Hand to the Liquidity Requirement by the Testing Date immediately subsequent to the delivery of the Officer’s Certificate required in the preceding paragraph, the Obligated Group Representative shall, within 30 days after delivery of the Officer’s Certificate disclosing such deficiency, select an Independent Consultant to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase the Days Cash on Hand to the Liquidity Requirement for future periods. A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with the Master Trustee within 60 days after the date such Independent Consultant is retained. Each member of the Obligated Group shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the member of the Obligated Group) permitted by law.

Failure of the Obligated Group to achieve the Liquidity Requirement for any Testing Date shall not constitute an event of default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for adopting a plan or retaining an Independent Consultant and follow each recommendation contained in such plan or Independent Consultant’s report to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law.

For specific information regarding the process under the Master Indenture for selection of Consultants, see APPENDIX E – “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Approval of Consultants.”

Financial Reporting and Continuing Disclosure

The Corporation has agreed to provide certain periodic reports regarding its financial and operating condition for the Series 2018A Bonds. See “FINANCIAL REPORTING AND CONTINUING DISCLOSURE” herein.

Feasibility Study

Wipfli LLP, an independent certified public accountant firm, has prepared the Saint John’s Communities, Inc. Financial Feasibility Study dated March 2, 2018 (the “Feasibility Study”), which is included as APPENDIX D hereto. The Feasibility Study includes management’s financial forecast of the Corporation for the six years ending December 31, 2023. The financial forecast presents, to the best of the Corporation’s knowledge and belief, the Corporation’s expected results of operations, changes in net assets, cash flows, and financial position for the forecast period. Forecasted results usually differ from actual results because events and circumstances frequently do not

iii occur as expected, and those differences may be material. The Financial Feasibility Study should be read in its entirety, including the notes and assumptions set forth therein. See APPENDIX D hereto.

The following table reflects the forecasted debt service coverage ratio, days cash on hand and cash to debt ratio for the Fiscal Years ending December 31, 2022 and 2023. The information in the following table has been extracted from the Feasibility Study included in APPENDIX D. See APPENDIX D – “FINANCIAL FEASIBILITY STUDY – Summary of Significant Forecast Assumptions and Accounting Policies.”

Forecasted Financial Ratios

Fiscal Year Ending December 31, 2022 2023 Debt Service Coverage Ratio: Income from Operations $ 2,313,000 $ 3,093,000 Add: Interest Expense 5,894,000 5,716,000 Add: Depreciation and Amortization 8,456,000 8,544,000 Less: Amortization of Entrance Fees (7,189,000) (7,687,000) Add: Net Entrance Fees Received 7,958,000 8,259,000

Net Income Available for Debt Service1 $ 17,432,000 $ 17,925,000 Forecasted Actual Debt Service 8,257,000 8,255,000 Debt Service Coverage Ratio – Forecasted Actual Debt Service 2.11 2.17 Maximum Annual Debt Service $ 8,251,000 $ 8,251,000 Debt Service Coverage Ratio – Maximum Annual Debt Service 2.11 2.17

Days Cash on Hand: Cash and Cash Equivalents $ 2,060,000 $ 2,100,000 Board-Designated Investments 72,324,000 82,885,000

Total Cash and Investments1 $74,384,000 $ 84,985,000 Total Expenses1 2 24,899,000 25,200,000 Daily Cash Operating Expenses $ 68,216 $ 69,041 Number of Days Cash on Hand 1,090 1,231

Cash to Debt Ratio: Cash and Cash Equivalents $ 2,060,000 $ 2,100,000 Board-Designated Investments 72,324,000 82,885,000

Totals $ 74,384,000 $ 84,985,000 Total Long-Term Debt $ 128,312,000 $125,967,000 Cash to Debt Ratio 58% 67%

______1 Determined as described in the Restated Master Trust Indenture dated December 1, 2015. 2 Total expenses are equal to total operating expenses, including interest but excluding depreciation, bad debts, amortization expense, and any other non-cash expense.

Risk Factors

AN INVESTMENT IN THE SERIES 2018A BONDS INVOLVES A CERTAIN DEGREE OF RISK INCLUDING THOSE SET FORTH UNDER THE HEADING “RISK FACTORS” HEREIN. A prospective Bondholder is advised to read the sections herein entitled “SECURITY FOR THE SERIES 2018A BONDS,” and “RISK FACTORS” herein for a discussion of certain risk factors which should be considered in connection with an investment in the Series 2018A Bonds. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement. Among other things, careful evaluation should be made of the Corporation’s management’s assumptions and rationale described in the Feasibility Study, and certain factors that may adversely affect the ability of the Corporation to generate sufficient revenues to pay expenses of operation, including the principal of, premium, if any, and interest on the Series 2018A Bonds.

iv

Matters Since Preliminary Official Statement

Cross Default Upon Acceleration of Certain Secured Debt. The Master Indenture will be amended to provide that the acceleration of any indebtedness for borrowed money secured by a Master Note issued and outstanding under the Master Indenture in a principal amount in excess of $3,000,000 is an event of default under the Master Indenture. See APPENDIX E – “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Amendments to Master Indenture.”

Bond Holder Approval of an Independent Consultant. The Master Indenture will be amended, but only for so long as the Series 2018A Bonds and Series 2018A Master Note are outstanding, to provide that in the event an independent consultant is required to be retained in relation to financial covenant requirements under the Master Indenture, the holders of the outstanding Master Notes will be notified and have the right to object to the independent consultant. See APPENDIX E – “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Amendments to Master Indenture.”

Continuing Disclosure Agreement. The Continuing Disclosure Agreement has been revised to require quarterly investor calls through construction completion of the Tower Portion of Project (as described in APPENDIX A) and annually thereafter, and to provide that audited financial reports be provided for the benefit of the Series 2018A Bonds beginning with the fiscal year ended December 31, 2017 rather than December 31, 2018, and unaudited quarterly financial reports beginning with the fiscal quarter ending March 31, 2018 rather than June 30, 2018. See APPENDIX H – “FORM OF CONTINUING DISCLOSURE AGREEMENT.”

Forward-Looking Statements This Official Statement and the Appendices hereto contain forward-looking information within the meaning of the federal securities laws. The forward-looking statements include statements about the Corporation’s outlook for the future, as well as other statements of beliefs, future plans or strategies or anticipated events, and similar expressions concerning matters that are not historical facts. Forward-looking statements and information are subject to many risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. The reader is cautioned not to place undue reliance on forward-looking statements because actual results may differ materially from those expressed in, or implied by, the statements. The forward- looking statements contained in this Official Statement are applicable only as of their dates, and the Corporation undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. General Disclosures

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2018A 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 UNDERWRITER MAY OFFER AND SELL THE SERIES 2018A BONDS TO CERTAIN DEALERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THE SERIES 2018A BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE ON CERTAIN EXEMPTIONS FROM REGISTRATION.

No dealer, broker, salesman or other person has been authorized by the Authority, the Corporation, DTC or the Underwriter to give any information or to make any representations with respect to this offering, other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2018A Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinions contained 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 Authority or the Corporation since the date hereof.

This Official Statement contains a general description of the Series 2018A Bonds, the Authority, the Corporation, the Project and the plan of financing and sets forth certain provisions of the Bond Indenture, the Loan Agreement, the Master Indenture and the Master Mortgage. The description and summaries herein do not purport to be complete. The Authority has furnished only the information included herein under the sections entitled

v

“SUMMARY STATEMENT – The Authority,” “THE AUTHORITY,” and “LITIGATION – Authority.” The Authority assumes no responsibility for the accuracy or completeness of any other information in this Official Statement. Persons interested in purchasing the Series 2018A Bonds should review carefully the Appendices attached hereto as well as copies of such documents, which prior to the issuance of the Series 2018A Bonds may be obtained from the Underwriter and, following the issuance of the Series 2018A Bonds, will be held by the Bond Trustee at its principal office.

References to web site addresses herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not a part of, this Official Statement.

The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety.

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vi TABLE OF CONTENTS

INTRODUCTION ...... 1 Certain Matters Relating to the Master Mortgage and to the Purpose of this Official Statement ...... 1 Security Interest in Master Trust Estate ...... 28 Saint John’s Communities, Inc ...... 1 Certain Matters Relating to the Enforceability of the Master Purpose of the Series 2018A Bonds ...... 1 Indenture ...... 28 Security ...... 2 The Master Mortgage ...... 29 Concurrent Bank Placement ...... 2 Foreclosure Rights and Enforceability Under Wisconsin Bondholders’ Risks ...... 3 Law ...... 30 THE AUTHORITY ...... 3 Licensing and Regulation ...... 31 Powers ...... 3 Medicare and Medicaid Programs ...... 31 Members of the Authority...... 3 Medicare and Medicaid Anti-Fraud and Abuse Provisions 31 Authority Counsel ...... 4 Tax-Exempt Status ...... 32 Financing Program of the Authority ...... 5 Unrelated Business Income ...... 33 Bonds of the Authority ...... 6 Other Federal Tax Matters ...... 34 Interest on the Series 2018A Bonds Not Exempt from Federal Income Tax Matters; Changes in or Application of Wisconsin Income Taxes ...... 6 Tax Laws ...... 35 State of Wisconsin Not Liable on the Series 2018A Bonds .. 6 Property Taxes ...... 35 PLAN OF FINANCING ...... 6 Employees ...... 35 ESTIMATED SOURCES AND USES OF FUNDS ...... 7 Nursing Shortage ...... 35 ANNUAL DEBT SERVICE REQUIREMENTS ...... 8 Patient Records and Patient Confidentiality ...... 36 THE SERIES 2018A BONDS ...... 9 The HITECH Act ...... 36 General ...... 9 Environmental Matters ...... 36 Redemption and Purchase ...... 10 Amendments to the Documents ...... 36 Registration, Transfer and Exchange ...... 13 Potential Effects of Bankruptcy ...... 37 BOOK-ENTRY ONLY SYSTEM ...... 13 Other Risk Factors ...... 37 Bonds in Book-Entry Form...... 13 LITIGATION ...... 38 DTC and Its Participants ...... 14 Authority ...... 38 Discontinuance of DTC Services ...... 15 Corporation ...... 38 Use of Certain Terms in Other Sections of the Official LEGAL MATTERS ...... 38 Statement ...... 15 TAX EXEMPTION ...... 38 Disclaimer...... 15 In General ...... 38 SECURITY FOR THE SERIES 2018A BONDS ...... 15 Federal Income Tax Opinion of Bond Counsel ...... 39 General ...... 15 Original Issue Discount ...... 39 The Loan Agreement ...... 16 Bond Premium ...... 40 Series 2018A Master Note and Master Indenture ...... 16 Other Federal Income Tax Considerations ...... 40 Additional Master Notes ...... 16 Wisconsin Income Tax ...... 40 Rate Covenant ...... 17 UNDERWRITING ...... 40 Liquidity Covenant ...... 17 FINANCIAL REPORTING AND CONTINUING Other Covenants ...... 18 DISCLOSURE ...... 41 Master Mortgage...... 18 Financial Reporting ...... 41 Title Insurance ...... 18 Continuing Disclosure ...... 41 Master Trust Estate ...... 18 RATING ...... 42 Bond Indenture and Debt Service Reserve Fund ...... 18 FINANCIAL STATEMENTS ...... 42 BONDHOLDERS’ RISKS ...... 19 INTERIM FINANCIAL STATEMENTS ...... 42 General ...... 19 MISCELLANEOUS ...... 43 Limited Obligations ...... 19 APPENDIX A Saint John’s Communities, Inc ...... A-1 Financial Projections ...... 20 APPENDIX B Audited Consolidated Financial Failure to Maintain Occupancy or Turnover ...... 20 Statements of Saint John’s Risk of Real Estate Investment ...... 21 Communities, Inc ...... B-1 Construction Risks ...... 22 APPENDIX C Management-Prepared Consolidated Construction Monitor Approval of Construction Draws ..... 22 Financial Statements of Saint John’s Rights of Residents ...... 22 Communities, Inc ...... C-1 Competition ...... 22 APPENDIX D Financial Feasibility Study ...... D-1 Nature of the Income of the Elderly ...... 23 APPENDIX E Summary of Master Indenture, Additional Debt; Dilution ...... 23 Supplements and Master Mortgage ...... E-1 Risks Inherent in Bank-held Bonds ...... 23 APPENDIX F Summary of the Bond Indenture and Additions to Obligated Group; Dilution ...... 24 the Loan Agreement ...... F-1 Discretion of Board of Directors and Management; Future APPENDIX G Form of Opinion of Bond Counsel ...... G-1 Plans ...... 24 APPENDIX H Form of Continuing Disclosure Present and Prospective Federal and State Regulation ...... 25 Agreement ...... H-1

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OFFICIAL STATEMENT

relating to

$83,725,000 Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project)

INTRODUCTION

Purpose of this Official Statement

The purpose of this Official Statement, including the cover page, the inside front cover page and the Appendices hereto, is to set forth information in connection with the offering of $83,725,000 in aggregate principal amount of Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project) (the “Series 2018A Bonds”) of the Wisconsin Health and Educational Facilities Authority (the “Authority”).

The descriptions and summaries of various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is made to each document for the complete details of all terms and conditions. All statements herein regarding any such documents are qualified in their entirety by reference to such documents. This Introduction is intended only to serve as a brief description of this Official Statement and is expressly qualified by reference to the Official Statement as a whole, as well as the documents summarized or described herein. All capitalized terms used in this Official Statement and not otherwise defined herein are defined in “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E and “SUMMARY OF THE BOND INDENTURE AND THE LOAN AGREEMENT” in APPENDIX F. The Official Statement speaks only as of its date, and the information contained herein is subject to change without notice.

Saint John’s Communities, Inc.

The Corporation owns and operates a continuing care retirement community known as “Saint John’s On The Lake,” located at 1840 North Prospect Avenue, Milwaukee, Wisconsin. The Corporation’s continuing care campus overlooks Lake Michigan and currently consists of 200 independent living apartments, 24 assisted living units and 50 skilled nursing facility beds (the “Community”). See Appendix A for a more detailed description of the Corporation and its organization and financial condition.

As of the date of this Official Statement, the Corporation is the sole member of the Obligated Group (as such term is defined in the hereinafter defined Master Indenture) created pursuant to the terms of an Amended and Restated Master Trust Indenture dated as of December 1, 2015 (as supplemented and amended from time to time, the “Master Indenture”) between the Corporation and U.S. Bank National Association, as master trustee (the “Master Trustee”).

Purpose of the Series 2018A Bonds

In connection with the issuance of the Series 2018A Bonds, the Corporation and the Authority will enter into a Loan Agreement, dated as of April 1, 2018 (the “Loan Agreement”), under which the proceeds to be received by the Authority from the sale of the Series 2018A Bonds will be loaned to the Corporation. Proceeds of the Series 2018A Bonds, together with certain other funds, will be used to (i) finance or reimburse the Corporation for certain costs of the acquisition, construction, renovation and equipping of an expansion project and other capital projects with the respect to the Corporation’s continuing care retirement community located in Milwaukee, Wisconsin (the “ Project”), (ii) fund a debt service reserve fund with respect to the Series 2018A Bonds, (iii) finance certain capitalized interest on the Series 2018A Bonds and (iv) pay certain costs associated with the issuance of the Series 2018 Bonds (as defined herein). The proceeds of the Series 2018A Bonds, together with the proceeds of the Authority’s $51,920,000 Adjustable Rate Revenue Bonds, Series 2018B (Saint John’s Communities, Inc. Project) (the “Series 2018B Bank Bonds”) described below under the heading “INTRODUCTION – Concurrent Bank Placement,” will be applied to the financing of the Project upon the contemporaneous closings on the two series. See “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

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Security

The Series 2018A Bonds are limited obligations of the Authority and are payable solely from (i) payments, income and revenues derived pursuant to the terms of the Loan Agreement (except to the extent included in the Unassigned Rights, as defined in APPENDIX F hereto) including all payments and prepayments made in respect of the Series 2018A Master Note, (ii) all amounts realized upon recourse to the Loan Agreement or any collateral given by the Corporation to secure its obligations under the Loan Agreement, (iii) all amounts realized upon recourse to the Master Indenture that are available pursuant to the Master Indenture to pay amounts due on the Series 2018A Master Note, and (iv) the money and securities (including the earnings from the investment of them) held by the Bond Trustee in the trust funds established under the Bond Indenture, including the Series 2018A Debt Service Reserve Fund.

The Series 2018A Master Note will be the full and unlimited obligation of the Corporation issued under the Master Indenture and the Third Supplemental Master Trust Indenture dated as of April 1, 2018 (the “Third Supplement”) by and between the Corporation and the Master Trustee. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E attached hereto. See “SECURITY FOR THE SERIES 2018A BONDS – Series 2018A Master Note and Master Indenture” herein for a description of the Master Indenture.

Subject to the conditions set forth in the Master Indenture, promissory notes may be issued under the Master Indenture from time to time by the members of the Obligated Group (such notes, together with the Series 2018A Master Note, are referred to herein as the “Master Notes”). See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E attached hereto. The Corporation is currently the sole member of the Obligated Group. The Master Indenture permits other entities to become members of the Obligated Group under certain circumstances. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – The Obligated Group” in APPENDIX E attached hereto. The Series 2018A Master Note and all other Master Notes will be equally and ratably secured by the Master Indenture. Including the Series 2018A Master Note, the Corporation will have five Master Notes outstanding as of the date of issuance of the Series 2018A Bonds. For a summary of the other Master Notes expected to be issued and outstanding at the time of closing of the Series 2018A Bonds, see “PLAN OF FINANCING” herein.

The obligations of the Obligated Group in respect of the Master Notes are secured by a Third Amended and Restated Mortgage, Security Agreement and Fixture Filing dated as of December 1, 2015, as supplemented and amended to the date hereof (the “Original Mortgage”) which is being further amended by a First Amendment to Third Amended and Restated Mortgage, Security Agreement and Fixture Filing, dated as of April 1, 2018 (the “Amended Mortgage,” and collectively with the Original Mortgage, the “Master Mortgage”) from the Corporation to the Master Trustee. The Master Mortgage creates a first mortgage lien on the principal real estate currently owned by the Corporation and a Uniform Commercial Code security interest in any equipment, furnishings, fixtures and other tangible personal property located on or in the land and buildings subject to the Master Mortgage (the “Mortgaged Property.”) Additionally, the Corporation has, with certain exceptions, granted to the Master Trustee a security interest in the Master Trust Estate, which includes all the rents, revenues and income from its operations. For a more detailed description of the security for the Series 2018A Bonds, see “SECURITY FOR THE SERIES 2018A BONDS” herein and “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Summary of certain provisions of The Master Indenture – Granting Clauses” in APPENDIX E. For a more detailed description of the facilities subject to the lien of the Master Mortgage, see “EXISTING CONTINUING CARE FACILITIES” in APPENDIX A hereto.

The Series 2018A Bonds are secured by a debt service reserve fund. See “SECURITY FOR THE SERIES 2018A BONDS” herein.

Concurrent Bank Placement

In a planned contemporaneous transaction not offered by this Official Statement, BMO Harris Bank N.A. is expected to purchase the Authority’s Series 2018B Bank Bonds, the proceeds of which will be loaned to the Corporation. The Series 2018B Bank Bonds will be draw down bonds with $50,001 being anticipated to be drawn at closing. The Corporation will be required to be in compliance with the terms of the Continuing Covenants Agreement dated April 11, 2018 (the “Continuing Covenant Agreement”), between the corporation and BMO Harris Bank N.A. in order to obtain the subsequent draws. The proceeds of the Series 2018B Bank Bonds, together with 2

the proceeds of the Series 2018A Bonds and certain other funds, will be applied to: (i) finance a portion the Project, (ii) finance certain capitalized interest on the Series 2018B Bank Bonds and (iii) pay certain expenses incurred in connection with the issuance of the Series 2018 Bonds. See “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF FUNDS” herein. The Series 2018B Bank Bonds will be secured by the Corporation’s Promissory Note, Series 2018B issued pursuant to the Master Indenture (the “Series 2018B Master Note”) and secured, on a parity basis, with the Series 2018A Master Note issued pursuant to the Master Indenture by the lien of the Master Indenture. The Series 2018B Bank Bonds have a maturity date of April 11, 2025, but have an initial mandatory tender date of April 11, 2023. If the Series 2018B Bank Bonds are not paid in full on the mandatory tender date, provided that certain conditions are satisfied under the Continuing Covenant Agreement, the Corporation has the option to pay the outstanding principal balance over an 18-month term-out period at an interest rate equal to the base rate (as defined in the Continuing Covenant Agreement) plus 2.0%. See “BONDHOLDERS’ RISKS – Risks Inherent in Bank-held Bonds” herein. The Corporation intends to use a portion of the initial entry fees received from the Project to redeem the Series 2018B Bank Bonds in full. The issuance of the Series 2018A Bonds is conditioned on the issuance of the Series 2018B Bank Bonds.

Bondholders’ Risks

There are risks associated with the purchase of the Series 2018A Bonds. See the information under the heading “BONDHOLDERS’ RISKS” herein for a discussion of certain of these risks.

THE AUTHORITY

Powers

The Authority has, among other powers, the statutory power to make loans to certain health care, educational, research and other nonprofit institutions in Wisconsin, to finance the cost of projects and refinance or refund outstanding indebtedness and to assign loan agreements, notes, mortgages and other securities of health care, educational, research and other nonprofit institutions to which the Authority has made loans, and the revenues therefrom, for the benefit of the holders of bonds issued to finance or refinance such projects.

Members of the Authority

The Authority consists of seven members, all of whom must be Wisconsin residents, appointed by the Governor of the State of Wisconsin by and with the consent of the Wisconsin State Senate. Members of the Authority serve staggered seven-year terms and continue to serve until their successors are appointed. The members of the Authority receive no compensation for the performance of their duties but are paid their necessary expenses while engaged in the performance of such duties. No member, officer, agent or employee of the Authority may, directly or indirectly, have any financial interest in any bond issue or in any loan or any property to be included in, or any contract for property or materials to be furnished or used in connection with, any project of the Authority, under penalty of law. Members of the Authority, however, may serve as directors or officers of institutions for which the Authority is providing financing, but they may not vote or take part in the Authority’s deliberations concerning such financing.

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The present members of the Authority are:

Term Expires (June 30)

James Dietsche, Chairperson 2019 Executive Vice President/Chief Financial Officer Bellin Health Systems, Inc. Green Bay, Wisconsin

Tim Size, Vice Chairperson 2018 Executive Director Rural Wisconsin Health Cooperative Sauk City, Wisconsin

Renee Anderson(1) 2024(2) President/CEO Saint John’s Communities, Inc. Milwaukee, Wisconsin

Paul Mathews 2021 President/CEO Marcus Center for the Performing Arts, Inc. Milwaukee, Wisconsin

James Oppermann 2023(2) Senior Vice President – Finance and Management Services Alverno College Milwaukee, Wisconsin

Pamela Stanick 2022(2) Associate Vice President, Finance & Treasury The Medical College of Wisconsin, Inc. Milwaukee, Wisconsin

Robert Van Meeteren 2020 President/CEO Reedsburg Area Medical Center, Inc. Reedsburg, Wisconsin

(1) Ms. Anderson is the CEO of the Corporation and has abstained from any discussion, deliberation and vote by the Authority members related to the Series 2018 Bonds.

(2) Ms. Anderson, Mr. Oppermann and Ms. Stanick have each been appointed by the Governor of the State of Wisconsin and each serves pending Wisconsin State Senate confirmation.

Authority Counsel

Quarles & Brady LLP serves as general counsel to the Authority.

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Financing Program of the Authority

The following summary outlines the principal amount of revenue bonds and notes issued during each of the Authority’s fiscal years. Except for the other series of bonds previously issued by the Authority for the benefit of the Corporation and the other members of the Obligated Group, such bonds and notes are secured by instruments separate and apart from the Master Indenture. All such bonds and notes are secured by instruments separate and apart from the Bond Indenture.

Public Issues Private Placements Total FY Ended Number Number Number June 30 of Issues Amount of Issues Amount of Issues Amount 1980 0 $ 0 1 $ 1,300,000 1 $ 1,300,000 1981 3 24,480,000 4 20,365,000 7 44,845,000 1982 3 34,100,000 4 12,575,000 7 46,675,000 1983 1 4,000,000 1 600,000 2 4,600,000 1984 4 16,375,000 3 13,225,000 7 29,600,000 1985 6 196,505,000 2 2,200,000 8 198,705,000 1986 9 213,260,000 5 17,478,000 14 230,738,000 1987 12 191,610,000 9 48,410,000 21 240,020,000 1988 14 170,890,000 14 81,589,000 28 252,479,000 1989 20 254,979,000 6 14,394,000 26 269,373,000 1990 14 277,605,000 9 45,737,000 23 323,342,000 1991 11 233,590,000 3 37,500,000 14 271,090,000 1992 15 346,160,000 5 43,500,000 20 389,660,000 1993 25 579,235,000 6 18,775,000 31 598,010,000 1994 16 434,495,000 6 46,615,000 22 481,110,000 1995 7 101,770,000 6 18,847,000 13 120,617,000 1996 14 382,905,000 2 8,800,000 16 391,705,000 1997 28 706,960,300 1 764,000 29 707,724,300 1998 25 722,050,000 1 2,700,000 26 724,750,000 1999 28 710,960,000 4 36,000,000 32 746,960,000 2000 16 415,710,000 6 17,736,450 22 433,446,450 2001 19 437,580,000 8 26,589,000 27 464,169,000 2002 18 815,100,000 2 8,000,000 20 823,100,000 2003 14 296,895,000 3 15,935,000 17 312,830,000 2004 26 912,245,000 4 25,980,000 30 938,225,000 2005 32 923,038,430 2 23,067,000 34 946,105,430 2006 25 706,235,000 2 6,570,000 27 712,805,000 2007 25 1,238,330,000 2 29,090,000 27 1,267,420,000 2008 24 1,006,255,000 4 36,500,000 28 1,042,755,000 2009 21 1,470,875,000 3 37,859,824 24 1,508,734,824 2010 17 1,338,695,000 13 114,746,851 30 1,453,441,851 2011 11 512,745,000 12 75,330,531 23 588,075,531 2012 10 1,149,250,000 16 469,944,854 26 1,619,189,854 2013 18 1,335,035,000 29 374,569,801 47 1,709,604,801 2014 5 326,220,000 19 468,391,000 24 794,611,000 2015 11 726,181,000 26 752,236,098 37 1,478,417,098 2016 4 1,219,215,000 19 689,319,802 23 1,908,534,802 2017 8 668,330,000 18 700,681,416 26 1,369,011,416 TOTAL 559 $ 21,099,863,7301 280 $ 4,343,921,6272 839 $ 25,443,785,357 ______1 Includes $8,249,365,308 which was refinanced by subsequent Authority bonds issues. 2 Includes $1,938,663,648 which was refinanced by subsequent Authority bonds issues.

In its fiscal year beginning July 1, 2017, the Authority has issued and authorized the issuance of additional issues of bonds. The Authority plans to offer other obligations from time to time to finance other health, educational, research and nonprofit facilities. Such other obligations will be issued pursuant to and secured by instruments separate and apart from the Bond Indenture and the security for the Series 2018A Bonds.

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Bonds of the Authority

The Authority may from time to time issue bonds for any corporate purpose and, pursuant to the Act, these bonds are negotiable for all purposes notwithstanding their payment from a limited source. The Series 2018A Bonds are payable solely out of revenues of the Authority specified in the resolution under which they are issued or in a related trust indenture or mortgage. The Authority must pledge the revenues to be received by it on account of each financing as security for the bonds issued in that financing.

Interest on the Series 2018A Bonds Not Exempt from Wisconsin Income Taxes

Interest on the Series 2018A Bonds is not exempt from present Wisconsin income taxes.

State of Wisconsin Not Liable on the Series 2018A Bonds

The Series 2018A Bonds and the interest payable thereon do not constitute a debt or liability of the State of Wisconsin or of any political subdivision thereof other than the Authority, but will be payable solely from the funds pledged for the Series 2018A Bonds in accordance with the Bond Indenture. The issuance of the Series 2018A Bonds does not, directly, indirectly or contingently, obligate the State of Wisconsin or any political subdivision thereof to levy any form of taxation for the payment for the Series 2018A Bonds or to make any appropriation for their payment. The State of Wisconsin will not in any event be liable for the payment of the principal of or interest on the Series 2018A Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Authority. No breach by the Authority of any such pledge, obligation or agreement may impose any pecuniary liability upon the State of Wisconsin or any charge upon its general credit or against its taxing power. The Authority has no taxing power.

The Act provides that the State of Wisconsin pledges to, and agrees with, holders of any obligations issued under the Act that it will not limit or alter the rights vested in the Authority by the Act until such obligations, together with the interest thereon, are fully met and discharged, provided nothing in the Act precludes such limitation or alteration if and when adequate provision will be made by law for the protection of the holders of such obligations.

PLAN OF FINANCING

The proceeds of the Series 2018A Bonds and the Series 2018B Bank Bonds (collectively, the “Series 2018 Bonds”), along with certain other funds, will be applied by the Corporation to (i) finance or reimburse the Corporation for certain costs of the acquisition, construction, renovation and equipping of an expansion project and other capital projects with the respect to the Corporation’s continuing care retirement community located in Milwaukee, Wisconsin, (ii) fund a debt service reserve fund with respect to the Series 2018A Bonds, (iii) finance certain capitalized interest on the Series 2018A Bonds and (iv) pay certain costs associated with the issuance of the Series 2018 Bonds.

As described under the heading “INTRODUCTION – Concurrent Bank Placement,” the Authority will loan the proceeds of the Series 2018B Bank Bonds to the Corporation which, along with the proceeds of the Series 2018A Bonds and certain other funds, will be applied to (i) finance a portion of the Project, (ii) finance certain capitalized interest on the Series 2018B Bank Bonds and (iii) pay certain costs associated with the issuance of the Series 2018 Bonds.

The Project will include the addition to the Corporation’s existing continuing care retirement community of a 22-story, approximately 427,000 square foot tower built on the existing site of the health care center consisting of 79 new independent living apartments, an updated health care center comprised of 50 skilled nursing facility beds, 24 community-based residential facility units, and 16 new transitional assisted living residential care apartments. The construction will also include 122 Community underground parking spaces.

For more information on the Corporation and the Project (including the development and management of the Project), see “THE PROJECT – Overview of the Project” in APPENDIX A hereto.

Upon the closing of the Series 2018 Bonds, the Corporation will have five master notes outstanding: (i) the Series 2018A Master Note in the principal amount of $83,725,000, (ii) the Series 2018B Master Note in the principal amount of $51,920,000, (iii) the Direct Note Obligation, Series 2015A Master Note in the

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outstanding principal amount of $19,950,103 as of December 31, 2017, issued in connection with the Authority’s Adjustable Rate Refunding Revenue Bonds, Series 2015A (Saint John’s Communities, Inc.) (the “Series 2015B Bonds”), (iv) the Direct Note Obligation, Series 2015B Master Note in the outstanding principal amount of $24,620,000 as of December 31, 2017, issued in connection with the Authority’s Adjustable Rate Refunding Revenue Bonds, Series 2015B (Saint John’s Communities, Inc.) (the “Series 2015B Bonds”) and (v) the Direct Note Obligation, Series 2012A payable to the Authority in the outstanding principal amount of $8,774,293 as of December 31, 2017, issued in connection with the Authority’s Adjustable Rate Revenue Bonds, Series 2012A (Saint John’s Communities, Inc.) (the “Series 2012A Bonds”). The Series 2012A Bonds and Series 2015A Bonds are currently owned by BMO Harris Bank, N.A.

The Corporation also has outstanding a $3,000,000 line of credit with BMO Harris Bank, N.A., of which $0 is currently outstanding. The Corporation anticipates drawing on the line of credit in an amount up to $2,500,000 to be used as a portion of the Corporation’s contribution to the sources of funds for the Project. The Corporation anticipates repaying such draw on the line of credit on or prior to December 31, 2018.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of proceeds of the Series 2018 Bonds are as follows (rounded to the nearest whole dollar):

Series Series 2018A Bonds 2018B Bank Bonds Total Sources of Funds Principal Amount $83,725,000 $51,920,000 $135,645,000 Net Original Issue Premium 3,047,708 - 3,047,708 Interest Income on Trustee Held Funds 476,860 - 476,860 Corporation Contribution 5,570,087 429,913 6,000,000 Total Sources of Funds $92,819,655 $52,349,913 $145,169,568

Uses of Funds Deposit to Project Fund $74,160,697 $50,300,499 $124,461,196 Deposit to Debt Service Reserve Fund 7,070,486 - 7,070,486 Deposit to Capitalized Interest Fund(1) 9,911,737 1,569,500 11,481,237 Costs of Issuance of Series 2018 Bonds(2) 1,676,735 479,914 2,156,649 Total Uses of Funds $92,819,655 $52,349,913 $145,169,568 ______(1) Includes approximately 29 months. (2) Includes Underwriter’s discount, placement fees, fees and expenses of accountants, legal counsel, the Bond Trustee and the Master Trustee and other miscellaneous costs, related to the issuance of the Series 2018 Bonds.

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ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth, for each Fiscal Year ending December 31, the amounts to be required in each year for the payment of interest when due and of principal at maturity or upon mandatory redemption for the Series 2018A Bonds after giving effect to the issuance of the Series 2018 Bonds. Fiscal Year Series 2018A Bonds Series 2018B Outstanding Ending Bonds Debt Bonds Debt Total Debt December 31 Principal Interest Service(1) Service(2) Service

2018 $ - $ 1,746,462 $ 1,395 $ 3,190,478 $ 4,938,334 2019 - 4,082,638 274,960 3,201,463 7,559,060 2020 - 4,082,638 37,015,481 3,195,906 44,294,025 2021 955,000 4,082,638 16,188,777 3,194,127 24,420,541 2022 1,005,000 4,044,438 - 3,183,400 8,232,837 2023 1,035,000 4,004,238 - 3,190,636 8,229,873 2024 1,090,000 3,962,838 - 3,180,799 8,233,637 2025 1,140,000 3,919,238 - 3,172,264 8,231,501 2026 1,185,000 3,873,638 - 3,168,800 8,227,437 2027 1,240,000 3,826,238 - 3,164,800 8,231,038 2028 1,290,000 3,776,638 - 3,160,861 8,227,498 2029 1,365,000 3,712,138 - 3,152,221 8,229,359 2030 1,435,000 3,643,888 - 3,148,642 8,227,529 2031 1,515,000 3,572,138 - 3,138,364 8,225,502 2032 1,595,000 3,496,388 - 3,135,415 8,226,802 2033 1,680,000 3,416,638 - 3,134,698 8,231,335 2034 1,770,000 3,332,638 - 3,131,376 8,234,014 2035 1,845,000 3,257,413 - 3,130,115 8,232,528 2036 1,925,000 3,179,000 - 3,131,282 8,235,282 2037 2,025,000 3,082,750 - 3,122,422 8,230,172 2038 2,130,000 2,981,500 - 3,120,990 8,232,490 2039 2,235,000 2,875,000 - 3,120,832 8,230,832 2040 2,350,000 2,763,250 - 3,117,201 8,230,451 2041 2,470,000 2,645,750 - 3,118,555 8,234,305 2042 2,600,000 2,522,250 - 3,111,077 8,233,327 2043 2,725,000 2,392,250 - 3,114,337 8,231,587 2044 2,860,000 2,256,000 - 3,112,904 8,228,904 2045 1,045,000 2,113,000 - 5,071,247 8,229,247 2046 6,180,000 2,060,750 - - 8,240,750 2047 6,490,000 1,751,750 - - 8,241,750 2048 6,810,000 1,427,250 - - 8,237,250 2049 7,155,000 1,086,750 - - 8,241,750 2050 14,580,000 729,000 - - 15,309,000 TOTAL $ 83,725,000 $ 99,699,124 $ 53,480,612 $ 90,115,210 $ 327,019,946 ______Note: Columns and rows may not add due to rounding. (1) The Series 2018B Bank Bonds bear interest at a monthly variable interest rate to the initial mandatory tender date of April 11, 2023 and then reset in accordance with the terms of the related agreements. The Series 2018B Bank Bonds have a final maturity date of April 11, 2025. The Debt Service shown above assumes that the Series 2018B Bank Bonds will bear an average interest rate of 4.00% per annum. The actual interest rates may vary from the assumed interest rates and variations could be substantial. See “BONDHOLDERS’ RISKS – Risks Inherent in Bank-held Bonds” herein. In addition, the Debt Service shown above assumes principal amortization based on the Corporation's proposed redemptions of Series 2018B Bank Bonds as described in the Feasibility Study. Principal on the Series 2018B Bank Bonds is expected to be paid from the initial entrance fees received on the Project independent living apartments, and the amortization is based on the anticipated receipt of such initial entrance fees. Therefore, actual amortization of the Series 2018B Bank Bonds may differ from the assumed amortization because of timing differences in receipt of initial entrance fees. These assumptions for Debt Service on the Series 2018B Bank Bonds are not the assumptions used for calculation of debt service for “Put Indebtedness” under the terms of the Master Indenture. (2) Includes the Series 2012A Bonds, Series 2015A Bonds and Series 2015B Bonds. The Series 2012A Bonds have an initial fixed interest rate of 3.54% per annum, which is in effect to the initial mandatory tender date of December 15, 2022, then reset in accordance with the related agreements. The Series 2012A Bonds are amortized through the stated maturity date of September 15, 2032. The Series 2015A Bank Bonds have an initial fixed interest rate of 2.861% per annum, which will be in effect to the initial mandatory tender date of December 8, 2025, then reset in accordance with the related agreements. The Series 2015A Bank Bonds are amortized through the stated maturity date of September 15, 2045. If either the Series 2012A Bonds or the Series 2015A Bonds are not paid in full on their applicable mandatory tender date, upon satisfaction of certain conditions, the Corporation has the option to pay the outstanding principal balance over an 18 month term-out period. The Debt Service shown above assumes the Series 2012A Bonds and Series 2015A Bonds bear interest at their current fixed interest rate to the applicable stated maturity date based on the actual principal amortization schedules set forth in the applicable related agreements. These assumptions for Debt Service on the Series 2012A Bonds and 2015A Bonds are not the assumptions used for calculation of debt service for “Put Indebtedness” under the terms of the Master Indenture.

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THE SERIES 2018A BONDS

The following is a summary of certain provisions of the Series 2018A Bonds. Reference is made to the Series 2018A Bonds and to the Bond Indenture for a more detailed description of such provisions. The discussion herein is qualified by such reference. See APPENDIX F – “SUMMARY OF THE BOND INDENTURE AND LOAN AGREEMENT” attached hereto.

General

The Series 2018A Bonds will be issued as fully registered bonds without coupons and will be dated the date of their initial delivery. The Series 2018A Bonds will be issued in Authorized Denominations of $5,000 and any integral multiple of $5,000 in excess thereof. The Series 2018A Bonds will bear interest at the rates indicated on the inside front cover of this Official Statement.

The Series 2018A Bonds will be subject to mandatory sinking fund, optional, extraordinary optional redemption and purchase in lieu of redemption prior to maturity as described under “THE SERIES 2018A BONDS – Redemption and Purchase” herein.

The Series 2018A Bonds will be made available to Beneficial Owners in book-entry form only, in Authorized Denominations. Beneficial Owners of the Series 2018A Bonds will not receive certificates representing their interests in the Series 2018A Bonds, except as described below. So long as Cede & Co. is the registered owner of the Series 2018A Bonds, the principal of, and the interest on, the Series 2018A Bonds are payable by wire transfer by the Bond Trustee to Cede & Co., as nominee for DTC which, in turn, will remit such amounts to DTC Participants for subsequent disbursement to the Beneficial Owners. So long as all records of ownership of the Series 2018A Bonds are maintained through the book-entry only system, all payments to the Beneficial Owners of the Series 2018A Bonds will be made in accordance with the procedures described below under the caption “BOOK- ENTRY ONLY SYSTEM.”

Payment of the principal of and premium, if any, on the Series 2018A Bonds when due, whether upon maturity, redemption, acceleration or otherwise, will be made to the Registered Owner upon presentation and surrender of the Series 2018A Bonds to be paid at the Principal Trust Office of the Bond Trustee or at the designated office of any alternate paying agent subsequently appointed. Payment of any installment of interest on any Series 2018A Bond will be made to the person who is the Registered Owner as of the close of business on the applicable Record Date (as defined below) without the necessity of surrendering the Series 2018A Bond on which payment is being made (i) by check mailed by first class mail on the applicable Bond Interest Payment Date by the Bond Trustee to the Registered Owner at the Registered Owner’s address as of such Record Date or (ii) by wire transfer on the applicable Bond Interest Payment Date to any Depository or any bank in the United States that is a member of the Federal Reserve System for any securities depository or for any Registered Owner of $1,000,000 or more in aggregate principal amount of the Series 2018A Bonds who, by written request delivered to the Bond Trustee no later than the Record Date for the payment, has requested the Bond Trustee to make any payments of interest due it by wire transfer at a specified wire transfer address (which request needs to be given only once unless the Registered Owner wishes to change the wire transfer address). Such payments of interest will be made to the person in whose name the ownership of the Series 2018A Bonds is registered at the close of business on the first day of the month (whether or not a Business Day) in which a Bond Interest Payment Date occurs (the “Record Date”).

Interest on the Series 2018A Bonds will be calculated as described below and will be payable on each Interest Payment Date in an amount equal to all interest which has accrued during the period from (and including) the last such Interest Payment Date to (but not including) such current Interest Payment Date.

Maturity. The Series 2018A Bonds mature on September 15 in the years indicated on the inside cover of this Official Statement.

Interest. Interest on the Series 2018A Bonds shall be calculated on a 360-day year of twelve 30- day months. Interest accrued on the Series 2018A Bonds will be payable on each March 15 and September 15, beginning September 15, 2018 (each, an “Interest Payment Date”).

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Redemption and Purchase

Optional Redemption. The Series 2018A Bonds maturing on or after September 15, 2024 shall be subject to redemption prior to their respective stated maturity dates by the Authority (upon direction of the Corporation pursuant to the Loan Agreement) on or after September 15, 2023 in whole or in part on any date at a redemption price equal to 100% of the principal amount of the Series 2018A Bonds being redeemed plus the full amount of the unpaid interest which has accrued on such Series 2018A Bonds and will accrue to the date such Series 2018A Bonds are so redeemed.

Mandatory Sinking Fund Redemptions.

(i) The Series 2018A Bonds maturing on September 15, 2035 are subject to partial mandatory redemption through the operation of a sinking fund on the dates and in the principal amounts specified below plus the full amount of the unpaid interest that has accrued on such Series 2018A Bonds and will accrue to the date such 2018A Bonds are so redeemed:

Redemption Date Principal Amount September 15 of Redemption 2034 $ 1,770,000 2035 1,845,000*

______* Due at stated maturity

(ii) The Series 2018A Bonds maturing on September 15, 2040 are subject to partial mandatory redemption through the operation of a sinking fund on the dates and in the principal amounts specified below plus the full amount of the unpaid interest that has accrued on such Series 2018A Bonds and will accrue to the date such 2018A Bonds are so redeemed:

Redemption Date Principal Amount September 15 of Redemption 2036 $ 1,925,000 2037 2,025,000 2038 2,130,000 2039 2,235,000 2040 2,350,000*

______* Due at stated maturity

(iii) The Series 2018A Bonds maturing on September 15, 2045 are subject to partial mandatory redemption through the operation of a sinking fund on the dates and in the principal amounts specified below plus the full amount of the unpaid interest that has accrued on such series 2018A Bonds and will accrue to the date such 2018A Bonds are so redeemed:

Redemption Date Principal Amount September 15 of Redemption 2041 $ 2,470,000 2042 2,600,000 2043 2,725,000 2044 2,860,000 2045 1,045,000*

______* Due at stated maturity

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(iv) The Series 2018A Bonds maturing on September 15, 2050 are subject to partial mandatory redemption through the operation of a sinking fund on the dates and in the principal amounts specified below plus the full amount of the unpaid interest that has accrued on such Series 2018A Bonds and will accrue to the date such 2018A Bonds are so redeemed:

Redemption Date Principal Amount September 15 of Redemption 2046 $ 6,180,000 2047 6,490,000 2048 6,810,000 2049 7,155,000 2050 14,580,000*

______* Due at stated maturity

The Bond Trustee shall, if requested to do so by the Corporation not less than 60 days in advance of a redemption date referred to above, reduce the amount designated as the “Principal Amount of Redemption” by the principal amount of outstanding Series 2018A Bonds of the same maturity acquired by the Corporation or any other member of the Obligated Group and delivered to the Bond Trustee for cancellation, or acquired by the Bond Trustee and canceled, which have not previously been used for such a reduction.

Each Series 2018A Bond delivered to the Bond Trustee pursuant to paragraph (i) above or redeemed in part as described under the captions “THE SERIES 2018A BONDS – Redemption and Purchase – Optional Redemption” or “–Extraordinary Optional Redemption” and maturing on September 15, 2035 will reduce the Principal Amount of Redemption and the amount due at maturity in the years and in the amounts directed by the Corporation or, if the Corporation has not provided adequate direction within 45 days of the redemption date, pro rata for each of the years 2034 to and including 2035 in which payments of principal on the Series 2018A Bonds under paragraph (i) above have not then been made based on the amount of the sinking fund redemptions to be made in those years, subject to the adjustments to be made by the Bond Trustee so that after a redemption no Series 2018A Bonds are outstanding in other than Authorized Denominations.

Each Series 2018A Bond delivered to the Bond Trustee pursuant to paragraph (ii) above or redeemed in part as described under the captions “THE SERIES 2018A BONDS – Redemption and Purchase – Optional Redemption” or “–Extraordinary Optional Redemption” and maturing on September 15, 2040 will reduce the Principal Amount of Redemption and the amount due at maturity in the years and in the amounts directed by the Corporation or, if the Corporation has not provided adequate direction within 45 days of the redemption date, pro rata for each of the years 2036 to and including 2040 in which payments of principal on the Series 2018A Bonds under paragraph (ii) above have not then been made based on the amount of the sinking fund redemptions to be made in those years, subject to the adjustments to be made by the Bond Trustee so that after a redemption no Series 2018A Bonds are outstanding in other than Authorized Denominations.

Each Series 2018A Bond delivered to the Bond Trustee pursuant to paragraph (iii) above or redeemed in part as described under the captions “THE SERIES 2018A BONDS – Redemption and Purchase – Optional Redemption” or “–Extraordinary Optional Redemption” and maturing on September 15, 2045 will reduce the Principal Amount of Redemption and the amount due at maturity in the years and in the amounts directed by the Corporation or, if the Corporation has not provided adequate direction within 45 days of the redemption date, pro rata for each of the years 2041 to and including 2045 in which payments of principal on the Series 2018A Bonds under paragraph (iii) above have not then been made based on the amount of the sinking fund redemptions to be made in those years, subject to the adjustments to be made by the Bond Trustee so that after a redemption no Series 2018A Bonds are outstanding in other than Authorized Denominations.

Each Series 2018A Bond delivered to the Bond Trustee pursuant to paragraph (iv) above or redeemed in part as described under the captions “THE SERIES 2018A BONDS – Redemption and Purchase – Optional Redemption” or “–Extraordinary Optional Redemption” and maturing on September 15, 2050 will reduce the Principal Amount of Redemption and the amount due at maturity in the years and in the amounts directed by the Corporation or, if the Corporation has not provided adequate direction within 45 days of the redemption date, pro rata for each of the years 2046 to and including 2050 in which payments of principal on the Series 2018A Bonds

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under paragraph (iv) above have not then been made based on the amount of the sinking fund redemptions to be made in those years, subject to the adjustments to be made by the Bond Trustee so that after a redemption no Series 2018A Bonds are outstanding in other than Authorized Denominations.

Extraordinary Optional Redemption. The Series 2018A Bonds are callable for redemption, in whole or in part, at any time prior to maturity, at the option of the Corporation, at a price equal to 100% of the principal amount of the Series 2018A Bonds being redeemed plus the full amount of the unpaid interest that has accrued on the Series 2018A Bonds and will accrue to the date the Series 2018A Bonds are redeemed and without premium, in the event of damage, destruction or condemnation of Facilities of the Obligated Issuers which results in the receipt by one or more Obligated Issuers of proceeds of insurance or condemnation awards, in any instance, which exceed 5% of the Book Value or, at the option of the Obligated Group Representative, the Market Value of the Net Property, Plant and Equipment of the Obligated Issuers at the end of the most recent Fiscal Year for which financial statements are available and applied to make prepayments on the Series 2018A Master Note, but only to the extent of the funds provided for in the Master Indenture with respect to damage, destruction and condemnation. The terms Facilities, Obligated Issuers, Book Value, Obligated Group Representative, Market Value, Net Property, Plant and Equipment and Fiscal Year used in this paragraph shall have the meanings specified in APPENDIX E hereto.

Purchase in Lieu of Redemption; Mandatory Tender. The Authority and, by their acceptance of the Series 2018A Bonds, the Bondholders, irrevocably grant to the Corporation and any assigns of the Corporation with respect to this right, the option to purchase, at any time and from time to time, any Series 2018A Bond that is redeemable pursuant to the Bond Indenture as described above under the captions “THE SERIES 2018A BONDS – Redemption and Purchase – Optional Redemption” and “– Extraordinary Optional Redemption” on the date on which the Series 2018A Bond would otherwise be redeemed at a purchase price equal to the optional redemption price therefor. To exercise such option, the Corporation shall give the Bond Trustee a written request exercising such option within the time period specified in the Bond Indenture and the Loan Agreement as though such written request were a written request of the Authority for redemption, and the Bond Trustee will thereupon give the bondholders of the Series 2018A Bonds to be purchased notice of such mandatory tender and purchase in the manner specified below as though such purchase were a redemption. The purchase of such Series 2018A Bonds shall be mandatory and enforceable against the bondholders, and the bondholders will not have the right to retain their Series 2018A Bonds. On the date fixed for purchase pursuant to any exercise of such option, the Corporation will pay the purchase price of the Series 2018A Bonds then being purchased to the Bond Trustee in immediately available funds, and the Bond Trustee will pay the same to the sellers of such Series 2018A Bonds against delivery thereof. Following such purchase, the Bond Trustee shall cause such Series 2018A Bonds to be registered in the name of the Corporation or its nominee or as otherwise directed by the Corporation and shall deliver them to the Corporation or its nominee or as otherwise directed by the Corporation. No purchase of the Series 2018A Bonds pursuant to these provisions shall operate to extinguish the indebtedness of the Authority evidenced thereby. Notwithstanding the foregoing, no such purchase shall be made unless the Corporation shall have delivered to the Bond Trustee and the Authority concurrently with such purchase an Opinion of Bond Counsel to effect that such purchase and any resale thereof will not adversely affect the validity of the Series 2018A Bonds or any exclusion from gross income for federal income tax purposes to which interest on the Series 2018 Bonds would otherwise be entitled.

Notice of Redemption or Purchase in Lieu of Redemption. For a description of the giving of notices while the Series 2018A Bonds are in the book-entry only system, see “BOOK-ENTRY ONLY SYSTEM” below. Notice of a call for any redemption or purchase of Series 2018A Bonds shall be given by mailing a copy of such notice of redemption or purchase by first class mail not less than 30 or more than 60 days prior to the date fixed for redemption or purchase to the registered owners of such Series 2018A Bonds to be redeemed or purchased to the address shown on the Registration Books, provided, however, that failure to give such notice by mailing or to provide such notice to any registered securities depository (as provided in the Bond Indenture) or a defect in the notice or the mailing as to any Series 2018A Bond will not affect the validity of any proceedings for redemption or purchase as to any other Series 2018A Bond with respect to which notice was properly given or the validity of any proceedings for the redemption or purchase of a Series 2018A Bond if the registered owner of it receives actual notice of the redemption or purchase from any source. Except for a mandatory Bond Sinking Fund redemption as described above, such notice of redemption or purchase shall state that any redemption or purchase, as applicable, is conditional on funds being on deposit with the Bond Trustee on the applicable redemption or purchase date and that failure to make such a deposit shall not constitute an event of default under the Bond Indenture.

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If sufficient funds are not so deposited by such redemption or purchase date, such Series 2018A Bonds will not be subject to redemption or purchase and the holders thereof shall have the same rights as if no such notice had been given. In such event, the Bond Trustee shall promptly give notice thereof to the registered owners of such Series 2018A Bonds by first class mail, postage prepaid.

Selection of Series 2018A Bonds for Partial Redemption. In the case of any partial optional redemption or partial extraordinary optional redemption as described above, the Series 2018A Bonds must be redeemed in Authorized Denominations, in the amount and of the maturities (and portions thereof within a maturity) designated by the Corporation or, if the Corporation has not provided adequate direction within 45 days of the redemption date (or such shorter period as is acceptable to the Bond Trustee), in the inverse of the order of their maturity, and within a maturity that is subject to mandatory sinking fund redemptions, applied to the outstanding mandatory sinking fund redemptions for such maturity on a pro rata basis by year.

Registration, Transfer and Exchange

For a description of the procedure to transfer ownership of a Series 2018A Bond while in the book-entry only system, see “BOOK-ENTRY ONLY SYSTEM” below. Any Series 2018A Bond may be transferred upon its presentation at the designated corporate trust office of the Bond Trustee if it has been duly endorsed for transfer or is accompanied by a written instrument of transfer satisfactory to the Bond Trustee that has been executed by the registered owner. The Bond Trustee will transfer any Series 2018A Bond so presented by making an appropriate entry in the Registration Books and delivering to the transferee(s) one or more new Bonds which have been executed by the Authority, have been authenticated by the Bond Trustee, are in an Authorized Denomination and have the same form, terms, interest rate, maturity and aggregate principal amount as the Series 2018A Bond being transferred.

Series 2018A Bonds may be exchanged for other Series 2018A Bonds by surrendering the Series 2018A Bonds to be exchanged at the designated corporate trust office of the Bond Trustee. The Bond Trustee will exchange any Series 2018A Bond so presented by making an appropriate entry in the Registration Books and delivering to the registered owner presenting the Series 2018A Bonds for exchange one or more new Bonds which have been executed by the Authority, have been authenticated by the Bond Trustee, are in an Authorized Denomination and have the same form, terms, interest rate, maturity and aggregate principal amount as the Series 2018A Bond being exchanged.

The registered owner requesting any transfer or exchange of any Series 2018A Bonds must pay, as a condition to the transfer or exchange, any resulting tax or other governmental charge but may not otherwise be charged for an exchange or transfer.

The Bond Trustee is not required to register, transfer, exchange or replace any Series 2018A Bond (a) during the 10-day period immediately preceding the first mailing or publication of a notice of redemption or purchase in lieu of redemption with respect to any Series 2018A Bonds of the same maturity or (b) after such Series 2018A Bond or any portion thereof has been called for redemption or purchase in lieu of redemption.

BOOK-ENTRY ONLY SYSTEM

Information concerning The Depository Trust Company, New York, NY (“DTC”) and the Book- Entry System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Authority, the Underwriter, the Bond Trustee or the Corporation.

Bonds in Book-Entry Form

Beneficial ownership in the Series 2018A Bonds will be available to Beneficial Owners (as described below) only by or through DTC Participants via a book-entry system (the “Book-Entry System”) maintained by DTC. If the Series 2018A Bonds are taken out of the Book-Entry System and delivered to owners in physical form, as contemplated hereinafter under “BOOK-ENTRY ONLY SYSTEM – Discontinuance of DTC Services,” the following discussion will not apply.

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DTC and Its Participants

DTC will act as securities depository for the Series 2018A Bonds. The Series 2018A Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2018A Bond will be issued for each maturity of the Series 2018A Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.

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 Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Series 2018A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2018A Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2018A Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2018A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2018A Bonds, except in the event that use of the book-entry system for the Series 2018A Bonds is discontinued.

To facilitate subsequent transfers, all Series 2018A 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 2018A Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2018A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2018A Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the Series 2018A Bonds of a single maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2018A Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The 14

Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2018A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal and interest and the redemption price on the Series 2018A 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 Authority or Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Authority, or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest and the redemption price to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority and Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

Discontinuance of DTC Services

DTC may discontinue providing its services as depository with respect to the Series 2018A Bonds at any time by giving reasonable notice to the Authority and the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be authenticated and delivered.

The Authority may, as provided in the Bond Indenture, decide to discontinue use of the Book- Entry System through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

Use of Certain Terms in Other Sections of the Official Statement

In reviewing this Official Statement it should be understood that while the Series 2018A Bonds are in the Book-Entry System, reference in other sections of this Official Statement to owners of such Series 2018A Bonds should be read to include any person for whom a Participant acquires an interest in Series 2018A Bonds, but (i) all rights of ownership, as described herein, must be exercised through DTC and the Book-Entry System and (ii) notices that are to be given to registered owners by the Bond Trustee will be given only to DTC. DTC is required to forward (or cause to be forwarded) the notices to the Participants by its usual procedures so that such Participants may forward (or cause to be forwarded) such notices to the Beneficial Owners.

Disclaimer

Neither the Authority, the Bond Trustee, the Underwriter or the Corporation has any responsibility or obligation to any Direct Participants or Indirect Participants or the Persons for whom they act with respect to (1) the accuracy of any records maintained by DTC or any Direct or Indirect Participant; (2) the payment by any relevant Participant of any amount due to any relevant Beneficial Owner in respect of the principal of or interest or premium, if any, on the Series 2018A Bonds; (3) the delivery by any relevant Direct Participant or relevant Indirect Participant of any notice to any relevant Beneficial Owner that is required or permitted under the terms of the Bond Indenture to be given to the holders of the Series 2018A Bonds; (4) the selection of the relevant Beneficial Owners to receive payment in the event of any partial redemption of the Series 2018A Bonds; or (5) any consent given or other action taken by DTC as holder of the Series 2018A Bonds.

SECURITY FOR THE SERIES 2018A BONDS

General

The Series 2018A Bonds are limited obligations of the Authority and are payable solely from (i) payments, income and revenues derived pursuant to the terms of the Loan Agreement (except to the extent included in the Unassigned Rights, as defined in APPENDIX F hereto) including all payments and prepayments made in respect of the Series 2018A Master Note, (ii) all amounts realized upon recourse to the Loan Agreement or any collateral given by the Corporation to secure its obligations under the Loan Agreement, (iii) all amounts realized upon recourse to the Master Indenture that are available pursuant to the Master Indenture to pay amounts due on the Series 2018A Master Note, and (iv) the money and securities (including the earnings from the investment of them)

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held by the Bond Trustee in the trust funds established under the Bond Indenture, including the Series 2018A Debt Service Reserve Fund.

Certain moneys deposited with the Bond Trustee may be held in a rebate fund established pursuant to a Tax Exemption Certificate and Agreement among the Authority, the Bond Trustee and the Corporation. Amounts held in the rebate fund are not pledged to secure the Series 2018A Bonds and consequently will not be available to make payments on the Series 2018A Bonds.

The Loan Agreement

The rights of the Authority in and to the Series 2018A Master Note, the amounts payable thereon and the amounts payable to the Authority under the Loan Agreement (except to the extent included in the Unassigned Rights, as defined in Appendix F hereto) have been assigned to the Bond Trustee to provide for and to secure the payment of principal of, premium, if any, and interest on the Series 2018A Bonds. The Corporation agrees under the Loan Agreement to make its payments on the Series 2018A Master Note directly to the Bond Trustee. The Loan Agreement imposes certain restrictions on the Corporation’s action for the benefit of the Authority and the holders of the Series 2018A Bonds. See the information under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND THE LOAN AGREEMENT – SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT” in APPENDIX F to this Official Statement.

Series 2018A Master Note and Master Indenture

The rights of the Authority in and to the Series 2018A Master Note, the amounts payable thereon and the amounts payable to the Authority under the Loan Agreement (other than the Authority’s fees and expenses and the Authority’s’ right to indemnification in certain circumstances) have been assigned to the Bond Trustee to provide for and to secure the payment of principal of, premium, if any, and interest on the Series 2018A Bonds. The Corporation agrees under the Loan Agreement to make its payments on the Series 2018A Master Note directly to the Bond Trustee.

Payments on the Series 2018A Master Note and any other Master Notes issued or to be issued under the Master Indenture will be the obligation of the Corporation and are to be guaranteed by the joint and several obligation of any future members of the Obligated Group. Notwithstanding uncertainties as to enforceability of the covenant of the members of the Obligated Group in the Master Indenture to jointly and severally guarantee each Master Note (see “BONDHOLDERS’ RISKS – Certain Matters Relating to Enforceability of the Master Indenture”), the accounts of the Corporation and any future members of the Obligated Group will be combined for financial reporting purposes and will be used in determining whether various covenants and tests contained in the Master Indenture (including tests relating to the incurrence of additional indebtedness) are met.

Additional Master Notes

Under certain conditions specified in the Master Indenture, members of the Obligated Group may issue additional Master Notes to the Authority or others, which additional Master Notes will not be pledged under the Bond Indenture, but will be equally and ratably secured by the Master Indenture with the Series 2018A Master Note. In addition, the Master Indenture permits each member of the Obligated Group to issue other indebtedness and to enter into guaranties, all upon the terms and conditions specified therein. There is no requirement in the Master Indenture that additional collateral be made subject to the Master Mortgage at the time any additional Master Notes are issued. See APPENDIX E hereto for a description of certain terms of the Master Indenture, including those which impose restrictions on actions of the Obligated Group for the benefit of all holders of Master Notes issued under the Master Indenture. Such restrictions include, among others, restrictions on liens on the Corporation’s property, restrictions on the incurrence of additional indebtedness and provisions governing the transfer of property. The Master Indenture provides that Supplemental Master Indentures pursuant to which one or more series of Master Notes entitled to additional security is issued may provide for such amendments to the provisions of the Master Indenture, including the provisions thereof relating to the exercise of remedies upon the occurrence of an event of default, as are necessary to provide for such security and to permit realization upon such security, solely for the benefit of the Master Notes entitled thereto. For additional discussion, see “BONDHOLDERS’ RISKS – Certain Matters Relating to the Master Mortgage and to the Security Interest in Master Trust Estate.”

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Rate Covenant

The Corporation and any future members of the Obligated Group shall set rates and charges for their facilities such that the Historical Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.10:1. If the Historical Debt Service Coverage Ratio, as calculated at the end of any Fiscal Year is below 1.10:1, the Corporation shall retain an Independent Consultant at the end of each such Fiscal Year to make recommendations to increase the Historical Debt Service Coverage Ratio for the subsequent Fiscal Years to at least 1.10:1; provided, however, that in the event that an Independent Consultant shall deliver a report to the Master Trustee to the effect that state or federal laws or regulations or administrative interpretations of such laws or regulations then in existence do not permit or by their application make it impracticable for the Obligated Group to produce a Historical Debt Service Coverage Ratio of 1.10:1, then the required Historical Debt Service Coverage Ratio shall be reduced to the highest practicable ratio permitted by the laws or regulations then in effect but in no event less than 1.00 for such subsequent Fiscal Year. So long as the Corporation shall retain an Independent Consultant at the end of each Fiscal Year in which the Historical Debt Service Coverage Ratio of the Obligated Group is below 1.10:1 and each Obligated Issuer shall follow such Independent Consultant’s recommendations for the subsequent Fiscal Year to the extent feasible, and so long as the Historical Debt Service Coverage Ratio of the Obligated Group is not less than 1.00 for the subsequent Fiscal Year, the rate covenant shall be deemed to have been complied with for such subsequent Fiscal Year, and those circumstances will not constitute an Event of Default under the Master Indenture. Prior to issuance of the Series 2018A Bonds, the Master Indenture was amended to clarify that initial entry fees received in relation to construction of new projects, including the Project, by the Corporation and used for the payment of principal on debt issued, in whole or in part, to finance such new project, shall be excluded from the calculation of the Historical Debt Service Coverage Ratio. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Historical Debt Service Coverage Ratio” in APPENDIX E hereto.

Liquidity Covenant

The Obligated Group covenants in the Master Indenture that it will calculate the Days Cash on Hand of the Obligated Group as of December 31 of each Fiscal Year (a “Testing Date”).

The Master Indenture requires that each Obligated Issuer conduct its business so that on each Testing Date the Obligated Group shall maintain no less than 180 Days Cash on Hand on each Testing Date (the “Liquidity Requirement”).

If the amount of Days Cash on Hand as of any Testing Date is less than the Liquidity Requirement, the Obligated Group Representative shall, within 45 days after delivery of the Officer’s Certificate disclosing such deficiency, deliver an Officer’s Certificate approved by a resolution of the Governing Body of the Obligated Group Representative to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to raise the level of the Days Cash on Hand to the Liquidity Requirement for future periods.

If the Obligated Group has not raised the level of the Days Cash on Hand to the Liquidity Requirement by the Testing Date immediately subsequent to the delivery of the Officer’s Certificate required in the preceding paragraph the Obligated Group Representative shall within 30 days after delivery of the Officer’s Certificate disclosing such deficiency select an Independent Consultant to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase the Days Cash on Hand to the Liquidity Requirement for future periods. A copy of the Independent Consultant’s report and recommendations if any shall be filed with the Master Trustee within 60 days after the date such Independent Consultant is retained. Each member of the Obligated Group shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (a determined in the reasonable judgment of the Governing Body of the member of the Obligated Group) and permitted by law.

Failure of the Obligated Group to achieve the Liquidity Requirement for any Testing Date shall not constitute an event of default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for adopting a plan or retaining an Independent Consultant and follows each recommendation contained in such plan or Independent Consultant’s report to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Liquidity Covenant” in APPENDIX E hereto. 17

Other Covenants

In addition to the covenants described above, the Master Indenture contains additional covenants relating to, among others, the maintenance of property and corporate existence, the maintenance of certain levels of insurance coverage, the incurrence of additional debt, the sale or lease of certain property, and restriction on creation of liens. For a description of these and other covenants, see “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E hereto.

The Corporation has entered into agreements with certain banks under which the Corporation has agreed (and have agreed to cause future Obligated Group Members) to observe and perform operating and financial covenants which are more restrictive than those contained in the Master Indenture unless otherwise agreed to by such banks. See “BONDHOLDERS’ RISKS – Risks Inherent in Bank-held Bonds.”

Master Mortgage

Pursuant to the Master Mortgage from the Corporation to the Master Trustee, the Corporation has granted to the Master Trustee a first mortgage lien on certain real estate owned by the Corporation and a security interest in certain tangible personal property of the Corporation, subject in each case to Permitted Encumbrances as defined in the Master Indenture. The Master Mortgage will, among other things, equally and ratably secure all Master Notes issued under the Master Indenture. See “BONDHOLDERS’ RISKS – Certain Matters Relating to the Master Mortgage and to the Security Interest in Master Trust Estate,” “EXISTING CONTINUING CARE FACILITIES in APPENDIX A attached hereto and “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E attached hereto.

Title Insurance

The Corporation will covenant to deliver, concurrently with the issuance of the Series 2018A Bonds, a loan title insurance policy in the name of the Master Trustee at the time the Amended Mortgage is executed and delivered to the Master Trustee. The face amount of the policy will be equal to the principal amount of the outstanding Master Notes. The Corporation is not required to obtain an increase in the amount of the policy in connection with the issuance of any additional Master Notes subsequent to the issuance of the Series 2018A Master Note, and the title insurance policy will not pay any claim that exceeds the aggregate face amount of the policy.

Master Trust Estate

The Corporation has granted a security interest in the Master Trust Estate, which includes all its rents, revenues and income from its operations subject to certain exceptions to the Master Trustee. The Master Indenture provides that the Master Trustee’s security interest in the Master Trust Estate is subject to certain permitted liens as provided in the Master Indenture and its security interest in the accounts receivable of the Corporation, which are included in the Master Trust Estate, may under certain circumstances be subordinate to a security interest in such accounts receivable granted to other creditors of the Corporation. For additional discussion, see “BONDHOLDERS’ RISKS – Certain Matters Relating to the Master Mortgage and to the Security Interest in Master Trust Estate” and “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Restrictions as to Creation of Liens” in APPENDIX E attached hereto.

Bond Indenture and Debt Service Reserve Fund

The Bond Indenture establishes a Debt Service Reserve Fund to be maintained for the benefit of the Series 2018A Bonds (the “Series 2018A Debt Service Reserve Fund”). An amount equal to the lesser of (i) the maximum amount of principal and interest due on the outstanding Series 2018A Bonds in the then current or any succeeding bond year, (ii) 10% of the face amount of the Series 2018A Bonds if the original issue discount on the Series 2018A Bonds is less than 2% of the stated redemption price of the Series 2018A Bonds at maturity or 10% of the issue price of the Series 2018A Bonds net of accrued interest if the original issue discount on the Series 2018A Bonds exceeds that amount, or (iii) 125% of the average annual principal and interest requirements on the Series 2018A Bonds (the “Debt Service Reserve Fund Requirement”) will be deposited into the Series 2018A Debt Service Reserve Fund at the time the Series 2018A Bonds are issued. Funds on deposit in the Series 2018A Debt Service Reserve Fund will be used to make up deficiencies in the Interest Account and the Principal Account (in that order). In the event the amount on deposit in the Series 2018A Debt Service Reserve Fund is less than 100% of the Debt Service Reserve Fund Requirement on any date as a result of a transfer from the Series 2018A Debt Service Reserve

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Fund to the Principal Account or the Interest Account to fund a deficiency in one or both of those accounts, then the Corporation agrees to restore the amount on deposit in the Series 2018A Debt Service Reserve Fund Requirement by the deposit with the Bond Transfer of an amount equal to such deficiency is not more than 12 substantially equal monthly installments beginning with the first day of the sixth month after the month in which the deficiency occurred. If on any September 1 (a “Valuation Date”) the amount on deposit in the Series 2018A Debt Service Reserve Fund is less than 90% of the Debt Service Reserve Fund Requirement as a result of a decline in the market value of investments on deposit in the Series 2018A Debt Service Reserve Fund, then the Corporation agrees to deposit amounts sufficient to make up the deficiency within 120 days following the date on which the Corporation received written notice of the deficiency.

If on any Valuation Date the value of amounts on deposit in the Series 2018A Debt Service Reserve Fund exceeds the Debt Service Reserve Fund Requirement, the excess will be transferred to the Principal Account, to the extent of the amount required to be on deposit on the date of the next scheduled payment therefrom on the Series 2018A Bonds if such next date is scheduled to occur within the 13-month period next succeeding the date of such transfer, then to the Interest Account to the extent necessary to make interest payments due on such Bonds within the 13-month period next succeeding the date of such transfer, and then to the Prepayment Account.

In connection with any partial redemption or defeasance prior to maturity of the Series 2018A Bonds, the Bond Trustee may, at the request of the Corporation, use any amounts on deposit in the Debt Service Reserve Fund in excess of the Debt Service Reserve Fund Requirement after such redemption to pay the principal of or the principal portion of the redemption price of said Bonds to be redeemed or defeased.

See “SUMMARY OF THE BOND INDENTURE – Debt Service Reserve Fund” and “SUMMARY OF THE BOND INDENTURE AND THE LOAN AGREEMENT – Debt Service Reserve Fund” in APPENDIX F hereto.

BONDHOLDERS’ RISKS

The following discussion of bondholders’ risks is not and is not intended to be exhaustive and should be read in conjunction with all other parts of this Official Statement.

General

The Series 2018A Bonds are special limited obligations of the Authority secured by and payable from payments to be made by the Corporation and any future members of the Obligated Group under the Series 2018A Master Note and the Loan Agreement. There is no assurance that the Corporation and any future members of the Obligated Group will generate sufficient revenues to make the required payments. The capabilities of management, future legislation, regulatory actions, economic conditions, competition, changes in the demand for services, and other factors and conditions which are unpredictable could materially and adversely affect the ability of the Obligated Group to meet its obligations.

The receipt of future revenues by the Corporation and any future members of the Obligated Group will be subject to, among other factors, federal and state policies affecting the senior housing and health care industries (including changes in reimbursement rates and policies), increased competition from other senior housing and health care providers, the capability of the management of the Corporation and future economic and other conditions that are impossible to predict. The extent of the ability of the Corporation and any future members of the Obligated Group to generate future revenues has a direct effect upon the payment of principal of, premium and purchase price, if any, and interest on the Series 2018A Bonds. Neither the Underwriter nor the Authority has made any independent investigation of the extent to which any such factors may have an adverse effect on the revenues of the Corporation.

Limited Obligations

The Series 2018A Bonds, together with interest and premium, if any, thereon, shall be limited obligations of the Authority payable solely from (i) payments, income and revenues derived pursuant to the terms of the Loan Agreement (except to the extent included in the Unassigned Rights, as defined in APPENDIX F hereto) including all payments and prepayments made in respect of the Series 2018A Master Note, (ii) all amounts realized upon recourse to the Loan Agreement or any collateral given by the Corporation to secure its obligations under the Loan Agreement, (iii) all amounts realized upon recourse to the Master Indenture that are available pursuant to the

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Master Indenture to pay amounts due on the Series 2018A Master Note, and (iv) the money and securities (including the earnings from the investment of them) held by the Bond Trustee in the trust funds established under the Bond Indenture, including the Series 2018A Debt Service Reserve Fund. The Series 2018A Bonds shall be a valid claim of the respective owners thereof only against the funds established under the Bond Indenture and other moneys held by the Bond Trustee for the benefit of the Series 2018A Bonds and the payments due on or to become due upon or under the Series 2018A Master Note and the Loan Agreement (except for Unassigned Rights) all of which are assigned and pledged under the Bond Indenture for the equal and ratable payment of the Series 2018A Bonds and shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the Series 2018A Bonds, except as may be otherwise expressly authorized in the Bond Indenture.

The Series 2018A Bonds do not constitute a debt or liability of the State of Wisconsin or of any political subdivision thereof other than the Authority. The Series 2018A Bonds are limited obligations of the Authority and are payable solely from the funds pledged therefor in accordance with the Bond Indenture. The issuance of the Series 2018A Bonds does not, directly, indirectly or contingently, obligate the State of Wisconsin or any political subdivision thereof to levy any form of taxation for the payment thereof or to make appropriation for their payment. The State of Wisconsin shall not in any event be liable for the payment of the principal of or interest on the Series 2018A Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever which may be undertaken by the Authority. No breach by the Authority of any such pledge, mortgage, obligation or agreement may impose any pecuniary liability upon the State of Wisconsin or any charge upon its general credit or against its taxing power. The Authority has no taxing power.

The Act provides that the State of Wisconsin pledges to, and agrees with, holders of any obligations issued under the Act that it will not limit or alter the rights vested in the Authority by the Act until such obligations, together with the interest thereon, are fully met and discharged, provided nothing in the Act precludes such limitation or alteration if and when adequate provision shall be made by law for the protection of the holders of such obligations.

Financial Projections

The financial forecast contained in the Feasibility Study included in APPENDIX D – “Financial Feasibility Study” is based upon assumptions made by management of the Corporation. As stated in the Financial Feasibility Study, there will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. In addition, the financial forecast is only for the years ended December 31, 2018 through 2023, and consequently does not cover the whole period during which the Series 2018A Bonds may be outstanding. See the Financial Feasibility Study included herein as APPENDIX D, which should be read in its entirety, including the summary of significant forecast assumptions and accounting policies included therein.

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

Failure to Maintain Occupancy or Turnover

The ability of the Corporation to generate sufficient revenues depends in large part upon the ability of the Project to attract sufficient numbers of residents to the Project as well as sustaining occupancy of the Corporation’s existing facilities in order to achieve and then to maintain substantial occupancy throughout the term of the Series 2018A Bonds. The ability of the Corporation to achieve and then to maintain substantial occupancy depends to some extent on factors outside its control. The success of the Project is dependent on numerous factors including, but not limited to, the maintenance of high future occupancy levels at the Project by eligible residents who will be able to pay the fees charged, the capabilities of the management of the facilities, and the availability of alternative housing opportunities in the general area and future economic and other conditions which are unpredictable. Any of these factors may affect revenues and payments on the Series 2018A Bonds. No

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representation or assurance can be made that revenues will be realized in amounts sufficient to make the required payments on the Series 2018A Bonds.

Risk of Real Estate Investment

General. Development, ownership and operation of real estate, such as the Project and the Community, involves certain risks, including the risk of adverse changes in general economic and local conditions, including the possible future oversupply and lagging demand for continuing care retirement communities; adverse use of adjacent or neighboring real estate; community acceptance of the Project; changes in the cost of operation of the Community; difficulties or restrictions in the Corporation’s ability to raise rents and fees charged; population decreases; uninsured losses; failure of residents to pay monthly fees; operating deficits and mortgage foreclosure; lack of attractiveness of the property to residents; adverse changes in neighborhood values; and adverse changes in zoning laws, federal and local rent controls, other laws and regulations and real property tax rates. Such losses also include the possibility of fire or other casualty or condemnation. If the Project or any portion of the Community were uninhabitable during restoration after damage or destruction, the units or common areas affected would not be available during the period of restoration, which could adversely affect the ability of the Community to generate sufficient revenues to pay debt service on the Series 2018A Bonds. Changes in general or local economic conditions and changes in interest rates and the availability of mortgage funding may render the sale or refinancing of the Community difficult or unattractive. These conditions may have an adverse effect on the demand for the Community as well as the market price received for the Community in the event of a sale or foreclosure of the Community. Many other factors may adversely affect the operation of facilities like the Project and cannot be determined at this time.

Sale of Personal Residences. It is anticipated that many prospective residents of the Project will be required to sell their current homes to meet the financial obligations under their residence agreements (the “Residency Agreements”). If prospective residents encounter difficulties in selling their current homes due to local or national economic conditions affecting the sale and finance of residential real estate, such prospective residents may not have sufficient funds to meet the obligations under their Residency Agreements, thereby causing a delay in scheduled occupancy of the Project or remarketing of vacated units, which would have an adverse impact on the revenues of the Corporation.

Failure to Maintain Occupancy. The economic feasibility of the Project and its ability to provide revenues to the Corporation to make payments on the Series 2018A Master Note depends in large part upon its being substantially occupied. See APPENDIX D – “FINANCIAL FEASIBILITY STUDY.” Occupancy of the Community may be affected by competition from existing competing facilities or from competing facilities which may be constructed in the area served by the Community, including new facilities which the Corporation, or its affiliates, may construct. Circumstances may occur, including but not limited to, insufficient demand for continuing care retirement communities in the Community’s location, decreases in the population, deterioration of the structure and living facilities of the Community, and construction of competing projects or other more attractive living accommodations, which could increase the rate of vacancy. Further, the sustained failure of residents to meet their monthly fee obligations would make it difficult for the Community to meet its current operating expenses which could result in a curtailment of essential services and decrease the desirability of the Community to existing or prospective residents.

Damage, Destruction or Condemnation. Although the Corporation will be required to obtain and maintain certain insurance against losses from damage or destruction as set forth in the Master Indenture, Loan Agreement and the Master Mortgage, there can be no assurance that the Community will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Project cannot generate revenues, will not exceed the coverage of such insurance policies.

If the Project or any portion of the Community is damaged or destroyed, or is taken in a condemnation proceeding, funds derived from proceeds of insurance or any such condemnation award for the Community must be applied as provided in the Master Indenture to restore or rebuild the Community or to redeem the related bonds designated by the Corporation in accordance with the Master Indenture. There can be no assurance that the amount of funds available to restore or rebuild the Project or to redeem the Series 2018A Bonds will be sufficient for that purpose, or that any remaining portion of the Community will generate revenues sufficient to pay the expenses of the Community and the debt service on the Series 2018A Bonds remaining outstanding.

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Risk of Resident Non-Payment of Monthly Fees. There can be no assurance that any resident of the Community will pay their monthly fees when due. No governmental agency has guaranteed the monthly fee payments due from residents. Thus, there can be no assurance that the monthly fee payments received from the residents will be sufficient to enable the Corporation to make timely debt service payments on the Series 2018A Master Note, or to enable the Authority to make timely payments of principal, premium, if any, and interest on the Series 2018A Bonds. Residence Agreements can be terminated by the Corporation for nonpayment of monthly fees by residents.

Construction Risks

Construction of the Project is subject to the usual risks associated with construction projects including, but not limited to, delays in issuance of required building permits or other necessary approvals or permits, strikes, labor disputes, shortages of materials and/or labor, transportation delays, restrictions related to endangered species, adverse weather conditions, fire, casualties, acts of God, war, acts of public enemies, terrorism, orders of any kind of federal, state, county, city or local government, insurrections, riots, adverse conditions not reasonably anticipated or other causes beyond the control of the Corporation or its contractors. Such events could result in delayed marketing, substantial completion, and/or occupancy of the Project and thus the revenue flow therefrom. In addition, the marketing, substantial completion and occupancy of the Project may be extended by reason of changes authorized by the Corporation, delays due to acts or neglect of the Corporation, or by independent contractors employed by the Corporation. Cost overruns could also result in the Corporation not having sufficient money to complete construction of the Project, thereby materially affecting the receipt of revenues needed to pay the Series 2018A Bonds.

It is anticipated that the proceeds from the sale of the Series 2018 Bonds and other available funds, together with anticipated investment earnings thereon will be sufficient to complete the construction and equipping of the Project based upon the Guaranteed Maximum Price (“GMP”) obtained from the contractor therefor. Moreover, to maintain the Construction Contract and the GMP, the Corporation must issue a notice to proceed. See APPENDIX A “PROJECT TEAM – Construction Manager – VJS Construction Services.”

Construction Monitor Approval of Construction Draws

The ability of the Corporation to receive disbursement from the Construction Account of the Project Fund held under the Bond Indenture is subject to approval of the independent construction monitor (the “Construction Monitor”) engaged by the Corporation. If the conditions to receipt of disbursements are not met, the Construction Monitor may temporarily suspend construction draws. A temporary suspension of funding might cause delay in completion and related cost overruns. Proceeds remaining in the Construction Account together with other funds held under the Bond Indenture would not be sufficient to pay the principal of the Series 2018A Bonds upon acceleration. See APPENDIX A – “PROJECT TEAM – Construction Monitor – zumBrunnen.”

Rights of Residents

The Corporation enters into Residency Contracts with its residents. For more information about the Residency Contracts, see APPENDIX A – “EXISTING CONTINUING CARE FACILITIES – Residency Contracts.” Although these contracts give to each resident a contractual right to occupy a unit or apartment, in the event that the Bond Trustee or the holders of the Series 2018A Bonds seek to enforce any of the remedies provided by the Bond Indenture upon the occurrence of a default or the Master Trustee seeks to enforce remedies under the Master Mortgage or the Master Indenture, it is impossible to predict the resolution that a court might make of competing claims among the Master Trustee, the Bond Trustee, the Authority or the holders of the Series 2018A Bonds and a resident of the Project who has fully or substantially complied with the terms and conditions of his or her Residency Contract.

Competition

The Corporation currently faces substantial competition from other providers of comparable senior living and care facilities in its primary service area. See APPENDIX D – “FINANCIAL FEASIBILITY STUDY – Summary of Significant Forecast Assumptions and Accounting Policies – Market Assessment.” The Corporation will likely continue to face competition in the future from other providers of new, expanded, or renovated facilities that offer competing services. If, as a result of competition or otherwise, the occupancy levels

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were to be materially lower than those anticipated by management, there would be an adverse effect on the revenues of the Corporation and the effect could be material.

The Wisconsin Department of Health Services has statutory authority to limit the number of skilled care nursing home beds available in Wisconsin. If the authorizing legislation were repealed or amended, the number of competing skilled nursing facilities or the number of beds available at existing skilled nursing facilities could increase materially. There is no assurance that the authorizing legislation will remain in place. If it were lifted, the effect on the supply, demand, and use of all senior care services might change markedly. This could have a negative impact on the ability of the Corporation to market its programs and facilities. There is no limit on the number of community based residential facilities or assisted living facilities that can be licensed in Wisconsin. There is no licensure of residential apartment facilities or regulatory limit on the number of such facilities that may be constructed.

Nature of the Income of the Elderly

A large percentage of the monthly income of the residents of the Corporation’s facilities will be fixed income derived from retirement plans and Social Security. In addition, some residents will be liquidating assets in order to pay the monthly and other fees. If, due to inflation or otherwise, substantial increases in fees are required to cover increases in operating costs, wages, benefits and other expenses, many residents may have difficulty paying or may be unable to pay such increased fees. Alternatively, any decrease in the amounts paid by such fixed income sources could affect the ability of residents to pay fees and additional restrictions imposed upon Social Security or other fixed income sources could affect the ability of future residents to pay the entrance fee or to meet other financial obligations under the Residency Agreements. The Corporation’s inability to collect from residents the full amount of their payment obligations may jeopardize the ability of the Corporation to pay amounts due under the Loan Agreement, as well as its Master Notes.

Additional Debt; Dilution

The Master Indenture permits the issuance of additional Master Notes on a parity with the Series 2018A Master Note, and also permits the incurrence of other indebtedness and guarantees of indebtedness by the members of the Obligated Group. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Restriction as to Incurrence of Additional Indebtedness” in APPENDIX E hereto. There is no requirement in the Master Indenture that additional collateral be made subject to the lien of the Master Mortgage at the time any additional Master Notes are issued. Certain amendments to the Bond Indenture and the Loan Agreement may be made with the consent of the holders of a majority in principal amount of the outstanding Series 2018A Bonds, and certain amendments to the Master Indenture may be made with the consent of the holders of a majority in principal amount of outstanding Master Notes. Such amendments may adversely affect the security of the Bondholders, and, in the case of the Master Indenture, the majority may be composed wholly or partially of Master Notes other than the Series 2018A Master Note. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Supplemental Master Indentures with Consent of Noteholders” in APPENDIX E hereto.

Risks Inherent in Bank-held Bonds

Upon the issuance of the Series 2018 Bonds, the Series 2012A Bank Bonds, the Series 2015A Bank Bonds and the Series 2018B Bank Bonds together will constitute $80,644,396 in outstanding principal amount of bank-held bonds (the “Bank-held Bonds”) of the Corporation, representing approximately 42.85% of the outstanding principal amount of all of the Corporation’s Outstanding Bonds as of issuance of the Series 2018 Bonds. See “ANNUAL DEBT SERVICE REQUIREMENTS” herein for more information about the Corporation’s outstanding long-term indebtedness.

To the extent the Bank-held Bonds bear interest at a variable rate, or bear interest at a rate that is re-determined periodically, such bonds present the risk that the interest rate on the Bank-held Bonds will increase. Also, to the extent the Bank-held Bonds are subject by their terms to optional or mandatory tender by the holder, such bonds present the risk that the Corporation will not be able to remarket or resell the Bank-held Bonds on the tender date, which could occur as a result of general market conditions or disruptions or a material adverse change in the Corporation’s financial condition. Furthermore, the Corporation may be required to purchase the Bank-held Bonds in the event the bonds cannot be resold or remarketed after being tendered.

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The Bank-held Bonds are privately placed with a bank for specified holding periods, and either bear interest at a variable rate plus a fixed spread or at a fixed rate. The Bank-held Bonds are subject to mandatory tender at the end of the specified holding periods. The Bank-held Bonds are also subject to optional tender by the holders or acceleration upon the occurrence of an “event of default” under the applicable bond indenture. Because certain of the Bank-held Bonds are subject to tender at the ends of the specified holdings periods, the Corporation must periodically extend the existing bank’s holding period or find a replacement bank. To manage bank renewal risk, the Corporation may seek to renew or replace bank purchases as far in advance as reasonable of stated expiration dates or holding periods. No assurance can be given that the Corporation will be able to renew or replace bank purchases on reasonable terms.

If the Bank-held Bonds are tendered and cannot be remarketed and the Corporation has insufficient resources to purchase the Bank-held Bonds, such bonds will bear interest at higher rates and will be subject to being repaid on an accelerated basis until they can be purchased or remarketed. There is no assurance that any Bank-held Bonds will be able to be remarketed or resold after they are tendered by the holder of such Bank-held Bond.

Also, in connection with the Bank-held Bonds, the Corporation has entered into or will enter into Credit Agreements or Continuing Covenants Agreements (the “Bank Agreements”) with BMO Harris Bank N.A. (the “Bank”). If the Corporation breaches any of the covenants in these Bank Agreements, the Bank can declare an event of default, causing acceleration of the Bank-held Bonds and the corresponding Master Notes. The Bank Agreements also contain additional events of default that may be waived or enforced by the Bank and are more restrictive than the Master Indenture and Bond Indenture events of default, including a default in the event the underlying rating assigned to any parity obligations of the Corporation are withdrawn, suspended or fall below “BBB-”, and a cross default under the Bank Agreements in the event of a default in any payment when due of any amount owed on other debt of the Corporation in an aggregate amount in excess of $750,000. The declaration of an event of default under the Bank Agreements will cause acceleration of the Bank-held Bonds and the corresponding Master Notes. Such an acceleration of Bank-held Bonds in an outstanding principal amount greater than $3,000,000 will result in an event of default under the Master Indenture and therefore result in default under the Bond Indenture for the Series 2018A Bonds. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Remedies for Certain Defaults” in APPENDIX E hereto and “SUMMARY OF THE BOND INDENTURE AND LOAN AGREEMENT – Acceleration and Other Remedies” in APPENDIX F hereto.

Additions to Obligated Group; Dilution

The Corporation is currently the sole member of the Obligated Group. Additional members may be added to the Obligated Group at any time provided that certain conditions set forth in the Master Indenture are satisfied. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – The Obligated Group” in APPENDIX E hereto. The accounts of the members of the Obligated Group will be combined for financial reporting purposes, and the combined accounts will be used in determining whether various covenants and financial tests contained in the Master Indenture have been met (including financial tests which must be met as conditions to transactions such as the incurrence of additional debt, the consummation of a merger or the transfer of assets to third parties). It is possible, therefore, that any addition of members to the Obligated Group could weaken the financial condition of the Obligated Group and diminish the financial performance of the Obligated Group to the minimum levels permitted by the Master Indenture. The Corporation currently has no plans to add additional members to the Obligated Group.

Discretion of Board of Directors and Management; Future Plans

The Master Indenture does not significantly restrict the ability of the Obligated Group to enter into transactions which could materially affect the business, organizational structure and control of the members of the Obligated Group. Such transactions could include, for example, such things as major new investments in facilities, new joint ventures, and mergers, consolidations or other forms of affiliations in which control of the Obligated Group could be materially changed. Given the pace of change in the senior living and health care industries, it is likely that the Corporation will be presented with opportunities to enter into transactions of such magnitude or significance. The ability of the Corporation to generate revenues sufficient to pay debt service on the Series 2018A Master Note and other Master Notes outstanding is dependent in large measure on the decisions of the Board of Directors and management of the Corporation with respect to such opportunities.

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The Board of Directors and the management of the Corporation are engaged continuously in evaluations of future alternatives and plans. These activities affect both operational and strategic issues. Many of the alternatives considered from time to time have capital investment requirements which may be the subject of capital financing.

The Board of Directors and the management of the Corporation also expect to be engaged in an ongoing monitoring and evaluation of its organization structure, space utilization, range of services, and potential mergers, acquisitions or affiliation possibilities to fulfill its mission, to improve services and operations, to address revenue and expenditure issues and to adjust to the constantly changing regulatory and economic environment.

Present and Prospective Federal and State Regulation

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

Health Care Reform. The Affordable Care Act has made a significant impact on the entire healthcare industry. Some of the provisions of the Affordable Care Act have taken effect immediately and others will be phased in during a period of time ranging from one to ten years. Because of the complexity of the Affordable Care Act generally, additional legislation is likely to be considered and enacted over time. The Affordable Care Act will also require the promulgation of substantial regulations with significant effects on the health care industry and third-party payors. In response, third-party payors and suppliers and vendors of goods and services to health care providers are expected to impose new and additional contractual terms and conditions. Thus, the health care industry will be subjected to significant new statutory and regulatory requirements and contractual terms and conditions, and consequently to structural and operational changes and challenges, for a substantial period of time.

A significant component of the Affordable Care Act is reformation of the sources and methods by which consumers will pay for health care for themselves and their families and by which employers will procure health insurance for their employees and dependents and, as a consequence, expansion of the base of consumers of health care services. One of the primary drivers of the Affordable Care Act is to provide or make available, or subsidize the premium costs of, health care insurance for some of the millions of currently uninsured (or underinsured) consumers who fall below certain income levels.

The legislation intends to accomplish this objective through various provisions, including: (i) creating active markets (referred to as exchanges) in which individuals and small employers can purchase health care insurance for themselves and their families or their employees and dependents, (ii) providing subsidies for premium costs to individuals and families based upon their income relative to federal poverty levels, (iii) mandating that individuals obtain and certain employers provide a minimum level of health care insurance, and providing for penalties or taxes on individuals and employers that do not comply with these mandates, (iv) establishing insurance reforms that expand coverage generally through such provisions as prohibitions on denials of coverage for pre- existing conditions and elimination of lifetime or annual cost caps, and (v) expanding existing public programs, including Medicaid for individuals and families. It is expected that there will be an increase in demand for health care services given that those who previously did not have access to health care because they could not afford it will now be eligible for health care coverage.

Some of the provisions of the Affordable Care Act that may adversely affect the Corporation’s operations, financial performance or financial conditions are described below. This listing is not, is not intended to be, nor should be considered by the reader as, comprehensive. The Affordable Care Act is complex and comprehensive, and includes a myriad of new programs and initiatives and changes to existing programs, policies, practices and laws. Moreover, the Affordable Care Act remains subject to amendment, repeal, lack of implementation and failure to fund. The demographics of the markets the Corporation serves, the mix of services that it provides to the community and other factors that are unique to the Corporation will affect individual outcomes. At this time, Management of the Corporation cannot predict the aggregate effect of the Affordable Care Act upon the Corporation.

The following provisions of the Affordable Care Act may affect the operations or financial condition of the Corporation: 25

• With varying effective dates, the annual Medicare market basket updates for many providers, including skilled nursing facilities, would be reduced, and adjustments to payment for expected productivity gains would be implemented.

• The Affordable Care Act includes an expansion of Medicaid programs to a broader population with incomes up to 133% of federal poverty levels, subject to state determinations to implement.

• With varying effective dates, the Affordable Care Act mandates a reduction of waste, fraud, and abuse in public programs by allowing provider enrollment screening, enhanced oversight periods for new providers and suppliers, and enrollment moratoria in areas identified as being at elevated risk of fraud in all public programs, and by requiring Medicare and Medicaid program providers and suppliers to establish compliance programs. The legislation requires the development of a database to capture and share healthcare provider data across federal healthcare programs and also provides for increased penalties for fraud and abuse violations, and increased funding for antifraud activities.

• In 2014, an Independent Payment Advisory Board was established to develop proposals to improve the quality of care and limitations on cost increases. Those proposals would be automatically implemented if Congress does not act to invalidate them.

• The Affordable Care Act also provides for the implementation of various demonstration programs and pilot projects to test, evaluate, encourage and expand new payment structures and methodologies to reduce health care expenditures while maintaining or improving quality of care, including bundled payments under Medicare and Medicaid, and comparative effectiveness research programs that compare the clinical effectiveness of medical treatments and develop recommendations concerning practice guidelines and coverage determinations. Other provisions encourage the creation of new health care delivery programs, such as accountable care organizations, or combinations of provider organizations, that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program.

• Through September 30, 2019, payments under the “Medicare Advantage” programs (Medicare managed care) have been and will continue to be restructured, which may result in increased premiums or out-of-pocket costs to Medicare beneficiaries enrolled in Medicare Advantage plans. Those beneficiaries may terminate their participation in those plans and opt for the traditional Medicare fee-for-service program. The reduction in payments to Medicare Advantage programs may also lead to decreased payments to providers by managed care companies operating Medicare Advantage programs. All or any of these outcomes will have a disproportionately negative effect upon those providers with relatively high dependence upon Medicare managed care revenues.

• The Affordable Care Act imposes additional disclosure, transparency, compliance, quality assurance, staffing, and reporting requirements on nursing facilities, and the failure to satisfy some of these requirements can result is significant penalties. For example, failure to report a crime committed against a resident of a long-term care facility within specified timeframes can result in civil monetary penalties and exclusion from federal health care programs.

The last election and changes to proposed White House healthcare policies, in addition to recent proposals in Congress, may result in the repeal of all or portions of the Affordable Care Act. It remains unclear what portions of that legislation may remain, or what any replacement or alternative programs may be created by future legislation.

In May 2017, the U.S. House of Representatives adopted legislation to replace the Affordable Care Act. That legislation featured provisions that would have, in material part (i) eliminated the individual and

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large employer mandates to obtain or provide health insurance coverage, respectively; (ii) permitted insurers to impose a surcharge up to 30 percent on individuals who go uninsured for more than two months and then purchase coverage; (iii) provided tax credits towards the purchase of health insurance, with a phase-out of tax credits according to income level; (iv) expand health savings accounts; (v) imposed a per capita cap on federal funding of state Medicaid programs, or, if elected by a state, transition federal funding to a block grant; and (vi) permitted states to seek a waiver of certain federal requirements that would allow such states to define essential health benefits differently from federal standards and that would allow certain commercial health plans to take health status, including pre-existing conditions, into account in setting premiums.

A May 2017 Congressional Budget Office (“CBO”) report estimates that repealing certain portions of the Affordable Care Act (including the individual mandate), while leaving the insurance exchange market in place, would (1) increase the number of uninsured by 14 million in the first year and 51 million by 2026, and (2) increase insurance premiums by 20-25 percent in the first year. To the extent the Affordable Care Act is not repealed, any increased utilization resulting from the law will also increase the variable and fixed costs of providing health care services, which may or may not be offset by increased revenues.

The legislation proceeded to the U.S. Senate, but Congress has not passed legislation corresponding to the House of Representatives bill to date. If the provisions of the proposed legislation are ultimately implemented along with other proposed amendments to the Affordable Care Act, there can be no assurance that any such legislation will not materially adversely affect the Corporation, which material effects may include a potential decrease in the market for health care services or a decrease in the Corporation’s ability to receive reimbursement for health care services provided.

In addition to legislative changes, Affordable Care Act implementation and the Affordable Care Act insurance exchange markets can be significantly impacted by executive branch actions. On January 20, 2017, President Trump issued an executive order requiring all federal agencies with authorities and responsibilities under the Affordable Care Act to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay” parts of the Affordable Care Act that place “unwarranted economic and regulatory burdens” on states, individuals or health care providers.

On October 11, 2017 the President signed an executive order directing the formation of association health plans that would be exempt from certain Affordable Care Act requirements such as the essential health benefits mandate. The executive order also: (i) provides for expanded access to short-term health plans that are limited under the Affordable Care Act; (ii) seeks to expand how workers use employer-funded accounts to purchase their own policies; and (iii) calls for an analysis of ways to limit consolidation within the insurance and health care industries.

Additionally, on October 12, 2017, President Trump announced that cost-sharing reduction payments will no longer be made to insurers. Cost sharing reduction payments help offset deductibles and other out- of-pocket expenses for exchange health insurance coverage for approximately seven million individuals earning up to 250 percent of the federal poverty level. The CBO previously reported that if cost sharing reduction payments were to end, premiums for silver-level plans would increase by 20 percent in 2018. Congress is currently evaluating proposals intended to continue cost sharing reduction payments, but no such legislation has been passed to date.

Tax legislation signed into law in December 2017 removes the tax penalties associated with failing to obtain health insurance under the Affordable Care Act individual health insurance mandate, which may have significant impact on the reimbursement for healthcare services generally, and may create reimbursement for services competing with the services offered by the Corporation. The CBO has indicated that the repeal would represent a reduction of 13 million individuals with health insurance by the end of 2026.

These recent actions have the potential to significantly impact the insurance exchange market by reducing the number of plans available on exchanges and/or increasing insurance premiums. The Corporation cannot predict the effect of any such executive actions on its operations or financial condition, though such effects could be material. Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a negative financial impact on the Corporation, including the Corporation’s ability to compete with alternative healthcare services, or to receive payment for the Corporation’s services.

Management of the Corporation is analyzing the Affordable Care Act and will continue to do so in order to assess the effects of the legislation on current and projected operations, financial performance and financial

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condition. However, management cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the legislation.

Affordable Care Act provisions relating to skilled nursing facilities include requirements that facilities (i) make certain disclosures regarding ownership; (ii) implement compliance and ethics programs; and (iii) make certain disclosures regarding expenditures for wages and benefits for direct care staff. In addition, the Affordable Care Act may affect skilled nursing facilities reimbursement through the creation of value-based purchasing payment and post-acute care payment bundling programs and may place limitations on skilled nursing facilities payments for health care acquired conditions. Investors are encouraged to review legislative, legal, and regulatory developments as they occur and to assess the elements and potential effects of the health care reform initiative as it evolves.

Certain Matters Relating to the Master Mortgage and to the Security Interest in Master Trust Estate

Residents of the Corporation’s facilities may have certain equitable rights of occupancy which would survive a foreclosure action under the Master Mortgage.

The effectiveness of the security interest in Master Trust Estate granted pursuant to the Master Indenture may be limited by a number of factors, including: (i) provisions prohibiting the direct payment of amounts due to providers from Medicaid and Medicare programs to persons other than such providers; (ii) the absence of an express provision permitting assignment of receivables due under the contracts with third party payors, and present or future prohibitions against assignment contained in any applicable statutes or regulations; (iii) certain judicial decisions which cast doubt upon the right of the Master Trustee, in the event of the bankruptcy of a member of the Obligated Group, to collect and retain Master Trust Estate due such member from Medicare, Medicaid, general assistance and other governmental programs; (iv) commingling of Master Trust Estate with other moneys of the Obligated Group not so pledged under the Master Indenture; (v) statutory liens; (vi) rights arising in favor of the United States of America or any agency thereof; (vii) the rights of residents and prospective residents in entrance fees paid to members of the Obligated Group; (viii) constructive trusts, equitable or other rights impressed or conferred by a federal or state court in the exercise of its equitable jurisdiction; (ix) federal bankruptcy laws which may affect the enforceability of the security interest in the Master Trust Estate of any member of the Obligated Group which are earned by such member within 90 days preceding or, in certain circumstances with respect to related corporations, within one year preceding and after any effectual institution of bankruptcy proceedings by or against such member; (x) rights of third parties in Master Trust Estate converted to cash and not in the possession of the Master Trustee; and (xi) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Wisconsin Uniform Commercial Code as from time to time in effect.

The Corporation’s existing facilities have been specifically designed to serve the needs of the elderly and are not generally suitable for alternative uses. As a result, in the event of default by the Corporation, the Master Trustee’s remedies and the number of entities which could operate the facilities may be limited, and the revenues therefrom might thus be affected. In particular, in the event of foreclosure, the proceeds of a sale of the Mortgaged Property of the Corporation may be less than that obtainable if the sale were not forced and, in any event, may not be sufficient to pay the Series 2018A Bonds in full. In connection with the issuance of the Series 2018A Bonds, there has not been a comprehensive appraisal of the real estate, buildings and equipment subject to the lien and security of the Master Mortgage. No assurances can be made whether the value of such collateral at the time of a foreclosure equals or exceeds the aggregate indebtedness evidenced or to be evidenced by Master Notes.

The Master Indenture provides that the Master Trustee’s security interest in the accounts receivable of the Corporation, which are included in Master Trust Estate, may under certain circumstances become subordinate to a security interest in such accounts receivable granted to other creditors of the Corporation. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE” in APPENDIX E attached hereto.

Certain Matters Relating to the Enforceability of the Master Indenture

The enforceability of the obligations of the Corporation and any future members of the Obligated Group will be limited by bankruptcy, insolvency and other laws of general application and by the application of general principles of creditors’ rights and as additionally described below.

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The guarantee of the Series 2018A Master Note is to be a joint and several obligation of the Corporation and any future members of the Obligated Group and may not be enforceable against members of the Obligated Group other than the Corporation (i) if the purposes for which the Series 2018A Master Note was issued is not consistent with the charitable purposes of such member of the Obligated Group from which such payment is requested or if, at the time of payment thereunder by such other member, the Corporation is not then a tax-exempt organization, (ii) if such payments are requested to be made from any moneys or assets which are donor restricted or which are subject to a direct or express trust which does not permit the use of such moneys or assets for such a payment, (iii) if such payments would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by such member of the Obligated Group, or (iv) if such payments are requested to be made pursuant to any loan violating applicable usury laws. The extent to which the assets of any member of the Obligated Group fall within the category referred to in clause (ii) above cannot now be determined. The amount of such assets which fall within such category could be substantial.

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

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

The Master Mortgage

The Corporation has executed the Master Mortgage pursuant to which the Mortgaged Property has been granted as security for its obligations pursuant to the Master Indenture. In the event that there is a default under the Master Indenture, the Master Trustee has the right to foreclose on the Mortgaged Property under certain circumstances.

All amounts collected upon foreclosure of the Mortgaged Property pursuant to the Master Mortgage will be used to pay certain costs and expenses incurred by, or otherwise related to, the foreclosure, the performance of the Master Trustee and/or the beneficiary under the Master Mortgage, and then to pay amounts owing under the Master Indenture in accordance with the provisions of the Master Indenture. All such moneys shall be applied to the payment of the principal, premium, if any, and interest then due and unpaid upon the Master Notes without preference or priority of principal, premium or interest over the others, or of any installment of interest over any other installment of interest, or of any Master Note over any other Master Note, ratably, according to the amounts due respectively for principal, premium, if any, and interest to the persons entitled thereto without any discrimination or privilege, pursuant to the Master Indenture.

In the event that the Master Mortgage is actually foreclosed, then, in addition to the customary costs and expenses of operating and maintaining the Mortgaged Property, the party or parties succeeding to the interest of the Corporation in the Mortgaged Property (including the Master Trustee, if such party was to acquire the interest of the Corporation in the Mortgaged Property) 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 continued use and occupancy of the Mortgaged Property such as the Americans with Disabilities Act; and costs associated with the potential reconstruction or repair of the Mortgaged Property in the event of any casualty or condemnation.

Any valuation of the Mortgaged 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 Mortgaged Property will at all times be dependent upon many factors beyond the control of the Corporation, such as 29

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 Property. Any weakened market condition may also depress the value of the Mortgaged Property. Any reduction in the market value of the Mortgaged Property could adversely affect the security available to the owners of the Series 2018A Bonds and any other debt secured by Master Notes. There is no assurance that the amount available upon foreclosure after the payment of foreclosure costs will be sufficient to pay the amounts owing by the Corporation on the Series 2018A Master Note.

In the event of foreclosure, a prospective purchaser of the Mortgaged Property may assign less value to the Mortgaged Property than the value of the Mortgaged Property while owned by the Corporation since such purchaser may not enjoy the favorable financing rates associated with the Series 2018A Bonds and other benefits. To the extent that buyers whose income is not tax-exempt may be willing to pay less for the Mortgaged Property than nonprofit buyers, then the resale of the Mortgaged Property after foreclosure may require more time to solicit nonprofit buyers interested in assuming the financing now applicable to the Mortgaged Property. In addition, there can be no assurance that the Mortgaged Property could be sold at 100% of its fair market value in the event of foreclosure. Although the Master Trustee will have available the remedy of foreclosure of the Master Mortgage upon the occurrence and continuance of an Event of 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 the Corporation’s bankruptcy), there are substantial risks that the exercise of such a remedy will not result in recovery of sufficient funds to satisfy all the Corporation’s obligations.

Foreclosure Rights and Enforceability Under Wisconsin Law

Wisconsin law only allows judicial foreclosures, meaning that all foreclosures require filing of a civil lawsuit. Such judicial foreclosures are governed by Wisconsin Statutes Chapter 846. A foreclosure in most respects is procedurally identical (until the end of the process when one arrives at the sheriff's sale and a judicial confirmation of that sale) to all other civil lawsuits. The creditor files a complaint alleging one or more breaches of the loan or security documents. Wisconsin follows a “first in time” filing rule. The first party to record a mortgage can foreclose all other interests in the real estate which were recorded or arose later. For example, a lender wishing to protect a mortgage recorded second in time would have to pay off the first mortgage to obtain clear title. Otherwise, the second filed mortgage will be terminated by the foreclosure. A creditor should name all parties having an interest in the subject property, in addition to the borrower/mortgagor, as defendants in the suit, whether they are junior mortgagees, tenants, service providers, etc. if the creditor wishes to foreclose their interests. If they are not named, their interest in the property may not affected by the foreclosure judgment.

All defendants have 20 days from the date of service of the complaint to respond. The issue then becomes whether the borrower will fail to answer, will file a response which is susceptible to a summary judgment motion, meaning no trial is needed, or whether a defense will be asserted. Assuming the mortgagor is eventually able to obtain a judgment, the result will be that all interests in the property (with the exception of certain statutorily enumerated interests, like real estate taxes) recorded after the first mortgage are extinguished. The mortgagor of a commercial property is entitled to a 6-month redemption period. This means the borrower has 6 months to refinance or otherwise pay off the lender in full. The redemption period commences when the judgment is entered with the Clerk of Courts. The redemption period can be reduced to 3 months if, in the complaint, the plaintiff waives its right to a deficiency. A deficiency is any amount still owed the lender after the property is sold at auction to the highest bidder. Before the redemption period draws to a close, the mortgagor schedules a sheriff's sale with the sheriff's department of the county in which the real estate is located. The mortgagor generally will also order an update of the title through the date of the filing of the Lis Pendens, which is a notice that a lawsuit involving the real estate has been filed in court and is pending. All claimants filing or recording encumbrances after the filing of the Lis Pendens are presumed to be subject to the foreclosure. However, occasionally the updated title will reveal additional parties who need to be made defendants. Finally, the mortgagor must publish notice of the sale. The sheriff's sale is an auction open to the public and anyone can bid. The property goes to the highest bidder. A judge must later confirm that the bid amount is fair. Bids get closer scrutiny if a deficiency is sought, but an appraisal or “Broker's Price Letter” which supports a deficiency is generally not seriously challenged. If the sale is confirmed, the high bidder receives the Sheriff's Deed to the property.

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Licensing and Regulation

The facilities of the Corporation are subject to regulation, and in some cases licensure, by federal, state and local and other regulatory bodies and accrediting agencies created to oversee planning, development and operation of senior living, continuing care and skilled nursing facilities. In certain instances, failure to comply with the regulations and guidelines promulgated by such bodies or agencies could result in penalties, including loss of licenses, approvals, accreditation or eligibility for third party reimbursement programs, including Medicare and Medicaid. See “EXISTING CONTINUING CARE FACILITIES – Licensing and Regulations” in APPENDIX A hereto.

Medicare and Medicaid Programs

For its fiscal year ended December 31, 2017, 4.8% and 2.0%, of the net resident service revenues of the Corporation were derived from payments under the Medicare Program and the Medicaid Program, respectively.

Medicare provides certain health care benefits to beneficiaries who are 65 years of age or older, blind, disabled, or qualify for the end stage renal disease program. Medicaid, administered in Wisconsin by the Wisconsin Department of Health and Family Services (“DHS”), is a program of financial assistance, funded jointly by the federal government and each of the various states, primarily for medical assistance to certain needy individuals and their dependents. Due to health care reform as well as continuing political and financial pressures, the legal and regulatory environment surrounding the Medicaid and Medicare programs has been changing and is expected to continue to change. Future changes to Medicare and Medicaid may alter features including: (1) services eligible for payment; (2) rates of payment; (3) eligibility requirements to participate or qualify for different levels of payment/reimbursement; (4) consequences of violations; (5) rates and requirements relating to additional payments unrelated to services offered to patients; (6) guidelines relating to interactions between the participating healthcare providers, third party payors and the federal and state governments; and (7) payment methodologies.

Government revenue sources, such as Medicare and Medicaid, are subject to change due to legislative changes, statutory and regulatory interpretations, determinations by fiscal intermediaries and carriers, and government funding restrictions, all of which may materially increase or decrease the rate of government payments to nursing facilities. There is no assurance that government payments under the Medicare and Medicaid programs will in the future remain at levels comparable to the present levels or be sufficient at the present, or in the future, to cover all the operating and fixed costs allocable to Medicare and Medicaid patients. In view of government budgetary pressures, the trend has been to reduce the levels of Medicare and Medicaid reimbursement to nursing home facilities. The impact of future reductions in government funding on revenues to be derived by the Corporation is uncertain for the additional reason that the allocation of Medicaid funds among segments of the Wisconsin Medicaid program, of which nursing home facilities are only a part, is determined at the state level. It can be expected that some reduction in revenue to the Corporation would occur if Medicaid funding were reduced.

Fiscal year 2018 skilled nursing facility (“SNF”) prospective payment rates reflect a 1.0% adjustment based on market basket index. As a result, the Centers for Medicare and Medicaid Services (“CMS”) will increase SNF prospective payment rates by 1.0% in fiscal year 2018. However, it is unclear what effect these provisions will have on the Corporation’s Medicare reimbursement beyond the 2018 fiscal year at this time. A Medicare SNF value-based purchasing program, starting in fiscal year 2019, will pay participating skilled nursing facilities for their services based on the quality of care, not just quantity of the services they provide in a given performance period.

Medicare and Medicaid Anti-Fraud and Abuse Provisions

The Medicare and Medicaid anti-fraud and abuse provisions of the Social Security Act (the “Anti- Kickback Law”) make it a felony, subject to certain exceptions, to engage in illegal remuneration arrangements with physicians and other health care providers for the referral of Medicare beneficiaries or Medicaid recipients. Violation of these provisions constitutes a felony and may result in imprisonment for up to five years and fines of up to $25,000. In addition, the U.S. Department of Health and Human Services (“HHS”) has the authority to impose civil assessments and fines, and may exclude providers engaged in prohibited activities from participation in the Medicare and Medicaid programs, as well as certain other state and federal health care programs. The Secretary of HHS is required to exclude from such programs any providers convicted of a criminal offense relating to the

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delivery of Medicare or Medicaid services, for not less than five years. Exclusion from these programs could have a material adverse effect on the operations and financial condition of the Corporation. The scope of prohibited payments in the Anti-Kickback Law is broad. HHS has published regulations which describe certain arrangements that will not be deemed to constitute violations of the Anti-Kickback Law. The safe harbors described in the regulations are narrow and do not cover a wide range of economic relationships which many hospitals, physicians and other health care providers consider to be legitimate business arrangements not prohibited by the statute. Because the regulations describe safe harbors and do not purport to describe comprehensively all lawful or unlawful economic arrangements or other relationships between health care providers and referral sources, health care providers having these arrangements or relationships may be required to alter them in order to ensure compliance with the Anti-Kickback Law.

In light of the narrowness of the safe harbor regulations and the scarcity of case law interpreting the Anti-Kickback Law, there can be no assurances that the Corporation will not be found to have violated the Anti- Kickback Law, and, if so, whether any sanction imposed could have a material adverse effect on the operations of facilities owned by the Corporation.

Restrictions on Referrals. Current federal law (known as the “Stark” law provisions) prohibits providers of “designated health services” from billing Medicare or Medicaid when the patient is referred by a physician or an immediate family member with a financial relationship with the designated health services provider, with limited exceptions. “Designated health services” include the following: clinical laboratory services; physical therapy services; occupational therapy services; radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and services; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. The sanctions under the Stark law include denial and refund of payments, civil monetary penalties and exclusion from the Medicare and Medicaid programs.

In light of the scarcity of case law interpreting the Stark law provisions, there can be no assurances that the Corporation will not be found to have violated the Stark law provisions, and if so, whether any sanction imposed would have an adverse effect on the operations or the financial condition of the Corporation.

False Claims Act/Qui Tam Actions. Medicare requires that extensive financial information be reported on a periodic basis and in a specific format or content. These requirements are numerous, technical and complex and may not be fully understood or implemented by billing or reporting personnel. With respect to certain types of required information, the False Claims Act and the Social Security Act may be violated by mere negligence or recklessness in the submission of information to the government even without any specific intent to defraud. New billing systems, new medical procedures and procedures for which there is not clear guidance may all result in liability. The penalties for violation include criminal or civil liability and may include, for serious or repeated violations, exclusion from participation in the Medicare program. While management believes that the Corporation’s billing practices will be consistent with Medicare criteria, those criteria are often vague and subject to interpretation and there can be no assurance that aggressive anti-fraud actions will not adversely affect the business of the Corporation.

The False Claims Act provides that an individual may bring a civil action referred to as a Qui Tam action which effectively allows an employee to be able to sue on behalf of the U.S. government if the employee believes that the healthcare entity has committed fraud. If the government proceeds with an action brought by this individual, then the employee could receive as much as 25 percent of any money recovered.

Tax-Exempt Status

Tax-Exempt Status of Interest on the Series 2018A Bonds. The Internal Revenue Code of 1986, as amended (the “Code”), imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Series 2018A Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds, limitations on the investment earnings of bond proceeds prior to expenditure, a requirement that certain investment earnings on bond proceeds be paid periodically to the United States, and a requirement that the issuers file an information report with the IRS. The Corporation has agreed that it will comply with such requirements. Failure to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of the interest on the Series 2018A Bonds as taxable. Such adverse treatment may be retroactive to the date of issuance. See also “TAX EXEMPTION” below. 32

Neither the Authority nor the Corporation has sought to obtain a private letter ruling from the IRS with respect to the Series 2018A Bonds, and the opinion of Quarles & Brady LLP is not binding on the IRS. There is no assurance that any IRS examination of the Series 2018A Bonds will not adversely affect the market for or market value of the Series 2018A Bonds during the pendency of such examination. See “TAX EXEMPTION” below.

Tax-Exempt Status of the Corporation. The tax-exempt status of the Series 2018A Bonds currently depends upon maintenance by the Corporation of its status as an organization described in Section 501(c)(3) of the Code. The maintenance of this status depends on compliance by the Corporation with general rules regarding the organization and operation of tax-exempt entities, including their operation for charitable purposes and their avoidance of transactions that may cause their earnings or assets to inure to the benefit of private individuals, such as the private benefit and inurement rules.

Tax-exempt organizations are subject to scrutiny from and face the potential for sanction and monetary penalties imposed by the IRS. One primary penalty available to the IRS under the Code with respect to a tax-exempt entity engaged in inurement or impermissible private benefit is the revocation of tax-exempt status. Loss of tax-exempt status by the Corporation could result in loss of tax exemption of the Series 2018A Bonds, and defaults in covenants regarding the Series 2018A Bonds and other obligations would likely be triggered. Loss of tax-exempt status by the Corporation also could result in substantial tax liabilities on its income. For these reasons, loss of tax-exempt status of the Corporation could have material adverse consequences on the financial condition of the Corporation.

The IRS Form 990 is used by most 501(c)(3) not-for-profit organizations exempt from federal income taxation to submit information required by the federal government. The IRS Form 990 requires detailed public disclosure of compensation practices, corporate government, loans to executive management and others, joint ventures and other types of transactions, political campaign activities, and other areas the IRS deems to be compliance risk areas. The form also requires reporting of information relating to tax-exempt bonds, including compliance with the arbitrage rules and rules limiting private use of bond-financed facilities, including compliance with the safe harbor guidance in connection with management contracts. This detailed information, available to the IRS as well as states’ attorneys general, unions, plaintiff class action lawyers and public interest groups, could result in increased enforcement actions, the effect of which cannot be determined at this time.

With increasing frequency, the IRS has imposed substantial monetary penalties and public benefit obligations on tax-exempt organizations in lieu of revoking tax-exempt status, as well as requiring that certain transactions be altered, terminated or avoided in the future and/or requiring governance or management changes. These penalties and obligations typically are imposed on the tax-exempt organization pursuant to a “closing agreement,” a contractual agreement pursuant to which a taxpayer and the IRS agree to settle a disputed matter. The Corporation may be at risk for incurring monetary and other liabilities imposed by the IRS. These liabilities could be materially adverse.

Less onerous sanctions, referred to generally as “intermediate sanctions”, have been enacted, which sanctions focus enforcement on private persons who transact business with a tax-exempt organization rather than the tax-exempt organization itself, but these sanctions do not replace the other remedies available to the IRS described above. See “– Other Federal Tax Matters – Intermediate Sanctions” herein.

The Corporation may be audited by the IRS. Because of the complexity of the tax laws and the presence of issues about which reasonable persons can differ, an IRS audit could result in additional taxes, interest and penalties. An IRS audit ultimately could affect the tax-exempt status of the Corporation, as well as the exclusion from gross income for federal income tax purposes of the interest on the Series 2018A Bonds and any other tax-exempt debt issued for the Corporation. See “– Other Federal Tax Matters – Bond Audit” herein.

Unrelated Business Income

The IRS and state, county and local taxing authorities may undertake audits and reviews of the operations of tax-exempt organizations with respect to the generation of unrelated business taxable income (“UBTI”). The Corporation participates in activities that may generate UBTI. The level of these activities is currently immaterial to the Corporation, but these activities could increase in the future. An investigation or audit could lead to a challenge that could result in taxes, interest and penalties with respect to UBTI and, in some cases, ultimately could affect the tax-exempt status of the Corporation, as well as the exclusion from gross income for

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federal income tax purposes of the interest payable on the Series 2018A Bonds and other tax-exempt debt issued for the Corporation.

Other Federal Tax Matters

Possible Changes in Corporation’s Tax Status. The possible modification or repeal of certain existing federal income or state tax laws or other loss by the Corporation of the present advantages of certain provisions of the federal income or state tax laws could materially and adversely affect the status of the Corporation and thereby the revenues of the Corporation. The Corporation has obtained a determination letter from the IRS to the effect that the Corporation is exempt from federal income taxation under Section 501(a) of the Code by virtue of being an organization described in Section 501(c)(3) of the Code. As such, the Corporation is subject to a number of requirements affecting its operations. The Feasibility Study prepared for management of the Corporation includes an assumption that the Corporation will continue to be treated as an organization described in Section 501(c)(3) of the Code. The failure of the Corporation to remain qualified as an exempt organization would affect the funds available to the Corporation for payments to be made under the Loan Agreement. Failure of the Corporation or the Authority to comply with certain requirements of the Code, or adoption of amendments to the Code to restrict the use of tax-exempt bonds for facilities such as those being financed with Series 2018A Bonds proceeds, could cause interest on the Series 2018A Bonds to be included in the gross income of Owners of the Series 2018A Bonds or former Owners of the Series 2018A Bonds for federal income tax purposes.

It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of charitable organizations. There can be, however, no assurance that future changes in the laws and regulations of the federal, state or local governments will not materially and adversely affect the operations and revenues of the Corporation by requiring it to pay income taxes.

Intermediate Sanctions. The Taxpayers Bill of Rights 2 (the “Taxpayers Act”), enacted by Congress in 1996, provides the IRS with an “intermediate” tax enforcement tool to combat violation by tax-exempt organizations of the private inurement prohibition of the Code. Previous to the “intermediate sanctions law”, the IRS could punish such violations only through revocation of an entity’s tax-exempt status. Intermediate sanctions may be imposed where there is an “excess benefit transaction” defined to include a disqualified person (i.e., a director, officer or other related party) (1) engaging in a non-fair market value transaction with the tax-exempt organization; (2) receiving excessive compensation from the tax-exempt organization; or (3) receiving payment in an arrangement that violates the private inurement proscription. A disqualified person who benefits from an excess benefit transaction will be subject to a “first tier” penalty excise tax equal to 25% of the amount of the excess benefit. Organizational managers who participate in an excess benefit transaction knowing it to be improper are subject to a first-tier penalty excise tax of 10% of the amount of the excess benefit, subject to a maximum penalty of $20,000. A “second tier” penalty excise tax of 200% of the amount of the excess benefit may be imposed on the disqualified person (but not organizational manager) if the excess benefit transaction is not corrected in a specified time period.

Bond Audit. The IRS has an ongoing program auditing tax-exempt obligations to determine whether, in the view of the IRS, interest on such tax-exempt obligation is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether the IRS will commence an audit of the Series 2018A Bonds. If an audit is commenced, under current procedures the IRS will treat the Authority as the taxpayer, and the Series 2018A Bond owners may have no right to participate in such procedure. Neither the Authority, the Underwriter nor Bond Counsel is obligated to defend the tax-exempt status of the Series 2018A Bonds. The Authority has covenanted in the Indenture not to take any action that would cause the interest on the Series 2018A Bonds to become includable in gross income except to the extent described above for the owners thereof for federal income tax purposes. None of the Authority, the Underwriter, or Bond Counsel is responsible to pay or reimburse the costs of any Series 2018A Bond owner with respect to any audit or litigation relating to the Series 2018A Bonds.

Schedule K to Form 990 is intended to address what the IRS believes is significant noncompliance by tax-exempt organizations with recordkeeping and record retention requirements relating to their outstanding tax- exempt bonds. Schedule K requires substantial additional efforts on the part of many tax-exempt organizations to complete. Schedule K also focuses on the investment of bond proceeds that could violate the arbitrage rebate requirements and on the private use of bond-financed facilities. These reporting requirements may increase the potential for sanctions and monetary penalties imposed by the IRS.

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Other Tax Status Issues. The IRS has also issued Revenue Rulings dealing specifically with the manner in which a facility providing residential services to the elderly must operate in order to maintain its exemption under Section 501(c)(3). Revenue Rulings 61-72 and 72-124 hold that, if otherwise qualified, a facility providing residential services to the elderly is exempt under Section 501(c)(3) if the organization (1) is dedicated to providing, and in fact provides or otherwise makes available services for, care and housing to aged individuals who otherwise would be unable to provide for themselves without hardship, (2) to the extent of its financial ability, renders services to all or a reasonable proportion of its residents at substantially below actual cost, and (3) renders services that minister to the needs of the elderly and relieve hardship or distress. Revenue Ruling 79-18 holds that a facility providing residential services to the elderly may admit only those tenants who are able to pay full rental charges, provided that those charges are set at a level that is within the financial reach of a significant segment of the community’s elderly persons, and that the organization is committed by established policy to maintaining persons as residents, even if they become unable to pay the monthly charges after being admitted to the facility.

Federal Income Tax Matters; Changes in or Application of Tax Laws

As described under “TAX EXEMPTION,” the issuance of the Series 2018A Bonds is subject to the delivery of Bond Counsel’s opinion to the effect that on the date of such delivery, assuming continuous compliance with certain covenants, interest on the Series 2018A Bonds will be excludable from gross income for federal income tax purposes under existing law and interest on the Series 2018A Bonds will not be subject to the alternative minimum tax on individuals. The Corporation cannot predict whether or to what extent Congress, the Treasury Department, the IRS or courts of competent jurisdiction may, following the issuance of the Series 2018A Bonds, enact new laws, or amend, change, or reinterpret existing laws, in a manner that could impact the Series 2018A Bonds. Although, with respect to tax-exempt obligations, such changes in the past have generally been accorded prospective application only and, as such, have not been applicable to outstanding indebtedness, there can be no assurance that changes with retroactive effect may not be enacted.

Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Series 2018A Bonds. For example, legislation recently enacted into law significantly changed the income tax rates for individuals and corporations and repealed the corporate alternative minimum tax for tax years beginning after December 31, 2017. Prospective purchasers of the Series 2018A Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law.

Property Taxes

Although the facilities currently owned by the Corporation are currently exempt from property taxation, local property tax assessors in Wisconsin have taken differing positions as to whether or not certain residential facilities such as those owned by the Corporation are exempt from property taxation. Moreover, budgetary pressures on local government may lead to increasing pressures for state legislation to amend the property tax statutes to subject to taxation various properties owned by nonprofit organizations or to condition exemption from taxation upon the performance of specific types or level or charitable activity. There can be no assurance as to whether the properties of the Corporation will be exempt from property taxation.

Employees

The Corporation employs a complex mix of professional, technical, clerical, housekeeping, maintenance, dietary and other employee skill levels. Although the Corporation considers its relationship with its employees as satisfactory, it bears a wide variety of risks with respect to its employees. These risks include strikes and other related work actions, contract disputes, discrimination claims, personal tort actions, work-related injuries, exposure to hazardous materials, interpersonal torts (such as between employees, between management and employees, or between employees and residents), and other risks that may flow from the relationships between employer and employee or between management, residents and employees. Certain of these risks are not covered by insurance, and certain of them cannot be anticipated or prevented in advance. Such risks, alone or in combination, could have adverse consequences to the financial condition or operations of the Corporation.

Nursing Shortage

The healthcare industry has experienced a shortage of nursing and other technical staff in recent years, which has resulted in increased costs and lost revenues due to the need to hire agency nursing personnel at higher rates, increased compensation levels, and the inability to use otherwise available beds as a result of staffing

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shortages. If the shortage continues, it could adversely affect the operations or financial condition of the Corporation.

Patient Records and Patient Confidentiality

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) requires certain entities and providers to protect the privacy and security of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted under the provisions of the HIPAA statute and regulations or authorized by the patient and a variety of safeguards must be used to protect against privacy or security breaches. HIPAA’s confidentiality provisions extend not only to patient medical records, but also to a wide variety of health care clinical and financial settings where patient privacy restrictions often impose new communication, operational, accounting and billing restrictions. These requirements add costs and potentially create unanticipated sources of legal liability.

HIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable health information. The penalties range up to $1.65 million for identical violations in a calendar year and/or imprisonment if the information was obtained or used with the intent to sell, transfer or use the information for commercial advantage, personal gain or malicious harm.

Violations of HIPAA, or of comparable state privacy and security laws, may result in significant costs, liability and reputational harm. The Corporation implemented policies and procedures designed to comply with HIPAA, but there can be no guaranty that violations will not occur or that any such violation would not have a material adverse effect.

The HITECH Act

Title XIII of the American Recovery and Reinvestment Act of 2009, otherwise known as the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”) expands the scope and application of the administrative simplification provisions of HIPAA, and its implementing regulation, by (i) imposing a written notice obligation upon covered entities for security breaches involving “unsecured” protected health information, (ii) expanding the scope of a provider’s electronic health record disclosure tracking obligations, (iii) substantially limiting the ability of health care providers to sell protected health information without patient authorization, (iv) increasing penalties for violations, and (v) providing for enforcement of violations by State attorneys general. The obligations imposed by the HITECH Act could have an adverse effect on the financial condition of the Corporation.

Environmental Matters

The Corporation is subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations. In its role as owner and operator of properties or facilities, the Corporation may be subject to liability for investigating and remedying any hazardous substances that have come to be located on its properties, even if it was not responsible for the contamination and even if such substances may have migrated off of its properties. There can be no assurance that the Corporation will not encounter environmental risks in the future, and such risks may result in material adverse consequences to its operations or financial condition. In addition, the Master Trustee may decline to enforce the Master Indenture, including enforcement of a judgment, if the Master Trustee has not been indemnified to its satisfaction, in accordance with the Master Indenture, for all liabilities it may incur as a consequence thereof. Such liabilities may include, but are not limited to, costs associated with complying with environmental laws and regulations.

Amendments to the Documents

Certain amendments to the Bond Indenture, the Loan Agreement and the Master Indenture may be made without the consent of the owners of the Series 2018A Bonds and other amendments may be made with the consent of the owners of a majority in an aggregate principal amount of all outstanding Series 2018A Bonds. Such amendments could affect the security for the Series 2018A Bonds. See “SUMMARY OF THE MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE – Supplements and Amendments” in APPENDIX E hereto. See also “SUMMARY OF THE BOND INDENTURE AND LOAN AGREEMENT” in APPENDIX F hereto.

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Potential Effects of Bankruptcy

If the Corporation or any future member of the Obligated Group were to file a petition for relief (or if a petition were filed against the Corporation or any future member of the Obligated Group) under the Federal Bankruptcy Code, the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Corporation or any such member of the Obligated Group, and its property. If the bankruptcy court so ordered the Corporation or any future member of the Obligated Group’s property, including its accounts receivable, could be used for the benefit of the Corporation or any future member of the Obligated Group despite the claims of its creditors. Amounts received by Bondholders with respect to the payment of principal of and interest on the Series 2018A Bonds during an applicable preference period could be required to be disgorged by the Bondholders to a bankruptcy trustee.

In a bankruptcy proceeding, the Corporation or any future Obligated Group could file a plan for the adjustment of its debts which modifies the rights of creditors generally, or the rights of any class of creditors, secured or unsecured. The plan, when confirmed by the court, would bind all creditors who had notice or knowledge of the plan and discharge all claims against the debtor provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two- thirds in dollar amount and more than one-half in number of the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly.

Other Risk Factors

In the future, the following factors, among others, may adversely affect the operations or financial performance of the Corporation to an extent that cannot be determined at this time:

1. Adoption of legislation that would establish rate setting agencies with statutory control over nursing homes may adversely affect the Corporation’s revenues.

2. Cost and availability of any insurance, such as malpractice, fire, automobile and general comprehensive liability, that senior care facilities of a similar size and type generally carry.

3. Cost increases without corresponding increases in revenue could result from, among other factors, increases in the salaries, wages and fringe benefits of employees, increases in costs associated with inflation and future legislation which would prevent or limit the ability of the Corporation to increase revenues from operating its physical plant.

4. A decline in the population, a change in the age composition of the population or a decline in the economic conditions of the market areas of the Corporation.

5. The cost and availability of energy which could, among other things, affect the cost of utilities of the Corporation’s facilities.

6. Any increase in the quantity of indigent care provided which is mandated by law or required due to increased needs of the community in order to maintain the charitable status of the Corporation.

7. The diminution of patients’ or residents’ assets or insurance coverage with the result that the patients’ charges are reimbursed from government reimbursement programs rather than private payments.

8. The occurrence of natural disasters which may damage the facilities of the Corporation, interrupt utility service to the facilities, or otherwise impair the operation and generation of revenues from said facilities.

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9. The cost and effect of any future unionization of the Corporation’s employees is not ascertainable at present.

10. The possible inability to obtain future governmental approvals to undertake projects necessary to be competitive both as to rates as well as quality and scope of care could adversely affect the operations of the Corporation.

11. Proposals to eliminate the tax-exempt status of bonds issued to finance nursing home and elderly care facilities, or to limit the use of such tax-exempt bonds, have been made in the past, and may be made again in the future. The adoption of such proposals would increase the interest cost to the Corporation of financing future capital needs.

12. Changes in law or revenue rulings governing the tax-exempt status of charitable corporations requiring tax-exempt organizations, as a condition of maintaining their tax-exempt status, to provide specific levels of indigent care at reduced rates or without charge.

LITIGATION

Authority

There is not now pending nor, to the knowledge of the Authority, threatened any litigation restraining or enjoining the issuance or delivery of the Series 2018A Bonds or questioning or affecting the validity of the Series 2018A Bonds or the proceedings or authority under which the Series 2018A Bonds are to be issued. Neither the creation, organization or existence of the Authority nor the title of any of the present members or other officers of the Authority to their respective offices is being contested. There is no litigation pending or, to its knowledge, threatened which in any manner questions the right of the Authority to enter into the Bond Indenture, the Tax Exemption Agreement or the Loan Agreement, or to issue or secure the Series 2018A Bonds in the manner provided in the Bond Indenture and the Act.

Corporation

The Corporation has advised that no litigation or proceedings are pending or, to its knowledge, threatened against it or any of its affiliates except (i) litigation in which the probable ultimate recoveries and the estimated costs and expenses of defense will be entirely within the applicable insurance policy limits (subject to applicable deductibles), or (ii) litigation in which the probable ultimate recoveries and the estimated costs and expenses of defense, in the event of an adverse determination, would not have a material adverse effect on the operations or condition, financial or otherwise, of the Corporation.

LEGAL MATTERS

All legal matters incident to the authorization and validity of the Series 2018A Bonds are subject to the approval of Quarles & Brady LLP, Bond Counsel to the Authority, whose approving opinion will be delivered with the Series 2018A Bonds. Certain legal matters will be passed upon for the Authority by its general counsel, Quarles & Brady LLP, for the Corporation by its special counsel, Quarles & Brady, LLP and for the Underwriter by its counsel, Norton Rose Fulbright US LLP.

TAX EXEMPTION

In General

The opinion of Bond Counsel and the descriptions of the tax laws contained in this Official Statement are based on laws and official interpretations of them that are in existence on the date the Series 2018A Bonds are issued. There can be no assurance that those laws or the interpretations of them will not change or that new laws will not be enacted or regulations issued while the Series 2018A Bonds are outstanding in a manner that would adversely affect the value of any investment in the Series 2018A Bonds or the tax treatment of the interest paid on the Series 2018A Bonds. It is expected that the Series 2018B Bank Bonds will be part of the same tax issue as the Series 2018A Bonds.

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Federal Income Tax Opinion of Bond Counsel

Quarles & Brady LLP, Bond Counsel, will deliver a legal opinion with respect to the federal income tax exemption applicable to the interest on the Series 2018A Bonds under existing law in substantially the form attached as APPENDIX G.

Original Issue Discount

To the extent that the initial public offering price of certain of the Series 2018A Bonds is less than the principal amount payable at maturity, such Series 2018A Bonds (“Discounted Bonds”) will be considered to be issued with original issue discount. The original issue discount is the excess of the stated redemption price at maturity of a Discounted Bond over the initial offering price to the public, excluding underwriters or other intermediaries, at which price a substantial amount of such Discounted Bonds were sold (“issue price”). With respect to a taxpayer who purchases a Discounted Bond in the initial public offering at the issue price and who holds such Discounted Bond to maturity, the full amount of original issue discount will constitute interest that is not includible in the gross income of the owner of such Discounted Bond for federal income tax purposes and such owner will not, subject to the caveats and provisions herein described, realize taxable capital gain upon payment of such Discounted Bond upon maturity.

Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discounted Bond, on days that are determined by reference to the maturity date of such Discounted Bond. The amount treated as original issue discount on a Discounted Bond for a particular semiannual accrual period is generally equal to (a) the product of (i) the yield to maturity for such Discounted Bond (determined by compounding at the close of each accrual period) and (ii) the amount that would have been the tax basis of such Discounted Bond at the beginning of the particular accrual period if held by the original purchaser; and less (b) the amount of any interest payable for such Discounted Bond during the accrual period. The tax basis is determined by adding to the initial public offering price on such Discounted Bond the sum of the amounts that have been treated as original issue discount for such purposes during all prior periods. If a Discounted Bond is sold or exchanged between semiannual compounding dates, original issue discount that would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.

For federal income tax purposes, the amount of original issue discount that is treated as having accrued with respect to such Discounted Bond is added to the cost basis of the owner in determining gain or loss upon disposition of a Discounted Bond (including its sale, exchange, redemption, or payment at maturity). Amounts received upon disposition of a Discounted Bond that are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain.

The accrual or receipt of original issue discount on the Discounted Bonds may result in certain collateral federal income tax consequences for the owners of such Discounted Bonds. The extent of these collateral tax consequences will depend upon the owner’s particular tax status and other items of income or deduction. In the case of corporate owners of Discounted Bonds, a portion of the original issue discount that is accrued in each year will be included in the calculation of the corporation’s alternative minimum tax liability. Corporate owners of any Discounted Bonds should be aware that such accrual of original issue discount may result in an alternative minimum tax liability although the owners of such Discounted Bonds will not receive a corresponding cash payment until a later year. We note, however, that the 2017 Tax Act (Public Law 115-97) enacted on December 22, 2017, repealed the alternative minimum tax on corporations for tax years beginning after December 31, 2017. Accordingly, any discussion herein regarding corporate alternative minimum tax is applicable only to a corporation’s tax years beginning before January 1, 2018.

The Code contains additional provisions relating to the accrual of original issue discount. Owners who purchase Discounted Bonds at a price other than the issue price or who purchase such Discounted Bonds in the secondary market should consult their own tax advisors with respect to the tax consequences of owning the Discounted Bonds. Under the applicable provisions governing the determination of state and local taxes, accrued interest on the Discounted Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment until a later year. Owners of Discounted Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning the Discounted Bonds.

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Bond Premium

To the extent that the initial offering price of certain of the Series 2018A Bonds is more than the principal amount payable at maturity, such Series 2018A Bonds (“Premium Bonds”) will be considered to have bond premium.

Any Premium Bond purchased in the initial offering at the issue price will have “amortizable bond premium” within the meaning of Section 171 of the Code. The amortizable bond premium of each Premium Bond is calculated on a daily basis from the issue date of such Premium Bond until its stated maturity date (or call date, if any) on the basis of a constant instant rate compounded at each accrual period (with straight line interpolation between the compounding dates). An owner of a Premium Bond that has amortizable bond premium is not allowed any deduction for the amortizable bond premium; rather the amortizable bond premium attributable to a taxable year is applied against (and operates to reduce) the amount of tax-exempt interest payments on the Premium Bonds. During each taxable year, such an owner must reduce his or her tax basis in such Premium Bond by the amount of the amortizable bond premium that is allocable to the portion of such taxable year during which the holder held such Premium Bond. The adjusted tax basis in a Premium Bond will be used to determine taxable gain or loss upon a disposition (including the sale, exchange, redemption, or payment at maturity) of such Premium Bond.

Owners of Premium Bonds who did not purchase such Premium Bonds in the initial offering at the issue price should consult their own tax advisors with respect to the tax consequences of owning such Premium Bonds. Owners of Premium Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning the Premium Bonds.

Other Federal Income Tax Considerations

Prospective purchasers of the Series 2018A Bonds should be aware that ownership of the Series 2018A Bonds may result in collateral federal income tax consequences to certain taxpayers. Bond Counsel will not express any opinion as to such collateral tax consequences. Prospective purchasers of the Series 2018A Bonds should consult their tax advisors to determine how the provisions described under this heading and under the subheadings “Original Issue Discount” and “Bond Premium” and other provisions of the Code relating to the ownership of tax-exempt obligations apply to them.

From time to time legislation is proposed, and there are or may be legislative proposals pending in the Congress of the United States that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Series 2018A Bonds. It cannot be predicted whether, or in what form, any proposal that could alter one or more of the federal tax matters referred to above or adversely affect the market value of the Series 2018A Bonds may be enacted. Prospective purchasers of the Series 2018A Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation.

Wisconsin Income Tax

The interest on the Series 2018A Bonds is not exempt from present Wisconsin income taxes.

UNDERWRITING

Pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”) by and among the Authority, the Corporation, and Piper Jaffray & Co. (the “Underwriter”), the Underwriter will purchase the Series 2018A Bonds at a purchase price of $85,893,595.95 which purchase price reflects $879,112.50 of underwriter’s discount and $3,047,708.45 of net original issue premium.

Pursuant to the Bond Purchase Agreement, the Corporation has agreed to indemnify the Underwriter and the Authority against certain liabilities. The Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2018A Bonds to the public. The obligations of the Underwriter to accept delivery of the Series 2018A Bonds are subject to various conditions contained in the Bond Purchase Agreement. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Series 2018A Bonds if any Series 2018A Bonds are purchased.

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The Underwriter may engage in other transactions with the Corporation, including transactions related to the investment of proceeds of the Series 2018A Bonds, in which it could earn additional compensation.

Moreover, the Underwriter is a full service financial institution engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The Underwriter has provided, and may in the future provide, a variety of these services to the Corporation and to persons and entities with relationships with the Corporation, for which it received or will receive customary fees and expenses.

In the ordinary course of its various business, the underwriter, and its officers, directors and employees may purchase, sell or hold array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the Corporation and/or persons and entities with relationships with the Corporation. The Underwriter may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

FINANCIAL REPORTING AND CONTINUING DISCLOSURE

Financial Reporting

The Master Indenture requires that the Corporation and each other Obligated Issuer, provide to the Master Trustee and certain additional parties specified therein, the following:

(i) Within 150 days of the end of each Fiscal Year, (a) a combined or consolidated and consolidating revenue and expense statement of the Corporation and each other Obligated Issuer for such Fiscal Year (eliminating all material inter-company transactions and balances), and (b) a combined or consolidated and consolidating balance sheet presented on the basis described in (a) as of the end of such Fiscal Year, showing in each case in comparative form the financial figures of the preceding Fiscal Year, accompanied by an opinion of qualified accountants which states such financial statements have been presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States;

(ii) Within 150 days after the end of each Fiscal Year, (a) a certificate of qualified accountants stating whether or not the Obligated Issuers are in default in performance of the Historical Debt Service Coverage Ratio and Days Cash on Hand covenants as of the end of such Fiscal Year, and (b) an Officer’s Certificate stating whether or not the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture, or, if not, specifying all such defaults and the nature thereof, calculating and certifying the Historical Debt Service Coverage Ratio and Days Cash on Hand covenant; and

(iii) Within 45 days after the completion of each fiscal quarter ended March 31, June 30 and September 30 and within 60 days after completion of each fiscal quarter ended December 31, quarterly unaudited financial statements of the Obligated Group, including a statement of cash flows, a consolidated or consolidating statement of operations and net assets of the Obligated Group during such period and a consolidated or consolidating balance sheet as of the end of such fiscal quarter with a comparison to the operating budget, all prepared in reasonable detail and certified, subject to year-end adjustment, by an officer of the Obligated Group Representative.

Continuing Disclosure

In accordance with the requirements of Rule 15c2-12 (the “Rule”) of the Securities and Exchange Commission (the “Commission”) under the Securities Exchange Act of 1934, as amended, the Corporation, on its own behalf and on behalf of any future member of the Obligated Group, will enter into a continuing disclosure agreement (the “Disclosure Agreement”) for the benefit of the holders of the Series 2018A Bonds. Pursuant to the Disclosure Agreement, the Corporation agrees that no later than 150 days following the close of the fiscal year of the Corporation, the Corporation will cause to be submitted to the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access (“EMMA”) system, an annual report which will include financial statements of the Corporation for its fiscal year last ended and certain financial and operating data, if

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material, for the Corporation. The Corporation also agrees pursuant to the Disclosure Agreement to cause to be submitted to the MSRB through EMMA quarterly reports, monthly reports through completion of the Project, and notice of the occurrence of certain events enumerated in the Rule related to the Series 2018A Bonds, all as set forth in APPENDIX H.

The Disclosure Agreement is intended to be for the benefit of the holders and beneficial owners of the Series 2018A Bonds and are enforceable by the Bond Trustee on behalf of such holders and owners. The Bond Trustee’s right to enforce such undertakings are limited to a right to obtain specific performance of such undertakings and any failure by the Corporation to comply with such undertakings will not constitute an event of default with respect to the Loan Agreement, the Bond Indenture or the Master Indenture.

In the past five years, the Corporation has delivered information pursuant to prior disclosure agreements and the Rule in connection with its previously issued bonds (the “Prior Bond Disclosure Agreements”), with the exception that the Corporation and/or dissemination agent posted one of the quarterly reports required to be delivered by the Corporation in accordance with the Prior Bond Disclosure Agreements three days late. In addition, the Corporation and/or dissemination agent did not include occupancy and payor mix information in two of the quarterly reports, and did not include the actuarial summary in one of the annual reports during the past 5 years.

The Corporation has procedures in place to ensure ongoing compliance with its continuing disclosure undertaking.

RATING

The Series 2018A Bonds have been assigned a long-term rating of “BBB-” from Fitch Ratings, as indicated on the cover of this Official Statement based on the credit strength of the Corporation. Such rating reflects only the views of such rating agency at the time the rating is given, and the Authority makes no representation as to the appropriateness of the rating. An explanation of the significance of any rating may be obtained only from the rating agency.

The Corporation has furnished the rating agency with certain information and materials that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies, and assumptions by the rating agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. Neither the Authority nor the Underwriter have undertaken any responsibility to bring to the attention of the holders of the Series 2018A Bonds any proposed revision or withdrawal of the rating of the Series 2018A Bonds or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such rating could have an adverse effect on the market price of the Series 2018A Bonds.

FINANCIAL STATEMENTS

The audited consolidated financial statements of Saint John’s Communities, Inc. for the fiscal years ended December 31, 2016 and 2015 included in APPENDIX B to this Official Statement have been audited by Wipfli LLP, independent certified public accountants, to the extent and for the periods indicated in their reports thereon. The consolidated financial statements include the accounts of Saint John’s Communities Foundation, Inc. (the “Foundation”) which is not a member of the Obligated Group. At December 31, 2016 and 2015, the Foundation represented approximately 5.0% and 4.4%, respectively, of the Corporation’s total assets.

INTERIM FINANCIAL STATEMENTS

The consolidated financial statements of Saint John’s Communities, Inc. for the year ended December 31, 2017, included in APPENDIX C have been provided by the Corporation, are unaudited and do not contain footnotes necessary for a complete presentation of financial condition, results of operations or cash flows in accordance with accounting principles generally accepted in the United States of America. However, in the opinion of management of the Corporation, all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements have been included.

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MISCELLANEOUS

The summaries or descriptions of provisions of the Act, the Series 2018A Bonds, the Series 2018A Master Note, the Loan Agreement, the Bond Indenture, the Master Indenture, Mortgage and the Tax Exemption Agreement, and all references to other materials not purported to be quoted in full, are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. Reference is made to the Act, the Series 2018A Bonds, the Series 2018A Master Note, the Loan Agreement, the Bond Indenture, the Master Indenture, Mortgage and the Tax Exemption Agreement for a full and complete statement of the provisions thereof. Such documents are on file at the offices of the Underwriter and following delivery of the Series 2018A Bonds will be on file at the offices of the Bond Trustee.

So far as any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of such statements will be realized. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the owners of the Series 2018A Bonds.

It is anticipated that CUSIP identification numbers will be printed on the Series 2018A Bonds, but neither the failure to print such numbers nor any error in the printing of such numbers shall constitute grounds for a failure or refusal by any purchaser thereof to accept delivery of and pay for any Series 2018A Bonds.

The attached APPENDICES A, B, C, D, E, F, G and H are integral parts of this Official Statement and must be read together with all of the foregoing statements.

The Corporation has reviewed the information contained herein which relates to it and has approved all such information for use within this Official Statement.

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APPENDIX A

Saint John’s Communities, Inc.

The information in this Appendix A was provided by Saint John’s Communities, Inc.

TABLE OF CONTENTS

THE CORPORATION ...... 1

BACKGROUND ...... 1 The Corporation ...... 1 Foundation ...... 1 History ...... 1

GOVERNANCE AND MANAGEMENT ...... 2 Board of Directors ...... 2 Board Composition ...... 3 Management ...... 4 Employees ...... 5

EXISTING CONTINUING CARE FACILITIES ...... 5 Tower Apartments – Central and South Towers (Independent Living) ...... 5 Health Center – Canterbury Court (Assisted Living) ...... 7 Health Center – Windsor/Stratford (Skilled Nursing) ...... 8 Residency Contracts ...... 8 Historical Occupancy ...... 10 Cultivation of Future Residents ...... 11 Licensing and Regulations ...... 11

THE PROJECT ...... 12 Overview of the Project ...... 12 Independent Living ...... 13 Health Center – Windsor/Stratford (Skilled Nursing) ...... 14 Health Center – Canterbury Court (Assisted Living) ...... 14 Health Center – Transitional Care Assisted Living ...... 14 Approvals and Permits ...... 14 Other Capital Projects ...... 15

PROJECT TEAM ...... 15 Project Manager – Witz Company ...... 15 Marketing Consultant – Varsity Marketing LLC ...... 16 Construction Manager – VJS Construction Services ...... 16 Estimated Fixed Price Project Costs ...... 17 Lead Architect – Eppstein Uhen Architects ...... 17 Consulting Architect – Blitch/Knevel Architects ...... 18 Environmental Gerontologist – Lorraine Hiatt, PhD ...... 19 Actuarial Consultant – A.V. Powell & Associates, LLC ...... 19 Construction Monitor – zumBrunnen ...... 19

PROJECTED FINANCIAL INFORMATION ...... 19

LOCATION, PRIMARY MARKET AREA, COMPETITION ...... 19

SELECT FINANCIAL INFORMATION ...... 19 Summary of Historical Financial Statements ...... 19 Management Discussion and Analysis ...... 22 Historical Debt Service Coverage Ratio ...... 23 Days Cash on Hand ...... 23 Sources of Revenues ...... 24 Investment Policy ...... 24 Insurance ...... 24

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THE CORPORATION Saint John’s Communities, Inc. (the “Corporation”) is a nonstock, nonprofit corporation organized under Chapter 181 of the Wisconsin Statutes. The Internal Revenue Service has determined that the Corporation is exempt from federal income tax under Section 501(a) of the Internal Revenue Code of 1986 (the “Code”) as an organization described in Section 501(c)(3) of the Code. The Corporation is currently the sole member of the Obligated Group under the Master Indenture.

BACKGROUND The Corporation The Corporation owns and operates a continuing care retirement (life plan) community known as Saint John’s On The Lake (the “Community”) located at 1840 North Prospect Avenue in Milwaukee. The Community is located on a 5.02- acre site just north of downtown overlooking Lake Michigan with easy access to the many downtown cultural and educational activities such as the Milwaukee Art Museum and the University of Wisconsin–Milwaukee. The Community currently consists of 274 total units including 200 independent living apartments, 24 assisted living units, and 50 skilled nursing beds organized as follows: Tower Apartments (the “Tower Apartments”)  Central Tower (f/k/a North Tower) (“Central Tower”) – consists of 110 entrance fee independent living apartments in a 10-story building, licensed as a Residential Care Apartment Complex (“RCAC”). The original North Tower was renamed Central Tower in 2017 and it will be referred to as Central Tower throughout Appendix A. Any references to North Tower in Appendix A are referring to the new tower described under the heading “THE PROJECT” herein.  South Tower (“South Tower”) – consists of 90 entrance fee independent living apartments in a 21-story building, licensed as a RCAC Health Center (the “Health Center”)  Canterbury Court (“Canterbury Court”) – consists of 24 assisted living units, licensed as a community based residential facility (“CBRF”)  Windsor and Stratford Courts (“Windsor/Stratford”) – consists of 50 skilled nursing beds, licensed as a skilled nursing facility. All of the facilities which comprise the Community are subject to the Master Mortgage. The Corporation provides services to residents and clients without regard to race, religion, national origin, sex or handicap.

Foundation In 1983, the Corporation established Saint John’s Communities Foundation, Inc. (the “Foundation”), a separate nonstock, nonprofit corporation, to raise and administer funds to support the activities of the Corporation. The Foundation is governed by a six member board of directors elected by the board of directors of the Corporation. The Foundation has been determined by the Internal Revenue Service that it is an organization described in Section 501(c)(3) of the Code and is exempt from federal income tax under Section 501(a) of the Code and is not a private foundation under Section 509(a) of the Code. As of December 31, 2017, the Foundation has approximately $7.4 million in cash and investments and no material liabilities. The Corporation reflects its interest in the Foundation as an asset on its balance sheet. As of December 31, 2017, the Foundation accounted for 5.4% of total assets. The Foundation is not a member of the Obligated Group under the Master Indenture and is not obligated under the Series 2018A Master Note or the Loan Agreement. No assets of the Foundation will be subject to the lien of the Master Indenture or are or will be pledged to secure Master Notes issued under the Master Indenture.

History The Corporation was founded in 1868 by a group of Episcopal women to provide care and shelter for needy members of the Episcopal Diocese. The Corporation operated in several locations in downtown Milwaukee until 1979 when construction of the Central Tower and Windsor/Stratford, located at the current location on Prospect Avenue on the east side of Milwaukee, Wisconsin was completed. A-1

Canterbury Court was added to the Community in 1993. A multi-year renovation to the Community began in October, 2002. Windsor/Stratford was remodeled, downsizing from 95 rooms to 52 rooms, and more common space was created. The common areas on the first floor of the Central Tower were remodeled, a new restaurant style dining room was added, and the chapel was replaced. Construction was completed in April, 2004. In 2003, the name of the Corporation was changed from Saint John’s Home of Milwaukee to Saint John’s Communities, Inc. The Corporation’s Community is now called Saint John’s On The Lake. In 2009 the Corporation began construction of the South Tower, consisting of 90 new independent living apartments in a 21-story building, connected to the existing structure by a town center consisting of a health and fitness center, a secondary dining venue (known as the Bistro), a multipurpose room/auditorium, and an art gallery. The project included two floors of under building parking and was completed in July, 2011. In 2012 Windsor/Stratford was again renovated with a further downsize from 52 beds to its current complement of 50 beds. In 2014, Canterbury Court was remodeled and capacity was increased from 17 to its current 24 units. In 2015 and early 2016, the Corporation completed two significant capital projects including renovation of the Corporation’s fine dining venue, Taylor’s Dining (“Taylor’s Dining”), and a complete renovation of the lower level office and common space (the “Lower Level”). Additionally, renovations were made upon turnover to Central Tower apartments to upgrade those apartments to South Tower apartment standards constructed in 2011. Renovations included complete kitchen and bath remodels combined with re-painting/re-finishing of all other components of the apartments. Taylor’s Dining, originally constructed in 2004, was completely renovated including a re-configuration of the dining space and the addition of a full-service bar. Finally, a complete renovation of the Lower Level concluded in the first quarter of 2016. The Lower Level includes office space for the Corporation’s human resources/education departments, laundry, employee locker and break rooms, bank, computer lab, thrift store, therapy, engineering services and mechanical space, among other common and office areas. The project included reconfiguration of the space, new finishes and equipment as well as a relocation of the independent living wellness clinic from its existing space on the 3rd floor of the Central Tower.

GOVERNANCE AND MANAGEMENT Board of Directors The affairs of the Corporation are managed by up to a 16 person board of directors (the “Board of Directors”), two of which shall be residents of the Community. In addition, the Bishop of the Episcopal Diocese of Milwaukee, Inc. (or, at the Bishop’s discretion, a designee for the purposes and time period appointed by the Bishop) and the immediate past Chair of the Board of Directors, unless such Chair is completing a regular term, shall be ex-officio directors. Directors of the Corporation are elected by the Board of Directors. Elected directors serve three-year terms; non- resident directors are limited to three consecutive three-year terms (but are eligible for re-election as a director while serving as an officer notwithstanding the nine-year limitation) and resident directors are limited to one three-year term. Officers of the Corporation are elected annually by the Board of Directors and hold office for a term of one year. The tenure of the Chair of the Board of Directors is limited to two consecutive one-year terms. Two-thirds of elected directors shall be adult communicants in good standing in one of the parishes of the Episcopal Diocese of Milwaukee, Inc. The Board of Directors has the authority to amend the bylaws.

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Board Composition As of December 31, 2017 the members of the Board of Directors and the officers of the Corporation, along with their business affiliations, are as follows: Years of Term Service Expires Name Title Occupation on Board (May) Stephanie Sue Stein Chair Retired Director, Milwaukee 11 2021 County Department on Aging W. Stuart Parsons Vice Chair Retired, Quarles & Brady LLP 5 2020

Deborah G. Conta Secretary Self-Employed, Sentencing 5 2018 Consultant John A. Mellowes Treasurer Retired, Chairman & CEO, Charter 4 2020 Manufacturing Kathy Armbruster Director Human Resources, Northwestern 2 2019 Mutual John Dawson Director Retired, Foley & Lardner LLP 3 2018 Fr. Seth Dietrich Director Rector, Christ Church Whitefish 2 2019 Bay Sanford Fedderly Director, Retired, Owner, Tri-City Pharmacy 1 2020 Resident Kathryn J. Housiaux Director Retired Associate Director of 4 2020 Admissions, University School of Milwaukee David Kuehl Director, General Counsel, 9 2018 Immediate Past Lubar & Company Chair Rt. Rev. Steven A. Miller Director Bishop of the Episcopal Diocese of 14 Unlimited, Milwaukee Ex-officio Judith T. Moon Director Chaplain, Zilber Hospice 4 2020 Robert Mueller Director COO, Godrey & Kahn 2 2019 Mary Beth Petersen Director, Retired, Sr Organization 2 2019 Resident Development Coach, Children’s Hospital Polly Walker Beal Director Self-Employed, Fundraising 5 2019 Consultant

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Management President and CEO Renee E. Anderson joined the Corporation in September, 1996 as Director of Finance, was named Vice President in 2001 and was promoted to President and CEO in 2011. Ms. Anderson also serves as President of the Foundation. Prior to joining the Corporation, Ms. Anderson was the Controller for MJ Care, Inc., a regional provider of physical, occupational and speech therapy, an analyst for Extendicare, one of the nation’s largest providers of skilled nursing services, and an auditor with Arthur Young. Ms. Anderson earned a Bachelor’s of Business Administration with a major in accounting from the University of Wisconsin-Whitewater in 1985. She is a certified public accountant, holds a Certificate of Achievement from the Department of Professional Development and Allied Studies, Programs on Aging and Long Term Care Nursing Administration from the University of Wisconsin-Madison and is a Certified Nursing Assistant. Ms. Anderson serves on the board of directors of Leading Age Wisconsin as Vice Chair of Operations, and as Treasurer for Industries for the Blind, Inc. She is a member of the board of directors of Wisconsin Health and Educational Facilities Authority and is an active member of Milwaukee’s Downtown Rotary. Ms. Anderson is 54 years old. Vice President of Administration Dan A. Lemminger joined the Corporation in 2011 as Director of Finance and was named Vice President of Administration as of January 1, 2018. Mr. Lemminger earned a Bachelor of Business Administration degree from the University of Wisconsin-Madison. Prior to joining the Corporation, Mr. Lemminger spent 18 years with Extendicare, most recently as the Senior Director of Reimbursement Services. Mr. Lemminger also was an auditor with Arthur Andersen & Co. and is a certified public accountant. Mr. Lemminger is 49 years old. Vice President of Facilities Mike W. Lingle joined the Corporation in 2016 as Director of Engineering Services and was named Vice President of Facilities on January 1, 2018. Mr. Lingle has over 16 years of Facility Management experience in both education and utilities at Maranatha Baptist University and FBG Service Corporation. Mr. Lingle earned a Bachelor of Science degree from Maranatha Baptist University in 1991 and IFMA’s FMP credential in 2015. Mr. Lingle is 58 years old. Vice President of Health Services Mary H. Milliren joined the Corporation in 2015 as the Director of Clinical Services and was named Vice President of Health Services on January 1, 2018. Ms. Milliren has leadership and administrative experience working in hospitals and senior living communities in the Milwaukee area. She was a member of the adjunct faculty in the School of Nursing at the University of Wisconsin-Milwaukee and has presented to audiences both locally and nationally on a variety of healthcare topics. Ms. Milliren holds a Bachelor’s degree in Nursing from Alverno College, a Master’s of Science in Nursing with a clinical focus in Gerontology from the University of Wisconsin - Milwaukee, and is a graduate of the Wharton Nurse Executive Fellowship Program through the University of Pennsylvania. Ms. Milliren is 64 years old. Vice President of Lifestyle Donna J. Spars joined the Corporation in 1984 as Administrative Assistant for the North Tower residents and has been Vice President of Lifestyle since January 1, 2018. Ms. Spars earned a Bachelor of Business Administration degree from Cardinal Stritch University. She has held a number of positions with the Corporation involving customer service, sales, social work and administration. Prior to her current position she was the Vice President and Director of LifeStreams. She was also a loaned administrator overseeing Lake Oaks, formerly an independent living retirement community owned by the Episcopal Diocese of Milwaukee in Racine County, Wisconsin. Ms. Spars is 58 years old Director of Sales and Marketing Lucia A. Klebar has served as Director of Sales and Marketing for the Corporation since 2011. Ms. Klebar holds a Bachelor of Arts degree in Economics from the University of Wisconsin-Milwaukee. In addition to leading the Sales and Marketing team, Ms. Klebar also oversees public relations. Prior to joining the Corporation, Ms. Klebar was a recruiter for a full-service staffing agency. Ms. Klebar has also held various sales and marketing positions in staffing and training, post-secondary adult education and technology consulting. Ms. Klebar is 59 years old.

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Employees As of December 31, 2017, the Corporation employed 229 employees, of which 85 were full-time and 144 were part- time. There are no unions organized by the Corporation’s employees. The Corporation’s management believes that the relationship between the Corporation and its employees is satisfactory. The Corporation administers the Saint John’s Communities, Inc. Pension Benefit Plan (the “Retirement Plan”) as a benefit to its employees. The Retirement Plan is a defined contribution plan subject to the Employee Retirement Income Security Act of 1974 (ERISA). All full and part-time employees age 21 or older are eligible to join the plan as an active participant January 1 or July 1 after having achieved one year of entry service. An active participant is eligible for a share of the Corporation’s discretionary contribution if they have worked at least 1,000 hours during the calendar year and are employed as of December 31 of the contribution year. Each annual discretionary contribution is typically 3% to 5% of the annual compensation of all participants, as defined by the plan, and is subject to Board of Directors approval.

EXISTING CONTINUING CARE FACILITIES The Corporation’s Community currently consists of 200 independent living apartments, 24 assisted living units, and 50 skilled nursing beds. Each level of care has its own common and support areas. All of the facilities described in this section are subject to the lien of the Master Mortgage. Tower Apartments – Central and South Towers (Independent Living) The independent living apartments are located in two separate towers – the Central Tower and the South Tower. The Central Tower was originally constructed in 1979. The 10-story building has 110 units, including 4 studio/alcove units, 59 one-bedroom units, and 47 two-bedroom units, ranging in size from 400 – 1,750 square feet. The Central Tower includes the following common spaces: Taylor’s Dining overlooking Lake Michigan, an art gallery, a fitness area, a library and various other resident, meeting and multipurpose spaces. The Central Tower was previously known as the North Tower. The South Tower, constructed in 2011, has 21 stories with 90 units, including 14 one-bedroom units and 76 two- bedroom units, ranging in size from 1,090 – 2,460 square feet. The South Tower includes the following common spaces: a town center consisting of a health and fitness center and pool, a casual dining venue, a multipurpose room/auditorium, and an art gallery. Residents in the Tower Apartments can utilize common space in either building. All independent living apartments in the Tower Apartments are furnished with window treatments; wall-to-wall carpeting, except in the kitchen and bath and subject to custom flooring requests; a full kitchen with refrigerator/freezer, range with oven, microwave oven and dishwasher; utility closet; fire and smoke alarms; fire sprinkler system; individually controlled heating and air conditioning; and telephone and cable television jacks. All utilities, except telephone and cable television services, are included within the monthly service fee (the “Monthly Service Fee”). Each resident enters into a residency contract (the “Residency Contract”) and pays an entrance fee (the “Entrance Fee”) upon occupying an independent living apartment. Two Residency Contract options are currently available to residents of the Tower Apartments: Life Care Contract (as defined herein) and Standard Contract (as defined herein). For additional information regarding the different types of Residency Contracts, see “Residency Contracts” herein. As of December 31, 2017, the Community has 200 independent living units of which 192 or 96% were occupied. Of these units, 145 units or 75% were under Life Care Contracts, 36 units or 19% were under Standard Contracts and 11 or 6% were under Rental Standard Contracts (which are a type of Residency Contract no longer offered to residents) or Split-Life Care Contracts (meaning a contract offered to a couple when one individual declines or is not eligible for a Life Care Contract). See “Residency Contracts” herein for a table of the number of contracts by refund option. For additional information regarding the independent living apartments and the Residency Contract, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Residency Contracts and Reimbursement Agreements – Independent Living Contracts” in the Feasibility Study in Appendix D.

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The following table summarizes the Monthly Service Fees and Entrance Fees for independent living apartments in the Central Tower and South Tower as of December, 2017: MONTHLY SERVICE FEES AND ENTRANCE FEES Central Tower Apartment Number of Size Monthly Entrance Style Unit Type Units (Sq. Ft.) Fees(1) Fees(1)(2) Alcove(3) Alcove 2 400 $1,700 $134,750 Studio(3) Studio 2 475 $1,900 $145,750 Saybrook 1-bedroom (Standard) 29 600 $2,290 $169,855 Trescott/Tresburn 1-bedroom (Large) 21 875 $3,140 $309,971 Bedford 1-bedroom (Large) 9 1,000 $3,160 $340,167 Canton 2-bedroom (Standard) 12 1,075 $3,205 $347,700 Devonshire 2-bedroom (Standard) 19 1,200 $3,525 $384,147 Dorset 2-bedroom (Large) 5 1,350 $3,725 $436,120 Edgehill 2-bedroom plus den 8 1,475 $3,925 $467,875 Lenox 2-bedroom plus den 2 1,675 $4,065 $553,700 Princeton 2-bedroom plus den 1 1,750 $4,115 $572,700 Totals/Weighted Average 110 963 $3,052 $310,296

South Tower Apartment Number of Size Monthly Entrance Style Unit Type Units (Sq. Ft.) Fees(1) Fees(1)(2) Bailey 1-bedroom 1 1,090 $3,275 $386,800 Amherst 1-bedroom plus den 12 1,135 $3,300 $390,567 Austen 1-bedroom plus den 1 1,250 $3,455 $420,200 Berkshire 2-bedroom 10 1,325 $3,535 $456,500 Cambridge 2-bedroom split 9 1,450 $3,865 $504,033 Hampshire 2-bedroom 5 1,465 $3,905 $499,400 Dover 2-bedroom plus den 14 1,630 $3,985 $587,371 Somerset I 2-bedroom 4 1,780 $4,120 $622,300 Brighton 2-bedroom plus den 1 1,395 $4,300 $583,100 Manchester Large two bedroom 1 1,675 $4,425 $841,200 Constable 2-bedroom 1 1,675 $4,500 $603,200 Somerset II 2-bedroom 1 1,780 $4,560 $650,800 Carlisle 2-bedroom plus den 6 1,945 $4,650 $680,883 Easthampton 2-bedroom plus den 12 1,930 $4,660 $685,225 Bristol 2-bedroom plus den (large) 6 1,980 $4,680 $687,317 Westminster 2-bedroom plus den 1 1,935 $5,010 $918,900 Bowman Large two bedroom plus den 2 2,285 $5,650 $761,700 Engleheart Large two bedroom plus den 2 2,430 $5,940 $844,250 York Large two bedroom plus den 1 2,460 $6,020 $984,200 Totals/Weighted Average 90 1,631 $4,135 $578,108

Second Person Fees: Standard Contract $ 475 $ 25,500 Life Care Contract 1,390 51,100 (1) Fees represent single person Entrance Fee and Monthly Service Fee. (2) Certain residents also pay an escalating Entrance Fee height premium for units on floors 8 and above. (3) As alcove and studio apartments are vacated, the Corporation may combine units to create larger apartments to meet market demand. In the Feasibility Study it is assumed there are no changes during the forecast period.

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The following table sets forth the demographics for the existing residents in the independent living apartments in the Central Tower and the South Tower as of December, 2017: Existing Residential Demographics Average Age Female 84.8 Male 84.5 Gender Mix Female 66.0% Male 34.0% Marital Status Single 60.0% Married 40.0% Median Net Worth $2,104,332 Median Annual Income $ 120,000

Health Center – Canterbury Court (Assisted Living) Canterbury Court is a 24-unit assisted living facility operated by the Corporation serving the needs of residents unable to live independently but not requiring skilled nursing care. It is licensed as a Class “C” (unrestricted) CBRF under Chapter 50 of the Wisconsin Statutes. Canterbury Court allows the Corporation to provide a more complete continuum of care to Tower Apartments residents. It also allows the Corporation to respond to the needs of Tower Apartments residents who are unable to live independently but who do not require the skilled nursing services provided by a skilled nursing facility. Admission to Canterbury Court is provided for Tower Apartments residents in accordance with the terms of the Residency Contracts. Care in Canterbury Court is part of the life care benefit program for residents of the Tower Apartments who are covered by a Life Care Contract. Residents admitted to Canterbury Court from the Tower Apartments who are covered by a Standard Contract or from the community pay a monthly fee of $5,890 to $7,630 depending on the size of the unit occupied. Assisted living is available for occupancy by persons other than Tower Apartments residents (the “Direct Admission Residents”). Direct Admission Residents are admitted, pursuant to the terms of a separate admissions agreement, on an as-available basis to the extent the units are not required to accommodate Tower Apartments residents. Direct Admission Residents pay a monthly service fee, but no entrance fee, and do not receive any healthcare discounts. Of the 23 residents residing in Canterbury Court on December 31, 2017, 52% receive care pursuant to the life care benefit program under their Life Care Contract, 13% transferred from Tower Apartments under a non-Life Care Contract and 35% are Direct Admission Residents. The 24 Canterbury Court units are currently located on the third floor of a three story building adjacent to the Central Tower. The units have been designed to foster the continued independence of residents who require varying amounts of assistance with activities of daily living. The assisted living suites range in size from 219 to 514 square feet. The Canterbury common areas include a lobby, living area, dining room and administrative and support areas.

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The following table summarizes the Monthly Service Fees for Canterbury Court (excluding residents under Life Care Contracts) as of December, 2017:

MONTHLY SERVICE FEES Canterbury Court Number Monthly of Service Unit Style Units Fees Kent 6 $5,720 Oxford 3 5,960 Cornwall 3 6,020 Essex 2 6,660 Hyde 1 6,670 Wedgewood 4 7,010 Spencer 2 7,220 Beckenham 2 7,270 Ashford 1 7,410 Totals/Weighted Average 24 $6,445

Health Center – Windsor/Stratford (Skilled Nursing) Windsor/Stratford is a 50-bed skilled nursing facility operated by the Corporation. Windsor/Stratford serves residents needing both skilled and intermediate care. Skilled nursing is available for occupancy by Tower Apartments residents when their physical condition so requires. Skilled nursing is also available for occupancy by Direct Admission Residents of the Corporation. Direct Admission Residents are admitted on a per-diem basis directly to skilled nursing to the extent that the nursing beds are not required to accommodate Tower Apartments residents of the Corporation. Residents admitted to Windsor/Stratford from the Tower Apartments who are covered by a Standard Contract or Direct Admission Residents pay a daily fee, which in 2017 ranged from $380 to $425 depending on the size and type of the unit occupied. Of the 32 permanent residents of Windsor/Stratford on December 31, 2017, 37% receive care pursuant to the life care benefit program under their Life Care Contract, 19% transferred from Tower Apartments under a non-Life Care Contract and 44% are Direct Admission Residents. As of December 31, 2017, there were 10 temporary residents in Windsor/Stratford covered by Medicare. Windsor/Stratford is currently located on the first and second levels of the three story building adjacent to the Central Tower shared with Canterbury Court. The private rooms are approximately 259 square feet. Skilled nursing common areas include administrative, service and support areas, resident dining, activity, lounge, therapy and bathing areas.

The following table summarizes the average daily rates for Windsor/Stratford for 2017 (excluding residents under Life Care Contracts):

AVERAGE DAILY RATES Windsor/Stratford Average Payor Type Daily Rates Private Pay $382.00 Life Care N/A Medicare 477.00 Medicaid 180.00 Average/Total $368.00

Residency Contracts Independent Living The Corporation considers applications for residence at the Tower Apartments based upon the guidelines for the acceptance of independent living residents described below and maintains sole discretion on the decision to accept an independent living resident. An application for residence at the Tower Apartments will be accepted only if the applicant demonstrates the ability to live independently and meet the financial obligations as an independent living A-8

resident of the Tower Apartments. Residents in each independent living apartment must be 62 years of age or older at the time of establishing occupancy. No dependent children may reside at the Tower Apartments unless otherwise agreed by the Corporation. Upon executing a Residency Contract with the Corporation, a person aged 62 or older receives use of a designated apartment, paid utilities and the use of building amenities. Each resident, upon entering the Tower Apartments, pays an Entrance Fee. The Entrance Fee is a lump sum amount, payable before occupancy, for the right to occupy an apartment. The Entrance Fee varies according to the size and location of the apartment and is subject to change and may be refundable in certain circumstances. The Entrance Fee is increased when a second person occupies an apartment. In addition, residents pay a Monthly Service Fee to cover the costs of additional services provided by the Corporation, including maintenance and janitorial services and various administrative, social, and cultural services. This Monthly Service Fee increases when a second person occupies the apartment and varies with the type of contract, size and location of the apartment. The Monthly Service Fee may be increased by the Corporation following notice to the residents and these increases have historically ranged from 3% to 5% annually. Upon reserving an apartment, potential residents are required to deposit with the Corporation at least 10% of the Entrance Fee. For a further description of the Entrance Fees, the Entrance Fees refund provisions, the Monthly Service Fees and the health care services, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Residency Contracts and Reimbursement Agreements – Independent Living Contracts – Entrance Fees”, – Health Care Benefits”, and – Monthly Fees” in the Feasibility Study in Appendix D. Life Care Contract Prior to January 1, 2014, the Corporation offered three (3) types of Life Care Contracts to Tower Apartments residents: an agreement under which the prospective resident pays a 0% refundable Entrance Fee; an agreement under which the prospective resident pays a 30% refundable Entrance Fee; and an agreement under which the prospective resident pays a 90% refundable Entrance Fee (collectively, the “Life Care Contracts”). Subsequent to January 1, 2014, the Corporation offers one (1) type of Life Care Contract to the Tower Apartments residents, an agreement under which the prospective resident pays a 30% refundable Entrance Fee. The three Life Care Contracts are substantively similar to one another with the exception of the amount of the refund. The Life Care Contracts entitle the resident to the life care benefits program which provides guaranteed access to health care services (which are defined as routine community-based residential facility services or routine skilled nursing facility services, as applicable) in the Health Center at a rate equal to the resident’s current independent living Monthly Service Fee plus costs incurred for meal services. This rate does not include the costs of drugs, special treatments, special therapies, or physician services. These costs are the obligation of the residents; additionally, residents are required to continue participation in the Medicare program. If, after consultation with the resident, the resident’s physician and the Corporation’s Medical Director, the Corporation determines that health care services are medically indicated, the resident will be provided with health care services in the Health Center, provided that, if all the rooms of the appropriate unit of the Health Center are occupied, necessary care, as determined by the Corporation in consultation with the Corporation’s Medical Director, the resident, and the resident’s physician, will be provided at the Corporation’s expense in the resident’s apartment or another appropriate facility until a room becomes available in the Health Center. If, after consultation with the resident, the resident’s physician and the Corporation’s Medical Director, the Corporation determines that the required health care services in the Health Center are of a temporary nature (anticipated to be less than three months), the resident shall retain the apartment and continue to pay the then-current independent living Monthly Service Fee plus costs incurred for meal services. Standard Contract Prior to January 1, 2009, the Corporation offered two (2) types of Standard Contracts to Tower Apartment residents: an agreement under which the prospective resident pays a fully refundable Entrance Fee (“Refundable Standard Contract”) and an agreement under which the prospective resident pays a non-refundable Entrance Fee (“Non- Refundable Standard Contract” and collectively, with the Refundable Standard Contract, the “Standard Contracts”). Subsequent to January 1, 2009, the Corporation offers one (1) type of Standard Contract to the Tower Apartments residents: an agreement under which the prospective resident pays a 90% refundable Entrance Fee (“90% Refundable Contract”). The Refundable Contract, the 90% Refundable Contract and the Non-Refundable Contract are substantively similar to one another with the exception of the provision allowing a refund, at 100% or 90%, or prohibiting the refund of the Entrance Fee.

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During the term of the Standard Contract, the resident is entitled to a total of thirty days of health care services (which are defined as routine community-based residential facility services or routine skilled nursing facility services) as applicable, provided in the Health Center. The resident may only use ten health care service days during the first 365 days of the Standard Contract. For a description of the health care services provided by the life care benefits program under a Life Care Contract and a description of the health care services under a Standard Contract, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Residency Contracts and Reimbursement Agreements – Independent Living Contracts – Health Care Benefits – Standard Contracts” and – Health Care Benefits – Life Care Contracts” in the Feasibility Study in Appendix D. Table of Residency Contracts by Refund Options The following table sets forth the number of the various types of Residency Contracts for current or former residents of the Tower Apartments as of December 31, 2017: Contract Residents Refundable Type Under Contract(1) Entrance Fee Life Care, 0% Refundable* 50 $ -- Life Care, 30% Refundable 76 7,103,010 Life Care, 90% Refundable* 36 14,715,828 Split-Life Care, 30% Refundable 5 549,270 Split-Life Care, 90% Refundable* 1 283,472 Standard, 90% Refundable 38 15,791,283 Rental Standard, 0% Refundable* 4 -- Rental Standard, 90% Refundable* 1 79,583 Rental Standard, 100% Refundable* 3 662,800 Total 214 $39,185,246 *Contract type no longer available to new residents (1) One hundred ninety-two (192) contract holders reside in the Tower Apartments, five (5) reside in Windsor/Stratford, twelve (12) reside in Canterbury Court and five (5) no longer reside at the Community but whose refundable entrance fee has not been refunded.

The weighted average refund percentage at December 31, 2017 is 45%.

Financial Assistance If a resident of the Tower Apartments no longer can pay the Monthly Service Fee in full due to lack of funds for reasons beyond the control of the resident, the Corporation shall subsidize, in whole or in part, the Monthly Service Fees and other charges, provided the ability of the Corporation to operate on a sound financial basis for all residents is not materially impaired. In the event that financial assistance is provided by the Corporation, such amounts, plus interest, may be charged against the refund, if any, of the Entrance Fee owed to an independent living resident upon termination of the Residency Contract. The Corporation may also require an independent living resident receiving financial assistance to move to a smaller independent living apartment. Historical Occupancy The following table sets forth the average occupancy of the various facilities at the Community for the fiscal years ended December 31, 2015, 2016 and 2017:

Number of Units Average Unit Type Available Occupancy (%) 2015 2016 2017 Independent Living 201/200(1) 98% 96% 95% Assisted Living 24 90% 94% 98% Skilled Nursing 50 91% 93% 89% (1) Based on 111 units available at the Central Tower through September 30, 2017, and 110 units thereafter.

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Cultivation of Future Residents The Corporation’s wait list program, known as “The Shore Holder’s Club” is designed for individuals who desire to move to the Community at some point in the future. Membership as of December 31, 2017 was 189. The membership fee is $2,500, $2,000 of which is transferrable to a future Entrance Fee or refundable should they decide that the Community is no longer the preferred community for them. Membership in The Shore Holder’s Club entitles members to the following benefits: 1. Priority opportunity to reserve the apartment style of their choice upon availability 2. Priority admission to the Health Center, if needed 3. Dining at Taylor’s Dining and the Bistro at resident rates 4. LifeStreams wellness programming 5. Access to the fitness center, swimming pool, art galleries, chapel and library 6. Use of common space for personal/private events 7. Social, educational and cultural programs Sixty-eight percent of The Shore Holder’s Club members reside in the Corporation’s primary market area described in the Feasibility Study. See “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Market Assessment – Primary Market Area” in the Feasibility Study in Appendix D. The remaining 32% are drawn from 29 different zip codes across multiple states. Consistent with existing residents’ locations prior to occupancy in the Community, membership in The Shore Holder’s Club attracts people from the primary market area and beyond. The Community draws older adults seeking diverse and rich opportunities for intellectual, cultural, spiritual and personal growth. In 2017, 18 of 19 residents that moved in to the Tower Apartments were members in The Shore Holder’s Club. In addition, as of January 31, 2018, 38 of the 72 reservations for the independent living apartments of the Project are from members in The Shore Holders Club, and 23 depositors for the independent living apartments of the Project have joined The Shore Holder’s Club since making their deposit.

The following table sets forth the reported median age, median annual income, and median net worth of the depositors for the Project as of January 1, 2018:

Reported Median Age, Annual Income and Net Worth of the Depositors Age 76 Annual Income $ 198,245 Net Worth $4,802,000

Licensing and Regulations The Corporation and the health care industry in general are subject to regulation by a number of federal, state and local governmental agencies, including those which administer the Medicare, Medicaid and health planning programs. As a result, the industry is sensitive to legislative changes in such programs and is affected by cuts in government spending for such programs. Windsor/Stratford is licensed by the Wisconsin Department of Health Services to provide skilled nursing care under Chapter 50.03(4)(c) of the Wisconsin Statutes. It is certified for participation in the Medicare and Medical Assistance Programs, Title XVIII and XIX of the Social Security Act of 1965, as amended. The Corporation has been granted a permit to enter into “Continuing Care” contracts with residents by the office of the Commissioner of Insurance under Chapter 647 of the Wisconsin Statutes. This statute specifies certain reporting requirements and contract provisions designed for the protection of the residents of continuing care institutions. Additionally, the Tower Apartments are licensed under Chapter 50 of the Wisconsin Statutes as a “Residential Care Apartment Complex”. Canterbury is licensed by the Department of Health Services under Chapter 50 of the Wisconsin Statutes as a “Community Based Residential Facility”.

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Windsor/Stratford and Canterbury Court are regularly inspected by the Wisconsin Department of Health Services to determine compliance with applicable rules associated with its various licenses and certifications. The management of the Corporation believes that it is in substantial compliance with all such rules.

THE PROJECT Overview of the Project The Corporation’s expansion project (the “Project”) will include construction of an approximately 427,400 square foot, 22-floor tower which will house the following components:  Two levels of underground and one level of underbuilding parking at grade.  First floor commons and administration offices.  108,587 square foot replacement Health Center on floors 2 – 5; the existing 24 assisted living units of Canterbury Court and the existing 50 skilled nursing beds of Windsor/Stratford will be relocated to floors 2 through 4. Of the 50 skilled nursing beds, 42 will be designated for long-term care and 8 for short-term rehabilitation. In addition, the Corporation will add 16 new transitional care assisted living units on floor 5.  Floor 6 will house mechanical equipment.  79 new two-bedroom independent living apartments on floors 7 – 22 with new common spaces including a Community auditorium; each independent living floor will have 5 apartments except for floor 22 which will have 4 penthouse apartments. Additionally, the Project will include exterior improvements to the existing Central Tower as well as replacement windows. The goals of the Project are to (i) replace the 38 year old Health Center, enhancing the Corporation’s market position within the assisted living and skilled nursing service sectors; (ii) improve the quality of life of its residents by creating more spacious Health Center units (each equipped with a shower), improving the common spaces, providing rooms for couples, and increasing natural light and access to the outdoors; and (iii) increase the number of independent living units to meet market demand. Site work began in January, 2018 with a formal construction expected to start in April, 2018. Construction of the new tower is expected allow occupancy of the 5th floor in October, 2019, occupancy of the lower floors of independent living in January, 2020 and upper floors in April, 2020. Construction of the new Health Center space in the lower levels of the new tower will be completed in phases with final completion expected in August, 2020. The foregoing is referred to as the “Tower Portion” of the Project. The first floor commons will also be completed in phases with first occupancy in August, 2020 and final occupancy in December, 2020, and is referred to as the “Administrative Offices Portion” of the Project.

The 79 new independent living apartments will be licensed under Chapter 50 of the Wisconsin Statutes as a “Residential Care Apartment Complex”. The 16 new transitional care assisted living units will be licensed under Chapter 50 of the Wisconsin Statutes as “Residential Care Apartment Complex”. In addition, the Corporation's Continuing Care Permit issued under Chapter 647 of the Wisconsin Statutes has been increased to cover the new units.

After the Project is completed, the Corporation will operate 369 units as follows:

Facility Level of Care License Current Proposed Tower Apartments - Central Independent Living RCAC 110 110 Tower Apartments - South Independent Living RCAC 90 90 Tower Apartments - North Independent Living RCAC -- 79 Health Center – Canterbury Court Assisted Living CBRF 24 24 Health Center – Transitional Care Transitional Care Assisted Living RCAC -- 16 Health Center – Windsor/Stratford Skilled Nursing SNF 50 50 Total 274 369

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Independent Living The 79 new independent living apartments will range in size from 1,455 to 2,515 square feet and all will feature two bedrooms with a living area, full kitchen, one to two bathrooms, laundry, an outdoor terrace and an optional den. Each apartment will feature a terrace from which Lake Michigan is visible. For a more detailed description of the furnishings and amenities of the independent living apartments, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Residency Contracts and Reimbursement Agreements – Independent Living Contract – Monthly Fees” in the Feasibility Study in Appendix D. Under the terms of a Residency Contract, an independent living resident will pay an Entrance Fee and a Monthly Service Fee. The following table summarizes the Monthly Service Fees and Entrance Fees for the Project’s independent living apartments. Fees are stated at the rates as of December, 2017. Monthly Service Fees are expected to increase 3% annually and continue throughout the forecast period. The Entrance Fees are expected to increase 3% annually beginning in 2021 and continue throughout the forecast period.

MONTHLY SERVICE FEES AND ENTRANCE FEES The Project – Independent Living Apartments Apartment Number of Size Monthly Entrance Style Unit Type Units (Sq. Ft.) Fees(1) Fees Johnstone 2-Bedroom 15 1,455 $3,970 $521,000 Kingston 2-Bedroom 15 1,665 $4,130 $607,700 Middleton 2-Bedroom 15 1,830 $4,330 $672,600 Lancaster 2-Bedroom 15 1,920 $4,630 $692,700 Northampton 2-Bedroom 15 1,915 $4,790 $704,600 Bridgewater 2-Bedroom + Den 1 1,830 $5,000 $947,600 Barrington 2-Bedroom + Den 1 1,920 $5,140 $979,700 Aberdeen 2-Bedroom + Den 1 2,515 $6,260 $1,094,900 Greenwich 2-Bedroom + Den 1 2,490 $6,340 $1,111,100 Totals/Weighted Average 79 1,779 $4,437 $659,649 (1) Single Occupancy. Excludes any height premiums for upper floors.

Second Person Fees: Standard Contract $ 475 $25,500 Life Care Contract 1,390 51,100

Under State law, the Corporation can begin the process of having prospective independent living residents execute Residency Contracts upon the receipt of the Continuing Care Permit. The Corporation has increased the total number of units covered by its existing Continuing Care Permit and began entering into Residency Contracts with respect to the Project in August, 2017. The Corporation is offering two types of Residency Contracts to prospective residents of the Project, a Life Care Contract or a Standard Contract. The Corporation is also offering prospective residents at the Central Tower and South Tower these same Residency Contracts. Under the Life Care Contract, a resident is entitled to health care services under the life care benefits program. The Life Care Contract will have an Entrance Fee that is 30% refundable. Under the Standard Contract, residents have certain limited health care services and the Entrance Fee is 90% refundable. The refundable portion of an Entrance Fee is paid at the earlier of re-occupancy of the unit by a new resident or within one year from when the unit is vacated. As of January 31, 2018, 72 of the 79 independent living apartments of the Project (91.1%) are reserved with a deposit equal to 10% of the applicable Entrance Fee. A summary of the marketing results can be found in the Feasibility Study under the heading “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Marketing the Independent Living Units” in Appendix D. Monthly Service Fees and Entrance Fees for the existing independent living apartments in the Tower Apartments increased 3% in 2018 and are expected to increase 3% annually through the forecast period.

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Health Center – Windsor/Stratford (Skilled Nursing) As part of the Project, the existing 25 Windsor beds will be relocated to floor two of the new tower and the existing 25 Stratford beds will be relocated to floor three of the new tower. All rooms will be private and will range in size from 346-505 square feet as compared to 275-290 square feet in the existing facility. Based on 2017 daily rates for the skilled nursing beds (see the chart entitled “Average Daily Rates-Windsor/Stafford” herein), the Corporation has forecasted annual rate increases of 3% for Private Pay, 2% for Medicare, and 1.5% for Medicaid beginning in 2018 continuing throughout the forecast period. The forecasted payor mix (by percentage of total days) for Windsor/Stratford during the forecast period is set forth in the Feasibility Study under the heading “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Management’s Basis for Forecast of Revenue and Entrance Fees – Forecasted Monthly Service Fees, Entrance Fees, and Daily Rates – Windsor/Stratford SNF” in Appendix D. Health Center – Canterbury Court (Assisted Living) As part of the Project, the existing 24 Canterbury Court units will be relocated to floor four of the new tower. Units will range in size from 346-505 square feet as compared to 277-462 square feet in the existing Canterbury Court units. Based on 2017 monthly rates for assisted living units (see the chart entitled “Monthly Service Fees - Canterbury Court” herein), the Corporation has forecasted annual rate increases of 3% for the Canterbury Court units beginning in 2018 continuing throughout the forecast period. The forecasted payor mix for Canterbury Court during the forecast period is set forth in the Feasibility Study under the heading “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Management’s Basis for Forecast of Revenue and Entrance Fees – Forecasted Monthly Service Fees, Entrance Fees, Entrance Fees, and Daily Rates – Canterbury Court” in Appendix D.

Health Center – Transitional Care Assisted Living The new 16 units of transitional care assisted living are being developed to serve the needs of residents unable to live independently but not requiring skilled nursing or CBRF care. The units are expected to be licensed as a RCAC under Chapter 89 of the Wisconsin Statutes. See “EXISTING CONTINUING CARE FACILITIES – Licensing and Regulations” herein. The units will provide services to residents transferring from the Tower Apartments and to residents admitted from the community at large. Located on 5th floor of the new tower, the 16 units will range in size from 424-1,147 square feet. The Life Care Contract and Standard Contract are available to residents under terms essentially the same as those described in the section “Residency Contracts”. Transitional care assisted living RCAC services are not part of the health care services under the Life Care Contract or Standard Contract. As a result, residents transferring from the Tower Apartments pay privately for transitional care assisted living RCAC services provided. In addition, residents who are admitted from the community at large pay privately for monthly fees. The following table summarizes the Average Monthly Service Fees and Average Entrance Fees for the transitional care assisted living units. Fees are stated at the rates for 2017. The Monthly Service Fees and Entrance Fees are expected to increase 3% annually beginning in 2018 and continuing throughout the forecast period.

MONTHLY SERVICE FEES AND ENTRANCE FEES The Project – Transitional Care Assisted Living Average Average Unit Type Number of Size Monthly Entrance Units (Sq. Ft.) Fees Fees Studio 2 415 $4,060 $142,400 One Bedroom 13 565-830 4,988 225,431 Two Bedroom 1 1,125 5,670 370,500 Totals/Weighted Average 16 662 $4,915 $224,119

Approvals and Permits The proposed timeline for construction and occupancy of the Project is set forth in Table 8 of the Feasibility Study in Appendix D. The Project is in the process of receiving architectural plan and construction approvals from the State

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of Wisconsin and the City of Milwaukee Development Center. Management of the Corporation believes that the Project, as currently designed, meets all applicable local government zoning ordinances. Receipt of permits for the Project will be received prior to the start of each of four phases of construction. The architectural team and construction manager have been in constant contact with the State of Wisconsin Department of Health Services (“DHS”) and the City of Milwaukee Development Center throughout the design process. Construction draws from the Project Fund are contingent upon receipt of permits and review by the Construction Monitor with respect to the Tower Portion of the Project. The Corporation has already received permits for the relocation of utilities prior to excavation. The State of Wisconsin DHS has already signed off on the excavation, footings and foundations and the City of Milwaukee permit for this work should be issued prior to April 11, 2018. The main building permit has been submitted to the State of Wisconsin DHS for review with approval anticipated late April or early May. The City of Milwaukee Development Center will typically issue its building permit approximately two weeks following the State of Wisconsin review. It is expected the final plans and specifications for the Health Center will be submitted to the State of Wisconsin for review in late June, with approval in September 2018. Construction on this portion of the project will not begin until fall 2019.

Other Capital Projects During the forecast period, other than the Project, there are no significant capital projects planned for the Community. Based on historical experience, the Corporation anticipates routine capital expenditures and improvements to its facilities will approximate between $1,600,000 to $1,900,000 per year during the forecast period.

PROJECT TEAM In 2016, the Corporation hired a development team to formally begin the development process for the Project. The team is led by Witz Company (Madison, Wisconsin) as the Project development manager. Other key members include Varsity Marketing LLC (Harrisburg, Pennsylvania) as the Marketing Consultant, VJS Construction Services (Milwaukee, Wisconsin) as the Construction Manager, Eppstein Uhen Architects (Milwaukee, Wisconsin) and Blitch/Knevel Architects (New Orleans, Louisiana) as Lead and Consulting Architects, respectively, Lorraine Hiatt, PhD, Environmental Gerontologist (New York, New York), A.V. Powell & Associates, LLC (Atlanta, Georgia) as the Actuarial Consultant, and zumBrunnen, Inc. as the Construction Monitor.

Project Manager – Witz Company The Corporation has engaged Witz Company (“Witz”) as the project manager for the Project. Witz, a Wisconsin corporation based in Madison, Wisconsin, provides development consulting services during the planning and development of the Project through construction and move-ins. Witz specializes in providing planning, development management, and strategic consulting services to senior housing clients nationwide. Craig Witz, the principal of Witz Company, has more than 30 years of senior living development experience. Mr. Witz obtained his juris doctorate from University of San Diego and is a member of the State Bar of Wisconsin. He previously served as project manager for both national and regional CCRC developers and for the last 15 years has worked independently offering project management and consulting services to expansion and new campus projects nationwide. His clients include non- profit owners and operators of existing senior housing facilities and for profit senior housing developers. Craig Witz is currently or has been responsible for or involved with the development of more than 16 senior living development and expansion projects. Mr. Witz served as the development project manager for the Corporation’s South Tower expansion which was completed in 2011. In 2016, Witz completed the $60 million redevelopment of the Rose Villa campus in Portland, Oregon, a project which won the EFA Award of Merit and the AIA Design for Aging Review award. He is currently serving as project manager on the $28 million Rose Villa Phase 2 project which began construction January, 2018. In the past five years Witz has completed master planning or development assignments on senior living projects in West Des Moines, Iowa, Belleville, Illinois, Baltimore, Maryland, Greensboro, North Carolina, Lincoln, Nebraska, Dallas, Oregon, Madison and Milwaukee, Wisconsin, among others. The Corporation entered into a Development Project Management Agreement (“Development Agreement”) dated October 12, 2016 with Witz to provide certain development services for the Project. For a description of the

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Development Agreement, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Consulting Agreements – Project Manager” in the Feasibility Study in Appendix D.

Marketing Consultant – Varsity Marketing LLC The Corporation has engaged Varsity Marketing LLC, a subsidiary of Pavone Marketing Group, Inc. (“Varsity”), a Pennsylvania corporation with its principal office in Harrisburg, PA, as the marketing consultant for the Project. Varsity is a full-service boutique marketing firm which provides strategic marketing services to organizations developing senior housing projects nationwide. Marketing services provided by Varsity are specified in a Marketing Services Agreement effective as of December 2, 2016. For a description of the Marketing Services Agreement, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Consulting Agreements – Marketing Consultant’ in the Feasibility Study in Appendix D. A partial list of Varsity marketing clients includes:

No. Independent Community Location State Living Units Edenwald Towson MD 287 Trinity Springs (Elim Care) Oxford FL 98 Rydal Waters (Presby’s Inspired Life) Jenkintown PA 85 The Esquiline Belleville IL 33 Rydal Park (Presby’s Inspired Life) Jenkintown PA 305 Rosemont (Presby’s Inspired Life) Rosemont PA 133 Spring Mill (Presby’s Inspired Life) Lafayette Hill PA 59 Homestead Village Lancaster PA 165 The Farmstead Lancaster PA 52

Construction Manager – VJS Construction Services The Corporation has selected VJS Construction Services, Pewaukee, Wisconsin (“VJS”) to provide pre-construction estimating and construction management services to the Project. The Corporation has executed a Construction Contract with VJS for construction of the Project. The Construction Contract is based on a stipulated guaranteed maximum lump sum price of $103,287,592. The guaranteed maximum price is based on the status of contract documents at the time the amount was negotiated along with a schedule of values, clarifications, allowances and contingencies, and exclusions agreed to by the Corporation. At the time of setting the guaranteed maximum price, certain design elements were still in process, therefore, VJS set aside certain contingencies pending final design. The guaranteed maximum price may be adjusted downward (but not upward) once all design is completed in summer, 2018; provided, however, like a typical guaranteed maximum price contract, the guaranteed maximum price may be adjusted if the scope of work changes. The guaranteed maximum price contract also includes a provision whereby any savings in the guaranteed maximum price, as adjusted by any approved changes in the work, shall be shared 20% to the Construction Manager and 80% to the Corporation. For information regarding the total construction costs for the Project, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Plan of Finance – Notes to Sources and Uses of Funds” in the Feasibility Study in Appendix D. The Construction Contract requires VJS to substantially complete construction of the Project within a pre-determined schedule agreed to before finance closing and construction start. In the event VJS does not complete construction within the specified construction period (namely, January, 2020 for the opening of floors 7 – 14 of the independent living apartment tower and April, 2020 for the opening of floors 15 –22 of the independent living apartment tower), subject to delays reasonably beyond its control, VJS will be liable for liquidated damages for each day of delay at a pre-determined per diem rate. For information regarding the Project timeline, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Project Timeline” in the Feasibility Study in Appendix D. VJS is required under the Construction Contract to furnish the Corporation with a performance bond and payment bond, each in the amount of the contract price but excluding costs of materials which will be purchased directly by the Corporation so that it may benefit from a sales tax exemption. A-16

A representative list of experience on similar projects: Project Name Location Owner Architect Final Billing Project Summary Saint John’s On Milwaukee, WI Saint John’s Perkins Eastman $49,532,000 independent living The Lake – Communities, in association (includes facility with 90 units South Tower Inc. with Continuum residential Expansion Architects + selections) Planners, S.C. St. Augustine Milwaukee, WI Gus Ramirez Korb + $43,000,000 192,454 square feet Preparatory Associates school for grades 4k- Academy Architects 12 and related athletic facilities Dickson Hollow Menomonee Presbyterian InSite Architects $32,000,000 297,675 square feet Senior Housing Falls, WI Homes of WI senior apartment facility and assisted living and memory care for total 180 units Bethany Home Waupaca, WI Bethany Home Plunkett Raysich $23,000,000 Independent living, Architects RCAC, CBRF, memory care and SNF Oak Creek- Oak Creek, WI Oak Creek- Eppstein Uhen $54,000,000 New elementary Franklin Joint Franklin Joint Architects school and 9th grade School District; School District center 9th Grade Center and Forest Ridge Elementary School

Estimated Fixed Price Project Costs VJS has provided an approximate allocation for the costs of the Construction Contract as follows: Portion of the Project Project Costs Site Work $ 2,622,397 Parking 10,861,920 Lower Level Health Center 2,049,905 First Floor/Auditorium 8,425,500 Floors Two - Five 36,201,450 Sixth Floor (Mechanical) 1,646,100 Floors Seven - Twenty-Two $ 41,016,720 Subtotal $102,823,992 Remodel First Floor $ 463,600 Total $103,287,592

For additional information on the Project costs see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Plan of Finance” in the Feasibility Study in Appendix D.

Lead Architect – Eppstein Uhen Architects The Corporation has engaged Eppstein Uhen Architects (“EUA”) to provide architectural design services and interior design services for the Project pursuant to an Architectural Design Agreement dated December 12, 2016 and an Interior Design Agreement dated August 22, 2017. EUA is an architecture firm founded in 1907 with offices located A-17

in Milwaukee (headquarters) and Madison, Wisconsin, Denver, Colorado and Des Moines, Iowa. It specializes in workplace, healthcare, learning, living, science and technology, and entertainment environments. A representative list of EUA’s projects includes the following:

Estimated Sponsor Project Status Project Cost State of Wisconsin & Veterans John R. Moses Skilled In Design $60 Million Administration Nursing Facility Campus Repositioning: New Phase 1 Complete, $45 Million IL, Wellness Center, AL, Oklahoma Methodist Manor Phase 2 Under (combined Memory Support and Construction phases) Community Center Milwaukee Bucks Milwaukee Bucks Arena Under Construction $524 Million Basketball Team Acuity Insurance Corporate Headquarters Complete $170 Million New High School, Capital Verona Wisconsin School Maintenance, and School In Design $181 Million District Renovations Kettle Moraine Wisconsin Renovations, Additions, Complete $49 Million School District Capital Maintenance Froedtert + Medical College of Drexel Town Square Health Complete $35 Million Wisconsin Center GE Healthcare Corporate Headquarters Complete $85 Million Conversion of a big-box mall into a lifestyle center with Bayshore Town Center Complete $210 Million housing, entertainment, and retail Open air mixed use The Corners of Brookfield Complete $150 Million development

The expected architect and design fees are described under the heading “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Consulting Agreements – Architect” in the Feasibility Study in Appendix D.

Consulting Architect – Blitch/Knevel Architects Ron Blitch of Blitch/Knevel Architects (“Blitch”) is serving as a Consulting Architect with EUA on the Project. Blitch/Knevel Architects specializes in the design of healthcare, educational, religious, and senior living facilities. A representative list of Blitch’s projects includes the following:

Estimated Sponsor Project Status Project Cost

Archdiocese of New Orleans CCRC Addition – Rehab Construction $8 million Pavillion – 30 beds Completed 2016 St. Margaret’s Daughters CCRC – Phase One Construction $26 million 116 Bed Skilled Nursing Completed 2015 Charter Senior Living Independent + Schematic $13 million Assisted Living – 80 units Design 2018

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Environmental Gerontologist – Lorraine Hiatt, PhD For information regarding Lorraine Hiatt, PhD and the services to be performed, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Consulting Agreements – Environmental Gerontologist” in the Feasibility study in Appendix D. Actuarial Consultant – A.V. Powell & Associates, LLC For information regarding A.V. Powell & Associations, LLC and the actuarial services provided to the Corporation, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Consulting Agreements – Actuary” in the Feasibility Study in Appendix D. Construction Monitor – zumBrunnen The Corporation has engaged zumBrunnen, Inc. (“zumBrunnen”) Atlanta, Georgia to act as construction monitor during the construction period for the “Tower Portion” of the Project (and not the “Administrative Offices Portion” of the Project). zumBrunnen is the nation’s leading construction consulting, facility assessment and capital replacement planning firm. The company was founded in 1989 and brings many years of construction industry experience specializing in senior living facilities. zumBrunnen has provided these services to over 100 projects nationally in the last five years alone. zumBrunnen served as Construction Monitor for the Corporation’s South Tower expansion which was completed in 2011. Under the terms of the contract, prior to the start of construction, zumBrunnen will issue a pre-closing report for the purpose of validating the scope of the Project, document status and sufficiency of funding. This includes a review of the Project scope, key contracts, permits, budgets and other documentation. The fee for such pre-closing work is $7,500. After construction commences, the services of zumBrunnen as construction monitor include attendance at monthly site meetings to report on the progress of construction, provide payment approvals and confirm substantial compliance with the plans and specifications. The fee for each site visit is $2,950 plus expenses. PROJECTED FINANCIAL INFORMATION Wipfli LLP, an independent certified public accountant firm, has prepared the Financial Feasibility Study dated March 2, 2018 (the “Feasibility Study”), which is included as Appendix D. The financial forecast included in the Feasibility Study is based upon assumptions made by management of the Corporation and presents, to the best of the Corporation’s knowledge and belief, the Corporation’s expected results of operations, changes in net deficient, cash flows, and financial position for the six (6) years ending December 31, 2023. Forecasted results usually differ from actual results because events and circumstances frequently do not occur as expected, and those differences may be material. See “RISK FACTORS – Financial Projections” in the forepart to this Official Statement. The Feasibility Study contains the forecasted debt service coverage ratio, days cash on hand and cash to debt ratio for the Fiscal Years ending December 31, 2022 and 2023. See APPENDIX D – “FINANCIAL FEASIBILITY STUDY – FINANCIAL STATEMENTS – Forecasted Schedules of Financial Ratios”.

LOCATION, PRIMARY MARKET AREA, COMPETITION The Community is located on an approximately 5.02 acre site just north of downtown Milwaukee, Wisconsin, overlooking Lake Michigan. For information regarding the site and location, the defined primary market area for the Community and a description of proposed comparable and competitive senior independent living and assisted living projects within the defined primary market area, see “SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES – Market Assessment” in the Feasibility Study in Appendix D.

SELECT FINANCIAL INFORMATION Summary of Historical Financial Statements The tables below set forth the consolidated balance sheets as of December 31, 2015, and 2016 and the consolidated statements of operations of the Corporation for the fiscal years then ended, which have been summarized from financial statements of the Corporation audited by Wipfli LLP, independent certified public accountants, whose report appears in Appendix B to this Official Statement. The following tables also summarize the information as of and for the year ended December 31, 2017, which has been derived from the consolidated financial statements of the Corporation which appear in Appendix C. Such financial statements are unaudited and do not contain footnotes, but in the opinion of management of the Corporation, reflect all adjustments (none of which was other than a normal recurring adjustment) necessary for a fair presentation of the results of the operations, in accordance with accounting

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principles generally accepted in the United States of America. The consolidated financial statements include the balances of the Foundation; however, the Foundation is not part of the Obligated Group.

Consolidated Balance Sheets December 31 (Audited) (Audited) (Unaudited) 2015 2016 2017 Assets

Current Assets Cash $ 645,977 $ 555,127 $ 445,330 Receivables Residents - Net 963,995 698,628 646,788 Entrance Fees 7,500 393,586 0 Pledges 175 181,105 49,205 Prepaid expenses and other 219,256 215,305 216,426 Total Current Assets 1,836,903 2,043,751 1,357,749

Property and equipment - Net 79,707,097 77,739,636 78,769,258 Assets limited to use 36,648,389 42,978,852 54,322,924 Development costs - Net 1,698,280 1,389,502 1,509,804 Investment in unconsolidated affiliate 0 74,998 74,998 Total Assets $119,890,669 $124,226,739 $136,034,733

Liabilities and Net Assets 2015 2016 2017

Current Liabilities: Current maturities of long-term debt $ 828,099 $1,102,505 $1,135,592 Accounts payable 424,335 228,068 1,042,871 Accrued expenses 947,499 1,352,032 1,299,442 Advance deposits and prepayments 841,802 1,411,537 1,421,203 Total Current Liabilities 3,041,735 4,094,142 4,899,108

Long-term liabilities Long-term debt, less current maturities 54,976,864 53,690,239 52,488,889 Refundable entrance fees 36,391,883 38,188,132 39,185,246 Expansion deposits 0 0 4,590,785 Deferred revenue on resident entrance fees 18,955,268 17,975,820 18,637,087 Total Long-term liabilities 110,324,015 109,854,191 114,902,007 ______Total liabilities 113,365,750 113,948,333 119,801,115

Net assets 6,524,919 10,278,406 16,233,618 ______Total Liabilities and Net Assets $119,890,669 $124,226,739 $136,034,733

A-20

Consolidated Statements of Operations Year ended December 31

(Audited) (Audited) (Unaudited) 2015 2016 2017 Revenue Net resident revenue $18,491,564 $18,759,409 $18,450,947 Investment income 1,282,594 1,248,730 1,684,861 Contributions 93,741 52,687 76,522 Net assets released from restrictions for operations 189,159 241,190 213,467 Other 1,605,435 1,268,826 1,375,154 Total revenue 21,662,493 21,570,842 21,800,951

Expenses Operating expenses 13,230,295 13,638,564 14,221,672 Depreciation and amortization 4,713,402 4,551,062 4,791,247 Interest 3,140,367 1,869,685 1,965,649 Total Expenses 21,084,064 20,059,311 20,978,568

Income from operations 578,429 1,511,531 822,383

Loss on early retirement of debt (10,383,633) 0 0

Excess (deficiency) of revenue over expenses (9,805,204) 1,511,531 822,383

Other changes in unrealized gains and losses on investments other than trading securities (1,215,539) 1,433,366 4,272,432

Net assets released from restrictions for purchase of property and equipment 56,058 25,596 40,075 ______Increase (decrease) in unrestricted net assets $(10,964,685) $ 2,970,493 $ 5,134,890

A-21

Management Discussion and Analysis The following is based on consolidated financial information, which includes accounts of the Corporation and the Foundation; however, the Foundation is not part of the Obligated Group. As of and for the year end December 31, 2017, the Foundation accounted for 5.4% of total consolidated assets, 0.9% of total consolidated revenues and 0.7% total consolidated expenses. Results of Operations Fiscal 2016 Compared to Fiscal 2015 Balance Sheet Cash of $555,127 reflects net entry fees of $3,300,000 collected year-to-date and the $810,000, $860,000, $1,000,000, and $1,000,000 transfers (total: $3,670,000) to the Investment Portfolio in March, July, November, and December 2016, respectively. Entry Fees Receivable reflects deferred entry fees on one resident for which collection has been deferred as part of the sale agreement. The investment portfolio balance (included in Assets Limited as to Use) of $43,000,000 reflects the $3,670,000 excess cash transfers referenced previously combined with positive portfolio earnings. Debt Service Reserve Fund consists of $1,900,000 of required Series 2015B reserve funds combined with $375,000 of elective principal/interest reserve funds. These funds reflect the December, 2015 refinancing of the Series 2009A bonds and the related 2017 principal and interest payments of $285,000 and $922,000 on the 2015B bonds, respectively. The next interest payment date is March 15, 2017. Deferred Financing Fees consist of issuance costs associated with the Series 2015A and Series 2015B bond issues which refinanced the Series 2009A bonds. Long-term debt reflects the December, 2015 refinancing of the Series 2009A bonds and consists of $20,302,000 of Series 2015A private bank placement bonds, $24,910,000 of Series 2015B public bonds and $9,235,000 Series 2012 private bank placement bonds. Net Assets reflects a one-time loss on advanced refunding of $10,384,000 recorded in December, 2015. No such losses occurred in 2016. Statement of Operations Total Revenue in 2016 was comparable to 2015. There was an average 3% increase assessed to monthly rates net of decreases in Tower Apartments occupancy, Investment Income and Contribution Income. Operating expenses decreased compared to December 2015 levels by 4.9%. Dining and Hospitality costs exceeded 2015 levels by 3.3% due to an average wage increase of 3% combined with anticipated increases in raw food costs and supplies related to increased dining utilization and net of the favorable 2016 dining inventory adjustment. Administrative costs exceeded 2015 levels by 8.2% due to planned increases in health insurance utilization and rates, and annual wage increases approximating 3%. Interest expense lags 2015 levels due mainly to interest savings from the 2015 refinancing. Favorable variances reported for unrealized gains/losses reflect the changes in investment markets between years. Results of Operations Fiscal 2017 Compared to Fiscal 2016 Balance Sheet Cash of $445,330 reflects net entry fees on existing units of $4,200,000, less $4,900,000 paid in Capital Expenditures ($4,000,000 of which relates to the Project). The investment portfolio balance (included in Assets Limited as to Use) of $54,300,000 reflects positive portfolio earnings. Debt Service Reserve Fund consists of $1,900,000 of required Series 2015B reserve funds combined with $376,000 of elective principle/interest reserve funds. These funds reflect the December, 2015 refinancing of the Series 2009A bonds. The next interest payment date is March 15, 2018. This balance also includes $4,600,000 from deposits on the expansion units. Deferred Financing Fees consist of issuance costs associated with the Series 2015A and 2015B bond issues which refinanced the Series 2009A Bonds. Long-term debt reflects the December, 2015 refinancing of the Series 2009A Bonds and consists of $20,000,000 of Series 2015A private bank placement bonds, $24,600,000 of Series 2015B public bonds and $8,800,000 Series 2012 private bank placement bonds. Statements of Operations Total Revenue exceeded December 2016 by 1.1% reflecting an average 3% increase assessed to monthly rates net of decreases in Tower Apartments occupancy, investment portfolio realized earnings and dividends which exceed 2016 levels, and increased Catering and Clinic revenues. Operating expenses exceed December 2016 levels by 4.6%. Direct Care costs exceed 2016 levels by 5.7% due mainly to annual wage increases of approximately 3% combined with additional health care staffing related to continuous improvement initiatives within the Community. Maintenance costs exceed 2016 levels by 3.9% primarily due to the December, 2016 addition of the Director of Facilities A-22

Management position combined with timing variances on various campus repair/replacement costs. Dining/Hospitality and Housekeeping & Laundry reflect the transfer of certain CBRF staff from Housekeeping to Dining as part of a departmental re-organization. Administrative costs exceed 2016 levels by 2.5% primarily due to annual wage increases approximating 3% and costs of organization-wide dementia training provided in February. Depreciation and Amortization exceeds 2016 levels by 5.3% due to the mid-2016 capitalization of the Lower Level renovation project. Favorable variances reported for unrealized gains/losses reflect the positive impact of the investment markets between years on the Saint John’s investment portfolio.

Historical Debt Service Coverage Ratio The table below sets forth the Historical Debt Service Coverage Ratio of the Corporation for the fiscal years ended December 31, 2015 and 2016 based on audited financial statements and for the fiscal year ended December 31, 2017 based on unaudited financial statements prepared by management of the Corporation.

Debt Service Coverage Ratio Fiscal Year Ended December 31, 2015 2016 2017 Income from Operations $ 661,804 $1,573,169 $ 775,175 Add: Interest Expense 3,140,367 1,869,685 1,965,649 Add: Depreciation & Amortization 4,713,402 4,551,062 4,791,247 Less: Amortization of Entrance Fees (2,494,653) (2,478,876) (2,554,521) Add: Net Entrance Fees Received 2,546,510 3,295,677 4,212,902 Net Income Available for Debt Service(1) $8,567,430 $8,801,717 $9,190,452

Actual Annual Debt Service(2) $3,868,947 $2,515,049 $3,031,084 Debt Service Coverage Ratio 2.21x 3.50x 3.03x

(1) Calculated in accordance with the terms of the Master Indenture; excludes the Foundation. (2) Actual annual debt service on the outstanding Series 2012A Bonds, Series 2015A and Series 2015B Bonds.

Days Cash on Hand The table below sets forth the Days Cash on Hand of the Corporation as of December 31, 2015 and 2016 based on audited financial statements and as of December 31, 2017 based on unaudited financial statements prepared by management of the Corporation. Days Cash on Hand(1) As of December 31, 2015 2016 2017 Cash and Cash Equivalents $ 645,977 $ 555,127 $ 445,330 Investments 28,729,900 34,717,781 44,670,413 TOTAL $29,375,877 $35,272,908 $45,115,743

Total Expenses $21,068,956 $20,046,198 $20,966,358 Less: Depreciation and Amortization (4,713,402) (4,551,062) (4,791,247) Less: Bad Debt (24,617) (29,200) (13,486) Adjusted Cash Operating Expenses $16,330,937 $15,465,936 $16,161,625 Daily Cash Operating Expenses $ 44,742 $ 42,372 $ 44,278

Days of Cash on Hand 657 833 1,019 (1) Calculated in accordance with the terms of the Master Indenture; excludes the Foundation. Days Cash on Hand is determined by dividing Cash and Investments (as defined in the Master Indenture) by the quotient obtained by dividing Total Expenses (as defined in the Master Indenture) including interest expense but excluding depreciation, amortization, bad debt and other non-cash expenses, by 365.

A-23

Sources of Revenues The following tables set forth the sources of revenues for the assisted living and skilled nursing facilities of the Corporation for the fiscal years ended December 31, 2015, 2016 and 2017:

Canterbury Court Sources of Revenues Fiscal Year Ended December 31, 2015 2016 2017 Life Care 37% 33% 40% Private Pay 63% 67% 60% Total 100% 100% 100%

Windsor/Stratford Sources of Revenues(1) Fiscal Year Ended December 31, 2015 2016 2017 Life Care 19% 18% 29% Private Pay 45% 59% 51% Medicaid 9% 7% 6% Medicare 27% 16% 14% Total 100% 100% 100% (1) Private Pay, Medicaid and Medicare may include former Tower Apartments residents not covered by a Life Care Contract. All percentages are based on “net” revenues of the applicable facility.

Investment Policy The Board of Directors of the Corporation has adopted Investment Policy Guidelines (the “Guidelines”) which establish the investment objectives and policy guidelines that will be used by the Investment Committee, a standing committee of the Board of Directors, in managing investments of assets designated for long-term investment, including entrance fees and other long-term funds which are under the Corporation’s control and deemed appropriate for this investment pool (the “Fund”). The Investment Committee hires investment managers to manage the assets of the Fund and an investment consultant to assist the Investment Committee in fulfilling their fiduciary responsibilities and in fulfilling their responsibilities in accordance with the Investment Policy. The primary investment objectives of the Corporation’s Fund are to (a) preserve the safety of principal, (b) earn the highest possible total return consistent with prudent levels of risk, and (c) to create a stream of investment returns to insure the systematic and adequate funding of cash flow requirements through contributions and professional management of the Fund assets. Insurance The Corporation maintains insurance with respect to its property and business (or to self-insure against such casualties, contingencies and risk) in such amounts not less than is customary in the case of corporations engaged in the same or similar activities and similarly situated and, in the judgment of the Corporation and certified by an Independent Insurance Consultant, which are adequate to protect the Corporation’s property and operations. The Corporation believes that its existing insurance policies satisfy this requirement.

A-24

APPENDIX B

Audited Consolidated Financial Statements of Saint John’s Communities, Inc.

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6DLQW-RKQ¶V&RPPXQLWLHV,QF and Subsidiary Milwaukee, Wisconsin

Consolidated Financial Statements and Supplementary Information

Years Ended December 31, 2016 and 2015

Independent Auditor's Report

Board of Directors Saint John's Communities, Inc. Milwaukee, Wisconsin

We have audited the accompanying consolidated financial statements of Saint John's Communities, Inc. and Subsidiary, which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended and the related notes to the consolidated financial statements.

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

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

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

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

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Saint John's Communities, Inc. and Subsidiary as of December 31, 2016 and 2015, and the results of their operations, changes in their net assets, and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States.

Wipfli LLP

March 27, 2017 Milwaukee, Wisconsin 1 Saint John's Communities, Inc. and Subsidiary Consolidated Balance Sheets December 31, 2016 and 2015

Assets 2016 2015

Current assets: Cash $ 555,127 $ 645,977 Receivables: Residents Net 698,628 963,995 Entrance fees 393,586 7,500 Pledges 181,105 175 Prepaid expenses and other 215,305 219,256

Total current assets 2,043,751 1,836,903

Property and equipment Net 77,739,636 79,707,097

Assets limited as to use 42,978,852 36,648,389

Development costs Net 1,389,502 1,698,280

Investment in unconsolidated affiliate 74,998

TOTAL ASSETS $ 124,226,739 $ 119,890,669

2 Saint John's Communities, Inc. and Subsidiary Consolidated Balance Sheets (Continued) December 31, 2016 and 2015

Liabilities and Net Assets 2016 2015

Current liabilities: Current maturities of longterm debt $ 1,102,505 $ 828,099 Accounts payable: Trade 159,805 103,207 Construction 68,263 321,128 Accrued expenses 1,352,032 947,499 Advance deposits and prepayments 1,411,537 841,802

Total current liabilities 4,094,142 3,041,735

Longterm liabilities: Longterm debt, less current maturities 53,690,239 54,976,864 Refundable entrance fees 38,188,132 36,391,883 Deferred revenue on resident entrance fees 17,975,820 18,955,268

Total longterm liabilities 109,854,191 110,324,015

Total liabilities 113,948,333 113,365,750

Net assets: Unrestricted 7,663,115 4,692,622 Temporarily restricted 2,615,291 1,832,297

Total net assets 10,278,406 6,524,919

TOTAL LIABILITIES AND NET ASSETS $ 124,226,739 $ 119,890,669

See accompanying notes to consolidated financial statements.

3 Saint John's Communities, Inc. and Subsidiary Consolidated Statements of Operations Years Ended December 31, 2016 and 2015

2016 2015

Revenue: Net resident service revenue $ 18,759,409 $ 18,491,564 Investment income 1,248,730 1,282,594 Contributions 52,687 93,741 Net assets released from restrictions for operations 241,190 189,159 Other 1,268,826 1,605,435

Total revenue 21,570,842 21,662,493

Expenses: Direct Care 4,449,779 4,591,571 Dietary 2,166,350 2,147,360 Maintenance 1,894,978 1,738,849 Housekeeping 467,049 446,774 Administration 4,647,295 4,295,741 Grants 13,113 10,000 Depreciation and amortization 4,551,062 4,713,402 Interest 1,869,685 3,140,367

Total expenses 20,059,311 21,084,064

Income from operations 1,511,531 578,429

Loss on early retirement of debt (10,383,633)

Excess (deficiency) of revenue over expenses 1,511,531 (9,805,204) Other changes in unrestricted net assets: Change in net unrealized gains and losses on investments other than trading securities 1,433,366 (1,215,539) Net assets released from restrictions for purchase of property and equipment 25,596 56,058

Increase (decrease) in unrestricted net assets $ 2,970,493 $ (10,964,685)

See accompanying notes to consolidated financial statements.

4 Saint John's Communities, Inc. and Subsidiary Consolidated Statements of Changes in Net Assets Years Ended December 31, 2016 and 2015

2016 2015

Unrestricted net assets: Excess (deficiency) of revenue over expenses $ 1,511,531 $ (9,805,204) Change in net unrealized gains and losses on investments other than trading securities 1,433,366 (1,215,539) Net assets released from restrictions for purchase of property and equipment 25,596 56,058

Increase (decrease) in unrestricted net assets 2,970,493 (10,964,685)

Temporarily restricted net assets: Contributions 879,980 1,468,673 Investment income 46,015 7,190 Change in net unrealized gains and losses on investments other than trading securities 123,785 (27,706) Net assets released from restrictions (266,786) (245,217)

Increase in temporarily restricted net assets 782,994 1,202,940

Change in net assets 3,753,487 (9,761,745) Net assets at beginning 6,524,919 16,286,664

Net assets at end $ 10,278,406 $ 6,524,919

See accompanying notes to consolidated financial statements.

5 Saint John's Communities, Inc. and Subsidiary Consolidated Statements of Cash Flows Years Ended December 31, 2016 and 2015

2016 2015

Increase (decrease) in cash: Cash flows from operating activities: Change in net assets $ 3,753,487 $ (9,761,745) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation and amortization 4,551,062 4,713,402 Amortization of original issue discounts and deferred financing costs (25,919) 66,917 Change in net unrealized gains and losses on investments other than trading securities (1,557,151) 1,243,245 Net realized gains on sales of securities (653,921) (694,289) Net proceeds from turnover of resident entrance fees 3,295,677 2,546,510 Provision for bad debt 29,200 24,617 Amortization of deferred revenue on resident entrance fees (2,478,876) (2,494,653) Loss on early retirement of debt 1,598,675 Restricted contributions (879,980) (1,468,673) Changes in operating assets and liabilities: Resident receivables 236,167 (241,286) Pledges receivable 100 Prepaid expenses and other 3,951 (18,890) Accounts payable 56,598 (255,763) Accrued expenses 404,533 (791,679) Advanced deposits and prepayments 183,649 (36,768)

Net cash provided by (used in) operating activities 6,918,477 (5,570,280)

Cash flows from investing activities: Sales of assets limited as to use 13,349,185 25,336,214 Purchases of assets limited as to use (17,468,576) (25,349,938) Purchase of investment in unconsolidated affiliate (74,998) Capital expenditures (2,527,688) (4,546,903)

Net cash used in investing activities (6,722,077) (4,560,627)

6 Saint John's Communities, Inc. and Subsidiary Consolidated Statements of Cash Flows (Continued) Years Ended December 31, 2016 and 2015

2016 2015

Increase (decrease) in cash: (continued) Cash flows from financing activities: Payment of deferred finance costs $ (158,201) $ (556,992) Restricted contributions 699,050 1,468,673 Payment of longterm debt (828,099) (39,145,000) Proceeds from issuance of longterm debt 46,895,398

Net cash provided by (used in) financing activities (287,250) 8,662,079

Net decrease in cash (90,850) (1,468,828)

Cash at beginning 645,977 2,114,805

Cash at end $ 555,127 $ 645,977

Supplemental cash flow information: Cash paid during the year for interest, net of amount capitalized of $126,368 and $51,193 in 2016 and 2015, respectively $ 1,560,582 $ 3,874,827

Noncash investing and financing activities: Capital expenditures included in accounts payable $ 68,263 $ 321,128 Financed portion of loss on early retirement of debt 8,784,958

See accompanying notes to consolidated financial statements.

7 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies

The Entity

Saint John's Communities, Inc.'s (the "Corporation") operations include a 111-unit independent living facility ("North Tower Apartments"), a 90-unit independent living facility ("South Tower Apartments"), a 24-unit assisted living facility ("Canterbury Court"), and a 50-bed skilled nursing facility ("Windsor/Stratford"). Collectively, the North Tower and South Tower Apartments are referred to as "Lake Tower Apartments."

Saint John's Communities Foundation, Inc. (the "Foundation") is a nonstock, nonprofit corporation organized exclusively to benefit, support, promote, and assist the Corporation. The Board of Directors of the Corporation elects the directors of the Foundation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Corporation and the Foundation (collectively, the "Organization"). All material intercompany accounts and transactions have been eliminated in consolidation.

Financial Statement Presentation

The Organization follows accounting standards set by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The ASC is the single source of authoritative accounting principles generally accepted in the United States (GAAP) to be applied to nongovernmental entities.

Use of Estimates in Preparation of Financial Statements

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that directly affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates.

Cash Equivalents

The Organization considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents, excluding amounts held as short-term investments in the Organization’s investment portfolio and amounts whose use is limited or restricted.

8 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies (Continued)

Resident Receivables and Credit Policy

Resident receivables are uncollateralized resident obligations that are stated at the amount management expects to collect from outstanding balances. These obligations are primarily from residents of the Organization's facilities, most of whom are from the Milwaukee area. A number of the nursing facility residents are insured under third-party payor agreements. Windsor/Stratford bills third-party payors on the residents' behalf, or if a resident is uninsured, the resident is billed directly. Once claims are settled with the primary payor, any secondary insurance is billed, and residents are billed for copay and deductible amounts that are the residents' responsibility. Lake Tower Apartments and Canterbury Court residents are billed directly. Payments on resident receivables are applied to the specific claim identified on the remittance advice or statement. The Organization does not have a policy to charge interest on past due accounts.

The carrying amounts of resident receivables are reduced by allowances that reflect management’s best estimate of the amounts that will not be collected. Management provides for contractual adjustments under terms of third-party reimbursement agreements through a reduction of gross revenue and a credit to resident receivables. In addition, management provides for probable uncollectible amounts, primarily uninsured residents and amounts residents are personally responsible for, through a charge to operations and a credit to an allowance for doubtful accounts based on its assessment of historical collection likelihood and the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to an allowance for doubtful accounts and a credit to resident receivables.

Resident receivables are recorded in the accompanying consolidated balance sheets net of the allowance for doubtful accounts.

Investments

Investments included in assets limited as to use are measured at fair value in the accompanying consolidated balance sheets.

Investment income or loss (including realized gains and losses on investments, interest, and dividends) is included in excess (deficiency) of revenue over expenses unless the income is restricted by donor or law. Unrealized gains and losses on investments are excluded from excess (deficiency) of revenue over expenses unless the investments are trading securities. Realized gains or losses are determined by specific identification.

The Organization monitors the difference between the cost and fair value of its investments. A decline in market value of an individual investment security below cost that is deemed to be othe than temporary results in an impairment, and the Organization reduces the investment's carrying value to fair value. A new cost basis is established for the investment, and any impairment loss is recorded as a realized loss in investment income.

9 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies (Continued)

Assets Limited as to Use

Assets limited as to use include assets held by trustees under terms of a bond trust indenture agreement, designated assets set aside by the Board of Directors for capital improvements and other purposes, over which the Board retains control and may at its discretion subsequently use for other purposes, and assets designated to fund temporarily restricted net assets.

Property, Equipment, and Depreciation

Property and equipment acquisitions are recorded at cost or, if donated, at fair value at the date of donation. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight-line method. Estimated useful lives range from 30 to 31 years for buildings, 15 years for building and land improvements, and from 3 to 10 years for vehicles, equipment, furniture, and fixtures.

The Organization capitalizes interest during the construction period for major capital additions. Capitalized costs include interest costs incurred on borrowed funds offset by interest earnings on certain trusteed funds.

Gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the acquired long-lived assets are placed in service.

Deferred Financing Costs and Original Issue Discounts and Premiums

Deferred financing costs and original issue premiums and discounts related to the issuance of long-term debt are amortized over the life of the related debt. Amortization of bond issuance costs and original issue premiums and discounts are included with interest expense in the accompanying consolidated statements of operations.

Development Costs

Development costs relate to amounts paid for development, sales, marketing, and other related costs incurred in connection with acquiring initial resident contracts for the South Tower expansion. These costs are amortized using the straight-line method over 10 years, which is the estimated average life expectancy of the initial resident population. The amortization of $308,778 in both 2016 and 2015 is included in depreciation and amortization in the accompanying consolidated statements of operations.

10 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies (Continued)

Impairment

The Organization reviews its property, equipment, and intangible assets periodically to determine potential impairment by comparing the carrying value of the property, equipment, and identified intangible assets with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, the Organization would recognize an impairment loss at that time. No impairment loss was recognized in 2016 or 2015.

Entrance Fees

Fees paid by residents upon entering Lake Tower Apartments, net of the portion thereof that is refundable to the residents, are recorded as deferred revenue and amortized to income using the straight-line method over future periods based on the estimated life expectancy of the resident. The period of amortization is adjusted annually based on the actuarially determined remaining life expectancy of each individual or joint and last survivor life expectancy of each pair of residents occupying the same unit. The refundable portion of entrance fees is recorded as a liability.

Net Assets

Unrestricted net assets are those not subject to donor-imposed stipulations and includes those expendable resources which have been designated for special use by the Board of Directors. Temporarily restricted net assets are those whose use by the Organization has been limited by donors to a specific time period or purpose.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date. A three-tier hierarchy prioritizes the inputs used in measuring fair value. These tiers include Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted market prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The asset's or liability's fair value measurement within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Net Resident Service Revenue

Net resident service revenue is reported at the estimated net realizable amounts from residents, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Net resident service revenue also includes amortization of deferred revenue on resident entrance fees.

11 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies (Continued)

Charity Care

The Organization provides care to residents who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because the Organization does not pursue collection of amounts determined to qualify as charity care, they are not included in net resident service revenue in the accompanying consolidated statements of operations.

Excess (Deficiency) of Revenue Over Expenses

The consolidated statements of operations and changes in net assets include excess (deficiency) of revenue over expenses, which is considered the operating indicator. Changes in unrestricted net assets which are excluded from the operating indicator include change in net unrealized gains and losses on investments other than trading securities and net assets released from restrictions used for purchases of property and equipment.

Donor-Restricted Gifts

Unconditional promises to give cash and other assets to the Organization are reported at fair value at the date the promise is received. Conditional promises to give and indications of intentions to give are reported at fair value at the date the gift is deemed unconditional. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of operations and changes in net assets as net assets released from restrictions.

Advertising Costs

Advertising costs are expensed as incurred.

Unemployment Compensation

The Organization uses the reimbursement method to finance the cost of unemployment compensation benefits. Unemployment compensation expense is charged to operations on a paid-claims basis.

12 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies (Continued)

Obligation to Provide Future Services and Use of Facilities

The Organization calculates annually the present value of the net cost of future services and use of facilities to be provided to current residents and compares that amount with the balance of deferred revenue from entrance fees. If the present value of the net cost of future services and use of facilities exceeds the deferred revenue from entrance fees, a liability is recorded with a corresponding charge to income. An interest rate of 5% in 2016 and 2015 was used to discount the liability to provide future services. At December 31, 2016 and 2015, the present value of the net cost of future services did not exceed the unamortized deferred revenue from entrance fees; accordingly, no liability was recorded.

Income Taxes

The Corporation and Foundation are nonprofit corporations as described in Section 501(c)(3) of the Internal Revenue Code (the "Code") and are exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. The Corporation and Foundation are also exempt from state income taxes on related income.

Federal and state income taxes are paid on nonexempt unrelated business income in accordance with the Code.

Subsequent Events

Subsequent events have been evaluated through March 27, 2017, which is the date the consolidated financial statements were issued.

Note 2: Reimbursement Arrangements With Third-Party Payors

A significant portion of Windsor/Stratford's services are provided to residents whose bills are paid in whole or in part under contractual arrangements with the Medicare and Medicaid programs. The contractual arrangements provide for reimbursement at amounts which vary from its established rates. A summary of the basis of reimbursement with major third-party payors follows:

Medicare - Windsor/Stratford's reimbursement for Part A residents under the Medicare program is based on a predetermined rate per resident day, which varies depending on the resident's level of care and the types of services provided. Medicare reimbursement for Part B services is based on predetermined fee schedule amounts.

Medicaid - Windsor/Stratford's reimbursement is based on a predetermined rate formula under a contractual arrangement with the Medical Assistance program under Title XIX of the Social Security Act. Rate adjustments under this program are reflected in income when determinable.

13 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 2: Reimbursement Arrangements With Third-Party Payors (Continued)

Compliance

The health care industry is subject to numerous laws and regulations of federal, state, and local governments. Compliance with these laws and regulations, particularly those relating to the Medicare and Medicaid programs, can be subject to government review and interpretation, as well as regulatory actions unknown and unasserted at this time. Violation of these laws and regulations could result in the imposition of fines and penalties, as well as repayments of previously billed and collected revenue from resident services. Management believes the Organization is in substantial compliance with current laws and regulations.

The Centers for Medicare and Medicaid Services (CMS) uses Recovery Audit Contractors (RAC) as part of its efforts to ensure accurate payments under the Medicare program. RACs search for potentially inaccurate Medicare payments that may have been made to health care providers that were not detected through existing CMS program integrity efforts. Once a RAC identifies a claim it believes is inaccurate, it makes a deduction from or addition to the provider's Medicare reimbursement in an amount estimated to equal the overpayment or underpayment. The provider will then have the opportunity to appeal the adjustment before the final settlement of the claim is made. As of December 31, 2016, the Organization has not received any notices from the RACs.

Note 3: Resident Receivables

Patient accounts receivable consisted of the following at December 31:

2016 2015

Resident receivables $ 739,411 $ 1,033,307

Less - Allowance for doubtful accounts 40,783 69,312

Resident receivables - Net $ 698,628 $ 963,995

14 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 4: Assets Limited as to Use

Assets limited as to use consisted of the following at December 31:

2016 2015

Cash equivalents $ 779,207 $ 1,409,487 Fixed income mutual funds 11,393,341 9,794,301 Equity mutual funds 24,600,684 19,247,623 Alternative investments 6,205,620 6,196,978

Totals $ 42,978,852 $ 36,648,389

Assets limited as to use were classified as follows at December 31:

2016 2015

Board designated: Capital improvements, other $ 34,242,909 $ 28,352,492 Support of Corporate activities 3,876,452 3,794,987 Held by trustee under bond indenture: Funded principal and interest 375,367 24 Cash management - 710,461 Debt service reserve funds 1,891,764 1,958,128 Temporarily restricted by donors 2,592,360 1,832,297

Totals $ 42,978,852 $ 36,648,389

15 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 4: Assets Limited as to Use (Continued)

Investment Income

The total return on investments, including investment income consisting of interest from cash equivalents and interest, dividends, and gains and losses on assets limited as to use consisted of the following for the years ended December 31:

2016 2015

Interest and dividends $ 600,671 $ 588,305 Net realized gains on sales of securities 648,059 694,289

Total investment income $ 1,248,730 $ 1,282,594

Other changes in net assets: Change in net unrealized gains and losses on investments other than trading securities $ 1,557,151 $ (1,243,245) Interest and dividends on temporarily restricted net assets 40,153 7,190 Net realized gains on temporarily restricted net assets 5,862 -

Total other changes in net assets $ 1,603,166 $ (1,236,055)

Total return on investments $ 2,851,896 $ 46,539

Investments, in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of certain investments will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.

Management assesses individual investment securities as to whether declines in market value are other than temporary and result in an impairment. The Organization considers whether it has the ability and intent to hold the investment until a market price recovery. Evidence considered includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, the issuer’s financial condition, and the general market condition in the geographic area or industry the investee operates in.

Because the Organization has the intent and the ability to hold investment securities until a market price recovery or maturity, investment securities at December 31, 2016 and 2015, are not considered other than temporarily impaired. No impairment losses were recognized by the Organization during 2016 and 2015.

16 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 5: Property and Equipment

Property and equipment consisted of the following at December 31:

2016 2015

Land and land improvements $ 2,201,491 $ 2,201,491 Buildings and building improvements 109,008,831 105,230,935 Equipment, furniture, and fixtures 11,696,883 10,810,611 Vehicles 343,248 343,248 Construction in progress 207,948 2,874,536

Total property and equipment 123,458,401 121,460,821 Less - Accumulated depreciation 45,718,765 41,753,724

Total $ 77,739,636 $ 79,707,097

Construction in progress at December 31, 2016, relates to costs to analyze the feasability of constructing an additional independent living tower and renovate the Organization's campus. The construction and renovation, if approved by the Organization's board of directors, is scheduled to begin in 2018.

Note 6: Line of Credit

The Organization has a $3,000,000 line of credit that expires June 30, 2017. Borrowings on the line bear interest at 2.0% over the one-month LIBOR. There were no borrowings on the line of credit at December 31, 2016 or 2015.

17 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 7: Long-Term Debt

Long-term notes payable consisted of the following December 31:

2016 2015

Wisconsin Health and Educational Facilities Authority (WHEFA) Adjustable Rate Refunding Revenue Bonds, Series 2015A, dated December 1, 2015, bearing interest at 2.66%; annual principal payments beginning September 2016, with final payment due in September 2045 $ 20,302,332 $ 20,500,000

WHEFA Revenue Bonds, Series 2015B, dated December 1, 2015, bearing interest at rates between 3.00% and 5.00%; annual principal payments beginning September 2016, with final payment due in September 2045 24,910,000 25,195,000

WHEFA Adjustable Rate Revenue Bonds, Series 2012A, dated December 28, 2012, bearing an interest rate of 2.91% until December 15, 2022; thereafter will bear an adjustable rate until maturity; annual principal payments beginning September 2016, with final payment due September 2032 9,234,569 9,580,000

Totals 54,446,901 55,275,000

Less:

Current maturities of long-term debt 1,102,505 828,099 Premium on long-term debt (1,113,445) (1,193,682) Deferred financing costs 767,602 663,719

Long-term debt $ 53,690,239 $ 54,976,864

In December 2015, WHEFA issued on behalf of the Organization the Series 2015A Adjustable Rate Refunding Revenue Bonds and Series 2015B Revenue Bonds (collectively the "Series 2015 Bonds") with total principal values of $20,500,000 and $25,195,000, respectively. The proceeds from the Series 2015 Bonds were used to defease and refund the Series 2009A Bonds and fund the costs of constructing, renovating, and equipping its facilities. Under an Escrow Deposit Agreement, proceeds from the Series 2015 Bonds were deposited with the bond trustee in an amount sufficient for the payment of principal and interest on the Series 2009A bonds through the first call date of September 15, 2019. The Organization has recognized and recorded within loss on early retirement of debt in the accompanying consolidated statements of operations approximately $8,786,000 of a prepayment penalty to defease the obligations of the Series 2009A Bonds. The Series 2015A Bonds were sold to a bank pursuant to an indenture and loan agreement between the Organization and the purchasing bank. The proceeds from the Series 2015A Bonds are being loaned to the Organization by the bank. The Organization has issued a promissory note to WHEFA under an existing master trust indenture as evidence to repay the bonds. The Organization is liable for all obligations under the loan agreement.

18 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 7: Long-Term Debt (Continued)

In conjunction with the refunding of the Series 2009A Bonds, the Organization has expensed within loss on early retirement of debt in the accompanying consolidated statements of operations approximately $1,273,000 and $325,000 of remaining deferred financing costs and bond discount, respectively, associated with the Series 2009A Bonds.

The bond indenture requires the establishment of certain funds to be held by the trustee that are unavailable for general corporate purposes. Required funds have been established and are included in assets limited as to use in the accompanying consolidated balance sheets.

The bond indenture contains various covenants and restrictions on the Organization, including requirements that the Organization maintain minimum debt service coverage and liquidity ratios. Management believes the Organization was in compliance with all covenants at December 31, 2016.

Scheduled principal payments on long-term debt at December 31, 2016, based on stated maturities, are summarized as follows:

2017 $ 1,102,505 2018 1,135,592 2019 1,169,335 2020 1,203,591 2021 1,247,523 Thereafter 48,588,355

Total $ 54,446,901

Note 8: Fair Value Measurements

The following is a description of the valuation methodologies used for assets measured at fair value.

Cash equivalents consist of money market funds, which are valued using $1 as the net asset value (NAV), and repurchase agreements, which are valued at historical cost ,which approximates fair value. Mutual funds are valued at the daily closing price as reported by the fund. These funds are registered with the U.S. Securities and Exchange Commission and are required to publish their daily NAV and to transact at that price. These funds are deemed to be actively traded. Alternative investments are valued using the NAV as reported by the investment manager, or using the Organization's proportional share of the net assets of the underlying investments as reported by the investment issuer. Alternative investments are considered Level 2 if the investment can trade at its NAV and has a redemption notification or lockup period of 90 days or less; otherwise, they are considered Level 3. In substantiating the reasonableness of the pricing of alternative investments, management evaluates a variety of factors including recently executed transactions, economic conditions, industry and market developments, and overall credit ratings.

19 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 8: Fair Value Measurements (Continued)

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodology used at December 31, 2016 and 2015.

The following table sets forth by level, within the fair value hierarchy, the Organization's assets at fair value as of December 31:

2016 Level 1 Level 2 Level 3 Total

Cash equivalents $ - $ 779,207 $ - $ 779,207 Fixed income mutual funds 11,393,341 - - 11,393,341 Equity mutual funds: Small cap 6,403,856 - - 6,403,856 Mid cap 3,491,472 - - 3,491,472 Index 7,759,209 - - 7,759,209 International 6,385,645 - - 6,385,645 Balanced 560,502 - - 560,502 Alternative investments - 3,946,791 2,258,829 6,205,620

Totals $ 35,994,025 $ 4,725,998 $ 2,258,829 $ 42,978,852

2015 Level 1 Level 2 Level 3 Total

Cash equivalents $ - $ 1,409,487 $ - $ 1,409,487 Fixed income mutual funds 9,794,301 - - 9,794,301 Equity mutual funds: Small cap 4,671,950 - - 4,671,950 Mid cap 2,971,763 - - 2,971,763 Index 6,443,024 - - 6,443,024 International 4,666,345 - - 4,666,345 Balanced 494,541 - - 494,541 Alternative investments - 4,527,085 1,669,893 6,196,978

Totals $ 29,041,924 $ 5,936,572 $ 1,669,893 $ 36,648,389

20 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 8: Fair Value Measurements (Continued)

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows:

2016 2015

Balance at beginning $ 1,669,893 $ 1,323,597 Purchases 667,500 445,000 Dividend and distributions (269,468) (259,463) Management fees (16,999) (10,247) Total net gains 207,903 171,006

Balance at end $ 2,258,829 $ 1,669,893

The following tables set forth additional disclosures of the Organization's investments whose fair value is estimated at NAV or based on the proportional share of net assets of the investment as of December 31, 2016:

Unfunded Redemption Redemption Fair Value Commitment Frequency Notice Period Lockup Period Ranges from quarterly to Ranges from semiannually 45-60 days depending on depending on Alternative investments Level 2 the terms of the terms of (a) $3,946,791 None the fund the fund None Alternative investments Level 3 (b) $2,258,829 $2,152,500 Limited Not applicable 10 years

(a) This class seeks to provide predictable investment returns from a target portfolio of low-risk equity investments in income-producing real estate and seeks superior absolute returns with low correlation with global equity and fixed-income market through investing in other hedge funds.

(b) This class seeks significant value appreciation of their portfolio companies through active management strategies or by investing in funds that invest in venture capital companies.

21 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 9: Net Resident Service Revenue

Net resident service revenue consisted of the following for the years ended December 31:

2016 2015

Gross resident service revenue: Resident services $ 8,134,417 $ 7,937,077 Resident fees: Amortization of deferred revenue on resident entrance fees 2,478,876 2,494,653 Maintenance fees 9,361,154 9,359,645

Totals 19,974,447 19,791,375 Less - Contractual adjustments and other deductions 1,215,038 1,299,811

Net resident service revenue $ 18,759,409 $ 18,491,564

During 2016, 21.9% and 11.3% of the Organization's gross revenue from resident services was from Medicare and Medicaid, respectively. During 2015, 30.7% and 12.7% of the Organization's gross revenue from resident services was from Medicare and Medicaid, respectively.

Note 10: Deferred Revenue From Residential and Life Care Programs

Two residency contract options are available to Lake Tower Apartments residents: LifeCare and Standard. On occasion Saint John’s will issue a “split” contract which combines LifeCare and Standard contract features to a couple when one of the individuals either is not qualified for LifeCare or declines the LifeCare offering. In those instances the characteristics of the LifeCare and Standard contract described herein govern all benefits and terms as they relate to each member of the couple, respectively. Each resident, upon entering those facilities, pays an “entrance fee.” The entrance fee is a lump-sum amount, payable before occupancy, for the right to occupy an apartment. Under the LifeCare agreement, the entrance fee is 30% refundable. Under the Standard agreement, the entrance fee is 90% refundable upon the shorter of reoccupancy of the unit by a new resident or one year from the date the unit is vacated. Prior to 2014, the Organization also had LifeCare agreements that were 90% refundable and offered Standard contracts that were 30% refundable. Some Lake Tower Apartments residents still have these contracts. The entrance fee varies according to the size and location of the apartment and is subject to change. The entrance fee is increased when a second person occupies an apartment. At December 31, 2016, the entrance fees ranged from $32,600 to $825,000. In addition, residents pay a monthly maintenance fee to cover the costs of additional services provided by the Organization.

Under the LifeCare agreement, the Organization agrees to provide care to residents, when medically indicated, in Canterbury Court or Windsor/Stratford at a rate equal to the resident's current monthly fee, plus costs incurred for meal services. This rate does not include the costs of drugs, special treatments, special therapies, or physician services. These costs are the obligation of the residents. In addition, residents are required to continue participation in the Medicare program. Under the Standard agreement, residents are entitled to a total of 30 days of health care benefits at Canterbury Court or Windsor/Stratford. Residents may only use 10 days of health care benefits during the first 365 days of the Standard agreement.

22 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 10: Deferred Revenue From Residential and Life Care Programs (Continued)

The Organization also has residents under other agreements that are no longer offered, including nonrefundable LifeCare and rental agreements.

Under the LifeCare agreement's refund provisions, a portion of the entrance fee is required to be refunded to the resident or the resident's estate if occupancy is terminated under the following conditions:

(a) If, within 30 days after occupancy of the unit, the resident dies or the agreement is terminated by the resident, the entrance fee is to be refunded in its entirety less the costs of refurbishing the unit and the unreimbursed costs of LifeCare and other services received by the resident.

(b) If, after the first 30 days following the date the unit is occupied but within the first 90 days following the date the unit is occupied, the resident dies or either party terminates the LifeCare agreement, the Organization will refund 90% of the entrance fee, less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded.

(c) If the resident dies or terminates the LifeCare agreement after 90 days following the date the unit is occupied, as defined, a refund of the entrance fee will be made as follows:

! If the resident has elected the 30% refundable entrance fee option, the entrance fee refund will amortize from 90% of the entrance fee to 30% of the entrance fee in equal increments (1.333% per month) over the subsequent 45 months less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded.

! If the resident has elected the 90% refundable entrance fee option, the resident’s entrance fee refund will equal 90% of the entrance fee less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded.

! If the resident has elected the nonrefundable entrance fee option, the entrance fee refund will fully amortize from 90% in equal increments (2.0% per month) over the subsequent 45 months less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded.

Any refund owed to the resident, under either the 30% or 90% option, will be paid by the earlier of the Organization’s receipt of an entrance fee from a new occupant for the vacated unit or within one year from the date the unit is vacated.

Under the Standard agreement, if the resident dies or the Standard agreement is terminated by either party within the first 30 days, the Organization will refund the entire entrance fee. If, after the first 30 days following the date the unit is occupied, as defined, the resident dies or either party terminates the standard agreement, the Organization will refund the refundable portion of the entrance fee, less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded. Any refund owed to the resident will be paid by the earlier of the Organization’s receipt of an entrance fee from a new occupant for the vacated unit or within one year from the date the unit is vacated.

23 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 10: Deferred Revenue From Residential and Life Care Programs (Continued)

The make-up of the Organization's residency contracts consisted of the following at December 31:

2016 2015 Residents Residents Under Refundable Under Refundable Contract Entrance Fee Contract Entrance Fee

Nonrefundable LifeCare 53 $ - 63 $ - Nonrefundable Rental 5 -- - 30% Refundable LifeCare 68 6,124,320 62 5,486,190 30% Refundable Split-LifeCare 5 549,270 5 549,270 90% Refundable LifeCare 39 15,582,618 39 15,850,998 90% Refundable Split-LifeCare 3 1,141,441 4 1,546,172 90% Refundable Standard 34 14,048,100 30 12,216,870 90% Refundable Rental 1 79,583 1 79,583 100% Refundable Rental 3 662,800 3 662,800

Totals 211 $ 38,188,132 207 $ 36,391,883

Note 11: Community Benefit and Charity Care

The estimated cost of providing care to residents under the Organization's charity care policy was approximately $103,000 and $143,000 in 2016 and 2015, respectively, calculated by multiplying the ratio of cost to gross charges for the Organization by the gross uncompensated charges associated with providing charity care.

Health care services to patients under the Medicaid program are also considered part of the Organization's benefit provided to the community, since a substantial portion of such services are reimbursed at amounts less than the cost of providing care. The Organization's shortfall (the difference between program reimbursement and costs to provide services) from the Medicaid program was $409,000 and $443,000 in 2016 and 2015, respectively.

24 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 12: Temporarily Restricted Net Assets

Temporarily restricted net assets were available for the following purposes at December 31:

2016 2015

Chaplaincy and chapel music $ 1,893,278 $ 1,337,249 Charitable care 93,678 68,748 Scholarships 72,657 54,162 Lifestreams program fund 84,412 60,597 Visual impairment 233,839 227,324 Opera and musical programming 156,168 25,368 Garden and nature fund 23,545 18,391 Other 57,714 40,458

Total temporarily restricted net assets $ 2,615,291 $ 1,832,297

Note 13: Endowment Funds

The Foundation's endowments consist of various funds established to benefit the Corporation for a variety of purposes. These funds are maintained by the Foundation in various investments, and the Foundation is responsible for investment decisions.

The Board of Directors has interpreted Wisconsin’s adoption of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor restricted endowment funds absent explicit donor stipulations to the contrary. The Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment funds in excess of the original fair value that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA. If the market value of the permanently restricted net asset at year-end is below the original fair value, the deficit is recorded as a temporarily restricted unrealized loss. No endowments were permanently restricted as of December 31, 2016 and 2015.

The primary long-term financial objective for the Organization’s endowments is to preserve the real purchasing power of endowment assets and income after accounting for endowment spending and costs of portfolio management. Performance of the overall endowment against this objective is measured over rolling periods of 20 quarters.

25 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 13: Endowment Funds (Continued)

The endowment funds are managed to optimize the long-run total rate of return on invested assets, assuming a prudent level of risk. The goal for this rate of return is one that provides funding for the Organization’s existing spending policy. Over the short term, the return for each element of the endowment portfolio should match or exceed each of the returns for the broader capital markets in which assets are invested.

The endowment assets are governed by a spending policy that seeks to distribute a specific payout rate of the endowment base to support the Organization’s programs. The endowment base will be defined as the 20 quarter moving average of the market value of the total endowment plus any board-designated additional distribution for earnings in excess of the specific payout rate. The distribution or payout rate will be calculated at a specific fixed percentage of the base. Such a policy will allow for a greater predictability of spendable income for budgeting purposes and for gradual steady growth for the support of operations by the endowments. In addition, this policy will minimize the probability of invading the principal over the long term. Spending in a given year will reduce the unit value of each endowment element by the payout percentage. In the case of short-term declines in the market value of the endowment pool of funds, the overall spending rate may be calculated below the designated payout percentage in order to maintain the original unit value of certain elements of the true endowment. Growth of the unit values over time should allow for spending of principal without drawing from the original corpus of a particular gift.

As of December 31, 2016 and 2015, the Board of Directors had designated $3,579,601 and $3,442,668, respectively, of unrestricted net assets as a general endowment fund to support the mission of the Organization. In addition, the endowment fund also consists of temporarily restricted funds that are donor restricted which the Board of Directors considers as endowment funds.

Endowment funds are invested in cash and cash equivalents and equity and fixed-income mutual funds. The total endowment is monitored on a continual basis for consistency of investment philosophy, return relative to objectives, and asset allocation.

Endowment net asset composition by type of fund as of December 31 was as follows:

2016 2015

Unrestricted $ 3,579,601 $ 3,442,668 Temporarily restricted 2,347,195 1,557,115

Totals $ 5,926,796 $ 4,999,783

26 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 13: Endowment Funds (Continued)

Changes in endowment net assets were as follows:

Temporarily Unrestricted Restricted Total

Endowments at December 31, 2014 $ 3,706,651 $ 337,786 $ 4,044,437

Investment losses (93,831) (10,542) (104,373) Contributions 31,348 1,235,438 1,266,786 Endowment distribution (201,500) (5,567) (207,067)

Endowments at December 31, 2015 3,442,668 1,557,115 4,999,783

Investment earnings 275,896 153,624 429,520 Contributions 16,037 642,377 658,414 Endowment distributions (155,000) (5,921) (160,921)

Endowments at December 31, 2016 $ 3,579,601 $ 2,347,195 $ 5,926,796

Note 14: Malpractice Insurance

The Organization's liability insurance for claim losses of less than $1,000,000 per claim and $3,000,000 per year covers professional liability claims reported during a policy year regardless of when the claims are reported (occurrence coverage). In addition, the Organization has umbrella coverage for all losses of up to $7,000,000 per claim and $7,000,000 per year, also on an occurrence coverage basis. The liability insurance policy is renewable annually and has been renewed by the insurance carrier for the annual period extending through January 1, 2018.

Note 15: Retirement Plan

The Organization sponsors a noncontributory defined contribution plan covering all eligible employees. The Organization's contributions to the plan are based on a percentage, subject to review and change at the discretion of the Board of Directors, of the annual compensation of all participants, as defined by the plan. The Organization recognized expense of approximately $258,000 and $199,000 related to this plan in 2016 and 2015, respectively.

Note 16: Unemployment Compensation

At December 31, 2016 and 2015, the Organization had provided a letter of credit in the amount of approximately $163,000 to the Treasurer of the Unemployment Reserve Fund of the State of Wisconsin as collateral for payment of eligible benefits.

27 Saint John's Communities, Inc. and Subsidiary Notes to Consolidated Financial Statements

Note 17: Concentration of Credit Risk

The Organization grants credit without collateral to its residents. The mix of gross receivables from residents and third-party payors was as follows at December 31:

2016 2015

Medicare 23 % %31 Medicaid 45 Private-pay and other insurance 73 64

Totals 100 % %100

The Organization maintains a depository relationship with a financial institution that is a Federal Deposit Insurance Corporation (FDIC) insured institution. The Organization maintains cash in accounts at this institution which are insured by the FDIC up to $250,000. At December 31, 2016, the Organization exceeded insured limits by approximately $803,000. Investments classified as assets limited as to use held by financial institutions are uninsured.

28 Supplementary Information Independent Auditor's Report on Supplementary Information

Board of Directors Saint John's Communities, Inc. and Subsidiary Milwaukee, Wisconsin

We have audited the consolidated financial statements of Saint John's Communities, Inc. and Subsidiary ("the Organization") as of and for the years ended December 31, 2016 and 2015, and our report thereon dated March 27, 2017, which expressed an unmodified opinion on those financial statements, appears on page 1. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary information appearing on pages 31 through 38 is presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Wipfli LLP

March 27, 2017 Milwaukee, Wisconsin

30 Saint John's Communities, Inc. and Subsidiary Consolidating Balance Sheet December 31, 2016

Saint John's Saint John's Communities Assets Communities, Inc. Foundation, Inc. Eliminations Consolidated

Current assets: Cash $ 555,127 $ $ $ 555,127 Receivables: Residents Net 698,628 698,628 Entrance fees 393,586 393,586 Pledges 50 181,055 181,105 Prepaid expenses and other 215,305 215,305 Due from related party 30 (30)

Total current assets 1,862,726 181,055 (30) 2,043,751

Property and equipment Net 77,739,636 77,739,636

Assets limited as to use 36,984,916 5,993,936 42,978,852

Development costs Net 1,389,502 1,389,502

Investment in unconsolidated affiliate 74,998 74,998

TOTAL ASSETS $ 118,051,778 $ 6,174,991 $ (30) $ 124,226,739

31 Saint John's Communities, Inc. and Subsidiary Consolidating Balance Sheet (Continued) December 31, 2016

Saint John's Saint John's Communities Liabilities and Net Assets Communities, Inc. Foundation, Inc. Eliminations Consolidated

Current liabilities: Current maturities of longterm debt $ 1,102,505 $ $ $ 1,102,505 Accounts payable: Trade 159,805 159,805 Construction 68,263 68,263 Accrued expenses 1,349,032 3,000 1,352,032 Advance deposits and prepayments 1,411,537 1,411,537 Due to related party 30 (30)

Total current liabilities 4,091,142 3,030 (30) 4,094,142

Longterm liabilities: Longterm debt, less current maturities 53,690,239 53,690,239 Refundable entrance fees 38,188,132 38,188,132 Deferred revenue on resident entrance fees 17,975,820 17,975,820

Total longterm liabilities 109,854,191 109,854,191

Total liabilities 113,945,333 3,030 (30) 113,948,333

Net assets: Unrestricted 4,083,514 3,579,601 7,663,115 Temporarily restricted 22,931 2,592,360 2,615,291

Total net assets 4,106,445 6,171,961 10,278,406

TOTAL LIABILITIES AND NET ASSETS $ 118,051,778 $ 6,174,991 $ (30) $ 124,226,739

See Independent Auditor's Report on Supplementary Information.

32 Saint John's Communities, Inc. and Subsidiary Consolidating Balance Sheet December 31, 2015

Saint John's Saint John's Communities Assets Communities, Inc. Foundation, Inc. Eliminations Consolidated

Current assets: Cash $ 645,977 $ $ $ 645,977 Receivables: Residents Net 963,995 963,995 Entrance fees 7,500 7,500 Pledges 175 175 Prepaid expenses and other 219,256 219,256 Due from related party 5,244 (5,244)

Total current assets 1,842,147 (5,244) 1,836,903

Property and equipment Net 79,707,097 79,707,097

Assets limited as to use 31,398,513 5,249,876 36,648,389

Development costs Net 1,698,280 1,698,280

TOTAL ASSETS $ 114,646,037 $ 5,249,876 $ (5,244) $ 119,890,669

33 Saint John's Communities, Inc. and Subsidiary Consolidating Balance Sheet (Continued) December 31, 2015

Saint John's Saint John's Communities Liabilities and Equity Communities, Inc. Foundation, Inc. Eliminations Consolidated

Current liabilities: Current maturities of longterm debt $ 828,099 $ $ $ 828,099 Accounts payable: Trade 103,207 103,207 Construction 321,128 321,128 Accrued expenses 942,999 4,500 947,499 Advance deposits and prepayments 841,802 841,802 Due to related party 5,244 (5,244)

Total current liabilities 3,037,235 9,744 (5,244) 3,041,735

Longterm liabilities: Longterm debt, less current maturities 54,976,864 54,976,864 Refundable entrance fees 36,391,883 36,391,883 Deferred revenue on resident entrance fees 18,955,268 18,955,268

Total longterm liabilities 110,324,015 110,324,015

Total liabilities 113,361,250 9,744 (5,244) 113,365,750

Net assets: Unrestricted 1,249,954 3,442,668 4,692,622 Temporarily restricted 34,833 1,797,464 1,832,297

Total net assets 1,284,787 5,240,132 6,524,919

TOTAL LIABILITIES AND NET ASSETS $ 114,646,037 $ 5,249,876 $ (5,244) $ 119,890,669

See Independent Auditor's Report on Supplementary Information.

34 Saint John's Communities, Inc. and Subsidiary Consolidating Statement of Operations Year Ended December 31, 2016

Saint John's Saint John's Communities Communities, Inc. Foundation, Inc. Eliminations Consolidated

Revenue: Net resident service revenue $ 18,759,409 $ $ $ 18,759,409 Investment income 1,169,841 78,889 1,248,730 Contributions 190,101 16,037 (153,451) 52,687 Net assets released from restrictions for operations 231,190 17,421 (7,421) 241,190 Other 1,268,826 1,268,826

Total revenue 21,619,367 112,347 (160,872) 21,570,842

Expenses: Direct Care 4,449,779 4,449,779 Dietary 2,166,350 2,166,350 Maintenance 1,894,978 1,894,978 Housekeeping 467,049 467,049 Administration 4,647,295 4,647,295 Distributions 173,985 (160,872) 13,113 Depreciation and amortization 4,551,062 4,551,062 Interest 1,869,685 1,869,685

Total expenses 20,046,198 173,985 (160,872) 20,059,311

Excess (deficiency) of revenue over expenses 1,573,169 (61,638) 1,511,531 Other changes in unrestricted net assets: Change in net unrealized gains and losses on investments other than trading securities 1,234,795 198,571 1,433,366

Net assets released from restrictions for purchase of property and equipment 25,596 25,596

Increase in unrestricted net assets $ 2,833,560 $ 136,933 $ $ 2,970,493

See Independent Auditor's Report on Supplementary Information.

35 Saint John's Communities, Inc. and Subsidiary Consolidating Statement of Operations Year Ended December 31, 2015

Saint John's Saint John's Communities Communities, Inc. Foundation, Inc. Eliminations Consolidated

Revenue: Net resident service revenue $ 18,491,564 $ $ $ 18,491,564 Investment income 1,190,709 91,885 1,282,594 Contributions 265,262 31,348 (202,869) 93,741 Net assets released from restrictions for operations 177,790 15,566 (4,197) 189,159 Other 1,605,435 1,605,435

Total revenue 21,730,760 138,799 (207,066) 21,662,493

Expenses: Direct Care 4,591,571 4,591,571 Dietary 2,147,360 2,147,360 Maintenance 1,738,849 1,738,849 Housekeeping 446,774 446,774 Administration 4,290,633 5,108 4,295,741 Distributions 217,066 (207,066) 10,000 Depreciation and amortization 4,713,402 4,713,402 Interest 3,140,367 3,140,367

Total expenses 21,068,956 222,174 (207,066) 21,084,064

Income (loss) from operations 661,804 (83,375) 578,429

Loss on early retirement of debt (10,383,633) (10,383,633)

Deficiency of revenue over expenses (9,721,829) (83,375) (9,805,204) Other changes in unrestricted net assets: Change in net unrealized gains and losses on investments other than trading securities (1,034,932) (180,607) (1,215,539)

Net assets released from restrictions for purchase of property and equipment 56,058 56,058

Decrease in unristricted net assets $ (10,700,703) $ (263,982) $ (10,964,685)

See Independent Auditor's Report on Supplementary Information.

36 Saint John's Communities, Inc. and Subsidiary Consolidating Statement of Changes in Net Assets Year Ended December 31, 2016

Saint John's Saint John's Communities Communities, Inc. Foundation, Inc. Eliminations Consolidated

Unrestricted net assets: Excess (deficiency) of revenue over expenses $ 1,573,169 $ (61,638) $ $ 1,511,531 Change in net unrealized gains and losses on investments other than trading securities 1,234,795 198,571 1,433,366

Net assets released from restrictions for purchase of property and equipment 25,596 25,596

Increase in unrestricted net assets 2,833,560 136,933 2,970,493

Temporarily restricted net assets: Contributions 244,884 642,517 (7,421) 879,980 Investment income 46,015 46,015 Change in net unrealized gains and losses on investments other than trading securities 123,785 123,785 Net assets released from restriction (256,786) (17,421) 7,421 (266,786)

Increase (decrease) in temporarily restricted net assets (11,902) 794,896 782,994

Change in net assets 2,821,658 931,829 3,753,487

Net assets at beginning 1,284,787 5,240,132 6,524,919

Net assets at end $ 4,106,445 $ 6,171,961 $ $ 10,278,406

See Independent Auditor's Report on Supplementary Information.

37 Saint John's Communities, Inc. and Subsidiary Consolidating Statement of Changes in Net Assets Year Ended December 31, 2015

Saint John's Saint John's Communities Communities, Inc. Foundation, Inc. Eliminations Consolidated

Unrestricted net assets: Deficiency of revenue over expenses $ (9,721,829) $ (83,375) $ $ (9,805,204) Change in net unrealized gains and losses on investments other than trading securities (1,034,932) (180,607) (1,215,539) Net assets released from restrictions for purchase of property and equipment 56,058 56,058

Decrease in unrestricted net assets (10,700,703) (263,982) (10,964,685)

Temporarily restricted net assets: Contributions 229,924 1,242,946 (4,197) 1,468,673 Investment income 7,190 7,190 Change in net unrealized gains and losses on investments other than trading securities (27,706) (27,706) Net assets released from restriction (233,848) (15,566) 4,197 (245,217)

Increase (decrease) in temporarily restricted net assets (3,924) 1,206,864 1,202,940

Change in net assets (10,704,627) 942,882 (9,761,745)

Net assets at beginning 11,989,414 4,297,250 16,286,664

Net assets at end $ 1,284,787 $ 5,240,132 $ $ 6,524,919

See Independent Auditor's Report on Supplementary Information.

38 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX C

Management-Prepared Consolidated Financial Statements of Saint John’s Communities, Inc.

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APPENDIX D

Financial Feasibility Study

[THIS PAGE INTENTIONALLY LEFT BLANK] Saint John’s Communities, Inc. Milwaukee, Wisconsin Financial Feasibility Study Years Ending December 31, 2018 Through 2023 Saint John’s Communities, Inc.

Financial Feasibility Study Years Ending December 31, 2018 Through 2023

Table of Contents

Independent Accountant’s Report ...... 1

Financial Statements Forecasted Statements of Operations and Changes in Net Assets ...... 6 Forecasted Statements of Cash Flows ...... 7 Forecasted Balance Sheets ...... 9 Forecasted Schedules of Financial Ratios ...... 11

Summary of Significant Forecast Assumptions and Accounting Policies Background Information ...... 12 The Project ...... 16 Residency Contracts and Reimbursement Agreements ...... 17 Consulting Agreements ...... 29 Project Timeline ...... 33 Plan of Finance ...... 34 Market Assessment ...... 37 Marketing the Independent Living Units ...... 75 Summary of Significant Accounting Policies ...... 80 Management’s Basis for Forecast of Revenue and Entrance Fees ...... 86 Management’s Basis for Forecast of Expenses ...... 99 Management’s Basis for Forecast of Other Items ...... 102 Sensitive Assumptions ...... 108 Sensitivity Analyses...... 110

Independent Accountant’s Report

Board of Directors Saint John’s Communities, Inc. Milwaukee, Wisconsin

We have prepared a financial feasibility study (the “Study”) of the plans of Saint John’s Communities, Inc. (the “Corporation”) to add 79 new independent living apartment units, 16 new transitional care assisted living (Transitional Care Assisted Living RCAC) residential care apartment complex (RCAC) units, a multipurpose room/auditorium and additional underground parking to its campus and to construct an updated health center to replace the existing 24 community-based residential facility (CBRF) units and the existing 50 skilled nursing facility (SNF) beds (collectively the “Project”). The Corporation currently owns and operates a continuing care retirement community located near the lakefront of Lake Michigan in Milwaukee, Wisconsin. The current campus consists of a 110-unit independent living facility, a 90-unit independent living facility, a 24-unit assisted living facility, and a 50-bed SNF.

The Study was undertaken to evaluate the ability of the Corporation to generate sufficient funds to meet its operating expenses, working capital needs, and other financial requirements, including the debt service requirements associated with the proposed issuance of $82,920,000 of tax-exempt Wisconsin Health and Educational Facilities Authority (WHEFA), Fixed Rate Revenue Bonds Series 2018A (Saint John’s Communities, Inc. Project), (the “Series 2018A Bonds” or “Permanent Debt”) and $51,920,000 of tax-exempt WHEFA Adjustable Rate Revenue Bonds, Series 2018B (Saint John’s Communities, Inc. Project), (the “Series 2018B Bonds” or “Entrance Fee Debt”), collectively the “Series 2018 Bonds” during the six years ending December 31, 2023. The responsibility for payment of the debt service on the Series 2018 Bonds is solely that of the Corporation.

Proceeds from the planned issuance of the Series 2018 Bonds together with available funds are planned to be used by the Corporation to pay for the costs of the Project.

1

The Corporation has the following existing indebtedness:  WHEFA Adjustable Rate Revenue Bonds, Series 2012A, dated December 28, 2012, bearing an interest rate of 3.54% until December 2022; thereafter will reset in accordance with the related bond agreements; annual principal payments with final payment due September 2032.  WHEFA Adjustable Rate Refunding Revenue Bonds, Series 2015A, dated December 1, 2015, bearing interest at 2.86% until December 2025; thereafter will reset in accordance with the related bond agreements; annual principal payments with final payment due in September 2045.  WHEFA Revenue Bonds, Series 2015B, dated December 1, 2015, bearing interest at rates between 3.00% and 5.00%; annual principal payments with final payment due in September 2045.

Management assumes that $134,840,000 of tax-exempt bonds will be issued on the Corporation’s behalf by WHEFA to pay for the Project’s construction and pay for other associated costs. The Corporation’s underwriter, Piper Jaffray & Co. (the “Underwriter”), has provided the assumed structure and terms of the Series 2018 Bonds as follows:  $82,920,000 of tax-exempt Series 2018A Bonds or Permanent Debt with an assumed weighted average coupon rate of 4.996%. The Series 2018A Bonds are assumed to be issued with an original issue premium of $3,670,000 for net proceeds of $86,590,000. The Series 2018A Bonds are anticipated to mature in 2050.  $51,920,000 of tax-exempt Series 2018B Bonds or Temporary Entrance Fee Debt with a variable interest rate until April 2023; thereafter the interest rate will be adjusted per the terms of the related bond documents. For the initial rate period, the Series 2018B Bonds have an assumed coupon rate of 4.0%. The Series 2018B Bonds have an initial mandatory tender date of April 2023 and an expected maturity date of April 2025. Entrance fee receipts from the initial occupancy of the Project’s independent living units are forecasted to be used to retire the Series 2018B Bonds prior to their tender/reset in 2023. Proceeds from the Series 2018 Bonds, interest earned on trustee-held funds relating to the Series 2018A Bonds, and an equity contribution from the Corporation, are assumed to be used, among other things, to:

• Pay the portion of the Project-related costs that have been incurred by the Corporation prior to issuance of the Series 2018 Bonds, including design, development, and marketing costs. • Pay the remaining Project costs. • Fund interest costs related to the Series 2018 Bonds for approximately 29 months following their issuance. • Establish a debt service reserve fund for the Series 2018A Bonds. • Pay certain issuance costs related to the Series 2018 Bonds. 2

Our procedures included analysis of:

 The Corporation’s objectives, timing, and financing.  Current and future demand of the Corporation’s services, including consideration of:  Economic and demographic characteristics of management’s defined primary market area for the Corporation.  Locations, capacities, and comparable market information pertaining to other existing senior care facilities in the Corporation’s primary market area.  Forecasted and historical occupancy and utilization levels of the Corporation.  Project-related costs.  Debt service requirements and estimated financing costs of the Series 2018 Bonds and debt service requirements of all other obligations of the Corporation.  Staffing requirements, salaries and wages, related fringe benefits, and other operating expenses of the Corporation.  Anticipated entrance fees, monthly service fees, per diem rates, and other charges for the Corporation’s residents.  Sources of other operating and non-operating revenue.  Corporation revenue, expenses, and volume/utilization relationships.

The accompanying financial forecast for the annual periods ending December 31, 2018 through 2023 is based on assumptions that were provided by, or reviewed with and approved by, management. The financial forecast includes the following:

 Forecasted Statements of Operations and Changes in Net Assets  Forecasted Statements of Cash Flows  Forecasted Balance Sheets  Forecasted Schedules of Financial Ratios

We have examined the accompanying financial forecast of the Corporation which comprises the forecasted statements of operations and changes in net assets, forecasted statements of cash flows, forecasted balance sheets and forecasted schedules of financial ratios as of December 31, 2018 through 2023 and for each of the six years then ending based on guidelines for the presentation of a forecast established by the American Institute of Certified Public Accountants (AICPA). The Corporation’s management is responsible for preparing and presenting the forecast in accordance with the guidelines for the preparation of a forecast established by the AICPA. Our responsibility is to express an opinion on the forecast based on our examination.

3

Our examination was conducted in accordance with attestation standards established by the AICPA. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the forecast is presented in accordance with the guidelines for the presentation of a forecast established by the AICPA, in all material respects. An examination involves performing procedures to obtain evidence about the forecast. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risk of material misstatement of the forecast, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

Legislation and regulations at all levels of government have affected and may continue to affect revenue and expenses of continuing care retirement communities (CCRCs). The financial forecast is based on legislation and regulations currently in effect. If future legislation or regulations related to the Corporation’s operations are enacted, such legislation or regulations could have a material effect on future operations.

Management has set forth its significant forecast assumptions upon which the accompanying forecasted financial statements are based in the accompanying section entitled “Summary of Significant Forecast Assumptions and Accounting Policies.” These assumptions are integral and essential to an understanding of management’s forecasted financial statements.

Management’s financial forecast is based on the achievement of occupancy levels as determined by management. We have not been engaged to evaluate the effectiveness of management and we are not responsible for future marketing efforts and other management actions upon which actual results will depend.

The assumed interest rate, principal payments, project costs, and financing structure assumptions are described in the section entitled “Summary of Significant Forecast Assumptions and Accounting Policies.” If actual interest rates, principal payments, or funding requirements are different from those assumed, the amount of the Series 2018 Bonds and the associated debt service requirements related to the Series 2018 Bonds would need to be adjusted accordingly from those indicated in the forecast. If such interest rates, principal payments, and funding requirements are lower than those assumed, such adjustments would not adversely affect the forecast.

The accompanying forecasted financial statements do not include implementation of Accounting Standards Update (ASU) 2014-09, Revenue Recognition which is effective for Saint John’s Communities, Inc. for the year beginning January 1, 2018, ASU 2016-02, Leases, which is effective for the year beginning January 1, 2019, and ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities, which is effective for the year beginning January 1, 2019. Management has not determined the financial impact of not implementing these ASUs during the forecast period.

4

The forecasted financial statements do not include Saint John’s Communities Foundation, Inc., which is a subsidiary of Saint John’s Communities, Inc. Accounting principles generally accepted in the United States would require Saint John’s Communities Foundation, Inc. to be consolidated with Saint John’s Communities, Inc. As a result, the forecasted financial statements do not purport to, and do not present fairly the forecasted financial statements of Saint John’s Communities, Inc. and Subsidiary as of December 31, 2018 through 2023, and for the years then ending, in conformity with accounting principles generally accepted in the United States.

Our conclusions are presented below:

 In our opinion, except for the departures from AICPA prescribed guidelines as described in the preceding paragraphs, the accompanying forecast is presented, in all material respects, in accordance with the guidelines for the presentation of a forecast established by the AICPA.

 In our opinion, the underlying assumptions are suitably supported and provide a reasonable basis for management’s forecast. However, there will usually be differences between the forecasted and actual results because events and circumstances frequently do not occur as expected, and those differences may be material.

 The accompanying financial forecast indicates that sufficient funds could be generated to meet Saint John’s Communities, Inc.’s operating expenses, working capital needs, and other financial requirements, including the debt service requirements associated with the proposed new debt of $134,840,000, which will be used to fund the Project. However, the achievement of any financial forecast is dependent on future events, the occurrence of which cannot be assured.

We have no responsibility to update this report for events and circumstances occurring after the date of this report.

Assumptions which are particularly sensitive and for which variation in the assumption would have a significant effect on forecasted results are presented on pages 108 through 113.

Wipfli LLP

March 2, 2018 Milwaukee, Wisconsin

5

Saint John’s Communities, Inc.

Forecasted Statements of Operations and Changes in Net Assets Years Ending December 31, 2018 Through 2023

2018 2019 2020 2021 2022 2023

Revenue: Resident revenue $ 16,273,000 $ 16,515,000 $ 20,043,000 $ 23,763,000 $ 24,661,000 $ 25,190,000 Entrance fee amortization 2,416,000 2,899,000 4,386,000 6,358,000 7,189,000 7,687,000 Investment income 689,000 776,000 861,000 965,000 1,038,000 1,187,000 Contributions 444,000 482,000 519,000 561,000 599,000 617,000 Other 1,590,000 1,641,000 1,866,000 2,177,000 2,263,000 2,330,000

Total revenue 21,412,000 22,313,000 27,675,000 33,824,000 35,750,000 37,011,000

Expenses: Salaries and wages 8,077,000 8,596,000 9,593,000 9,914,000 10,210,000 10,517,000 Employee benefits 2,139,000 2,285,000 2,563,000 2,676,000 2,756,000 2,838,000 Insurance 215,000 283,000 291,000 300,000 309,000 318,000 Utilities 727,000 929,000 1,254,000 1,300,000 1,339,000 1,379,000 Supplies and other 3,905,000 3,786,000 4,161,000 4,334,000 4,473,000 4,606,000 Depreciation and amortization 8,462,000 8,732,000 8,093,000 8,635,000 8,456,000 8,544,000 Interest 2,006,000 2,186,000 6,390,000 6,157,000 5,894,000 5,716,000

Total expenses 25,531,000 26,797,000 32,345,000 33,316,000 33,437,000 33,918,000

Income (loss) from operations (4,119,000) (4,484,000) (4,670,000) 508,000 2,313,000 3,093,000

Other changes in net assets - Change in unrealized gains and losses on investments 1,404,000 1,506,000 1,699,000 1,922,000 2,187,000 2,531,000

Change in net assets (2,715,000) (2,978,000) (2,971,000) 2,430,000 4,500,000 5,624,000 Net assets (deficit) at beginning 8,797,000 6,082,000 3,104,000 133,000 2,563,000 7,063,000

Net assets at end $ 6,082,000 $ 3,104,000 $ 133,000 $ 2,563,000 $ 7,063,000 $ 12,687,000

See Independent Accountant’s Report. See Summary of Significant Forecast Assumptions and Accounting Policies. 6

Saint John’s Communities, Inc.

Forecasted Statements of Cash Flows Years Ending December 31, 2018 Through 2023

2018 2019 2020 2021 2022 2023

Increase (decrease) in cash and cash equivalents: Cash flows from operating activities: Change in net assets $ (2,715,000) $ (2,978,000) $ (2,971,000) $ 2,430,000 $ 4,500,000 $ 5,624,000 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 8,462,000 8,732,000 8,093,000 8,635,000 8,456,000 8,544,000 Unrealized gains and losses on investments (1,404,000) (1,506,000) (1,699,000) (1,922,000) (2,187,000) (2,531,000) Amortization of original issue premiums and deferred financing costs (23,000) (24,000) (65,000) (67,000) (82,000) (174,000) Turnover entrance fees - Net of refunds 5,587,000 5,617,000 5,941,000 7,016,000 7,958,000 8,259,000 Entrance fee amortization (2,416,000) (2,899,000) (4,386,000) (6,358,000) (7,189,000) (7,687,000) Changes in operating assets and liabilities: Resident receivables 47,000 20,000 18,000 (48,000) 31,000 28,000 Inventory and prepaid expenses (44,000) (27,000) (42,000) (25,000) (13,000) (11,000) Accounts payable (11,000) 7,000 57,000 18,000 15,000 14,000 Accrued expenses: Interest 9,000 43,000 1,183,000 (46,000) (19,000) (20,000) Salaries and wages, paid time off, and other 52,000 64,000 122,000 42,000 36,000 37,000 Advanced deposits and prepayments 44,000 45,000 46,000 48,000 49,000 51,000

Net cash provided by operating activities 7,588,000 7,094,000 6,297,000 9,723,000 11,555,000 12,134,000

Cash flows from investing activities: Sales (purchases) of assets limited as to use - Net Board designated (1,715,000) (4,213,000) (4,967,000) (379,000) (7,640,000) (8,030,000) Trustee held funds: Series 2015 Revenue Bonds (144,000) (99,000) (11,000) (6,000) (14,000) (6,000) Series 2018 Bonds (53,256,000) 42,089,000 2,394,000 (24,000) (13,000) (13,000) Capital expenditures: Project related (33,658,000) (71,704,000) (22,801,000) - - - Non-project related (1,600,000) (1,800,000) (1,600,000) (1,900,000) (1,600,000) (1,700,000)

Net cash used in investing activities (90,373,000) (35,727,000) (26,985,000) (2,309,000) (9,267,000) (9,749,000)

7 Saint John’s Communities, Inc.

Forecasted Statements of Cash Flows (Continued) Years Ending December 31, 2018 Through 2023

2018 2019 2020 2021 2022 2023

Cash flows from financing activities: Proceeds from issuance of long-term debt $ 86,642,000 $ 29,729,000 $ 22,139,000 $ - $ - $ - Receipt of initial entrance fees 186,000 155,000 36,192,000 10,796,000 - - Payment of deferred financing costs (1,947,000) - - - - - Payment of long-term debt (1,136,000) (1,169,000) (37,131,000) (18,175,000) (2,262,000) (2,345,000)

Net cash provided by (used in) financing activities 83,745,000 28,715,000 21,200,000 (7,379,000) (2,262,000) (2,345,000)

Net increase in cash and cash equivalents 960,000 82,000 512,000 35,000 26,000 40,000 Cash and cash equivalents at beginning 445,000 1,405,000 1,487,000 1,999,000 2,034,000 2,060,000

Cash and cash equivalents at end $ 1,405,000 $ 1,487,000 $ 1,999,000 $ 2,034,000 $ 2,060,000 $ 2,100,000

Supplemental disclosure of cash flow information: Interest expense paid $ 2,031,000 $ 2,167,000 $ 5,272,000 $ 6,270,000 $ 5,995,000 $ 5,910,000 Capitalized interest paid 1,709,000 4,272,000 1,941,000 - - - Capitalized investment income 323,000 116,000 - - - -

Supplemental schedule of noncash investing and financing activities: Capital expenditures included in accounts payable $ 5,921,000 $ 3,165,000 $ - $ - $ - $ - Capitalized interest in accrued interest payable 1,210,000 1,214,000 - - - -

See Independent Accountant’s Report. See Summary of Significant Forecast Assumptions and Accounting Policies. 8 Saint John’s Communities, Inc.

Forecasted Balance Sheets December 31, 2018 Through 2023

Assets 2018 2019 2020 2021 2022 2023

Current assets: Cash and cash equivalents $ 1,405,000 $ 1,487,000 $ 1,999,000 $ 2,034,000 $ 2,060,000 $ 2,100,000 Assets limited as to use 7,651,000 4,998,000 2,363,000 2,393,000 2,420,000 2,439,000 Resident receivables 618,000 598,000 580,000 628,000 597,000 569,000 Inventory and prepaid expenses 260,000 287,000 329,000 354,000 367,000 378,000

Total current assets 9,934,000 7,370,000 5,271,000 5,409,000 5,444,000 5,486,000

Assets limited as to use: Board designated for: Capital improvements, Life Care program, and other 43,016,000 48,544,000 54,908,000 62,497,000 72,324,000 82,885,000 Initial Project entrance fees 4,795,000 4,986,000 5,288,000 - - - Trustee held: Series 2015 Revenue Bonds: Principal and interest fund 520,000 619,000 630,000 636,000 650,000 656,000 Debt service reserve funds 1,868,000 1,868,000 1,868,000 1,868,000 1,868,000 1,868,000 Series 2018 Bonds: Project fund 37,993,000 - - - - - Capitalized interest fund 8,223,000 4,127,000 - - - - Principal and interest fund - - 1,733,000 1,757,000 1,770,000 1,783,000 Debt service reserve fund 7,040,000 7,040,000 7,040,000 7,040,000 7,040,000 7,040,000

Total assets limited as to use 103,455,000 67,184,000 71,467,000 73,798,000 83,652,000 94,232,000 Less - Current portion 7,651,000 4,998,000 2,363,000 2,393,000 2,420,000 2,439,000

Assets limited as to use - Less current portion 95,804,000 62,186,000 69,104,000 71,405,000 81,232,000 91,793,000

Property and equipment 126,311,000 207,848,000 247,707,000 249,607,000 251,207,000 252,907,000 Less - Accumulated depreciation 58,077,000 66,500,000 61,619,000 69,991,000 78,328,000 86,753,000

Net depreciated value 68,234,000 141,348,000 186,088,000 179,616,000 172,879,000 166,154,000 Construction in progress 44,532,000 33,695,000 - - - -

Property and equipment - Net 112,766,000 175,043,000 186,088,000 179,616,000 172,879,000 166,154,000

Other assets: Interest in unconsolidated affiliate 75,000 75,000 75,000 75,000 75,000 75,000 Development costs - Net 772,000 463,000 1,339,000 1,076,000 957,000 838,000

Total other assets 847,000 538,000 1,414,000 1,151,000 1,032,000 913,000

TOTAL ASSETS $219,351,000 $245,137,000 $261,877,000 $257,581,000 $260,587,000 $264,346,000

9 Saint John’s Communities, Inc.

Forecasted Balance Sheets (Continued) December 31, 2018 Through 2023

Liabilities and Net Assets 2018 2019 2020 2021 2022 2023

Current liabilities: Current maturities of long-term debt $ 1,169,000 $ 1,204,000 $ 2,182,000 $ 2,262,000 $ 2,345,000 $ 2,437,000 Accounts payable: Trade 381,000 388,000 445,000 463,000 478,000 492,000 Construction in progress 5,921,000 3,165,000 - - - - Accrued expenses: Interest 1,586,000 1,633,000 1,602,000 1,556,000 1,537,000 1,517,000 Salaries, wages, paid time off, and other 981,000 1,045,000 1,167,000 1,209,000 1,245,000 1,282,000 Advance deposits and prepayments 1,465,000 1,510,000 1,556,000 1,604,000 1,653,000 1,704,000

Total current liabilities 11,503,000 8,945,000 6,952,000 7,094,000 7,258,000 7,432,000

Long-term liabilities: Long-term debt, less current maturities 135,996,000 164,445,000 148,402,000 130,080,000 127,653,000 125,042,000 Project advance deposits 4,777,000 4,932,000 1,199,000 - - - Deferred revenue 20,545,000 22,275,000 45,042,000 51,566,000 51,356,000 50,867,000 Refundable entrance fees 40,448,000 41,436,000 60,149,000 66,278,000 67,257,000 68,318,000

Total long-term liabilities 201,766,000 233,088,000 254,792,000 247,924,000 246,266,000 244,227,000

Total liabilities 213,269,000 242,033,000 261,744,000 255,018,000 253,524,000 251,659,000

Net assets (deficit): Unrestricted and temporarily restricted 6,082,000 3,104,000 133,000 2,563,000 7,063,000 12,687,000

TOTAL LIABILITIES AND NET ASSETS $ 219,351,000 $ 245,137,000 $ 261,877,000 $ 257,581,000 $ 260,587,000 $ 264,346,000

See Independent Accountant’s Report. See Summary of Significant Forecast Assumptions and Accounting Policies. 10 Saint John’s Communities, Inc.

Forecasted Schedules of Financial Ratios Years Ending December 31, 2022 and 2023

2022 2023 Debt Service Coverage Ratio: Income from operations $ 2,313,000 $ 3,093,000 Add: Interest expense 5,894,000 5,716,000 Add: Depreciation and amortization 8,456,000 8,544,000 Less: Amortization of entrance fees (7,189,000) (7,687,000) Add: Net entrance fees received 7,958,000 8,259,000

Net income available for debt service (1) $ 17,432,000 $ 17,925,000

Forecasted actual debt service $ 8,257,000 $ 8,255,000

Debt service coverage ratio - Forecasted actual debt service 2.11 2.17

Maximum annual debt service 8,251,000 8,251,000

Debt service coverage ratio - Maximum annual debt service 2.11 2.17

Days Cash on Hand: Cash and cash equivalents $ 2,060,000 $ 2,100,000 Board-designated investments 72,324,000 82,885,000

Total cash and investments (1) $ 74,384,000 $ 84,985,000

Total expenses (1) (2) $ 24,899,000 $ 25,200,000

Daily cash operating expenses $ 68,216 $ 69,041

Number of days of cash on hand 1,090 1,231

Cash to Debt Ratio: Cash and cash equivalents $ 2,060,000 $ 2,100,000 Board-designated investments 72,324,000 82,885,000

Totals $ 74,384,000 $ 84,985,000

Total long-term debt $ 128,312,000 $ 125,967,000

Cash to debt ratio 58% 67%

Notes: (1) Determined as described in the Restated Master Trust Indenture dated December 1, 2015. (2) Total expenses are equal to total operating expenses, including interest but excluding depreciation, bad debts, amortization expense, and any other non-cash expense.

See Independent Accountant’s Report. See Summary of Significant Forecast Assumptions and Accounting Policies. 11 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Background Information

Basis of Presentation

The accompanying financial forecast as of December 31, 2018 through 2023 and for each of the six years then ending (the “Forecast Period”) is based on assumptions that were provided by management. This financial forecast presents, to the best of management’s knowledge and belief, Saint John’s Communities, Inc.’s (the “Corporation”) expected financial position, results of operations, changes in net assets, and cash flows for the forecast period. The forecast reflects the judgment of the Corporation’s management regarding the expected conditions and expected courses of action as of March 1, 2018, the date of this forecast.

This forecast has been prepared in accordance with the following assumptions, which are those that management believes are significant to the forecast. These assumptions are based on their judgment and the assumptions may not be all-inclusive. Furthermore, even if the assumptions are significantly correct, there will usually be differences between the forecasted and actual results because events and circumstances frequently do not occur as expected, and those differences may be material.

The Corporation

The Corporation was incorporated in June of 1868 as a Wisconsin nonstock, nonprofit corporation to establish an institution for the care and relief of sick, aged, and infirm persons. The Corporation currently owns and operates a continuing care retirement community, Saint John’s On The Lake, which is located at 1840 North Prospect Avenue in Milwaukee, Wisconsin, along Lake Michigan. The Corporation has been granted permission to operate a continuing care retirement community by the Office of the Commissioner of Insurance of the State of Wisconsin under Chapter 647 of the Wisconsin Statutes.

The Corporation’s current operations consist of the following components:

 A 110-unit independent living facility (“Central Tower Apartments” f/k/a North Tower Apartments) and a 90-unit independent living facility (“South Tower Apartments”), collectively the “Tower Apartments”  A 24-unit assisted living facility (“Canterbury Court CBRF”)  A 50-bed skilled nursing facility (SNF) (“Windsor/Stratford SNF”)

Canterbury Court CBRF and Windsor/Stratford SNF are collectively referred to as the “Health Center.”

12 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The Corporation plans to add 79 new independent living apartments. In addition, it plans to add an updated health center containing the existing 24 CBRF units, the existing 50 SNF beds, and 16 new Transitional Care Assisted Living RCAC units. In addition, it will include a multipurpose room/auditorium and additional underground parking.

The proposed addition of a third tower which will be located north of the current North Tower resulted in the renaming of the current North Tower to the Central Tower. The new tower, being constructed as part of the Project will be known as the North Tower.

Proceeds from the planned issuance of the Series 2018 Bonds together with available funds are planned to be used by the Corporation to pay for the costs of the Project.

Tax Status of the Corporation

The Corporation has received a determination letter from the Internal Revenue Service (IRS) that it is an organization as described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”) and is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. The Corporation is also exempt from state income taxes on related income.

Saint John’s Communities Foundation, Inc.

The Corporation established Saint John’s Communities Foundation, Inc. (“Saint John’s Foundation”) in 1983 as a separate nonstock, nonprofit corporation to raise and administer funds to support the activities of the Corporation. Saint John’s Foundation Board of Directors members are elected by the Corporation.

Saint John’s Foundation is not a member of the Obligated Group created under the Master Indenture. As a result, Saint John’s Foundation is not included in these forecasted financial statements.

Operations

Central Tower Apartments and Windsor/Stratford SNF were first opened in 1979, and Canterbury Court CBRF was added in 1993. In May 2004, a $10,000,000 renovation of the campus was completed in which Windsor/Stratford SNF was remodeled and downsized, and more common space was created. In addition, the first floor of Central Tower Apartments was remodeled including the common areas, conference rooms, and administrative offices; a new restaurant style dining room overlooking Lake Michigan was added; and the chapel was replaced. During 2008, the Corporation completed replacement of an existing parking structure. In 2011, the Corporation completed a new 21-story, 90-unit independent living building, South Tower Apartments, on a 1.84-acre site adjacent to the existing campus.

13 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The following table presents a summary of the number of units and square footage, by type, of the existing Canterbury Court CBRF and Windsor/Stratford SNF.

Table 1A Existing CBRF and Skilled Nursing Facility Units Type, Number, and Average Square Footage Weighted Average Unit Type Number of Units Square Footage

Assisted living suites 24 350

Skilled nursing rooms: Standard room 46 251 Suite 4 345

Total skilled nursing rooms 50 259 Source: Management

The following table presents a summary of the number of units and square footage, by type, of the South Tower Apartments which were constructed in 2011:

Table 1B Existing South Tower Apartments Units Type, Number, and Average Square Footage Average Number of Square Unit Type Units Footage

Bailey - One bedroom 1 1,090 Amherst - One bedroom plus den 12 1,135 Austen - One bedroom plus den 1 1,250 Berkshire -Two bedroom 10 1,325 Brighton - Two bedroom plus den, Floor 21 1 1,395 Cambridge - Two bedroom split 9 1,450 Hampshire - Two bedroom 5 1,465 Manchester - Large two bedroom Floor 21 1 1,590 Dover - Two bedroom plus den 14 1,630 Constable - Two bedroom 1 1,675 Sommerset - Two bedroom 4 1,780 Carlisle - Two bedroom plus den 6 1,930 Westminister - Two bedroom plus den, Floor 21 1 1,935 Sommerset II - Two Bedroom 1 1,943 Easthampton - Two bedroom plus den 12 1,945 Bristol - Large two bedroom plus den 6 1,980 Bowman - Large two bedroom plus den 2 2,285 Engleheart - Large two bedroom plus den 2 2,430 York - Large two bedroom plus den, Floor 21 1 2,460 Total units/Weighted average 90 1,631 Source: Management

14 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The following table presents a summary of the number of units and square footage, by type, of the Central Tower Apartments which were constructed in 1979:

Table 1C Existing Central Tower Apartments Units Type, Number, and Average Square Footage Average Number of Square Unit Type Units Footage

Alcove 2 400 Studio 2 475 Saybrook - Standard one bedroom 29 600 Trescott/Tresburn - Large one bedroom 21 875 Bedford - Large one bedroom 9 1,000 Canton - Standard two bedroom 12 1,075 Devonshire - Standard two bedroom 19 1,200 Dorset - Large two bedroom 5 1,350 Edgehill - Two bedroom plus den 8 1,475 Lenox - Two bedroom plus den 2 1,675 Princeton - Two bedroom plus den 1 1,750 Total units/Weighted average 110 963 Source: Management

Historical Occupancy

The historical average occupancy percentages of the Corporation’s facilities are as follows:

Table 2 Historical Occupancy 2013 2014 2015 2016 2017 Occupied Occupancy Occupied Occupancy Occupied Occupancy Occupied Occupancy Occupied Occupancy Units/Beds Percentage Units/Beds Percentage Units/Beds Percentage Units/Beds Percentage Units/Beds Percentage

Facility: Central Tower Apartments (1) 95 86% 107 96% 108 97% 107 96% 103 93% South Tower Apartments (2) 89 99% 90 100% 89 99% 87 97% 88 98% Canterbury Court (3) 16 94% 21 87% 22 90% 23 94% 24 98% Windsor/Stratford (4) 46 91% 45 89% 46 91% 46 93% 44 89% Source: Management

(1) Based on 111 units available at Central Tower Apartments through September 30, 2017, and 110 units thereafter (2) Based on 90 units available at South Tower Apartments (3) Based on 24 units available at Canterbury Court (except 2013 when only 17 units were available) (4) Based on 50 beds available at Windsor/Stratford

15 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The Project

The Corporation is developing a new 79-unit independent living building, as well as an updated health care center composed of 50 SNF beds, 24 CBRF units, and 16 new Transitional Care Assisted Living RCAC units. The new 22-story tower will comprise the following:

• Under building parking structure which includes 122 community parking spaces • Lower Level M Administrative offices and support departments • Floor 1 M Common space, including a multipurpose room and auditorium • Floor 2 M Windsor M 25 beds of the 50-bed SNF • Floor 3 M Stratford M 25 beds of the 50-bed SNF • Floor 4 M Canterbury Court M 24-unit CBRF assisted living • Floor 5 M The new 16-unit Transitional Care Assisted Living RCAC • Floor 6 M Mechanical spaces • Floors 7-21 M Independent living apartments, ranging from 1,455 to 1,920 square feet per unit • Floor 22 M Signature penthouse apartments, ranging from 1,830 to 2,515 square feet per unit

Each independent living apartment will have a terrace from which Lake Michigan is visible.

The following table presents a summary of the total planned units compared to total existing units of the Corporation:

Table 3 Total Existing and Planned Units/Beds Existing Project Planned

Independent living apartments 200 79 279 Assisted living apartments: Transitional Care Assisted Living RCAC - 16 16 CBRF 24 - 24 Skilled nursing beds 50 - 50

Totals 274 95 369 Source: Management

16 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The following table presents a summary of the planned number of units and square footage of the Project’s new independent living units, new Transitional Care Assisted Living RCAC units, and the replacement CBRF and SNF units.

Table 4 The Project - New Net Units Type, Number, and Average Square Footage of Planned Units

Number of Average Square Unit Type Units Footage

A - Johnstone 15 1,455 B - Kingston 15 1,665 D - Middleton 15 1,830 P4 - Bridgewater 1 1,830 E - Northampton 15 1,915 C - Lancaster 15 1,920 P3 - Barrington 1 1,920 P1 - Greenwich 1 2,490 P2 - Aberdeen 1 2,515 Total units/Weighted average - Independent Living 79 1,779 Assisted living suites: Transitional Care Assisted Living RCAC - 16 new units 16 424-1,147 sq. ft. CBRF - 24 replacement units - no net new - 346-505 sq. ft. Subtotal assisted living 16

Skilled nursing rooms: Private room - 50 replacement rooms - no net new - 346-505 sq. ft.

Total new net units 95 Source: Management

Residency Contracts and Reimbursement Agreements

Independent Living Contracts

Two residency contract options are available to independent living residents: “Life Care” and “Standard.” On occasion, the Corporation will issue a “split” contract which combines Life Care and Standard contract features to a couple when one of the individuals is either not qualified for Life Care or declines the Life Care offering. In those instances, the characteristics of the Life Care and Standard contract described herein govern all benefits and terms as they relate to each member of the couple, respectively.

17 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Each resident, upon entering the Corporation’s independent living facilities, pays an “entrance fee.” The entrance fee is a lump-sum amount, payable before occupancy, for the right to occupy an apartment. Under the Life Care Contract currently available to residents, the entrance fee is 30% refundable. Under the Standard Contract options, the entrance fee is 90% refundable. Refunds are paid upon the shorter of re-occupancy of the unit by a new resident or one year from the residency contract termination date. Prior to 2014, the Corporation offered Life Care contract options that were nonrefundable and 90% refundable. Many independent living apartment residents still have these contracts. The entrance fee varies according to the size and location of the apartment and is subject to change. The entrance fee is increased when a second person occupies an apartment. In addition, residents pay a monthly maintenance fee to cover the costs of additional services provided by the Corporation. Under the Life Care Contract, the Corporation agrees to provide care to residents, when medically indicated, in the Canterbury Court CBRF or Windsor/Stratford SNF at a rate equal to the resident’s current monthly fee, plus costs incurred for meal services. This rate does not include the costs of drugs, special treatments, special therapies, or physician services. These costs are the obligation of the residents. In addition, residents are required to continue participation in the Medicare program. Under the Standard Contract, residents are entitled to a total of 30 days of health care services at the Canterbury Court CBRF or Windsor/Stratford SNF. Residents may use only 10 days of health care services during the first 365 days of the Standard Contract.

The Corporation also has residents under other contract types that are no longer offered. The composition of the Corporation’s residency contracts for individuals who either are currently or were previously residents of the independent living units consisted of the following at December 31, 2017:

Table 5 Life Care and Rental Contracts in Place on December 31, 2017

Nonrefundable Life Care Contract * 50 Split-Life Care, 30% Refundable 5 Split-Life Care, 90% Refundable * 1 90% Refundable Rental Contract * 1 100% Refundable Rental Contract * 3 Rental Contract with no Entrance Fee * 4 90% Refundable Life Care Contract * 36 30% Refundable Life Care Contract 76 90% Refundable Standard Contract 38

Totals 214 * Contract type no longer available to new residents. Source: Management

18 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Further information related to the independent living contracts which are currently offered is described below.

Admission Criteria

To qualify for residency in the independent living units, an applicant must be at least 62 years of age and demonstrate, to the satisfaction of the Corporation, the ability to live independently. Applicants agree to complete a self-assessment form and undergo further evaluation as requested by the Corporation to evaluate the applicant’s ability to satisfy the occupancy requirements. In addition, applicants must meet certain financial requirements by demonstrating sufficient assets and income to pay the required financial obligations.

Reservation Fees

When an applicant desires to reserve an independent living unit, the applicant completes a residency contract, provides details about his or her health and finances, and places a deposit equal to 10% of the Entrance Fee (“Reservation Fee”) with the Corporation. If two individuals will occupy the apartment, a second resident Reservation Fee will also be included. Once management determines the applicant meets the admission criteria described above, the applicant is approved for residency. Upon approval, the applicant receives an acceptance letter and an executed copy of the residency contract. The remaining balance of the Entrance Fee is due upon occupancy.

The Reservation Fees are refundable upon termination of the residency contract as follows:

 If the Corporation does not accept the prospective resident’s application for residency, the Reservation Fee will be returned to the prospective resident within 30 days of Corporation’s written notice to resident of non-acceptance.  If the Corporation terminates the residency contract prior to occupancy, the Reservation Fee will be refunded to the prospective resident within 30 days of Corporation’s written notice to resident.  If prior to occupancy, the prospective resident dies or terminates the residency contract because of illness, injury, or incapacity as verified by a physician, the Reservation Fee will be refunded to the prospective resident or resident’s estate or personal representative within 30 calendar days of such termination.

19 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

 If a prospective resident of the existing Central Tower or South Tower independent living units terminates the Residency Contract prior to occupancy for conditions other than those described above, then a refund of the Reservation Fee, less $5,000, will be made within the earlier of 30 days following the date on which the apartment is reserved by a new individual and the new individual has paid the appropriate Reservation Fee or one year from Corporation’s receipt of the resident’s written notice of termination.  If a prospective resident of the Project’s independent living units terminates the Residency Contract prior to occupancy for conditions other than those described above, a refund of the Reservation Fee will be made as follows: - If construction of the Project’s independent living units has not commenced and the prospective resident terminates within 90 days of signing the Residency Contract, a refund of the Reservation Fee will be made within 30 days of the Corporation’s receipt of the prospective resident’s written notice of termination, with interest. - If construction of the Project’s independent living units has not commenced and the prospective resident terminates after 90 days, a refund of the Reservation Fee will be made, with interest, less $1,000 within 30 days of the Corporation’s receipt of prospective resident’s written notice of termination. - If construction of the Project’s independent living units has not commenced within 18 months of execution of the Residency Contract and the prospective resident terminates the Residency Contract, a refund of the Reservation Fee will be made within 30 days of the Corporation’s receipt of the prospective resident’s written notice of termination, with interest. - If construction of the Project’s independent living units has commenced, the prospective resident will receive a refund of the Reservation Fee, without interest, less $7,500. Said refund will be paid within the earlier of 30 days following the date on which the Apartment is reserved by a new individual and the new individual has paid the appropriate Reservation Fee; or one year from the Corporation’s receipt of the prospective resident’s written notice of termination.  If a second resident remains a party to the contract after termination by a single resident, only the second resident Reservation Fee will be refunded.

20 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Entrance Fees

In order to reside in the independent living units under a Life Care or Standard Contract, applicants agree to pay an entrance fee (the “Entrance Fee”). If two individuals will occupy the unit, the Entrance Fee includes a basic fee (“Single Resident Entrance Fee”) plus an additional fee (“Second Resident Entrance Fee”). The Entrance Fee is due and payable on the date the resident assumes occupancy of the apartment.

Entrance fee refunds occur in accordance with contract terms, as described below:

 If, prior to or within the first 30 days following the date the unit is occupied, as defined, the resident dies or a Standard or a Life Care Contract is terminated by either party, the Corporation will refund the entire Entrance Fee, less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded, and any unpaid fees and costs for services received by the resident.  If, after the first 30 days following the date the unit is occupied, as defined, the resident dies or either party terminates a Standard Contract, the Corporation will refund 90% of the Entrance Fee, less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded, as well as any unpaid fees and costs for services received by the resident.  If, after the first 30 days following the date the unit is occupied, but within the first 90 days following the date the unit is occupied, the resident dies or either party terminates a Life Care Contract, the Corporation will refund 90% of the Entrance Fee, less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded, and any unpaid fees and costs for services received by the resident.  If the resident dies or terminates a Life Care Contract after 90 days following the date the unit is occupied, as defined, a refund of the Entrance Fee will be made as follows: If the resident has elected the 30% refundable Entrance Fee option, the Entrance Fee refund will amortize from 90% of the Entrance Fee to 30% of the Entrance Fee in equal increments (1.333% per month) over the subsequent 45 months less the reasonable cost of returning the unit to the same condition as it was upon initial occupancy, reasonable wear and tear excluded, and any unpaid fees and costs for services received by the resident.

21 Saint John’s Communities, Inc.

Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

 If the Corporation terminates a Life Care Contract after 90 days following the date the unit is occupied, as defined, the Corporation will refund to the resident, less the reasonable cost of returning the Apartment to the same condition as it was upon initial occupancy, reasonable wear and tear excluded, and any unpaid fees and costs for services received by resident, the greater of (a) 30% of the Entrance Fee or (b) that portion of the Entrance Fee as calculated by the following formula: 1 minus (actual length of occupancy divided by the projected length of stay of all residents) times the Entrance Fee.  Any refund owed to the resident will be paid by the earlier of the Corporation’s receipt of an Entrance Fee from a new occupant for the vacated unit, or within one year from the date the unit is vacated. If a second resident continues to reside in the unit, only the Second Resident Entrance Fee will be refunded in accordance with the terms described above.  If a resident under a Standard contract is a resident of the Health Center at the time the refund is due, the refund will be paid to the resident in the form of payments to the Health Center in amounts necessary, as determined by the Corporation in consultation with the resident, to supplement the resident’s assets and income in order for the resident to meet his or her financial obligations to the Health Center.  Refunds are made without interest.

Health Care Benefits

Standard Contracts

During the term of the Standard Contract, the resident is entitled to a total of 30 days of “Health Care Benefits,” which is defined as routine CBRF services, or routine SNF services.

If the Health Care Benefits are of a temporary nature (anticipated being less than three months), the resident will retain their unit and continue to pay the then-current Monthly Fee. The resident will also be financially responsible for all fees and costs incurred at the Health Center that are not covered by the Health Care Benefit or paid for by Medicare or another third-party payor. No temporary transfer to the Health Center for the Health Care Benefit shall exceed 90 days without first establishing a permanent transfer.

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If, after consultation with the resident, the resident’s physician, and the Corporation’s Medical Director, the Corporation determines that the resident’s permanent transfer to the Health Center is medically indicated, the resident will become a permanent occupant in the Health Center and will vacate his or her unit. In the absence of other medical indications, temporary transfer to the Health Center for three months’ duration will establish the resident’s need for permanent transfer to the Health Center.

The resident is financially responsible for payment of care provided to the resident in the Health Center after the resident has exhausted the Health Care Benefit days under the Standard Contract. Such care may be paid for by Medicare or the Medical Assistance Program. The Corporation currently participates in the Medical Assistance Program, but there is no assurance that participation in the program will continue, and the resident should not assume that such program will be available to them should they exhaust their Health Care Benefit and be unable to pay for future care in the Health Center.

Life Care Contracts

The Corporation’s Life Care Contract provides guaranteed access to health care services in the Health Center. Under the Life Care Contract, the Monthly Fee for the additional care required in the Health Center does not change.

If, after consultation with the resident, the resident’s physician, and the Corporation’s Medical Director, the Corporation determines that the applicant qualifies for Life Care, the resident will be provided with Health Care Benefits, as defined above.

If the required Life Care services in the Health Center are of a temporary nature (anticipated being less than three months), the resident will retain his or her unit.

If, after consultation with the resident, the resident’s physician, and the Corporation’s Medical Director, the Corporation determines that the resident’s permanent transfer to the Health Center for Life Care is medically indicated, the resident shall become a permanent occupant of the Health Center and will vacate their unit. In the absence of other medical indications, temporary transfer to the Health Center for three months’ duration will establish the resident’s need for permanent transfer to the Health Center.

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Monthly Fees

Under both the Standard and Life Care contracts, residents will be obligated to pay a fee each month (the “Monthly Fee”). If two individuals occupy the unit, an additional second resident fee will become part of the Monthly Fee. The Monthly Fee is due beginning on the earlier of the occupancy date or the date the resident takes possession (issuance of keys) of the apartment. Thereafter, the Monthly Fee will be paid in advance of each month and no later than the seventh day of the prior month.

Upon occupancy of the unit in the Project and in exchange for payment of the Monthly Fee, the Corporation will provide the following facilities, utilities, and services to each resident:  Apartment, including carpets, window coverings, window hardware, kitchen appliances, including repair, maintenance, and, at the discretion of the Corporation, replacement from time to time.  All utilities (heating, air conditioning, water, electricity, sewer, trash, garbage removal, and basic cable television), except for telephone and internet for which outlets are provided in the unit and which are available at resident’s own expense.  A fire and smoke detection system for the apartment.  Public area janitorial and cleaning services, public area maintenance and repair, structural repairs, and painting of units according to a schedule set by the Corporation.  Emergency response 24 hours daily.  Administrative, social, wellness, and recreational services.  Use of public and common areas and amenities of the buildings.  Upgrades or alterations to the unit as set forth in a separate agreement to be signed by the resident and the Corporation.

In addition to the Monthly Fee, the resident agrees to spend a minimum for food and beverage in the Corporation’s dining program. This includes eat-in or take-out meals from any of the Corporation’s dining, catering, or take-out programs. If two individuals occupy the apartment, an additional fee will become part of the dining minimum until such time as the contract is terminated with respect to either resident, at which time the remaining resident will continue to pay the dining minimum rate for one person.

As of August 1, 2017, parking spaces are no longer part of the Monthly Fee but can be obtained through a separate fee for service agreement.

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The following table summarizes the Monthly Fees and Entrance Fees for the existing South Tower Apartments and is stated at the rates as of December 2017. Entrance Fees and Monthly Fees are forecast to have annual increases as shown in Table 52:

Table 6A Existing South Tower Apartments Average Average Number Monthly Entrance of Units Fees Fees

Bailey - One bedroom 1$ 3,275 $ 386,800 Amherst - One bedroom plus den 12 3,300 390,567 Austen - One bedroom plus den 1 3,455 420,200 Berkshire - Two bedroom 10 3,535 456,500 Cambridge - Two bedroom split 9 3,865 504,033 Hampshire - Two bedroom 5 3,905 499,400 Dover - Two bedroom plus den 14 3,985 587,371 Sommerset - Two bedroom 4 4,120 622,300 Brighton - Two bedroom plus den, Floor 21 1 4,300 583,100 Manchester - Large two bedroom, Floor 21 1 4,425 841,200 Constable - Two bedroom 1 4,500 603,200 Sommerset II - Two bedroom 1 4,560 650,800 Carlisle - Two bedroom plus den 6 4,650 680,883 Easthampton - Two bedroom plus den 12 4,660 685,225 Bristol - Large two bedroom plus den 6 4,680 687,317 Westminister - Two bedroom plus den, Floor 21 1 5,010 918,900 Bowman - Large two bedroom plus den 2 5,650 761,700 Engleheart - Large two bedroom plus den 2 5,940 844,250 York - Large two bedroom plus den, Floor 21 1 6,020 984,200

Total/Weighted average 90$ 4,135 $ 578,108 Second person fees: Standard $ 475 $ 25,500 Life Care 1,390 51,100

Source: Management

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The following table summarizes the Monthly Fees and Entrance Fees for the existing Central Tower Apartments and is stated at the rates as of December 2017. Entrance Fees and Monthly Fees are forecast to have annual increases as shown in Table 52:

Table 6B Existing Central Tower Apartments Average Average Number Monthly Entrance of Units Fees Fees

Alcove 2$ 1,700 $ 134,750 Studio 2 1,900 145,750 Saybrook - Standard one bedroom 29 2,290 169,855 Trescott/Tresburn - Large one bedroom 21 3,140 309,971 Bedford - Large one bedroom 9 3,160 340,167 Canton - Standard two bedroom 12 3,205 347,700 Devonshire - Standard two bedroom 19 3,525 384,147 Dorset - Large two bedroom 5 3,725 436,120 Edgehill - Two bedroom plus den 8 3,925 467,875 Lenox - Two bedroom plus den 2 4,065 553,700 Princeton - Two bedroom plus den 1 4,115 572,700

Total/Weighted average 110$ 3,052 $ 310,296 Second person fees: Standard $ 475 $ 25,500 Life Care 1,390 51,100 Source: Management

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The following table summarizes the Monthly Fees and Entrance Fees for the new independent living units being constructed as part of the Project. Fees are stated at the rates as of December 2017. Entrance Fees and Monthly Fees are forecast to have annual increases as shown in Table 52:

Table 7 The Project - Independent Living Units Monthly Fees and Entrance Fees Average Average Entrance Number of Units Monthly Fees Fees A - Johnstone 15$ 3,970 $ 521,000 B - Kingston 15 4,130 607,700 D - Middleton 15 4,330 672,600 C - Lancaster 15 4,630 692,700 E - Northampton 15 4,790 704,600 P4 - Bridgewater 1 5,000 947,600 P3 - Barrington 1 5,140 979,700 P2 - Aberdeen 1 6,260 1,094,900 P1 - Greenwich 1 6,340 1,111,100

Totals/Weighted average 79$ 4,437 $ 659,649

Second person fees - Assume 50% of total: Standard $ 475 $ 25,500 Life Care 1,390 51,100

Height premium - Weighted average (1) N/A $ 9,823 Source: Management

(1) Certain residents will also pay an escalating Entrance Fee height premium for units on floors 11 and above.

Transitional Care Assisted Living RCAC

The new Transitional Care Assisted Living RCAC being developed as part of the Project is forecasted to be a 16-unit assisted living facility operated by the Corporation serving the needs of residents unable to live independently but not requiring skilled nursing or CBRF care. The Transitional Care Assisted Living RCAC is forecasted to be licensed as a RCAC under Chapter 89 of the Wisconsin statutes.

The Transitional Care Assisted Living RCAC is forecasted to provide services to residents transferring from Tower Apartments and to residents admitted from the community at large.

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

The Life Care and Standard Contracts are available to Transitional Care Assisted Living RCAC residents under terms essentially the same as those described on pages 17 to 24. Transitional Care Assisted Living RCAC services are not part of the Health Benefit under the Life Care or the Standard Contracts. As a result, residents transferring from Tower Apartments pay privately for Transitional Care Assisted Living RCAC services provided.

Canterbury Court

Canterbury Court is a 24-unit assisted living facility operated by the Corporation and serving the needs of residents unable to live independently but not requiring skilled nursing care. Canterbury Court is licensed as a CBRF under Chapter 50 of the Wisconsin Statutes.

Canterbury Court provides services to residents transferring from Tower Apartments as part of the Life Care program and to residents admitted from the community at large. In 2017, the facility averaged 98% occupancy. Of these residents, 46% received care through their participation in the Life Care program and 54% were private pay residents.

Windsor/Stratford SNF

Windsor/Stratford is a SNF operated by the Corporation and serving residents needing skilled and/or intermediate care. Windsor/Stratford is licensed to provide skilled nursing care under Chapter 50.03(4)(c) of the Wisconsin Statutes. The facility is licensed for 50 beds, all of which are licensed for single occupancy.

Windsor/Stratford SNF provides services to residents transferring from Tower Apartments as part of the Life Care program and to residents admitted from the community at large. In 2017, the facility averaged 89% occupancy. Of the 2017 resident days, 31% were transfers from Tower Apartments receiving care under the Life Care program, 47% were for private pay residents responsible for their full cost of care, 12% were paid for by the Medical Assistance Program (“Medicaid” or “Title XIX”), and 10% were paid for by Medicare (“Title XVIII”).

Reimbursement under terms of the Medical Assistance and Medicare programs are based on prospectively determined rates which vary based on the care needs of the resident and which are determined based on the reimbursement provisions of the respective program.

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Consulting Agreements

The development and marketing of the Project is being overseen by management of the Corporation.

The Corporation will be assisted in the development of the Project by the following companies:

Project Manager

The Corporation has engaged Witz Company, a Wisconsin corporation with its principal office in Madison, Wisconsin, as the Development Project Manager to provide certain professional and consulting services related to the development of the Project. Witz Company works exclusively with senior housing developments and has successfully completed projects nationwide. Witz Company’s principal has 30 years of senior housing development experience and also served as the Development Project Manager for the Corporation’s South Tower expansion which was completed in 2011.

Project Manager services to be provided by Witz Company are specified in a Development Project Management Agreement effective as of October 12, 2016, and include the following:

• Provide project management services to implement the development plan for the Project as approved by the Corporation. • Prepare detailed schedules and budgets for the Project, evaluate and update schedules and budgets as the Project progresses, and submit schedules and budgets to management for approval. • Lead development team meetings, monitor all project open issues, and monitor status of schedule and budgets. Assist in obtaining all government approvals required for development of the Project. • Assist in selection process of the architect for the Project and coordinate preparation of all design and construction plans and specifications with the Project architect and other design consultants. • Assist management with the oversight of the marketing consultant. • Assist in securing financing for the Project. • Assist in negotiating and awarding a construction contract for the Project and monitor the progress of construction after it commences. • Assist management with the operational start-up of the Project during the move-in period.

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Witz Company is compensated for its services as follows:

 Monthly fee of $10,000 until the earlier of the Project achieving 85% occupancy or the Corporation terminating the agreement.  Incentive bonus of $210,000 paid as follows:  25% earned at beginning of formal sales but deferred until closing of construction loan  25% earned at start of construction but deferred until closing of construction loan  25% paid at first resident move-in  25% paid when residential occupancy reaches 85%

Marketing Consultant

The Corporation has engaged Varsity Marketing LLC (“Varsity”), a subsidiary of Pavone Marketing Group, Inc., a Pennsylvania corporation with its principal office in Harrisburg, Pennsylvania, to assist management with developing and implementing a strategic marketing plan for the Project. Varsity provides strategic marketing services to organizations developing senior housing projects nationwide.

Marketing services to be provided by Varsity are specified in a Marketing Services Agreement effective as of December 2, 2016, and include the following:

• Develop a comprehensive strategic marketing and sales plan and budget for the Project, as approved by management, including an expression of interest and then formal sales conversion programs. • Develop and supervise implementation of the marketing and sales program. • Develop or assist the Corporation in the development of graphics, communications, and marketing tools. • Make recommendations for and assist in the direction of promotional advertising, and media campaigns. • Assist the Corporation in cultivating and building upon its qualified lead base. • Train, supervise, and monitor the Corporation’s marketing and sales staff. • Work with the Corporation’s marketing and sales staff in the development and implementation of regularly scheduled information meetings and special events for prospective residents, their family members, and advisors. • Assist the Corporation’s marketing and sales staff in converting leads to sales.

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Varsity is compensated for its services as follows:

 Creation of a marketing plan and budget - $6,000  Sales Consulting Responsibilities - $8,000 per month  Account and Project Management - $2,000 per month

In addition to the above, Varsity is compensated for additional services associated with developing marketing, sales, and website materials. These additional services are billed to Saint John’s based on the time and materials involved, subject to approval by the Corporation.

With respect to the agreements with Witz Company and Varsity, the Corporation has exercised and will continue to exercise final authority in all matters relating to the development and marketing of the Project.

Architect

The Corporation entered into agreements with Eppstein Uhen Architects (“EUA”) to provide architectural design services and interior design services for the Project. The architectural design agreement is dated December 12, 2016, and interior design agreement is dated August 22, 2017. EUA was founded in 1907 and has offices in Milwaukee, Wisconsin, Madison, Wisconsin, Des Moines, Iowa, and Denver, Colorado. EUA has extensive health care and senior living experience in the Milwaukee area, as well as nationwide.

For the Project, EUA engaged Ron Blitch of Blitch Knevel Architects, a 60-year-old New Orleans-based design firm, as a consulting architect (“Blitch”). Blitch is a nationally respected authority in health care and senior living design. He has served as Chairman of the Design for Aging Center of the AIA, and as Vice President of AIA’s Academy of Architecture for Health. Blitch is also a fellow of the American Institute of Architects and the American College of Healthcare Architects. He has won over 50 national, regional, and local awards for design excellence. He is a frequent lecturer at AIA, Leading Age, and health care conferences and served on multiple design juries. Blitch and EUA are working closely together on the Project with Blitch serving as project team leader for design and EUA providing design project management, local code review, coordination of local design consultants, document production, and interface with state and local jurisdictions.

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EUA’s architectural design fees are anticipated by management to total approximately 5.4% of the cost of the work, less site costs, with approximately 80% of those fees expected to be earned by EUA prior to the start of construction. EUA’s fee to provide interior design services total approximately $298,000. EUA will render invoices to the Corporation as services are provided.

Environmental Gerontologist

The Corporation has engaged Lorraine Hiatt, PhD, an environmental gerontologist, to assist with programming and planning for the health center components of the Project. Based in New York City, Hiatt has 48 years of experience providing nationwide planning, research, and design consultation to optimize elders’ capabilities (movement, energy, social options, and memory) and to streamline staff effort by understanding desired work flow, space design, distances, and “geometry.” She has used her ‘data-driven’ approach to provide on-site consultation for more than 800 projects and is a frequent speaker at industry conferences, as well as a writer on senior living issues and design jurist.

Construction Manager

VJS Construction Services (“VJS”) is providing pre-construction estimating and construction management services to the Project. VJS was founded in 1947 and has been serving clients in southeastern Wisconsin for more than 70 years with a 2017 volume of approximately $120,000,000. VJS has extensive experience in construction management for senior living and health care facilities, having completed more than 2,500 senior living housing units involving more than 40 projects. VJS participated in its first construction project for the Corporation in 1993 and has continued to provide construction services for the past 16 years. VJS completed the chapel and dining room additions and renovations to the first and second floor of the Health Center in 2003 and 2004, cosmetic and complete renovations of independent living apartments in the Central Tower and construction of the new independent living South Tower in 2011 and 2012, renovations and updates throughout the campus from 2012 to 2017, updates and renovations to Canterbury Court in 2013, and renovations to the lower level common area space and Taylor’s Restaurant in 2015 and 2016.

Actuary

A.V. Powell & Associates, LLC (“A.V. Powell”) provides actuarial consulting services to the Corporation. A.V. Powell was founded in 1982 and focuses on research, consulting, and actuarial financial modeling for continuing care retirement communities using actuarial simulation techniques. A.V. Powell is one of the leading actuarial firms providing services to continuing care retirement communities.

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

A.V. Powell provides an annual actuarial report for the Corporation’s existing operations and provided actuarial consulting services for the Project, including the design and pricing of the Project Residency Contracts and actuarial-based assumptions regarding apartment turnover and usage of health care services.

Project Timeline

The proposed timeline for the Project, as provided by management, is as follows:

Table 8 The Project Development Timeline Date Item January 2018 Early site work began April 2018 Series 2018 Bonds are issued April 2018 Primary construction begins October 2019 Existing Health Center residents are moved to first phase of new Health Center space October 2019 Transitional Assisted Living RCAC move-ins begin January 2020 First independent living move-ins begin (floors 7-14) April 2020 Second independent living move-ins begin (floors 15-22) July 2020 Independent living at 50% occupancy August 2020 Final health center construction complete; residents moved to completed space August 2020 Auditorium and new first floor commons complete; begin renovations offices to commons December 2020 Renovated first floor commons complete June 2021 Independent living move-ins completed at 95% occupancy 2022 First full calendar year of stabilized occupancy

The Corporation will obtain various permits and licenses related to construction of the Project and commencement of operations in Project facilities. The Corporation anticipates receiving these licenses and permits in a timely manner consistent with the achievement of the timeline identified in the above table.

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Plan of Finance

A summary of the forecasted sources and uses of funds for the Corporation’s financing is as follows:

Table 9 Series 2018 Bonds Sources and Use of Funds

Sources of funds: Proceeds from the Series 2018 Bonds: Series 2018A Bonds (Permanent debt): Par amount $ 82,920,000 Bond Premium 3,670,000 Series 2018B Bonds (Temporary Entrance Fee debt) 51,920,000

Total proceeds from the Series 2018 Bonds (1) 138,510,000 Interest income on trustee held funds (2) 470,000 Equity contribution (3) 6,000,000

Total sources of funds $ 144,980,000

Uses of funds: Project Fund deposits: Design and construction (4)$ 109,507,000 Contingency (5) 4,077,000 Additional project costs (6) 6,816,000 Furniture, fixtures, and equipment (4) 2,876,000 Marketing (7) 1,185,000

Total project related costs 124,461,000 Debt service reserve fund (8) 7,040,000 Funded interest (29 Months) (9) 11,532,000 Issuance and other finance costs (10) 1,947,000

Total uses of funds $ 144,980,000 Source: Management and the Underwriter

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Notes to Sources and Uses of Funds:

1. The Corporation’s underwriter, Piper Jaffray & Co. (the “Underwriter”), has indicated that proceeds in the amount of $138,510,000 are estimated to be generated by the issuance of the Series 2018 Bonds. The responsibility for payment of the debt service on the Series 2018 Bonds is solely that of the Corporation.

The Underwriter has provided the assumed structure and terms of the Series 2018 Bonds as follows:

• $82,920,000 of tax-exempt Series 2018A Bonds or Permanent Debt with an assumed weighted average coupon rate of 4.996%. The Series 2018A Bonds are assumed to be issued with an original issue premium of $3,670,000 for net proceeds of $86,590,000. The Series 2018A Bonds are anticipated to mature between 2021 and 2050. • $51,920,000 of tax-exempt Series 2018B Bonds or Temporary Entrance Fee Debt with a variable interest rate until April 2023; thereafter the interest rate will be adjusted per the terms of the related bond documents. For the initial rate period, the Series 2018B Bonds have an assumed coupon rate of 4.0%. The Series 2018B Bonds have an initial mandatory tender date of April 2023, and an expected maturity date of April 2025. Entrance fee receipts from the initial occupancy of the Project’s independent living units are forecasted to be used to retire the Series 2018B Bonds prior to their tender/reset in 2023.

2. A portion of the proceeds from the issuance of the Series 2018A Bonds is forecasted to be deposited into a capitalized interest fund, a project fund, and a debt service reserve fund. Interest income, in the following amounts, is assumed to be earned on these trustee-held funds.

Table 10 Interest Earnings on Series 2018 Trustee Held Funds 2018 2019 2020 2021 2022 2023

Capitalized interest fund $ 46,000 $ 31,000 $ - $ - $ - $ - Project fund 277,000 85,000 - - - - Debt service reserve fund 37,000 53,000 53,000 53,000 53,000 53,000

Totals $ 360,000 $ 169,000 $ 53,000 $ 53,000 $ 53,000 $ 53,000

Source: Underwriter

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

3. The Corporation is forecasted to contribute $6,000,000 of its existing cash and assets toward Project-related costs. The Corporation expended approximately $4,400,000 of the $6,000,000 prior to January 1, 2018, the initial date of this forecast. 4. Management has assumed the total construction costs for the Project will approximate $112,383,000, including $103,287,000 for a fixed price construction contract from the construction manager, VJS, $1,055,000 for owner-paid construction-related costs, $2,876,000 for furniture, fixtures, and equipment, and a $5,165,000 change order allowance. 5. Management has estimated a Project contingency equal to $4,077,000, which represents approximately 3.9% of the fixed price construction contract and 3.3% of the total Project-related cost. 6. Management has assumed additional project costs, including architect and engineering costs totaling $5,681,000, other site-related costs, fees, and regulatory approvals necessary for the planning of the Project, and certain consulting fees, will be approximately $6,816,000. 7. Marketing costs related to the initial occupancy of the Project are assumed to total $1,185,000 and consist of amounts paid to Varsity and amounts for direct marketing costs, salaries and commissions, promotional materials, and other items, as provided by management, the Project Manager, and Varsity based on their experience with other projects. 8. The Underwriter has estimated an initial deposit of approximately $7,040,000 into a Debt Service Reserve Fund for the Permanent Debt based on 125% of the average annual debt service on the Permanent Debt. 9. Management and the Underwriter estimate interest in the amount of $11,532,000 incurred on the Series 2018 Bonds through September 15, 2020, which is approximately 29 months from the assumed issuance date, will be funded by proceeds of the Series 2018 Bonds. 10.Management and the Underwriter estimate issuance and financing-related costs in the amount of $1,947,000 will be incurred, including the Underwriter’s discount, legal, accounting, and other costs associated with the assumed issuance of the Series 2018 Bonds.

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Initial Entrance Fees

A summary of the forecasted initial Entrance Fees for the Project follows:

Table 11 Forecasted Initial Entrance Fees - Project 2018 2019 2020 2021 2022 2023

Balance at beginning $ 4,591,000 $ 4,777,000 $ 4,932,000 $ 41,124,000 $ 51,920,000 $ 51,920,000 Entrance fees received from initial residents 186,000 155,000 36,192,000 10,796,000 - -

Cumulative totals $ 4,777,000 $ 4,932,000 $ 41,124,000 $ 51,920,000 $ 51,920,000 $ 51,920,000 Source: Management Notes: 1. Timing reflects receipt of $4,591,000 of reservation fees prior to the forecast period, 10% of the Entrance Fee as a reservation fee when the unit is reserved, and the remaining 90% of the Entrance Fee upon occupancy. 2. Reflects stabilized occupancy of 95% in 2021.

Market Assessment

General  Management’s assumptions for the future utilization of the Project were based on an analysis of the following factors that may affect demand for the units and services:

• Site description and general community analysis • Defined primary market area (PMA) for the Corporation • Demographic and economic characteristics of the defined PMA • Estimated age- and income-qualified households within the defined PMA • Description and utilization of existing and proposed comparable and competitive senior independent living and assisted living RCAC projects within the defined PMA • Penetration rates for the senior independent living and assisted living RCAC for the defined PMA • Management’s historical and future ability to market the Corporation and Project • General information including background on the Corporation • Description of Life Care Contracts, Standard Contracts, including a description of health care services provided under terms of the Life Care Contracts and under the terms of the Standard Contracts

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Summary of Significant Forecast Assumptions and Accounting Policies See Independent Accountant’s Report

Site Analysis  Site Description

The Corporation is located at 1840 North Prospect Avenue along Lake Michigan in Milwaukee, Wisconsin. The existing campus is on a 5.02-acre site north of downtown Milwaukee. The Project will be located on the most northern part of the existing campus. The campus is zoned for multi-unit residential.

The following map depicts the location of the Corporation.

Source: Mappoint

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Access

Interstate 794 (“I-794”) provides direct access to downtown and the lakefront and is less than two miles from the Corporation; I-794 can be easily accessed from North Prospect Avenue. Within Milwaukee, I-794 connects with Interstate 94 (“I-94”), a major east/west route, and Interstate 43 (“I-43”), a major north/south route. I-94 provides access west to suburbs of Milwaukee including Wauwatosa (10 miles from the Corporation) and Brookfield (13 miles from the Corporation), and Interstate 41 which has an interchange in Wauwatosa and is a major north/south route. I-43 provides access north to suburbs including Shorewood, Fox Point, Bayside, and Mequon, which are all located within the PMA.

General Mitchell International Airport is the closest major airport and is located 12 miles from the Corporation. There is also an Amtrak station, Milwaukee Intermodal Station, located three miles from the Corporation.

Hospitals and Medical Centers

The following table summarizes the hospitals and medical centers near the Community.

Table 12 Hospitals and Medical Centers Located near the Corporation Driving Miles From the Number Name Location Corporation of Beds Columbia St. Mary's Hospital - Milwaukee 53211 0.6 432 Aurora Sinai Medical Center 53233 2.5 386 Froedtert Memorial Lutheran Hospital 53226 8.1 596 Wheaton Franciscan Healthcare (Ascension) - St. Francis Hospital 53215 8.2 260 Children's Hospital of Wisconsin 53226 8.3 298 Aurora St. Luke's Medical Center 53215 8.6 938 Source: Wisconsin Department of Health Services, January 2018

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Cultural and Shopping

The Corporation is located in an area that features a variety of retail shopping, pharmacies, grocery stores, churches, entertainment, cultural venues, and day-to-day conveniences. There are a variety of restaurants and boutiques within walking distance, and The Milwaukee Yacht Club, Milwaukee Art Museum, Veterans Park, and O’ Donnell Park are located along the lakefront close to the campus.

Other attractions include the Milwaukee Public Museum, Harley-Davidson Museum, Milwaukee Public Market, Marcus Center for Performing Arts, and The Pabst Theater. In addition, Henry W. Maier Festival Park, also known as the Summerfest Grounds, is also located on the lakefront and hosts various music, ethnic, and cultural festivals.

Milwaukee is also home to the University of Wisconsin-Milwaukee, which has an enrollment of 27,000 students, and Marquette University, a nationally recognized private university, which has an enrollment of 11,000 students; both universities are located within three miles of the Corporation.

Economy and Employment Information

The following table summarizes the top 10 largest employers in the Milwaukee region.

Table 13 Top 10 Largest Private Employers in the Milwaukee Region Headquarters Number of Employer Location Business Sector Employees Aurora Health Care Milwaukee Health care system 25,700 Ascension Wisconsin Milwaukee Health care system 14,500 Froedtert Health Wauwatosa Health care services 9,700 Kroger Co. / Roundy's Milwaukee Food distributor & retailer 8,300 Kohl's Corp. Menomonee Falls Department stores 7,800 Quad/Graphics, Inc. Sussex Commercial printer 6,800 GE Healthcare Technologies Waukesha Medical imaging & information systems 6,000 Medical College of Wisconsin Wauwatosa Medical school 5,500 Northwestern Mutual Milwaukee Life insurance & investment services 5,000 ProHealth Care, Inc. Milwaukee Health care system 4,800 Source: 2016 MMAC Business Resource Guide, & The Business Journal, July 22, 2016

40 Saint John’s Communities, Inc.

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The following table summarizes employment by industry sector for Milwaukee County.

Table 14 Employment by Industry Sector - Milwaukee County Annual Averages for 2016 Major Occupational Group Employment % of Total Health care and social assistance 93,483 21.8% Manufacturing 52,205 12.2% Retail trade 43,474 10.1% Accommodation and food services 39,105 9.1% Administrative and waste services 36,331 8.5% Finance and insurance 23,669 5.5% Professional and technical services 22,230 5.2% Management of companies and enterprises 19,227 4.5% Educational services 17,793 4.2% Other services, except public administration 16,448 3.8% Wholesale trade 15,893 3.7% Transportation and warehousing 14,392 3.4% Construction 10,944 2.6% Information 8,320 1.9% Arts, entertainment, and recreation 7,218 1.7% Real estate and rental and leasing 5,960 1.4% Utilities 1,898 0.4% All Occupations 428,590 100.0% Source: United States Department of Labor, Bureau of Labor Statistics, January 2018

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The following table summarizes the unemployment trends for Milwaukee County, Milwaukee Metropolitan Statistical Area (MSA), Wisconsin, and the United States.

Table 15 Unemployment Trends 2013 2014 2015 2016 2017 (1) Milwaukee County 8.4% 6.9% 5.8% 5.1% 3.6% Milwaukee MSA 7.2% 5.9% 4.9% 4.5% 3.2% Wisconsin 6.7% 5.4% 4.6% 4.1% 3.4% United States 7.4% 6.2% 5.3% 4.6% 3.9% Source: United States Department of Labor, Bureau of Labor Statistics, January 2018 (1) As of October 2017

Primary Market Area

The PMA for senior living providers is often defined as the geographic area from which a majority of residents resided prior to occupancy of a senior living community. The PMA was defined based on an evaluation of historic admission patterns, originating ZIP Codes of depositors for the Project, and discussions with management. Management has defined the PMA to be a 5-ZIP Code area near the Corporation extending north and northwest along Lake Michigan, with the area further north being approximately 14 miles from the Corporation.

The following table summarizes the ZIP Codes that are included in the PMA.

Table 16 PMA ZIP Codes and Cities/Localities ZIP Code City Other Localities Within the ZIP Code 53202 Milwaukee - 53209 Milwaukee Brown Deer, Glendale, River Hills 53211 Milwaukee Glendale, Shorewood, Whitefish Bay 53217 Milwaukee Bayside, Fox Point, Glendale, River Hills, Whitefish Bay 53092 Mequon Thiensville Source: Management

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Approximately 72% of admissions/move-ins to the Corporation originated from the PMA. The following table summarizes the admission/move-in data for the period 2015 to December 31, 2017.

Table 17 Resident Origin Data for the Corporation ZIP Code City/Locality Admissions (2) % of Total 53202 Milwaukee (1) 127 29.1% 53211 Milwaukee, Glendale, Shorewood, Whitefish Bay 72 16.5% 53217 Milwaukee, Bayside, Fox Point, Glendale, River Hills, Whitefish Bay 67 15.3% 53092 Mequon, Thiensville 32 7.3% 53209 Milwaukee, Brown Deer, Glendale, River Hills 17 3.9% Total from PMA Zip Codes 315 72.1% Other Areas (3) 122 27.9% Total 437 100% Source: Management (1) The Corporation is located in ZIP Code 53202. (2) Resident admission/move-in data for January 1, 2015 through December 31, 2017. (3) Other areas include 58 other ZIP Codes.

43 Saint John’s Communities, Inc.

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The following map depicts the PMA and the location of the Corporation. The PMA consists of the ZIP Codes highlighted yellow.

44 Saint John’s Communities, Inc.

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PMA Population Data

The age distribution of the population in a geographic area is considered by management to be a key factor in the determination of the area’s retirement housing needs. Population data for the PMA is presented in the following table. The 2018 and 2023 data are projections and were provided by ESRI, which is a national demographic research firm.

Table 18 Population Data for the PMA Average Compounded Population Percentage Change 2010 2018 2023 2010 to 2018 to (Actual) (Projected) (Projected) 2018 2023 Total Population 154,323 157,550 159,454 0.3% 0.2% Age 65 to 74 10,042 14,610 16,635 5.7% 2.8% Age 75 to 84 6,870 7,086 8,911 0.4% 5.2% Age 85 & Older 3,457 4,061 4,106 2.2% 0.2% Total Age 65 & Older 20,369 25,757 29,653 3.3% 3.0% Total Age 75 & Older 10,327 11,147 13,017 1.0% 3.4% Source: ESRI, 2017

The following table presents the percentage of total population by age group for the PMA, Wisconsin, and the United States.

Table 19 Percentage of Total Population by Age Cohort 2018 (Projected) PMA Wisconsin U.S. Age Cohort: 65 & Older 16.3% 16.7% 16.0% 75 & Older 7.1%6.9%6.5% 85 & Older 2.6%2.3%2.0%

2023 (Projected)

PMA Wisconsin U.S. Age Cohort: 65 & Older 18.6% 19.1% 18.0% 75 & Older 8.2% 7.9% 7.5% 85 & Older 2.6%2.2%2.0% Source: ESRI, 2017

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PMA Real Estate Trends

The ability of potential residents to sell their homes in a timely fashion may have an impact on the fill- up period of the Project and may affect the ability of residents to pay the Entrance Fee. The following table summarizes the single-family home sales data for the PMA for the periods January 1, 2015 to December 31, 2017:

Table 20 Real Estate Trends for the Primary Market Area 2015 2016 2017 Number Average Number Average Number Average ZIP Code City/Locality of Sales Sale Price of Sales Sale Price of Sales Sale Price 53202 (1) Milwaukee 18$ 273,649 21$ 235,781 27$ 305,339 53209 Milwaukee, Brown Deer, Glendale, River Hills 332 99,893 413 100,076 442 102,449 53211 Milwaukee, Glendale, Shorewood, Whitefish Bay 276 395,598 303 402,398 268 407,534 53217 Milwaukee, Bayside, Fox Point, Glendale, River Hills, Whitefish Bay 523 396,540 582 407,484 539 409,047 53092 Mequon, Thiensville 259 414,150 250 441,148 281 471,610 Total / Weighted Average 1,408$ 328,076 1,569$ 328,650 1,557$ 331,242 Source: Multiple Listing Services (MLS) and Redfin (1) The Corporation is located in ZIP Code 53202.

The following table summarizes the housing values for the PMA for the periods 2018 and 2023:

Table 21 PMA Housing Values Number of Houses 2018 2023 Value range: Less than $300,000 18,342 15,799 $300,000 - $399,999 5,753 6,349 $400,000 - $499,999 3,313 4,448 $500,000 - $749,999 3,628 4,472 $750,000 - $999,999 1,270 1,294 $1,000,000 + 963 1,205 Source: ESRI, 2017

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Independent Living Market Assessment

Continuing Care Community Regulations

Retirement communities that offer continuing care contracts are regulated under Chapter 647 of Wisconsin statutes. Wisconsin defines a continuing care contract as a contract with an entrance fee in excess of $10,000 that is entered into to provide nursing services, medical services, or personal care services, in addition to maintenance services, for the duration of a person’s life or for a term in excess of one year.

A continuing care contract provider must obtain a permit to enter into a continuing care contract. To be granted the permit, a provider must meet all requirements of the law and have satisfied state regulators that its methods and practices and the character and value of its assets will adequately safeguard the interests of its residents and the public.

To operate as a continuing care contract provider, the provider must annually submit audited financial statements and make the financial statements available to residents, submit copies of all entrance fees and refund schedules to the state, provide contracts that are written in commonly understood language that specify what services are provided to the resident and what services are provided at an additional cost, and comply with refund guidelines under the statute.

Comparable and Competitive Senior Independent Living Units

Comparable and competitive retirement communities (offering the full continuum of care) typically include independent living with similar services, amenities, and fee structures, and also offer health care services such as assisted living and skilled nursing. These communities offer varying residency agreements, including “life care”, modified “life care”, fee-for-service, or rental contracts.

Independent living units could be apartments, cottages, and/or free-standing homes. Residents in these communities generally have access to various amenities, including a choice of dining options, a library, lounge areas, guest accommodations, fitness facilities, hair salons, a chapel, and an assortment of community areas. Monthly service fees usually cover a dining program, housekeeping services, most utilities, maintenance, emergency call system, scheduled transportation, and activities.

47 Saint John’s Communities, Inc.

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Management defined the competition considering multiple market factors including their experience in the market. Such factors included:

 Entry fee structure  Monthly fee structure  Amenities  Location  Sponsorship  Complement of services offered  Age of physical plant  Other physical plant factors such as unit mix and size

Continuing Care Retirement Communities (CCRC) typically provide various contract options to residents. The most common contract options are as follows:

 Life Care Contract M A resident entering senior independent living typically pays an initial entrance fee plus a monthly service fee in exchange for the right to lifetime occupancy of an independent living unit with varying levels of service and health care services, and the ability to transition to assisted living and skilled nursing care that provide for a resident’s changing health care needs as they progress through the aging process. As the resident progresses through the continuum of care they will typically pay the same monthly fee. There are also modified “life care” contracts that provide similar benefits. However, under a modified “life care” contract when the resident transitions to assisted living and skilled care the monthly service fee increases but will still be discounted from the standard rates. There are various approaches to offering these discounts such as a percent discount or an entitlement to a certain number of days of care. The Corporation offers Life Care contracts as described in the Independent Living Contracts section beginning on page 17.  Fee-for-Service Contract M A resident will typically still pay an entrance fee, but at a much lower level, and a higher monthly service fee. This typically provides the resident with the right to lifetime occupancy of an independent living unit and priority access to assisted living and skilled care for which they pay non-discounted per diem rates.

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 Rental Community Contract M A resident will sign a lease for the independent living unit. The community may or may not offer the full complement of health care services found in a CCRC. At these facilities, residents are not required to pay an entrance fee. The contract is typically on a monthly basis and the resident will pay higher monthly fees than they would under the aforementioned contracts. The resident will pay for any additional services needed or selected on a per diem basis.

Management has defined comparable and competitive retirement communities as CCRCs that offer three or more levels of care (independent living, assisted living, and skilled nursing), offer similar services and amenities, have a similar age and income demographic, and are located within the PMA. Standalone independent living, assisted living, and skilled nursing facilities were not considered comparable and competitive alternatives to the Project and, therefore, are not included in the assessment.

The following table summarizes the comparable independent living communities within the PMA. There are 459 comparable independent living units at existing CCRCs, excluding the Corporation.

Table 22 Comparable Independent Living Units in the PMA ZIP Number Facility Name Owner/Sponsor City Code of Units The Corporation: South Tower Apartments Saint John's Communities, Inc. Milwaukee 53202 90 The Corporation: Central Tower Apartments Saint John's Communities, Inc. Milwaukee 53202 110 Ovation Chai Point Jewish Home and Care Center Milwaukee 53202 59 Milwaukee Catholic Home Milwaukee Catholic Home, Inc. Milwaukee 53211 118 Eastcastle Place Milwaukee Protestant Home for the Aged, Inc. Milwaukee 53211 82 Sarah Chudnow Campus Jewish Home and Care Center Mequon 53092 41 Newcastle Place Newcastle Senior Care, LLC Mequon 53092 159 Total 659 Source: Management, surveys, and Senior Resources, January 2018

The following tables summarize the Corporation and comparable independent living communities in the PMA. The data summarized is based on telephone surveys and research completed in January 2018. Competitive market data changes periodically and the data in these tables is subject to change. In some cases, data was not available at the time of the assessment and is noted as such. Data that was not applicable is noted as “N/A”.

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Table 23a Comparable and Competitive Retirement Communities in the PMA The Project: North Tower The Corporation: South The Corporation: Central Tower Apartments Tower Apartments Apartments Street address 1840 N Prospect Ave. 1840 N. Prospect Ave. 1840 N. Prospect Ave. City/State/Zip Code Milwaukee, WI, 53202 Milwaukee, WI 53202 Milwaukee, WI 53202 Miles from the Project -- - Life Care-30% Refundable / Life Care / Standard Life Care / Standard Refundable Entry Type of contract Standard-90% Refundable Refundable Entry Fees Fees Owner/Sponsor Saint John's Communities Saint John's Communities Saint John's Communities Profit/Nonprofit Nonprofit Nonprofit Nonprofit Year opened N/A 2011 1979 Independent living (IL) units: One Room/Bath - - Alcove/efficiency -- 4 One-Bedroom apartments -14 59 Two-Bedroom apartments 75 31 36 Two-Bedroom/Den apartments 445 11 Three-Bedroom apartments -- - Total IL units 79 90 110 Assisted living units (AL) 24 (CBRF) & 16 (RCAC) 24 (CBRF) 24 (CBRF) Skilled nursing facility beds (SNF) 50 50 50 IL square footage: One Room/Bath - - Alcove/efficiency - - 400 - 475 One-Bedroom apartments - 1,090 - 1,250 600 - 1,000 Two-Bedroom apartments 1,455 - 1,920 1,325 - 1,943 1,075 - 1,350 Two-Bedroom/Den apartments 1,830 - 2,515 1,395 - 2,460 1,475 - 1,750 Three-Bedroom apartments -- - IL Monthly Service Fees: One Room/Bath - - Alcove/efficiency - - $1,700 - $1,900 One-Bedroom Apartments - $3,275 - $3,455 $2,290 - $3,160 Two-Bedroom Apartments $3,970 - $4,790 $3,535 - $4,560 $3,205 - $3,725 Two-Bedroom/Den Apartments $5,000 - $6,340 $4,300 - $6,020 $3,925 - $4,115 Three-Bedroom Apartments -- Second Person Fee $475 - $1,390 $475 - $1,390 $475 - $1,390 IL Entrance Fees: One Room/Bath - - - Alcove/efficiency - - $134,750 - $145,750 One-Bedroom Apartments - $386,800 - $420,200 $169,855 - $340,167 Two-Bedroom Apartments $521,000 - $704,600 $456,500 - $841,200 $347,700 - $436,120 Two-Bedroom/Den Apartments $947,600 - $1,111,100 $587,371 - $984,200 $467,875 - $572,700 Three-Bedroom Apartments -- - Second Person Fee: $25,500 - $51,100 $25,500 - $51,100 $25,500 - $51,100 Included in the IL Monthly Fee: Meals No No No Housekeeping No No No Linen Service No No No Laundry Service No No No Scheduled Transportation Yes Yes Yes IL reported occupancy rate N/A 98% 93% AL reported occupancy rate N/A 98% 98% SNF reported occupancy rate N/A 89% 89% Source: Management, surveys, online resources

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Table 23b Comparable and Competitive Retirement Communities in the PMA

Eastcastle Place Newcastle Place Milwaukee Catholic Home Street address 2505 East Bradford Ave. 12600 North Port Washington Rd. 2330 North Prospect Ave. City/State/Zip Code Milwaukee, WI, 53211 Mequon, WI 53092 Milwaukee, WI 53211 Miles from the Project 0.85 14.6 0.58 Rental and 90% Refundable Rental; 90% & 70% Refundable Entry Type of contract Entry Fees Fees; Standard Entry Fee with 2% Rental and 90% Refundable Entry Fees Owner/Sponsor Milwaukee Protestant Home Newcastle Senior Care, LLC Milwaukee Catholic Home, Inc.. Profit/Nonprofit Nonprofit For-profit Nonprofit Year opened 1963; 1987; 2000 2003; 2009 1973 Independent living (IL) units: One Room/Bath -- 9 Alcove/efficiency -- 8 One-Bedroom apartments 20 28 64 Two-Bedroom apartments 62 77 37 Two-Bedroom/Den apartments -9 - Two-Bedroom Homes -29 - Three-Bedroom apartments -16 - Total IL units 82 159 118 Assisted living units (AL) 18 (CBRF) & 52 (RCAC) 16 (CBRF) & 36 (RCAC) 27 (CBRF) Skilled nursing facility beds (SNF) 40 47 122 IL square footage: One Room/Bath -- 300 Alcove/efficiency -- 320 One-Bedroom apartments 924 - 1,038 633 - 904 611 - 865 Two-Bedroom apartments 1,082 - 1,988 968 - 1,212 936 -1,168 Two-Bedroom/Den apartments -965 - 1400 - Two-Bedroom Homes - 1,718 - 1,982 - Three-Bedroom apartments - 1,368 - 1,604 - IL Monthly Service Fees: Choice "A" Choice "B" Choice "C" (Rental) One Room/Bath --$1,359 $1,492 $1,617 Alcove/efficiency --$1,610 $1,817 $2,016 One-Bedroom Apartments $2,740 - $4,185 $2,723 - $3,600 $2,462 - $2,976 $2,828 - $3,416 $3,188 - $3,848 Two-Bedroom Apartments $3,750 - $5,630 $3,100 - $5,100 $3,576 - $4,150 $4,248 - $4,841 $4,911 - $5,526 Two-Bedroom/Den Apartments - $3,100 - $5,100 --- Two-Bedroom Homes - $5,100 - $5,230 --- Three-Bedroom Apartments - $4,9700 - $5,270 --- Second Person Fee $1,293 $1,250 $275 $275 $275 IL Entrance Fees: One Room/Bath --$38,500 $19,250 N/A Alcove/efficiency --$61,000 $30,500 N/A $203,000 (90%) - $280,000 (90%); One-Bedroom Apartments $269,350 - $443,185 $111,500 (Std.) - $153,800 (Std.) $113,000 - $165,000 $56,500 - $82,500 N/A $311,000 (90%) - $410,000 (90%); Two-Bedroom Apartments $326,685 - $681,035 $171,000 (Std.) - $225,300 (Std.) $203,000 - $220,000 $101,500 - $110,000 N/A $311,000 (90%) - $410,000 (90%); Two-Bedroom/Den Apartments - $171,000 (Std.) - $225,300 (Std.) --- $300,000 (70%) - $369,000 (70%); Two-Bedroom Homes - $190,000 (Std.) - $233,700 (Std.) --- $436,000 (90%) - $442,000 (90%); - Three-Bedroom Apartments - $239,500 (Std.) - $24,100 (Std.) -- Second Person Fee: N/A $1,250 & $540 (Homes) N/A N/A N/A Included in the IL Monthly Fee: Continental Breakfast and 325 points ($1 Meals Breakfast plus one meal per point) No Housekeeping Bi-weekly Bi-weekly Every other week Linen Service Weekly Bi-weekly No Laundry Service No No No Scheduled Transportation Yes Yes No IL reported occupancy rate 98% 91% 98% AL reported occupancy rate 100% 98% 100% SNF reported occupancy rate 56% Not available 90% Source: Management, surveys, online resources

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Table 23c Comparable and Competitive Retirement Communities in the PMA

Ovation Chai Point Ovation Sarah Chudnow Street address 1414 N. Prospect 10995 N. Market St. City/State/Zip Code Milwaukee, WI 53202 Mequon, WI 53092 Miles from the Project 0.5 11.8

Type of contract Rental Rental Owner/Sponsor Jewish Home and Care Center Jewish Home and Care Center Profit/Nonprofit Nonprofit Nonprofit Year opened 1973 2005 Independent living (IL) units: Alcove/efficiency - Not available One-Bedroom apartments 24 Not available Two-Bedroom apartments 31 Not available Two-Bedroom/Den apartments -- Two-Bedroom Homes - - Three-Bedroom apartments 4 Not available Total IL units 59 41 Assisted living units (AL) 38 (CBRF) & 41 (RCAC) 9 (CBRF) & 68 (RCAC) Skilled nursing facility beds (SNF) 160 25 IL square footage: Alcove/efficiency -500 One-Bedroom apartments 660 - 832 622 - 800 Two-Bedroom apartments 1,053 - 1,060 937 - 1,040 Two-Bedroom/Den apartments -- Two-Bedroom Homes - - Three-Bedroom apartments 1,582 1,261 - 1,324 IL Monthly Service Fees: Alcove/efficiency - $2,355 One-Bedroom Apartments $3,376 - $4,380 $3,034 and higher Two-Bedroom Apartments $4,380 $3,321 and higher Two-Bedroom/Den Apartments - - Two-Bedroom Homes - - Three-Bedroom Apartments $6,054 Not available Second Person Fee Not available $200 IL Entrance Fees: Alcove/efficiency N/A N/A One-Bedroom Apartments N/A N/A Two-Bedroom Apartments N/A N/A Two-Bedroom/Den Apartments N/A N/A Two-Bedroom Homes N/A N/A Three-Bedroom Apartments N/A N/A Second Person Fee: Not available N/A Included in the IL Monthly Fee: Meals No No Housekeeping No No Linen Service No No Laundry Service No No Scheduled Transportation No No IL reported occupancy rate 100% 91% AL reported occupancy rate 92% 91% SNF reported occupancy rate 86% Not available Source: Management, surveys, online resources

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Notes to the Tables

The Corporation:  Pricing reflects Entrance Fees and Monthly Fees for 2017.  Monthly fees are effective for both the Life Care and Standard Contract. The low second person fee applies to the Standard contract and the high fee applies to the Life Care contract.  The campus currently consists of 200 IL units, 24 CBRF units, and 50 SNF beds. After the Project, the campus will offer 279 IL units, 24 CBRF units, 16 Transitional Care Assisted Living RCAC units, and 50 SNF beds.  The current 200 IL units are licensed as RCAC to allow the Corporation to provide up to 28 hours of health care services per week, as needed. The new IL units will also be licensed as RCAC. Additional fees apply for RCAC services provided in the IL and could include the following: Licensed Nurse services including clinical assessment visit, medication management, wound care, and other services - $31/fifteen-minutes or $110/hour; Certified Nursing Assistance services including personal care assistance, wellness check, medication and meal reminders, personal shopping, and other services - $11/fifteen-minutes or $38/hour; Housekeeping - $28/hour; Transportation services (with or without an escort) $46 to $49/hour.

Milwaukee Catholic Home:  The 118 IL units are licensed as RCAC to allow the organization to provide up to 28 hours of health care services per week, as needed. Additional fees apply for RCAC services provided in the IL and could include the following: Health and wellness monitoring - $370/month; Medication setup - $165/month; Medication assistance - $245/month; Personal assistance $10/instance; Additional skilled services - $22/instance.

Eastcastle Place:  Thirty-six of the 82 IL units are licensed as RCAC to allow the organization to provide up to 28 hours of health care services per week, as needed. Additional fees apply for RCAC services provided in the IL; fee data was not available.  Base monthly fees include cable TV, internet, and all utilities except telephone.

Newcastle Place:  The 70% refundable entrance fee applies only to the two-bedroom homes which are residences separate from the main building.

53 Saint John’s Communities, Inc.

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Ovation Chai Point:  Residents are required to purchase a minimum 20-meal per month program for $307 per person.

Ovation Sarah Chudnow:  The 41 IL units are licensed as RCAC to allow the organization to provide up to 28 hours of health care services per week, as needed. Additional fees apply for RCAC services provided in the IL.

The following map depicts the locations of the identified comparable independent living communities.

Legend Saint John's Communities Continuing Care Retirement Communities (with IL and RCAC) within the PMA 1) Ovation Chai Point 4) Ovation Sarah Chudnow 2) Milwaukee Catholic Home 5) Newcastle Place 3) Eastcastle Place

54 Saint John’s Communities, Inc.

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Non-Comparable Independent Living Communities

There are two market-rate independent living communities within the PMA that are not considered comparable to the Corporation due to pricing structure and/or lack of health care services offered. These communities are included for information purposes only and are excluded from the penetration analysis that follows. The following table summarizes these communities.

Table 24 Non-Comparable Independent Living Units in the PMA ZIP Number of Facility Name Owner/Sponsor Location Code Units Laurel Oaks Laureate Group 1700 W. Bender Road, Glendale 53209 123 Highlands at Riverwalk Highlands Communities, Inc. 10954 N. Cedarburg Road, Mequon 53092 96 Totals 219 Source: Management and Senior Resources, January 2018

Planned Independent Living Projects

Per discussion with local city planning departments in February 2018, the following potential independent living projects to be located within the PMA were identified:

 St. Rita’s Square is planned to be a redevelopment of St. Rita’s Catholic Church located at 1601 N. Cass Street. The developer is Tarantino & Company and the facility will be operated by Capri Communities. The Project is planned to consist of 72 independent living apartments (rental), 20 assisted living units, and 26 memory care units. The current St. Rita’s Church will be razed and the project will be connected to a newly built church. Tarantino & Company has received approval for the project from the Planning Commission but still needs approval from the city’s Common Council. St. Rita’s Square is not considered to be a future competitor of the Corporation due to pricing structure and lack of a full continuum of health care service offerings. The project is included for information purposes only and is excluded from the penetration analysis that follows.

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 The Oaks of Shorewood is currently under construction in the Shorewood “River District” on the south side of Capitol Drive and the east side of the Milwaukee River. The Project is planned to be a 4-story, 100-unit independent living (rental) community. The developer is Sherman Associates out of Minneapolis, Minnesota. The Project will offer many building amenities, including but not limited to, a library, fireside lounge, business center, theater room, game room, fitness center, yoga studio, great room with community kitchen, and outdoor swimming pool. Groundbreaking occurred in May of 2017 and construction is planned to be completed in spring 2018. The apartments consist of 23 one-bedroom units (645 - 740 sq. ft.) with rent of $1,250 to $1,360 per month and 77 two-bedroom units (995 - 1,865 sq. ft.) with rent of $1,680 to $2,275 per month. The Oaks of Shorewood is not considered to be a future competitor of the Corporation due to pricing structure and lack of health care services offered. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

 Dunwood Crossing is planned to be constructed by a developer, the Mandel Group, Inc. Mandel Group purchased the former Dunwood School property located in Fox Point at 217 W. Dunwood Road, just off N. Port Washington Road and Good Hope Road. The Village has rezoned the property and approved the development of 105 independent living (rental) apartments that will be constructed in four buildings that are two- and three-stories. Rental rates will range from $1,550, for a one-bedroom unit to $3,200 for a three-bedroom unit. These rental rates do not include ancillary costs such as underground parking. Also, an assisted living facility will be built on another piece of the former school grounds and will consist of approximately 80 units, including memory care beds. The independent living buildings are expected to be completed in May 2019 with the assisted living and memory care to be completed 6 to 12 months later. Dunwood Crossing is not considered to be a future competitor of the Corporation due to pricing structure and lack of a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

 Inland Properties and Matter Development has proposed 145-unit development to be located on a 5.98-acre site in Glendale at 6701 North Port Washington Road. The development is proposed to consist of 103 independent living units and 42 assisted living units, and 22,000 square feet of retail space. The senior living units are proposed to include studio, one-bedroom, and two- bedroom apartments. Construction is anticipated to begin in late 2018 with a construction period of 15 months. The proposal has not been approved and is awaiting review from the Planning Commission. The development is not considered to be a future competitor of the Corporation due to lack of a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

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 Index Development Group, LLC and Cardinal Capital Management, Inc. has inquired about constructing a three-story independent living building in Glendale at 1500 West Custer Avenue. The development would consist of 60 one- and two-bedroom affordable rent apartments. No project plans have been submitted. The development is not considered to be a future competitor of the Corporation due to pricing structure and lack of a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

Estimated Eligible Households for Independent Living at the Project

To qualify for independent living residency at the Corporation, an individual must be at least 62 years old, demonstrate sufficient financial resources to pay for the initial entrance fee and required monthly fees, and have the ability to live independently.

Management evaluates the financial profile of prospective residents, including their annual household income and net assets, in order to assess the ability to afford the entrance fee and monthly fees over a prospective resident’s expected lifetime. Management’s consideration of a prospective resident’s financial condition includes consideration of their ability to liquidate their net assets and future household income. Management also reviews prospective resident’s health status on a case-by-case basis to determine their ability to live independently.

As provided by management, the Project’s minimum monthly fees will range from $3,275 for a single occupant in the smallest unit to $7,730 for a couple in the largest two-bedroom unit. For single occupants, the annual fees range from $39,300 to $72,240, and for couples, the annual fees range from $45,000 to $92,760. The low ends of the ranges reflect monthly fees under the provisions of the Standard Contract and the high end of the ranges reflect monthly fees under the provisions of the Life Care Contract.

For purposes of assessing gross penetration, net market penetration, and project penetration rates, management has assumed, based on fee structure, that the annual household income of eligible residents would need to be $50,000 or above.

The average age of the Project’s depositors as of January 31, 2017, according to management’s assessment, is approximately 76 years. Accordingly, management has assumed that the age of seniors moving into the Project would be 75 years and older.

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The following tables present the projected household income for householders aged 65 and older, 65 to 74, and 75 and older in the PMA. The data is projected based on the 2010 census, as provided by ESRI, a national demographic research company. The data for the year 2020 was interpolated from the projected 2018 and 2023 data.

Table 25 Income Eligible Households in the PMA 2018 (Projected): Age Range 65 & Older 65 - 74 75 & Older Total Households 17,061 9,321 7,740 Household Income: Less than $35,000 6,579 3,013 3,566 $35,000 - $49,999 1,939 940 999 $50,000 - $74,999 2,641 1,305 1,336 $75,000 - $99,999 1,711 1,079 632 $100,000 - $149,999 2,043 1,443 600 $150,000 - $199,999 791 572 219 $200,000 plus 1,357 968 389 Households with $50,000 or more of income 8,543 5,367 3,176 Percentage of households with $50,000 or more of income 50% 58% 41% 2020 (Interpolated): Age Range 65 & Older 65 - 74 75 & Older Total Households 17,943 9,807 8,136 Household Income: Less than $35,000 6,594 3,000 3,594 $35,000 - $49,999 1,907 924 983 $50,000 - $74,999 2,757 1,354 1,403 $75,000 - $99,999 1,978 1,228 750 $100,000 - $149,999 2,314 1,608 706 $150,000 - $199,999 880 625 255 $200,000 plus 1,513 1,067 446 Households with $50,000 or more of income 9,442 5,882 3,560 Percentage of households with $50,000 or more of income 52.6% 60.0% 43.8% 2023 (Projected): Age Range 65 & Older 65 - 74 75 & Older Total Households 19,267 10,536 8,731 Household Income: Less than $35,000 6,616 2,980 3,636 $35,000 - $49,999 1,860 901 959 $50,000 - $74,999 2,931 1,427 1,504 $75,000 - $99,999 2,378 1,452 926 $100,000 - $149,999 2,721 1,855 866 $150,000 - $199,999 1,014 705 309 $200,000 plus 1,747 1,215 532 Households with $50,000 or more of income 10,791 6,654 4,137 Percentage of households with $50,000 or more of income 56.0% 63.2% 47.4% Source: ESRI, 2017

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The following tables summarizes a comparison of the income-eligible households to total households for householders aged 75 and older, for the PMA, Wisconsin, and the United States.

Table 26 Comparison of Income Eligible Households 2018: Age 75 & Older PMA Wisconsin United States Percentage of Income Eligible Households to Total Households - $50,000 or more 41.0% 29.9% 25.4% 2023: Age 75 & Older Percentage of Income Eligible Households to Total Households - $50,000 or more 47.4% 35.6% 36.0% Source: ESRI, 2017

Independent Living Penetration Analysis

Penetration rates are one measure of the degree to which the PMA might be either under-served or saturated. As penetration rates increase, independent living units may become more difficult to fill. However, higher penetration rates may not necessarily mean difficulty in achieving expected occupancy levels. Some markets may have a higher acceptance level for independent living housing options and, therefore, may support higher penetration rates. Three penetration rate calculations are shown in the following table:

 Gross market penetration M Calculated by adding the total number of independent living units from the Project to those of the comparable independent living units in the PMA, at 95% occupancy, and dividing by the total number of age- and income-eligible households as defined above. Gross market penetration is the percentage of age- and income-eligible households that the total market must absorb for the entire market to achieve stabilized occupancy.  Net market penetration M Calculated by adding the total number of independent living units of the Project and the comparable independent living units, in the PMA, at 95% occupancy, that are available due to attrition, divided by the total number of age- and -income eligible households. Net market penetration is an indicator of the ability to fill units as they turn-over.

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 Project penetration M Calculated by dividing the total number of independent living units of the Project by the number of age- and income-eligible households. Project percentage is the percentage of the age- and income-eligible households, in the PMA, that the Project would have to capture to fill the units and maintain 95% occupancy.

In the calculations, the total independent living units are adjusted to reflect assumptions about the percentage of units expected to be filled from households in the PMA.

These rates should be considered in conjunction with each other and other market factors such as occupancy levels at existing communities within the PMA, the number of proposed facilities in the PMA, the design of the units and community, historic occupancy levels of the community, and marketing plans and the efforts of management.

The following tables represent the penetration rate analysis, as described, assuming householder age of 75 and older, annual household income of $50,000 and over, and demographic projections for 2018, 2020, and 2023.

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Table 27 Market Penetration Rate Analysis for Independent Living Gross market penetration rate: 2018 2020 2023 Market inventory of independent senior living units: The Corporation (IL) 200 200 200 New Independent Living Units (1) - 79 79 Comparable independent living units: Existing 459 459 459 Planned (2) - - - Total IL units in the PMA 659 738 738 Number of units to be filled assuming 70% of residents originate from within the PMA; at 95% occupancy (3) [A] 438 491 491

(4) Number of age and income eligible in the PMA [B] 3,176 3,560 4,137

Gross market penetration rate [A]/[B] 13.8% 13.8% 11.9% Net market penetration rate: Total unoccupied units within the PMA: Existing units available due to resident attrition (5) 238 266 266 Total units to be occupied by PMA population 238 266 266

Number of units to be filled assuming 70% of residents originate from within the PMA; at 95% occupancy [C] 167 186 186

Number of age and income eligible in the PMA 3,176 3,560 4,137 Less: Existing inventory of occupied comparable units 438 491 491 Net number of age and income qualified in the PMA [D] 2,738 3,069 3,646

Net market penetration rate [C]/[D] 6.1% 6.1% 5.1% Project penetration rate: Project units at 95% occupancy [E] - 79 79

Net number of age and income qualified in the PMA [B] 3,176 3,560 4,137

Project penetration rate [E]/[B] 0.0% 2.2% 1.9% Source: Management and ESRI (1) Management is planning the construction of 79 new independent living units. (2) Three independent living projects were identified, however, the projects are not considered to be comparable and competitive. (3) 70% based on resident admissions data provided by Management. (4) Age and income eligible defined as 75+ years old and $50,000+ of annual income. (5) Total IL units in the PMA assuming 38% turnover of units annually (State of Senior Housing, 2017) and 95% occupancy.

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Assisted Living RCAC Market Assessment

The assisted living market assessment relates to the 16-unit Transitional Care Assisted Living RCAC portion of the Project. The Transitional Care Assisted Living RCAC will be available to serve the needs of residents unable to live independently but not requiring skilled nursing or CBRF care and will act as a “bridge” between the IL and CBRF. The Transitional Care Assisted Living RCAC is intended to provide services for residents transferring from Tower Apartments and is unlikely to admit (or need to admit) residents from outside of the campus.

Assisted Living Regulations

In Wisconsin, assisted living facilities are regulated by the Department of Health Services, Bureau of Assisted Living, and Division of Quality Assurance. There are four types of assisted living license, certification, or registration options available in Wisconsin, with frail elderly assisted living facilities typically operating under the community based residential facilities (CBRF) or residential care apartment complexes (RCAC) designations. The Project will be registered as a RCAC under Chapter 89 of Wisconsin statutes.

RCACs provide each resident with an independent apartment in a setting that must be home-like and residential in character. RCACs consist of five or more independent apartments, each of which has an individual, lockable entrance and exit; a kitchen, including a stove; individual bathroom, sleeping, and living areas; and provide residents up to 28 hours per week of personal, supportive, and nursing services that are appropriate to the needs, abilities, and preferences of individual residents. RCACs operate in a manner that protects residents' rights, respects resident privacy, enhances resident self- reliance, and supports resident autonomy in decision-making, including the right to accept risk. To be reimbursed by Medicaid, RCACs must be certified as being in compliance with all applicable federal, state, and local licensing, building, zoning, and related requirements, including the requirements of the Medicaid Community Waivers Manual.

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The Department of Health Services has the authority, but is not required, to inspect registered RCACs to determine compliance with regulatory requirements. Residents in registered facilities must be notified that the Department does not regularly visit or inspect them. However, the Department inspects RCACs in response to all complaints. The Department conducts periodic inspections of RCACs that are certified as Medicaid providers every two years to determine compliance with certification requirements. There is no Certificate of Need (CON) requirements for adding new RCAC units.

Comparable and Competitive Assisted Living RCAC Units

Management has defined comparable and competitive assisted living RCAC communities as RCAC units that are part of a CCRC that offer three or more levels of care (independent living, assisted living, and skilled nursing), offer similar services and amenities, have a similar age and income demographic, and are located within the PMA. Standalone assisted living facilities were not considered comparable and competitive alternatives to the Project and, therefore, are not included in the assessment.

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The following table summarizes the comparable assisted living RCAC communities within the PMA. There are 551 assisted living RCAC units at existing retirement communities. However, the units identified at the Corporation, Milwaukee Catholic Home, and Bradford Terrace (Milwaukee Protestant Home) are RCAC licenses that overlay the independent living units identified in Table 22. This approach provides residents of the independent living units the flexibility to receive some initial health care services until their health care needs progress to the level of assisted living and skilled nursing care. Because the communities market these units as independent living and not assisted living, the units (354 units, including the Corporation) are excluded from the assisted living RCAC penetration analysis that follows.

Table 28 Comparable Residential Care Apartment Complex (RCAC) Units in the PMA ZIP Number Facility Name Owner/Sponsor Location Code of Units Included in Penetration Analysis: Ovation Chai Point Jewish Home and Care Center Milwaukee 53202 41 Eastcastle Place: Watertower Assisted Living Milwaukee Protestant Home for the Aged, Inc. Milwaukee 53211 52 Ovation Sarah Chudnow Jewish Home and Care Center Mequon 53092 68 The Highlands at Newcastle Place Newcastle Senior Care, LLC Mequon 53092 36 Total 197 Excluded from Penetration Analysis: The Corporation: South Tower Saint John's Communities, Inc. Milwaukee 53202 90 The Corporation: Central Tower f/k/a North Tower Saint John's Communities, Inc. Milwaukee 53202 110 Milwaukee Catholic Home Milwaukee Catholic Home, Inc. Milwaukee 53211 118 Eastcastle Place: Bradford Terrace Milwaukee Protestant Home for the Aged, Inc. Milwaukee 53211 36 Total 354 Grand Total 551 Source: Management, surveys, and Senior Resources, January 2018

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Comparable and Competitive Assisted Living RCAC Units

The following tables summarize the Corporation and comparable assisted living RCAC communities in the PMA. The data summarized is based on telephone surveys and research completed in January 2018. Competitive market data changes periodically and the data in these tables are subject to change. In some cases, data was not available at the time of the assessment and is noted as such. Data that was not applicable is noted as “N/A”.

Table 29a Comparable and Competitive Retirement Communities in the PMA Eastcastle Place: The Highlands at The Project: North Tower Watertower Assisted Newcastle Place Street address 1840 N Prospect Ave. 2505 East Bradford Ave. 12600 North Port City/State/ZIP Code Milwaukee, WI, 53202 Milwaukee, WI, 53211 Mequon, WI 53092 Miles from the Project - 0.85 14.6 Owner/Sponsor Saint John's Communities Home LLC Profit/Nonprofit Nonprofit Nonprofit For-profit Year opened N/A 1963; 1987; 2000 2003; 2009 Assisted living units (RCAC) 16 52 36 RCAC square footage: Alcove/efficiency 695 - - One-Bedroom apartments 826 - 845 476 - 582 570 -635 Two-Bedroom apartments 1,196 920 783 Two-Bedroom/Den apartments --- RCAC Monthly Rent/Base Fees: Alcove/efficiency $1,760 - - One-Bedroom Apartments $2,210 - $3,030 $4,289 and higher $4,967 - $5,411 Two-Bedroom Apartments $3,350 $6,267 $5,823 Two-Bedroom/Den Apartments --- Second Person Fee $475 - $1,390 N/A $1,500 RCAC Service Fees: Tier One $1,500 per month All inclusive $250 per month Tier Two $2,500 per month - $750 per month Tier Three $3,500 per month - - AL reported occupancy rate N/A 100% 98% Source: Management, surveys, online resources

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Table 29b Comparable and Competitive Retirement Communities in the PMA

Ovation Chai Point Ovation Sarah Chudnow Street address 1414 N. Prospect 10995 N. Market St. City/State/ZIP Code Milwaukee, WI 53202 Mequon, WI 53092 Miles from the Project 0.5 11.8 Owner/Sponsor Jewish Home and Care Center Jewish Home and Care Center Profit/Nonprofit Nonprofit Nonprofit Year opened 1973 2005 Assisted living units (RCAC) 41 68 RCAC square footage: Alcove/efficiency -500 One-Bedroom apartments 660 - 832 622 - 800 Two-Bedroom apartments 1,053 - 1,060 937 - 1,040 Two-Bedroom/Den apartments -- Three-Bedroom apartments -- RCAC Monthly Rent/Base Fees: One Room/Bath -- Alcove/efficiency -$2,874 One-Bedroom Apartments $3,376 - $4,380 $3,219 - $4,090 Two-Bedroom Apartments $4,380 $4,377 Two-Bedroom/Den Apartments -- Second Person Fee -- RCAC Service Fees: Tier One $1,595 Tier Two Services al la carte Additional services al la carte Tier Three AL reported occupancy rate 92% 91% Source: Management, surveys, online resources

Notes to the Tables

The Corporation:  The campus currently consists of 200 IL units, 24 CBRF units, and 50 SNF beds. After the Project, the campus will offer 279 IL units, 24 CBRF units, 16 Transitional Care Assisted Living RCAC units, and 50 SNF beds.  The reported pricing reflects fees for the 16 Transitional Care Assisted Living RCAC units for 2017.

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Eastcastle Place:  Thirty-six (Bradford Terrace) of the 82 IL units are licensed as RCAC to allow the organization to provide some health care services to the residents, as needed. Additional fees apply for RCAC services provided in the IL.  The reported pricing reflects fees for the 52-unit assisted living RCAC.

Newcastle Place:  Base monthly fees include personalized care pendant, 30 minutes of personal care, monthly wellness monitoring by a nurse, and weekly shower assistance.

Ovation Chai Point:  All RCAC services are al la carte and include the following: Health monitoring - $258/month; Medication administration - $268/month; Oxygen assistance - $124; RN services (15 min.) - $23/instance; Personal care (15 min.) - $10.50/instance; Bathing assistance - $23/bath; Daily bed making - $151/month.

Ovation Sarah Chudnow:  All meals are included in the monthly base fees.

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The following map depicts the locations of the identified comparable assisted living RCAC communities.

Legend Saint John's Communities Continuing Care Retirement Communities (with IL and RCAC) within the PMA 1) Ovation Chai Point 4) Ovation Sarah Chudnow 2) Milwaukee Catholic Home 5) The Highlands at Newcastle Place 3) Eastcastle Place: Watertower Assisted Living / Bradford Terrace

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Non-Comparable Assisted Living RCAC Communities

There are six market-rate assisted living RCAC communities within the PMA that are not considered comparable to the Corporation due to pricing structure and/or lack of a full continuum of health care service offerings. These communities are included for information purposes only and are excluded from the penetration analysis that follows. The following table summarizes these communities.

Table 30 Non-Comparable Residential Care Apartment Complex (RCAC) Units in the PMA ZIP Number Facility Name Owner/Sponsor Location Code of Units Deerwood Crossing Senior Residence JFS Housing, Inc. 4195 W. Bradley Road, Milwaukee 53209 66 Laurel Oaks Laurel Oaks V, LLC 1700 W. Bender Road, Glendale 53209 85 Harborchase Of Shorewood CHP Shorewood WI Tenant Corp. 1111 E. Capitol Drive, Shorewood 53211 59 The Apartments At Elizabeth Residence RJJG, LLC 9279 N. Port Washington Road, Bayside 53217 40 Meadowmere Northshore Five Star Northshore, LLC 10803 N. Port Washington Road, Mequon 53092 60 Willowbrook Place Mid West Senior Living, LLC 205 Green Bay Road, Thiensville 53092 64 Totals 374 Source: Management, competitor surveys, and Senior Resources, January 2018

Planned Assisted Living Projects

Per discussion with local city planning departments in February 2018, the following potential assisted living projects to be located within the PMA were identified:

 St. Rita’s Square is planned to be a redevelopment of St. Rita’s Catholic Church located at 1601 N. Cass Street. The developer is Tarantino & Company and the facility will be operated by Capri Communities. The Project is planned to consist of 72 independent living apartments (rental), 20 assisted living units, and 26 memory care units. The current St. Rita’s Church will be razed and the project will be connected to a newly built church. Tarantino & Company has received approval for the project from the Planning Commission but still needs approval from the city’s Common Council. St. Rita’s Square is not considered to be a future competitor of the Corporation due to pricing structure and lack of a full continuum of health care service offerings. The project is included for information purposes only and is excluded from the penetration analysis that follows.

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 Silverado is developing a 53-unit, 85-resident, memory care and assisted living community to be located at 7800 North Green Bay Road in Glendale. The Project was approved by the Planning Commission on March 7, 2017, and construction is planned to begin in the spring of 2018. Silverado is not considered to be a future competitor of the Corporation due to pricing structure and lack of independent living and a full continuum of health care service offerings. In addition, all units will be licensed as CBRF rather than RCAC. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

 Caddis Partners, LLC and Heartis Brand is developing a 105-unit project at 100 West River Woods Parkway in Glendale, with 71 of the units being dedicated to assisted living and 34 units being dedicated to memory care (CBRF license). The Planning Commission approved the Project on May 2, 2017, and construction is scheduled to be completed the first quarter of 2019. The Project is not considered to be a future competitor of the Corporation due to pricing structure and lack of independent living and a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

 Wright House Senior Living, to be managed and operated by Tealwood Senior Living, is planned as a 60-unit assisted living RCAC community located at 6729 West Mequon Road in Mequon. Construction began in June of 2017 and is planned to be completed the summer of 2018. This facility is adjacent to Wright House Memory Care (40 units) which opened in the fall of 2015. Wright House Senior Living is not considered to be a future competitor of the Corporation due to pricing structure and lack of independent living and a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

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 Dunwood Crossing is planned to be constructed by a developer, the Mandel Group, Inc. Mandel Group purchased the former Dunwood School property located in Fox Point at 217 W. Dunwood Road, just off N. Port Washington Road and Good Hope Road. The Village has rezoned the property and approved the development of 105 independent living (rental) apartments that will be constructed in four buildings that are two- and three-stories. Rental rates will range from $1,550, for a one-bedroom unit to $3,200 for a three-bedroom unit. These rental rates do not include ancillary costs such as underground parking. Also, an assisted living facility will be built on another piece of the former school grounds and will consist of approximately 80 units, including memory care beds. The independent living buildings are expected to be completed in May 2019 with the assisted living and memory care to be completed 6 to 12 months later. Dunwood Crossing is not considered to be a future competitor of the Corporation due to pricing structure and lack of a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

 Inland Properties and Matter Development has proposed 145-unit development to be located on a 5.98-acre site in Glendale at 6701 North Port Washington Road. The development is proposed to consist of 103 independent living units and 42 assisted living units, and 22,000 square feet of retail space. The senior living units are proposed to include studio, one-bedroom, and two- bedroom apartments. Construction is anticipated to begin in late 2018 with a construction period of 15 months. The proposal has not been approved and is awaiting review from the Planning Commission. The development is not considered to be a future competitor of the Corporation due to lack of a full continuum of health care service offerings. The Project is included for information purposes only and is excluded from the penetration analysis that follows.

Estimated Eligible Households for Assisted Living RCAC at the Project

The increased size of the private-pay frail elderly market has attracted providers to develop new and creative options for caring for this population. The decision by elderly persons to enter an assisted living facility to meet their needs for assistance often depends on alternatives available and is somewhat more discretionary than the decision to enter a nursing facility. Methodologies for projecting bed need or demand for assisted living vary.

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Population data and income statistics may be utilized to some extent to estimate the number of qualified households (age 75 and older) for assisted living services, yet should not be relied on entirely as a measure of success for a facility. Income qualification is determined, in part, by Management’s assumption that to pay for their cost of care, potential residents will supplement their income levels with alternative sources typically including the “spend down” of an asset base as well as income from family members.

Management evaluates the financial profile of prospective residents, including their annual household income and net assets, in order to assess the ability to afford the monthly fees over a prospective resident’s expected lifetime. Management’s consideration of a prospective resident’s financial condition includes consideration of their ability to liquidate their net assets and future household income. Management also reviews prospective resident’s health status on a case-by-case basis to determine their health care needs.

For purposes of assessing gross penetration, net market penetration, and project penetration rates, management considers seniors aged 75 and older with annual income of $50,000 or above to be age- and income-eligible. Furthermore, Wisconsin nursing home utilization data is applied to estimate the number of individuals that would be in need of skilled care, and incident rates of Alzheimer’s and dementia to estimate the number of individuals that would be in need of memory care services, and removes these populations from the age- and income-eligible total.

Assisted Living RCAC Penetration Analysis

Penetration rates are one measure of the degree to which the PMA might be either under-served or saturated. As penetration rates increase, assisted living units may become more difficult to fill. However, higher penetration rates may not necessarily mean difficulty in achieving expected occupancy levels. Some markets may have a higher need for assisted living services and, therefore, may support higher penetration rates. Three penetration rate calculations are shown in the following table:

 Gross market penetration M Calculated by adding the total number of assisted living units from the Project to those of the comparable assisted living RCAC units in the PMA, at 95% occupancy, and dividing by the total number of age- and income-eligible households as defined above. Gross market penetration is the percentage of age- and income-eligible households that the total market must absorb for the entire market to achieve stabilized occupancy.

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 Net market penetration M Calculated by adding the total number of assisted living RCAC units of the Project and the comparable assisted living RCAC units, in the PMA, at 95% occupancy, that are available due to attrition, divided by the total number of age- and income-eligible households. Net market penetration is an indicator of the ability to fill units as they turn over.  Project penetration M Calculated by dividing the total number of assisted living RCAC units of the Project by the number of age- and income-eligible households. Project percentage is the percentage of the age- and income-eligible households in the PMA that the Project would have to capture to fill the units and maintain 95% occupancy.

In the calculations, the total assisted living RCAC units are adjusted to reflect assumptions about the percentage of units expected to be filled from households in the PMA.

These rates should be considered in conjunction with each other and other market factors such as occupancy levels at existing communities within the PMA, the number of proposed facilities in the PMA, the design of the units and community, historic occupancy levels of the community, and marketing plans and the efforts of management.

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The following table represents the penetration rate analysis, as described, assuming householder age of 75 and older, annual household income for $50,000 and over, and demographic projections for 2018, 2020, and 2023.

Table 31 Market Penetration Rate Analysis for Assisted Living (RCAC) Gross market penetration rate: 2018 2020 2023 Market inventory of RCAC assisted living units: New RCAC Assisted Living Units (1) - 16 16 Comparable assisted living units: Existing 197 197 197 Planned (2) - - - Total IL units in the PMA 197 213 213 Number of units to be filled assuming 70% of residents originate from within the PMA; at 95% occupancy (3) [A] 131 142 142

(4) Number of age and income eligible in the PMA [B] 2,890 3,271 3,843 Gross market penetration rate [A]/[B] 4.5% 4.3% 3.7% Net market penetration rate: Total unoccupied units within the PMA: Existing units available due to resident attrition (5) 101 109 109 Total units to be occupied by PMA population 101 109 109 Number of units to be filled assuming 70% of residents originate from within the PMA; at 95% occupancy [C] 71 76 76

Number of age and income eligible in the PMA 2,890 3,271 3,843 Less: Existing inventory of occupied comparable units 131 142 142 Net number of age and income qualified in the PMA [D] 2,759 3,129 3,701 Net market penetration rate [C]/[D] 2.6% 2.4% 2.1% Project penetration rate: Project units at 95% occupancy [E] - 15 15 Net number of age and income qualified in the PMA [B] 2,890 3,271 3,843 Project penetration rate [E]/[B] 0.0% 0.5% 0.4% Source: Management and ESRI (1) Management is planning the construction of 16 new RCAC assisted living units. (2) Five RCAC projects were identified, however, the projects are not considered to be comparable and competitive. (3) 70% based on resident admissions data provided by Management. (4) Age and income eligible defined as 75+ years old, $50,000+ of annual income, and as adjusted by Wipfli. (5) Total RCAC units in the PMA assuming 54% turnover of units annually (State of Senior Housing, 2017) and 95% occupancy.

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Marketing the Independent Living Units

The success of the Corporation’s new independent living project is dependent, in part, on Management’s ability to pre-sell units. Management began accepting entrance fee deposits in August 2017. A prospective resident must sign a residency contract and pay a deposit equaling 10% of the entrance fee for the prospective resident’s unit of choice.

As of January 31, 2018, 72 (net of cancellations) out of 79 of the Corporation’s new independent living units, or 91.1 percent, have been reserved. Four of the reservations were made by current Tower residents. Each depositor was evaluated by management for financial and health status factors.

The following table summarizes the total number of new independent living units reserved by month as reported by Management, as of January 31, 2018.

Table 32 Marketing the Project Number of Net Cumulative Cumulative Units Number of Reservations Units Percentage of Reserved Cancellations for Month Reserved (1) Total Units (1) Calendar 2017: August 29 - 29 29 36.7% September 20 - 20 49 62.0% October 13 3 10 59 74.7% November 10 3 7 66 83.5% December 2 1 1 67 84.8% Calendar 2018: January 5 - 5 72 91.1% Totals 79 7 72 72 91.1% Source: Management (1) Total of 79 units possible

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The following table summarizes the total number of deposits by type of residency contract as of January 31, 2018.

Table 33 Residency Agreement Type Number Percent Residency Agreement: Standard Contract 22 31% Life Care - 30% Refundable 40 56% Split 4 6% TBD (1) 68% Total deposits 72 100% Source: Management (1) Depositors have not selected contract type.

The following table summarizes where depositors currently reside, as of January 31, 2018.

Table 34 Project Depositors by Area of Origin The Project

Sales Percent

PMA 52 72.2% Other Areas in Wisconsin 13 18.1% Out of State 7 9.7% Totals 72 100.0% Source: Management

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The following table summarizes the age of the depositors and second occupants, as of January 31, 2018. For purposes of the penetration analysis, management set age eligibility as 75 and older; 37.5 percent of depositors/second occupants are ages 74 or younger.

Table 35 Depositor Information Age Total Percentage 60 - 64 4 3.1% 65 - 69 18 14.1% 70 - 74 26 20.3% 75 - 79 51 39.8% 80 - 84 16 12.5% 85 - 89 11 8.6% 90 and older 2 1.6% Total 128 100.0% Source: Management

The following table summarizes the self-reported annual income and net worth for the depositors (before payment of the entrance fee), as of January 31, 2018.

Table 36 Reported Annual Income and Net Worth of the Project Depositors Net Worth

Not Less Than $500,000 to $1,000,000 to $2,000,000 to $3,000,000 to Greater than Provided $500,000 $999,999 $1,999,999 $2,999,999 $4,999,999 $5,000,000 Totals Annual Income: Not provided 2 - - - 2 2 2 8 Less than $35,000 ------1 1 $35,000 to $49,000 ------2 2 $50,000 to $99,999 - - 1 1 3 1 - 6 $100,000 to $199,999 4 - - 1 5 8 6 24 Greater than $200,000 3 1 - - 2 5 20 31 Totals 9 1 1 2 12 16 31 72 Source: Management

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The following table summarizes the self-reported home values for the depositors, as of January 31, 2018.

Table 37 Depositor Home Values Value range: Less than $300,000 8 $300,000 - $399,999 5 $400,000 - $499,999 7 $500,000 - $749,999 22 $750,000 - $999,999 6 $1,000,000 + 17 N/A 7 Total 72 Source: Management

The median home value of the depositors is $674,000.

An independent survey and confirmation process of 67 depositors was conducted in December 2017. Responses were received from 62 depositors. The following information was compiled from the responses.

 62 (100 percent) of the respondents indicated they had paid an entrance fee deposit for a new independent living unit.

 59 (95.2 percent) of the respondents indicated they intend to reside in the Corporation’s new independent living project.

 Three respondents indicated they were uncertain if they would reside in the Corporation’s new independent living project and no respondents indicated they would not reside in the new independent living project.

 35 (56.5 percent) of the respondents indicated they intend to use proceeds from the sale of their home to pay the balance of their entrance fee upon moving into the new independent living project. Six (9.7 percent) of those respondents indicated they need the proceeds from the sale of their home to pay the balance of their entrance fees.

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 Two (3.2 percent) of the respondents indicated they had made a deposit at a second independent living community.

Respondents indicated their intended timeline for moving into their new independent living unit. The following table summarizes the responses.

Table 38 Anticipated Move-ins After Independent Living Units are Available Respondents Percent Timing: 1 to 30 days 27 44% 31-60 days 10 16% 61-90 days 12 19% Greater than 90 days 1 2% No answer/ Did not know 12 19% Totals 62 100% Source: Wipfli Survey

Respondents indicated their primary reason(s) for choosing the Corporation’s new independent living community.

Table 39 Reasons for Selecting the Project Number of Percentage of Responses Responses Location of the campus 59 11.2% Reputation of The Corporation 56 10.6% Campus setting, with continuum of care options available 55 10.4% Availability of the Life Care Option 45 8.5% Association with the arts and culture 45 8.5% View of Lake Michigan 45 8.5% Upscale amenities and finishes 45 8.5% Proximity to family and friends 43 8.1% Ability to attend current activities 38 7.2% Person-first culture 31 5.9% Close friends reside / intend to reside at The Corporation 27 5.1% Meeting current residents of The Corporation 25 4.7% Association with The Corporation, e.g. board member 14 2.7% Totals 528 100.0% Source: Wipfli Survey Note: Many respondents indicated more than one reason for selecting the Project.

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Summary of Significant Accounting Policies

Basis of Presentation

Except as described below, the Corporation follows accounting standards set by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The ASC is the single source of authoritative accounting principles generally accepted in the United States (GAAP) to be applied to nongovernmental entities.

Forecasted Financial Statement Presentation

The accompanying forecasted financial statements do not include implementation of Accounting Standards Update (ASU) 2014-09, Revenue Recognition, which is effective for the Corporation for the year beginning January 1, 2018, ASU 2016-02, Leases, which is effective for the year beginning January 1, 2019, and ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities, which is effective for the year beginning January 1, 2019. Management has not determined the financial impact of not implementing these ASUs during the forecast period.

In addition, the forecasted financial statements do not include Saint John’s Foundation which is a subsidiary of the Corporation. Accounting principles generally accepted in the United States would require Saint John’s Foundation to be consolidated with the Corporation. As a result, the forecasted financial statements do not purport to, and do not present fairly the forecasted financial statements of Saint John’s Communities, Inc. and Subsidiary as of December 31, 2018 through 2023, and for the years then ending, in conformity with accounting principles generally accepted in the United States.

Use of Estimates in Preparation of Financial Statements

The preparation of the accompanying forecasted financial statements in conformity with GAAP requires management to make estimates and assumptions that directly affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates.

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Cash and Cash Equivalents

The Corporation considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents, excluding amounts held as short-term investments in the Corporation’s investment portfolio and amounts whose use is limited or restricted.

Resident Receivables and Credit Policy

Resident receivables are uncollateralized resident obligations that are stated at the amount management expects to collect from outstanding balances. These obligations are primarily from residents of the Corporation’s facilities, most of whom are from the Milwaukee area. A number of the nursing facility residents are insured under third-party payor agreements. Windsor/Stratford SNF bills third-party payors on the residents’ behalf, or if a resident is uninsured, the resident is billed directly. Once claims are settled with the primary payor, any secondary insurance is billed, and residents are billed for copay and deductible amounts that are the residents’ responsibility. Tower Apartments and Canterbury Court residents are billed directly. Payments on resident receivables are applied to the specific claim identified on the remittance advice or statement. The Corporation does not have a policy to charge interest on past due accounts.

The carrying amounts of resident receivables are reduced by allowances that reflect management’s best estimate of the amounts that will not be collected. Management provides for contractual adjustments under terms of third-party reimbursement agreements through a reduction of gross revenue and a credit to resident receivables. In addition, management provides for probable uncollectible amounts, primarily uninsured residents and amounts residents are personally responsible for, through a charge to operations and a credit to an allowance for doubtful accounts based on its assessment of historical collection likelihood and the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to an allowance for doubtful accounts and a credit to resident receivables.

Resident receivables are recorded in the accompanying forecasted balance sheets net of the allowance for doubtful accounts.

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Investments and Investment Income

Investments included in assets limited as to use are measured at fair value in the accompanying forecasted balance sheets.

Investment income or loss (including realized gains and losses on investments, interest, and dividends) is included in excess (deficiency) of revenue over expenses unless the income is restricted by donor or law. Unrealized gains and losses on investments are excluded from income (loss) from operations unless the investments are trading securities. Realized gains or losses are determined by specific identification.

The Corporation monitors the difference between the cost and fair value of its investments. A decline in market value of an individual investment security below cost that is deemed to be other than temporary results in an impairment, and the Corporation reduces the investment’s carrying value to fair value. A new cost basis is established for the investment, and any impairment loss is recorded as a realized loss in investment income.

Assets Limited as to Use

Assets limited as to use include assets held by trustees under terms of bond trust indenture agreements, assets set aside by the Board of Directors for capital improvements, the Life Care program, and other purposes, and entrance fee receipts from the Project’s initial independent living residents which are designated by the Board of Directors for repayment of the Entrance Fee Debt. The Board retains control over assets limited as to use which it has set aside and may at its discretion subsequently use these assets for other purposes.

Property, Equipment, and Depreciation

Property and equipment acquisitions are recorded at cost or, if donated, at fair value at the date of donation. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight-line method. Estimated useful lives range from 30 to 31 years for buildings, 15 years for building and land improvements, and from 3 to 10 years for vehicles, equipment, furniture, and fixtures.

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The Corporation capitalizes interest during the construction period for major capital additions. Capitalized costs include interest costs incurred on borrowed funds offset by interest earnings on certain trustee held funds.

Gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the acquired long-lived assets are placed in service.

Deferred Finance Costs and Original Issue Discounts and Premiums

Deferred financing costs and original issue premiums related to the issuance of long-term debt are amortized over the life of the related debt using a straight-line method for deferred financing costs and an effective interest method for the original issue premium. Amortization of bond issuance costs and original issue premiums are included with interest expense in the accompanying forecasted statements of operations and changes in net assets.

Deferred Marketing Costs

Deferred marketing costs relate to amounts paid for sales, marketing, and other related costs incurred in connection with acquiring initial resident contracts for the South Tower expansion and the Project Independent Living Expansion. These costs are amortized using the straight-line method over 10 years, which is the estimated average life expectancy of the initial resident population. The amortization of these costs is included in depreciation and amortization in the accompanying forecasted statements of operations and changes in net assets.

Impairment

The Corporation reviews its property, equipment, and intangible assets periodically to determine potential impairment by comparing the carrying value of the property, equipment, and identified intangible assets with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, the Corporation would recognize an impairment loss at that time.

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Entrance Fees

Fees paid by residents upon entering Tower Apartments, net of the portion thereof that is refundable to the residents, are recorded as deferred revenue and amortized to income using the straight-line method over future periods based on the estimated life expectancy of the resident. The period of amortization is adjusted annually based on the actuarially determined remaining life expectancy of each individual or joint and last survivor life expectancy of each pair of residents occupying the same unit. The refundable portion of entrance fees is recorded as a liability.

Obligation to Provide Future Services

Management calculates annually the present value of the net cost of future services and use of facilities to be provided to current residents and compares that amount with the balance of deferred revenue from entrance fees. If the present value of the net cost of future services and use of facilities exceeds the deferred revenue from entrance fees, a liability is recorded (obligation to provide future services and use of facilities) with a corresponding charge to income. Management has forecasted that an obligation to provide future services to residents will not be required to be recorded during the forecast period.

Net Assets

Unrestricted net assets are those not subject to donor-imposed stipulations and include those expendable resources which have been designated for special use by the Board of Directors. Temporarily restricted net assets are those whose use by the Corporation has been limited by donors to a specific time period or purpose.

Net Resident Service Revenue

Net resident service revenue is reported at the estimated net realizable amounts from residents, third- party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Net resident service revenue also includes amortization of deferred revenue on resident entrance fees. Management has assumed that there will be no significant third- party payor settlements or adjustments during the forecast period.

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Donor-Restricted Gifts

Unconditional promises to give cash and other assets to the Corporation are reported at fair value at the date the promise is received. Conditional promises to give and indications of intentions to give are reported at fair value at the date the gift is deemed unconditional. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the forecasted statements of operations and changes in net assets as net assets released from restrictions.

Charity Care

The Corporation provides care to residents who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because the Corporation does not pursue collection of amounts determined to qualify as charity care, they are not included in net resident service revenue in the accompanying forecasted statements of operations and changes in net assets.

Income Taxes

The Corporation is a nonprofit corporation as described in Section 501(c)(3) of the Internal Revenue Code (the “Code”) and is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. The Corporation is also exempt from state income taxes on related income.

Financial Forecast Assumptions

The financial forecast presents, to the best of management’s knowledge and belief, the Corporation’s expected financial position, results of operations, and cash flows for the forecast period. The forecast reflects the judgment of the Corporation’s management regarding the expected conditions and expected courses of action as of March 2, 2018, the date of this forecast.

This forecast has been prepared in accordance with the following assumptions, which are those that management believes are significant to the forecast. These assumptions are based on their judgment and the assumptions may not be all-inclusive. Furthermore, even if the assumptions are significantly correct, there will usually be differences between the forecasted and actual results because events and circumstances frequently do not occur as expected, and those differences may be material.

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Management’s Basis for Forecast of Revenue and Entrance Fees

Resident revenue and entrance fee amortization for the independent living units are based primarily on forecasted monthly service fees charged to residents, nonrefundable entrance fee receipts amortized over the expected life of the resident, and the assumed utilization of the independent living units. Revenue for the Transitional Care Assisted Living RCAC, Canterbury Court CBRF, and Windsor/Stratford SNF include amounts generated from health care services provided to residents who are either transfers from the independent living units or from residents admitted directly from outside the Corporation.

Under the requirements of the residency contract, a resident transfer to an assisted living unit or to a skilled nursing bed is classified as either temporary or permanent, depending on the medical assessment. If the required services in the Health Center are of a temporary nature (anticipated being less than three months), the resident will retain his or her independent living unit and continue to pay the monthly fee plus costs incurred for meals and other costs as applicable. If the resident’s permanent transfer to the Health Center is medically indicated, the resident will become a permanent resident in the Health Center and will vacate his or her independent living unit. Residents will continue to pay the monthly fee plus costs incurred for meals and other costs as applicable.

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Forecasted Occupancy Levels

Forecasted occupancy levels for the new Transitional Care Assisted Living RCAC and the Project’s independent living units is based upon management’s assumed move-in schedule for these units. The following tables reflect the forecasted move-in schedule as well as the forecasted occupancy assumptions for the Project:

Table 40 Move in Schedule and Occupancy - The Project Independent Living Transitional Assisted Living RCAC Initial Move- Cumulative Occupancy Initial Move- Cumulative Occupancy Total Units Ins Occupancy Percent Total Units Ins Occupancy Percent 2019 October 0 0.0 0.0 n/a 16 1.3 1.3 7.9% November 0 0.0 0.0 n/a 16 1.3 2.5 15.8% December 0 0.0 0.0 n/a 16 1.3 3.8 23.8% 2020 January 79 4.9 4.9 6.2% 16 1.3 5.1 31.7% February 79 4.9 9.8 12.4% 16 1.3 6.3 39.6% March 79 4.9 14.6 18.5% 16 1.3 7.6 47.5% April 79 9.9 24.5 31.0% 16 1.3 8.9 55.4% May 79 6.3 30.8 38.9% 16 1.3 10.1 63.3% June 79 6.3 37.0 46.9% 16 1.3 11.4 71.3% July 79 6.3 43.3 54.8% 16 1.3 12.7 79.2% August 79 2.9 46.2 58.4% 16 1.3 13.9 87.1% September 79 2.9 49.1 62.1% 16 1.3 15.2 95.0% October 79 2.9 51.9 65.7% 16 0.0 15.2 95.0% November 79 2.9 54.8 69.4% 16 0.0 15.2 95.0% December 79 2.9 57.7 73.1% 16 0.0 15.2 95.0% 2021 January 79 2.9 60.6 76.7% 16 0.0 15.2 95.0% February 79 2.9 63.5 80.4% 16 0.0 15.2 95.0% March 79 2.9 66.4 84.0% 16 0.0 15.2 95.0% April 79 2.9 69.3 87.7% 16 0.0 15.2 95.0% May 79 2.9 72.2 91.4% 16 0.0 15.2 95.0% June 79 2.9 75.1 95.0% 16 0.0 15.2 95.0% Thereafter 79 0.0 75.1 95.0% 16 0.0 15.2 95.0% Source: Management

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The forecasted double occupancy percentages at the Project’s independent living units are as follows during the forecast period:

Table 41 Double Occupancy - The Project's Independent Living Units Double Occupancy Percent

2018 NA 2019 50% 2020 50% 2021 50% 2022 50% 2023 50% Source: Management

Management has forecasted occupancy for the existing Tower Apartments as follows:

Table 42 Forecasted Occupancy - Existing Facility Years Ending December 31, 2018 Through 2023 Units/Beds Average Average Available Occupancy Occupancy %

Central Tower Apartments 110 106 96.4% South Tower Apartments 90 88 97.8% Source: Management

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Forecasted Health Care Utilization

Forecasted average daily census for the Transitional Care Assisted Living RCAC, Canterbury Court CBRF, and Windsor/Stratford SNF attributable to Life Care Contract residents is forecasted as follows:

Table 43 Forecasted Health Care Utilization by Life Care Contract Residents CBRF and Transitional Assisted Living RCAC Skilled Nursing Facility Average Daily Percentage of Average Daily Percentage of Census * Available Units Census * Available Units

2018 12.45 52% 16.23 32% 2019 14.32 54% 18.56 37% 2020 15.50 39% 20.48 41% 2021 16.93 42% 22.35 45% 2022 18.72 47% 24.30 49% 2023 20.16 50% 26.06 52% * Average Daily Census for Life Care contract residents only. Source: Management and Actuary

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Forecasted Monthly Service Fees, Entrance Fees, and Daily Rates

The following tables summarizes the Monthly Fees and Entrance Fees for the existing South Tower Apartments and is stated at the rates as of December 2017. Entrance Fees and Monthly Fees are forecasted to have annual increases as shown in Table 52:

Table 44A Existing South Tower Apartments Average Average Number Monthly Entrance of Units Fees Fees

Bailey - One bedroom 1$ 3,275 $ 386,800 Amherst - One bedroom plus den 12 3,300 390,567 Austen - One bedroom plus den 1 3,455 420,200 Berkshire - Two bedroom 10 3,535 456,500 Cambridge - Two bedroom split 9 3,865 504,033 Hampshire - Two bedroom 5 3,905 499,400 Dover - Two bedroom plus den 14 3,985 587,371 Sommerset - Two bedroom 4 4,120 650,800 Brighton - Two bedroom plus den, Floor 21 1 4,300 583,100 Manchester - Large two bedroom, Floor 21 1 4,425 841,200 Somerset II - Two bedroom 1 4,560 650,800 Constable - Two bedroom 1 4,500 603,200 Carlisle - Two bedroom plus den 6 4,650 680,883 Easthampton - Two bedroom plus den 12 4,660 685,225 Bristol - Large two bedroom plus den 6 4,680 687,317 Westminister - Two bedroom plus den, Floor 21 1 5,010 918,900 Bowman - Large two bedroom plus den 2 5,650 761,700 Engleheart - Large two bedroom plus den 2 5,940 844,250 York - Large two bedroom plus den, Floor 21 1 6,020 984,200

Total/Weighted average 90$ 4,135 $ 579,374 Second person fees: Standard $ 475 $ 25,500 Life Care 1,390 51,100

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The following tables summarizes the Monthly Fees and Entrance Fees for the existing Central Tower Apartments and is stated at the rates as of December 2017. Entrance Fees and Monthly Fees are forecasted to have annual increases as shown in Table 52:

Table 44B Existing Central Tower Apartments Average Average Number Monthly Entrance of Units Fees Fees

Alcove 2$ 1,700 $ 134,750 Studio 2 1,900 145,750 Saybrook - Standard one bedroom 29 2,290 169,855 Trescott/Tresburn - Large one bedroom 21 3,140 309,971 Bedford - Large one bedroom 9 3,160 340,167 Canton - Standard two bedroom 12 3,205 347,700 Devonshire - Standard two bedroom 19 3,525 384,147 Dorset - Large two bedroom 5 3,725 436,120 Edgehill - Two bedroom plus den 8 3,925 467,875 Lenox - Two bedroom plus den 2 4,065 553,700 Princeton - Two bedroom plus den 1 4,115 572,700

Total/Weighted average 110$ 3,052 $ 310,296 Second person fees: Standard $ 475 25,500$ Life Care 1,390 51,100

Source: Management

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The following table summarizes the forecasted average Monthly Fees and average Entrance Fees, excluding any height premiums for upper floors, for single occupancy for the Project’s independent living units. Fees are stated at the rates as of December 2017. Entrance Fees and Monthly Fees are forecasted to have annual increases as shown in Table 52 and expected to be in effect upon opening in 2020.

Table 45 The Project's Independent Living Units Monthly Fees and Entrance Fees Average Monthly Average Entrance Number of Units Fees Fees A - Johnstone 15 $ 3,970 $ 521,000 B - Kingston 15 4,130 607,700 D - Middleton 15 4,330 672,600 C - Lancaster 15 4,630 692,700 E - Northampton 15 4,790 704,600 P4 - Bridgewater 1 5,000 947,600 P3 - Barrington 1 5,140 979,700 P2 - Aberdeen 1 6,260 1,094,900 P1 - Greenwich 1 6,340 1,111,100

Totals/Weighted average (1) 79 $ 4,437 $ 659,649

Second person fees - Assume 50% of total Standard - 25% $ 475 $ 25,500 Life care - 75% 1,390 51,100

Height premium - Weighted average N/A $ 9,823 Source: Management (1) Certain residents will also pay an escalating Entrance Fee height premium for units on floors 11 and above.

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Canterbury Court

The following table summarizes the Base Monthly Fees for the existing Canterbury assisted living units, stated at the rates as of December 2017. Monthly Fees for the Canterbury units are forecasted to have annual increases as shown in Table 52:

Table 46 Canterbury Court Number of Monthly Units Fee

Assisted Living: Kent 6$ 5,720 Oxford 3 5,960 Cornwall 3 6,020 Essex 2 6,660 Hyde 1 6,670 Wedgewood 4 7,010 Spencer 2 7,220 Beckenham 2 7,270 Ashford 1 7,410

Total/Weighted Average 24$ 6,445 Source: Management

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Transitional Care Assisted Living RCAC

The following table summarizes the Monthly Fees for the new Transitional Care Assisted Living RCAC to be developed as part of the Project. Fees are stated at the rates for 2017. Monthly fees for the Transitional Care Assisted Living RCAC are forecasted to have annual increases as shown in Table 52:

Table 47 The Project - Transitional Assisted Living RCAC Monthly Fees and Entrance Fees

Number of Average Average Units Monthly Fees Entrance Fees

Studio (425 square feet) 2 $ 4,060 $ 142,400 One Bedroom (574-849 square feet) 13 4,988 225,431 Two Bedroom (1147 square feet) 1 5,670 370,500

Totals/Weighted average 16 4,915$ 224,119 Source: Management

Windsor/Stratford SNF

The following table summarizes the payor mix (by percentage of total days) and the daily rates, stated at the payor mix levels and rates for 2017 for the skilled nursing beds. Daily rates for the skilled nursing beds are forecasted to have annual increases as shown in Table 52:

Table 48A Windsor/Stratford Payor Mix Daily Rates

Private pay 47.0%$ 382 Life Care 31.0% N/A Medicare 10.0%$ 477 Medicaid 12.0%$ 180

Total/Weighted average 100.0%$ 368 Source: Management

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The payor mix is forecasted to transition as a result of the Project to include a higher percentage of days attributable to Life Care residents. Payor mix is forecasted as follows during the forecast period.

Table 48B Windsor/Stratford Payor Mix 2018 2019 2020 2021 2022 2023 Medicaid 9% 7% 4% 4% 4% 4% Medicare 9% 9% 10% 10% 10% 10% Private 45% 43% 41% 38% 34% 30% Life Care 37% 41% 45% 48% 52% 55%

Totals 100% 100% 100% 100% 100% 100% Source: Management and actuary

Canterbury Court

In 2017, 54% of Canterbury Court’s resident days were for private pay residents and 46% were for Life Care residents. The payor mix is forecasted to transition as a result of the Project to include a higher percentage of days attributable to Life Care residents. Payor mix is forecasted as follows during the forecast period:

Table 48C Canterbury Payor Mix 2018 2019 2020 2021 2022 2023 Private 46%38%60%56%51%47% Life Care 54%62%40%44%49%53%

Totals 100% 100% 100% 100% 100% 100% Source: Management and actuary

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Other Revenue

Management has forecasted other resident and operating revenue to include resident and guest meal revenue, concierge assisted living services provided to independent living residents, and other operating revenue based on historical operations. Management has also forecasted additional meal revenue beginning in 2020 related to the Project, based on the operating experience of Tower Apartments. Other revenue is forecasted as follows during the forecast period.

Table 49 Forecasted Other Revenue 2018 2019 2020 2021 2022 2023

Meals and dining services $ 711,000 $ 732,000 $ 899,000 $ 1,076,000 $ 1,123,000 $ 1,156,000 Concierge services 370,000 381,000 392,000 404,000 416,000 429,000 Other 509,000 528,000 575,000 697,000 724,000 745,000

Totals $ 1,590,000 $ 1,641,000 $ 1,866,000 $ 2,177,000 $ 2,263,000 $ 2,330,000 Source: Management

Entrance Fee Receipts and Refunds

Entrance Fee receipts for the independent living units being developed as part of the Project are based on information provided by the Actuary. The following table summarizes the forecasted Entrance Fees for the Project and for the existing Tower Apartments during the forecast period:

Table 50 Forecasted Entrance Fees Received - All Units 2018 2019 2020 2021 2022 2023

Entrance fees received from initial residents (1) $ 186,000 $ 155,000 $ 36,192,000 $ 10,796,000 $ - $ - Entrance fees received from turnover residents 8,121,000 8,417,000 9,444,000 11,427,000 12,689,000 13,087,000 Refunds paid on turnover residents (2,534,000) (2,800,000) (3,503,000) (4,411,000) (4,731,000) (4,828,000)

Total entrance fees received, net of refunds $ 5,773,000 $ 5,772,000 $ 42,133,000 $ 17,812,000 $ 7,958,000 $ 8,259,000

Number of turnover units 19 19 20 22 23 23

Source: Management and Actuary (1) Timing reflects receipt of 10% of the Entrance Fee as a reservation fee when the unit is reserved and the remaining 90% of the Entrance Fee upon occupancy. The Corporation received $4,591,000 of reservation fees for the Project prior to the forecast period.

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Entrance Fee receipts for the new independent living units being developed as part of the Project are forecasted, based on information provided by the Actuary, as follows:

Table 51 Forecasted Entrance Fees Receipts for the Project's Independent Living Apartments 2018 2019 2020 2021 2022 2023

Entrance fees received from initial residents $ 186,000 $ 155,000 $ 36,192,000 $ 10,796,000 $ - $ - Entrance fees received from turnover residents - - 725,000 2,342,000 3,191,000 3,601,000 Refunds paid on turnover residents - - - - (46,000) (131,000)

Total entrance fees received, net of refunds $ 186,000 $ 155,000 $ 36,917,000 $ 13,138,000 $ 3,145,000 $ 3,470,000

Number of turnover units - - 2 4 4 4 Source: Management and Actuary

Contributions

Management has forecasted contributions based on historical experience. Management has assumed that any contributions received for the benefit of the Corporation by Saint John’s Foundation will pass through to the Corporation. These amounts are included in forecasted contribution revenue.

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Revenue and Reimbursement Inflation

Management has forecasted the following inflationary rates for revenue through the forecast period. These inflationary rates are based on expected increases in private pay monthly fees and entrance fees and expected increases in Medicare and Medicaid reimbursement rates as follows:

Table 52 Forecasted Revenue Rate Increases 2018 2019 2020 2021 2022 2023

Existing operations: Independent living: Monthly fees 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Entrance fees 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Canterbury monthly fee 3.0%3.0%3.0%3.0%3.0%3.0% Windsor/Stratford daily rates: Private pay 3.0%3.0%3.0%3.0%3.0%3.0% Medicare 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Medicaid 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% The Project: New Transitional Assisted Living RCAC 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Independent living: Monthly fees 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Entrance fees 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Other revenue 3.0%3.0%3.0%3.0%3.0%3.0% Source: Management

Investment Income

Management’s assumed investment income rates are based on the historical rate of return on the Corporation’s cash and investments. Excess operating cash is generally invested in interest-bearing cash equivalents such as money market funds or overnight repurchase agreements. Trustee-held funds are generally invested in fixed income securities such as U.S. treasury securities. Board-designated investments are invested in debt and equity securities and certain alternative investments.

Investment income consists of interest, dividends, and realized gains and losses on cash equivalents, investments, and investments classified as assets limited as to use. Realized investment income is included in operating revenue, and unrealized net appreciation (depreciation) on investments is included in other changes in net assets in the accompanying forecasted statements of operations and changes in net assets.

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During the Project’s construction period, interest earned on certain trustee-held funds will be netted with interest expense on the Series 2018A Bonds and will be capitalized.

Based on historical results, along with consultation with their investment advisors, management has forecasted the following rates of returns by investment class:

Table 53 Forecasted Investment Income Rates 2018 2019 2020 2021 2022 2023

Cash and cash equivalents 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% Board-designated investments for capital improvements, Life Care program, and other: Realized investment income 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% Net unrealized appreciation 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% Total investment return - Board-designated investments 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Board-designated entrance fee fund 0.75% 0.75% 0.75% 0.75% 0.75% N/A Debt service reserve funds 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% Funded interest fund 0.75% 0.75% 0.75% 0.75% N/A N/A Project fund 0.75% 0.75% 0.75% 0.75% N/A N/A Source: Management and the Underwriter

The Corporation’s investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the value of investments will occur during the forecast period and that such change could materially affect the amounts reported in the forecasted balance sheets.

Management’s Basis for Forecast of Expenses

Expense Inflation

Management has forecasted a 3% annual inflationary rate for expenses through the forecast period. This rate reflects management’s outlook for the future movement of prices. The factor has been applied to expenses unless management believes a different factor should be applied for a specific expense item. Inflation is caused by multiple factors and unanticipated events and circumstances will impact the actual inflation rate. Accordingly, the operating results achieved during the forecast period may vary from the forecast, and these variations may be material.

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Operating Expenses

Management has forecasted operating expenses based upon the historical experience of the Corporation and its plans for operating the Project. The specific bases for major expense items were formulated by management and are discussed as follows:

Salaries and Wages

A full-time equivalent (FTE) employee represents 2,080 hours of time within a calendar year. Average hourly wage rates are forecasted to increase 3% annually throughout the forecast period. Salaries and wage expense is forecasted based on forecasted FTEs as follows:

Table 54A By Facility Forecasted Staffing and Average Hourly Rates 2018 2019 2020 2021 2022 2023 Number of Average Number of Average Number of Average Number of Average Number of Average Number of Average FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate Facility: Windsor/Stratford 74 21.83 76 22.30 80 22.76 80 23.44 80 24.14 80 24.87 Tower Apartments 47 25.04 47 25.79 47 26.56 47 27.36 47 28.18 47 29.03 Canterbury Court 22 18.39 23 18.66 25 19.03 25 19.60 25 20.19 25 20.79 Independent Living - - - - 11 18.60 11 19.77 11 20.36 11 20.97 Transitional Assisted Living RCAC - - - - 3 35.41 5 32.52 5 33.49 5 34.50 Administration 19 35.22 19 36.27 19 37.36 19 38.48 19 39.63 19 40.82

Total/Weighted average 163$ 23.87 166$ 24.89 185$ 24.76 187$ 25.47 187$ 26.24 187$ 27.02

Source: Management

Table 54B By Position Forecasted Staffing and Average Hourly Rates 2018 2019 2020 2021 2022 2023 Number of Average Number of Average Number of Average Number of Average Number of Average Number of Average FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate FTEs Hourly Rate Position: Canterbury 12 $ 18.71 12 $ 19.27 12 $ 19.85 12 $ 20.44 12 $ 21.06 12 $ 21.69 Windsor/Stratford 44 23.63 44 24.34 44 25.07 44 25.82 44 26.59 44 27.39 Concierge 7 29.40 7 30.21 10 33.85 11 33.97 11 34.99 11 36.04 Social Work 1 27.60 1 28.43 1 29.31 1 30.15 1 31.03 1 31.96 Activities 9 29.73 10 31.10 12 31.23 12 32.16 12 33.12 12 34.12 Dietary 37 17.53 39 17.60 42 17.80 42 18.50 42 19.06 42 19.63 Maintenance 14 26.05 16 26.90 18 26.68 18 27.48 18 28.29 18 29.14 Homemakers 11 15.44 13 15.08 17 15.80 18 16.37 18 16.85 18 17.37 Marketing 4 31.32 4 32.26 4 33.22 4 34.22 4 35.25 4 36.31 Administration 23 34.65 25 34.30 27 33.88 27 34.90 27 35.95 27 37.02

Total/Weighted average 163 $ 23.87 170 $ 24.89 187 $ 24.76 187 $ 25.47 187 $ 26.24 187 $ 27.02

Source: Management

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Employee Benefits

Benefit costs include payroll taxes, including FICA and unemployment taxes, workers’ compensation, health insurance, and other miscellaneous benefits. In addition, the Corporation sponsors a defined contribution pension plan under which the Corporation may contribute a percentage (subject to the review and change at the discretion of the Board of Directors) of the annual compensation of all participants, as defined by the plan. Management has assumed that no contributions will be made to the pension plan for the forecast period. Management estimates employee benefits will be approximately 27% of salaries and wages throughout the forecast period.

Insurance

Insurance expense includes management’s estimate of the cost of general and professional liability insurance, property insurance, vehicle insurance, and other related costs which management assumes are primarily fixed in nature. Insurance costs are forecasted to increase 2% annually throughout the forecast period, along with an additional increase beyond the rate of inflation with the opening of the Project.

Utilities

Utilities expense includes management’s estimate of the costs for electricity, water and sewer, and natural gas. These costs are forecasted to increase 3% annually throughout the forecast period, along with an additional increase beyond the rate of inflation with the opening of the Project.

Supplies and Other

Supplies include management’s estimate of the costs for drugs, medical supplies, food, operating supplies, minor equipment, and other similar items. Management has forecasted these costs based on the historical experience of the Corporation with an increase of 3% annually throughout the forecast period. Management has forecasted additional expenses to be incurred during and following the opening of the Project.

Depreciation

Property and equipment are forecasted to be depreciated over their estimated useful lives by the straight- line method. See page 105 for additional information related to property and equipment.

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Amortization

Amortization expense is forecasted based on amortizing deferred marketing costs over the anticipated average life expectancy of the initial residents.

Interest Expense

Interest expense prior to the assumed issuance of the Series 2018 Bonds is forecasted related to the debt service requirements of the Series 2012A and Series 2015 Bonds. Interest expense after the assumed issuance of the Series 2018 Bonds is forecasted related to the debt service requirements of the Series 2012A, Series 2015, and Series 2018 Bonds. The forecasted debt service requirements for the Series 2018 Bonds have been provided by management and the Underwriter. Interest expense on the Series 2018 Bonds, net of investment income on certain trustee-held funds, will be capitalized during the construction period of the Project. Interest expense also includes amortization expense related to deferred financing costs and amortization of original issue premium on the Series 2015B and the Series 2018A Bonds.

Management’s Basis for Forecast of Other Items

Current Assets and Current Liabilities

Cash and Cash Equivalents

Cash and cash equivalent balances for the forecast period are based on the results of the forecasted statements of cash flows.

Resident Receivables

Resident receivables, net of allowance for doubtful accounts and contractual adjustments, are forecasted based on historical levels which are approximately 55 days of Medicare, Medicaid, and private pay resident revenue in resident receivables for the Corporation throughout the forecast period.

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Other Current Assets

Other current assets include supplies, prepaid expenses, and other miscellaneous items and are forecasted based on the historical levels of the Corporation adjusted for forecasted changes in dietary supplies and insurance expense. Management has forecasted that other current assets will increase with the opening of the Project.

Accounts Payable

Accounts payable have been forecasted based upon historical levels, which is approximately 30 days of operating expenses including utilities and supplies and other expense throughout the forecast period.

Accrued Expenses

Accrued expenses, consisting primarily of accrued salaries and wages, employee benefits, paid time off, and other accrued expenses, are forecasted based upon historical levels, which is approximately 10% of salaries, wages, and employee benefits throughout the forecast period.

Accrued Interest

Accrued interest is forecasted at 15 days of interest on the Series 2012A, Series 2015A, and Series 2018B Bonds and 107 days of interest expense on the Series 2015B and Series 2018A Bonds.

Advance Deposits and Prepayments

Advance deposits and prepayments for existing independent living units have been forecasted based on historical levels with an inflationary increase of 3% per year throughout the forecast period. Advance deposits for the Project are forecasted based on the forecasted presales of the unit, the move-in schedule, and the forecasted number of applicants anticipated to submit deposits for a waiting list.

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Assets Limited as to Use

Board Designated

Assets limited as to use include assets set aside by the Board of Directors for capital improvements, the Life Care program, and other purposes, and entrance fee receipts from the Project’s initial independent living residents which are designated by the Board of Directors for repayment of the Entrance Fee Debt.

Board-designated investments for capital improvements, the Life Care program, and other purposes are forecasted based on historical levels adjusted by annual investment earnings and deposits of cash and cash equivalents balances in excess of 30 days of expense.

Assets limited as to use also include an account which will be funded with entrance fees for initial residents of the Project’s independent living units and which will be used to pay any refunds due and retire the Series 2018B Bonds. This fund is forecasted based on forecasted receipts of entrance fees for initial residents and forecasted principal payments of the Series 2018B Bonds.

Trustee-Held Funds

In accordance with the assumed revenue bond agreements, the Corporation is required to establish debt service reserve funds, a project fund, and a funded interest fund. The sources and uses of these funds will be governed by the revenue bond agreements and are described in this section. These funds are forecasted to be held in interest-bearing accounts.

Project Fund

The Project fund will be funded from the assumed issuance of the Series 2018A Bonds and will be used to pay project-related construction and furniture, fixtures, and equipment costs.

The Series 2018B Bonds will be drawn monthly for Project-related construction and furniture, fixtures, and equipment costs after proceeds from the Series 2018A Bonds are fully disbursed from the Project fund.

Funded Interest Fund

Interest expense for the first 29 months after the assumed issuance of the Series 2018 Bonds is assumed to be funded from a portion of the proceeds from the issuance of the Series 2018 Bonds.

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Debt Service Reserve Fund

The Corporation is required to maintain debt service reserve funds related to the Series 2018A Bonds in an estimated amount of $7,040,000 equal to 125% of forecasted average annual debt service requirement of the Series 2018A Bonds. The debt service reserve fund is intended to be utilized should the Corporation not be able to meet its scheduled interest and principal payments on the Series 2018A Bonds. Management assumes no draw against the debt service reserve funds during the forecast period.

Property and Equipment

Property and equipment balances, net of accumulated depreciation, are forecasted based on historical levels, costs of constructing the Project, and routine capital expenditures during the forecast period, reduced by estimated annual depreciation. In addition, property and equipment with an estimated cost and accumulated depreciation totaling $12,665,000 and $3,999,000, respectively, are forecasted to be disposed of as a result of the Project. Depreciation on these assets will be accelerated so there will be no remaining net book value at the date the assets are removed from service. Accelerated depreciation, included within depreciation expense, totals $3,709,400 in 2018 and $3,709,400 in 2019.

The following table reflects Project construction costs, capitalized interest net of interest earnings, and other routine capital additions during the forecast period:

Table 55 Forecasted Property and Equipment Additions 2018 2019 2020 2021 2022 2023

Project costs $ 37,543,000 $ 64,792,000 $ 17,695,000 $ - $ - $ - Capitalized interest, net of interest income 2,558,000 4,108,000 719,000 - - - Routine capital additions 1,600,000 1,800,000 1,600,000 1,900,000 1,600,000 1,700,000

Total capital additions $ 41,701,000 $ 70,700,000 $ 20,014,000 $ 1,900,000 $ 1,600,000 $ 1,700,000 Source: Management

Other Assets

Deferred Marketing Costs

Deferred marketing costs are forecasted based on actual costs incurred prior to January 1, 2018, plus the additional marketing costs forecasted to be incurred in connection with acquiring the initial entrance fee contracts for the Project, reduced by annual amortization starting with the date of initial occupancy.

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Line of Credit

The Corporation has an outstanding $3,000,000 line of credit with a bank. There were no borrowings outstanding at January 1, 2018 related to this line of credit. Borrowings on the line bear interest at 2% over the one-month LIBOR. The Corporation anticipates they may draw up to $2,500,000 in 2018, to use as a portion of the Corporation’s contribution to the sources of funds for the Project. The Corporation forecasts this borrowing to be repaid by December 31, 2018 utilizing cash flows from operations. No borrowings on the line of credit will be made during the remaining forecast period.

Long-Term Debt

The Corporation is forecasted to have the following outstanding long-term debt during the forecast period.

 Management assumes that $134,840,000 of tax-exempt bonds will be issued on the Corporation’s behalf by the Wisconsin Health and Educational Facilities Authority (WHEFA) to pay for the Project’s construction and pay for other costs. The Series 2018 Bonds are assumed to consist of the following:  $82,920,000 of tax-exempt Series 2018A Bonds or Permanent Debt with an assumed weighted average coupon rate of 4.996%. The Series 2018A Bonds are assumed to be issued with an original issue premium of $3,670,000 for net proceeds of $86,590,000. The Series 2018A Bonds are anticipated to mature in 2050.  $51,920,000 of tax-exempt Series 2018B Bonds or Temporary Entrance Fee Debt with a variable interest rate until April 2023; thereafter the interest rate will be adjusted per the terms of the related bond documents. For the initial rate period, the Series 2018B Bonds have an assumed coupon rate of 4.0%. The Series 2018B Bonds have an initial mandatory tender date of April 2023 and an expected maturity date of April 2025. Entrance fee receipts from the initial occupancy of the Project’s independent living units are forecasted to be used to retire the Series 2018B Bonds prior to their tender/reset in 2023. • WHEFA Adjustable Rate Revenue Bonds, Series 2012A, dated December 28, 2012, bearing an interest rate of 3.54% until December 2022; thereafter will reset in accordance with the related bond agreements; annual principal payments with final payment due September 2032. • WHEFA Adjustable Rate Refunding Revenue Bonds, Series 2015A, dated December 1, 2015, bearing interest at 2.86% until December 2025; thereafter will reset in accordance with the related bond agreements; annual principal payments with final payment due in September 2045. • WHEFA Revenue Bonds, Series 2015B, dated December 1, 2015, bearing interest at rates between 3.00% and 5.00%; annual principal payments with final payment due in September 2045.

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Forecasted principal and interest payments on the Corporation’s long-term debt are as follows:

Table 56 Forecasted Debt Service Year Series 2012A Series 2015A Series 2015B Series 2018A Series 2018B Total

Principal payments: 2018 $ 474,000 $ 362,000 $ 300,000 $ - $ - $ 1,136,000 2019 488,000 256,000 425,000 - - 1,169,000 2020 502,000 262,000 440,000 - 35,927,000 37,131,000 2021 517,000 270,000 460,000 935,000 15,993,000 18,175,000 2022 529,000 278,000 475,000 980,000 - 2,262,000 2023 550,000 285,000 500,000 1,010,000 - 2,345,000

Totals$ 3,060,000 $ 1,713,000 $ 2,600,000 $ 2,925,000 $ 51,920,000 $ 62,218,000

Interest payments 2018 $ 282,000 $ 568,000 $ 1,181,000 $ 1,708,000 $ 1,000 $ 3,740,000 2019 298,000 567,000 1,172,000 4,127,000 275,000 6,439,000 2020 281,000 560,000 1,155,000 4,127,000 1,090,000 7,213,000 2021 262,000 552,000 1,138,000 4,127,000 191,000 6,270,000 2022 244,000 543,000 1,119,000 4,089,000 - 5,995,000 2023 225,000 535,000 1,100,000 4,050,000 - 5,910,000

Totals$ 1,592,000 $ 3,325,000 $ 6,865,000 $ 22,228,000 $ 1,557,000 $ 35,567,000

Total principal and interest payments: 2018 $ 756,000 $ 930,000 $ 1,481,000 $ 1,708,000 $ 1,000 $ 4,876,000 2019 786,000 823,000 1,597,000 4,127,000 275,000 7,608,000 2020 783,000 822,000 1,595,000 4,127,000 37,017,000 44,344,000 2021 779,000 822,000 1,598,000 5,062,000 16,184,000 24,445,000 2022 773,000 821,000 1,594,000 5,069,000 - 8,257,000 2023 775,000 820,000 1,600,000 5,060,000 - 8,255,000

Totals$ 4,652,000 $ 5,038,000 $ 9,465,000 $ 25,153,000 $ 53,477,000 $ 97,785,000

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Deferred financing costs represent costs associated with issuing the Series 2012A, Series 2015, and Series 2018 Bonds reduced by annual amortization. Management has assumed that the payment of the issuance costs for the Series 2018 Bonds will be funded from a portion of the proceeds of the Series 2018 Revenue Bonds.

Unamortized original issue premium is reported as a component of long-term debt and represents the original issue premium associated with issuing the Series 2018A Bonds reduced by annual amortization.

Sensitive Assumptions

Forecast assumptions are considered particularly sensitive if either there is a relatively high probability of a sizable variation from the assumption or if the effect of virtually any variation in the assumption would have a significant effect on forecasted results.

Management believes the following assumptions do not have a high probability of variation. However, forecasted operating results and related cash flows are deemed particularly sensitive to variations in these assumptions:

 Reimbursement Rates MRevenue is generated through services for which reimbursement is determined under state and federal reimbursement-related regulations. These state and federal reimbursement-related regulations are subject to change based on legislative action. If reimbursement rates vary from the projected rates, revenue could be affected, and the effects could be material.

 Census M The Corporation forecasts an average daily census of 360 upon stabilized occupancy in 2021. If the Corporation is not able to achieve the forecasted number of residents, revenue and expense would be affected, and the effects could be material.

 Financing M If the financing terms and conditions change from what is presented, the Project’s increase in net position would be affected, and the effects could be material.

 Entrance Fees M The Corporation has forecasted turnover of Life Care and standard contract residents based on an actuarial analysis prepared by the actuary. If forecasted turnover, entrance fee receipts, or entrance fee refunds vary from the actuarially determined estimates, revenue in excess of expenses, cash and cash equivalents, and investments would be affected and the effects could be material.

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 Staffing – Staffing and compensation levels are based on expected levels necessary to operate the Corporation. If staffing levels vary from forecasted levels or if adequate staff are not able to be recruited and retained at forecasted compensation levels, expenses would be affected, and the effects could be material.

 Investment Returns –Management is forecasting investment income and unrealized gains and losses on investments at levels based on historical experience. If returns on investments vary from forecasted levels, the change in net assets and cash and cash equivalents and investments would be affected, and the effects could be material.

 Inflation –Management is forecasting various inflation factors for expenses. If inflation is more than forecasted, expenses would be affected, and the effects could be material.

 Project Costs – Construction of the Project is subject to the usual risks associated with construction projects, including, but not limited to, cost overruns, delays in issuance of required building permits or other necessary approvals, strikes, shortages of materials, and adverse weather conditions. It is anticipated proceeds from the issuance of debt, together with anticipated investment earnings thereon and other funds provided by the Project, will be sufficient to complete the acquisition, construction, furnishing, and equipping of the Project. Should significant cost overruns occur or should the completion of the Project be delayed, assets and revenue could be affected, and the effects could be material.

 Laws and Regulations M The health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure and accreditation. Violations of these laws and regulations could result in revocation of licensure and/or accreditation together with the imposition of fines and penalties. The financial forecast assumes that the Corporation will be in substantial compliance with laws and regulations throughout the forecast period.

 Recovery Audit Contractors – The Centers for Medicare and Medicaid Services (CMS) has implemented a new project using recovery audit contractors (RACs) as part of CMS’s efforts to ensure accurate payments. CMS uses RACs to search for potentially inaccurate Medicare payments that may have been made to health care providers and that were not detected through existing CMS program integrity efforts. Once a RAC identifies a claim it believes is inaccurate, it makes a deduction from or addition to the provider’s Medicare reimbursement in an amount estimated to equal the overpayment or underpayment. RAC reviews with the Corporation are anticipated; however, the outcome of such potential reviews is unknown and cannot be reasonably estimated for this forecast, and the effects could be material.

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 National Health Care Reform M The impact of national health care reform in the future is unknown. Depending on the impact, if any, revenue could be affected, and the effects could be material.

Sensitivity Analyses

The financial forecast was prepared based on assumptions made by management concerning future operations of the Corporation. Various factors and conditions may occur which could adversely affect the financial condition of the Corporation and its ability to meet debt service requirements. These factors may include, but are not limited to, legislation and regulatory actions, changes in assumptions concerning occupancy, rates for services, financing, construction costs, operating costs, increased competition from other senior housing facilities, and independent living turnover.

The sensitivity analyses that follow do not necessarily reflect the only significant assumptions presented in the forecast and are not intended to be all-inclusive. These sensitivity analyses are presented for the purpose of demonstrating the significance of:

[ Sensitivity #1: Turnover in the independent living units occurs at a lower rate than forecasted by the actuary. For purposes of this sensitivity, turnover entrance fee receipts and refunds were forecasted at 75 percent of the amounts forecasted by the actuary. [ Sensitivity #2: The fill-up period for the Project occurs slower than forecasted by management. [ Sensitivity #3: The fill-up period for the Project occurs slower than forecasted by management and occupancy at the Central Tower Apartments and at the South Tower Apartments is lower than forecasted by management.

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Sensitivity Analysis #1 Sensitivity analysis #1, as presented by management, was conducted to assess the impact of a lower turnover rate than forecasted by the actuary. For purposes of this sensitivity, turnover entrance fee receipts and refunds were forecasted at 75% of the amounts forecasted by the actuary.

2022 2023

As forecasted: Debt service coverage ratio - Maximum annual debt service 2.11 2.17 Number of days cash on hand 1,090 1,231 Cash to debt ratio 58% 67%

Sensitivity Analysis #1: Debt service coverage ratio - Maximum annual debt service 1.86 1.91 Number of days cash on hand 962 1,067 Cash to debt ratio 51% 58%

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Sensitivity Analysis #2 Sensitivity analysis #2, as presented by management, was conducted to assess the impact if the fill-up period for the Project occurs slower than forecasted by management. For purposes of sensitivity #2:

 North Tower Apartments are forecasted to fill up at a rate of 3.13 residents per month beginning January 2020 through December 2021 (24 months).  The RCAC Transitional Care Assisted Living Units are forecasted to fill up at a rate of .63 residents per month beginning October 2019 through September 2021 (24 months).  Revenue was adjusted to reflect the slower fill-up periods described above.  Expenses remained unchanged from forecasted levels.

2022 2023

As forecasted: Debt service coverage ratio - Maximum annual debt service 2.11 2.17 Number of days cash on hand 1,090 1,231 Cash to debt ratio 58% 67%

Sensitivity Analysis #2: Debt service coverage ratio - Maximum annual debt service 2.11 2.17 Number of days cash on hand 1,056 1,195 Cash to debt ratio 56% 65%

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Sensitivity Analysis #3 Sensitivity analysis #3, as presented by management, was conducted to assess the impact if the fill-up period for the Project occurs slower than forecasted by management and occupancy at the Central Tower Apartments and at the South Tower Apartments is lower than forecasted by management. For purposes of sensitivity #3:

 North Tower Apartments are forecasted to fill up at a rate of 3.13 residents per month beginning January 2020 through December 2021 (24 months).  The RCAC Transitional Care Assisted Living Units are forecasted to fill up at a rate of .63 residents per month beginning October 2019 through September 2021 (24 months).  Average occupancy of the North Tower Apartments and the South Tower Apartments are forecasted to average 94% throughout the forecast period.  Revenue was adjusted to reflect the slower fill-up periods and lower occupancy levels described above.  Expenses remained unchanged from forecasted levels.

2022 2023

As forecasted: Debt service coverage ratio - Maximum annual debt service 2.11 2.17 Number of days cash on hand 1,090 1,231 Cash to debt ratio 58% 67%

Sensitivity Analysis #3: Debt service coverage ratio - Maximum annual debt service 2.06 2.12 Number of days cash on hand 1,029 1,162 Cash to debt ratio 55% 64%

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APPENDIX E

Summary of Master Indenture, Supplements and Master Mortgage

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SUMMARY OF MASTER INDENTURE, SUPPLEMENTS AND MASTER MORTGAGE

Brief descriptions of the Master Indenture, First Supplement, Second Supplement, Third Supplement and the Master Mortgage are set forth below. Those descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to those documents are qualified in their entirety by reference to each document, copies of which are available at the offices of the Master Trustee.

DEFINITIONS OF CERTAIN TERMS

“Accountant’s Certificate” shall mean a certificate prepared and executed by a firm of independent certified public accountants.

“Additional Indebtedness” shall mean any Indebtedness incurred or assumed subsequent to the date of the Master Indenture.

“Balloon Indebtedness” shall mean Indebtedness, 25% or more of the original principal amount of which matures during any consecutive twelve-month period, if such maturing principal amount is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such twelve-month period. Balloon Indebtedness does not include Indebtedness which otherwise would be classified under the Master Indenture as Put Indebtedness.

“Board of Directors” shall mean either the Board of Directors of the Corporation or any duly authorized committee of that Board (and not the Governing Body of any other Obligated Issuer).

“Book Value” shall mean, when used in connection with Property of the Corporation or any other Obligated Issuer, that value of such Property, net of accumulated depreciation, and any unimproved Property or interest therein, as it is carried on the books of account of the Corporation or any other Obligated Issuer and in conformity with accounting principles generally accepted in the United States of America, and when used in connection with Property of the Obligated Group, means the aggregate of the values so determined with respect to Property of each member of the Obligated Group.

“Business Day” shall mean a day on which the Master Trustee and, if the action to be taken on a Business Day involves a Related Bond Trustee, the Related Bond Trustee shall be scheduled in the normal course of its operations to be open to the public for conduct of its banking operations.

“Cash and Investments” shall mean (a) the sum of the following unrestricted and unencumbered items: cash, cash equivalents, funded depreciation investments, long term marketable and liquid investments, less (b) the required collateral levels under an Interest Rate Agreement if collateral was actually posted or is required to be posted by the Obligated Group, if those funds are not already restricted. Cash and Investments shall exclude (i) donor-restricted funds to the extent that the payments of debt service on Notes would be inconsistent with the donors’ restrictions; (ii) trustee-held funds, reserves, deposits, set-asides, debt service funds, construction funds and reserve funds to the extent the payment of debt service on Notes would be inconsistent or unavailable from such funds; (iii) malpractice funds and litigation reserves; (iv) self-insurance and captive insurer funds; and (v) pension and retirement funds.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and any proposed, temporary or final regulations related to it or any successor federal income tax code and its related regulations.

“Commitment Indebtedness” shall mean the obligation of any Person to repay amounts disbursed pursuant to a commitment from a financial institution, insurer, surety or similar entity to pay, refinance or purchase when due, when tendered or when required to be purchased or tendered, or to extend funds for such purpose, other Indebtedness of such Person or any other obligation of any other Person, and the obligation of any Person to pay interest payable on amounts disbursed for such purposes, plus any fees, costs or expenses payable to such financial institution, insurer, surety or similar entity for, under or in connection with such commitment, in the event of disbursement pursuant to such commitment or in connection with enforcement thereof, including without limitation any penalties payable in the event of such enforcement and any indemnification or contribution obligation related thereto.

E-1

“Completion Indebtedness” shall mean any Long-Term Indebtedness incurred by any Person for the purpose of financing the completion of facilities for the acquisition, construction or equipping of which Long-Term Indebtedness has theretofore been incurred in compliance with the provisions of the Master Indenture, to the extent necessary to provide a completed and equipped facility of substantially the same type and scope contemplated at the time that such Long-Term Indebtedness theretofore incurred was originally incurred, and with a principal amount not in excess of the amount required to provide a completed and equipped facility of substantially the same type and scope contemplated at the time such prior Long-Term Indebtedness was originally incurred, to provide for interest on the Completion Indebtedness through the completion of the facility being financed, to provide any reserve funds related to such Completion Indebtedness and to pay the costs and expenses of issuing such Completion Indebtedness.

“Construction Index” shall mean the then current health care component of the implicit price deflator for the gross national product as most recently reported by the United States Department of Commerce or its successor agency, or, if such index is no longer published, such other index as is certified to be comparable and appropriate by the Corporation in an Officer’s Certificate delivered to the Master Trustee.

“Corporation” shall mean Saint John’s Communities, Inc., a Wisconsin nonstock nonprofit corporation or any successor permitted by the provisions summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Consolidation, Merger, Sale or Conveyance.”

“Counterparty” means the counterparty with which an Obligated Issuer enters into an Interest Rate Agreement.

“Cross-Over Date” means, with respect to Cross-Over Refunding Indebtedness, the date on which the principal portion of the Cross-Over Refunded Indebtedness is paid or redeemed, or on which it is anticipated that such principal portion be paid or redeemed, from the proceeds of such Cross-Over Refunding Indebtedness.

“Cross-Over Refunded Indebtedness” means Indebtedness of a Person refunded by Cross-Over Refunding Indebtedness.

“Cross-Over Refunding Indebtedness” means Indebtedness of a Person issued for the purpose of refunding other Indebtedness of such Person if the proceeds of such Cross-Over Refunding Indebtedness are irrevocably deposited in escrow to secure the payment on the applicable Cross-Over Date of the Cross-over Refunded Indebtedness and earnings on such escrow deposit are required to be applied to pay interest on either or both of such Cross-Over Refunding Indebtedness or such Cross-Over Refunded Indebtedness until the Cross-Over Date.

“Days Cash on Hand” means, as of the date of calculation, the amount determined by dividing (a) the amount of Cash and Investments on such date by (b) the quotient obtained by dividing Total Expenses (including interest on Indebtedness but excluding provisions for bad debt, amortization, depreciation or any other non-cash expenses) as shown on the most recent annual audited financial statements of the Obligated Group, by 365.

“Debt Service” shall mean the aggregate annual principal (whether at maturity or pursuant to sinking fund redemption requirements), interest payments and other payments of the Corporation and the other Obligated Issuers on all Outstanding Long-Term Indebtedness, including Balloon Indebtedness, Commitment Indebtedness, Guaranties (other than any Guaranty by one Obligated Issuer of Indebtedness of another Obligated Issuer) and Put Indebtedness, but excluding Non-Recourse Indebtedness, Subordinated Indebtedness and Short-Term Indebtedness, for the period of time for which calculated; provided, however, that for purposes of calculating such amount: (a) the amount of such payments for any future period shall be calculated in accordance with the assumptions summarized under the headings “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” and “ – Calculation of Debt Service;” (b) principal and interest shall be excluded from the determination of Debt Service to the extent that such principal or interest is payable and expected to be paid in the period of the determination from amounts deposited in trust, escrowed or otherwise set aside for the payment thereof with the Master Trustee, a Related Bond Trustee or another Person approved by the Master Trustee; and (c) fees and expenses related to Indebtedness, such as remarketing fees, auction fees, bond insurance premiums, letter of credit fees, and amortization of original issue discount or premium, shall be excluded from the determination of Debt Service.

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“Defeasance Obligations” has the meaning attributed to it under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Providing for Payment of Notes.”

“Entrance Fees” means fees, other than security deposits, monthly rentals or monthly service charges, paid to an Obligated Issuer by residents of living units for the purpose of obtaining the right to reside in those living units or to obtain a parking space including any refundable resident deposits described in any lease, residency agreement or similar agreement with respect to those living units or parking spaces, but shall not include any such amounts held in escrow or otherwise set aside pursuant to the requirements of any such agreement or a reservation agreement prior to the occupancy of the living unit or parking space covered by such lease, residency agreement or similar agreement (which amounts shall be included if and when occupancy occurs).

“Event of Default” shall have the meaning attributed to it under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default.”

“Excluded Property” means (a) any Property of an Obligated Issuer which is not used or needed in any significant respect at the time of determination in connection with the operation of revenue producing facilities or activities of an Obligated Issuer; (b) any assets of “employee pension benefit plans” as defined in the Employee Retirement Income Security Act of 1974, as amended; and (c) any moneys and securities held as an entrance fee deposit or security deposit, or in a resident trust fund, for any resident of any Facility of a member of the Obligated Group prior to such resident’s occupancy of any Facility.

“Facilities” shall mean the real and personal property owned by each Obligated Issuer and used by any such Obligated Issuer in its primary operations, but does not include Excluded Property.

“Federal Bankruptcy Code” shall mean United States Code, Title 11-Bankruptcy, as amended.

“Fiscal Year” shall mean the period commencing on the first day of January of each year and ending on the thirty-first day of December of each calendar year. So long as any Obligated Issuer uses and with respect to any period during which any Obligated Issuer used a fiscal year for its internal purposes which is or was different from the Fiscal Year provided for in the Master Indenture, for any purpose under the Master Indenture the financial information for any Fiscal Year may include financial information from the most recently completed fiscal year of such Obligated Issuer ending on a date prior to the ending date of such Fiscal Year.

“Fitch” means Fitch Inc., its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Corporation with written notice to the Master Trustee.

“Governing Body” shall mean with respect to any corporation the board of trustees or directors or other analogous body established as required by the law of the state of incorporation of such corporation.

“Guaranty” when used in connection with a particular Person shall mean all obligations of such Person guaranteeing or in effect guaranteeing any indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including without limitation, obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any Property or assets constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation at any time after its original incurrence, or (ii) to maintain working capital or other balance sheet condition; (c) to lease Property or to purchase securities or other Property or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of the primary obligor to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of the indebtedness or obligation of the primary obligor against loss in respect thereof; provided, however, that notwithstanding the foregoing, none of the following shall be deemed to constitute a Guaranty: (A) the endorsement in the ordinary course of business of negotiable instruments for deposit or collection; (B) the discount or sale with recourse of any such person’s notes receivable or accounts receivable; (C) rentals payable in future years under leases which are not treated as a debt on a balance sheet prepared in accordance with generally acceptable accounting principles; (D) the obligation to make payments on Notes pursuant to the provisions of the Master Indenture; and (E) excluding obligations of the type

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described in (c) above, any obligation of such person guaranteeing or in effect guaranteeing any obligation of the primary obligor that does not constitute an obligation for the payment of money.

“Historical Debt Service Coverage Ratio” means, for any period of time, the ratio consisting of a numerator equal to the amount determined by dividing Net Income Available for Debt Service for that period by the Debt Service for such period and a denominator of one; provided, however, that in calculating Debt Service for such period, the principal amount of any Indebtedness included in such calculation which is paid during such period shall be excluded to the extent such principal amount is paid from the proceeds of other Indebtedness incurred in accordance with the provisions of the Master Indenture.

“Historical Pro Forma Debt Service Coverage Ratio” means the ratio of Net Income Available for Debt Service for the period or periods in question to the Maximum Annual Debt Service (other than any Long-Term Indebtedness being refunded with the Long-Term Indebtedness then proposed to be issued) and the Long-Term Indebtedness then proposed to be issued.

“Holder” (see “Noteholder”).

“Indebtedness” means (a) all Notes, (b) all Guaranties, and (c) all other indebtedness or obligations of any Obligated Issuer for the repayment of borrowed money or credit extended (including capital leases, installment purchase contracts and guaranties of indebtedness) shown as liabilities on the balance sheet of such Obligated Issuer (exclusive of reserves established for such purposes as deferred taxes or litigation) or which are properly capitalized on the balance sheet of such Obligated Issuer in accordance with accounting principles generally accepted in the United States of America (including obligations that are not evidenced or secured by Notes under the Master Indenture). Indebtedness does not include, without limitation (whether or not evidenced by a Note, Guaranty or otherwise): (a) obligations of any Obligated Issuer to another Obligated Issuer or guarantees or assumptions by an Obligated Issuer, directly or indirectly, of Indebtedness of another Obligated Issuer; (b) any portion of any Indebtedness or any Related Bonds which is deemed to be discharged or defeased in accordance with the terms of the instrument or instruments creating or evidencing such Indebtedness or Related Bonds, as the case may be; (c) liabilities incurred by the endorsement for collection or deposit of checks or drafts received in the ordinary course of business or overdrafts to banks to the extent there are immediately available funds sufficient to pay such overdrafts and such overdrafts are incurred and corrected in the normal course of business; (d) accounts payable and similar liabilities (other than for the repayment of borrowed money) incurred in the ordinary course of business; (e) liabilities payable out of current payments for the funding of employee pension plans, retiree benefits other than pensions, health plans and other benefit programs, contributions to self-insurance or pooled-risk insurance programs and estimated long-term self-insurance liability, and the funding of reserves for deferred taxes, deferred revenues, deferred compensation, and similar such liabilities; (f) obligations under contracts for supplies, services or pensions allocated to the current operating expenses of future years in which the supplies are to be furnished, the services rendered or the pensions paid; (g) rentals payable under leases which are not capitalized under accounting principles generally accepted in the United States of America as in effect on the date of the Master Indenture; (h) any other obligations that do not constitute indebtedness under accounting principles generally accepted in the United States of America; (i) obligations of any Obligated Issuer with respect to an Interest Rate Agreement; and (j) any obligation to repay moneys deposited by residents or patients or others with an Obligated Issuer as security for or as prepayment of the cost of resident or patient care or any rights of residents of life care, elderly housing or similar facilities to Entrance Fees (whether amortized into income or not), endowment or similar funds deposited by or on behalf of such residents including but not limited to any deferred obligations for the refund or repayment of Entrance Fees, any rent, development, marketing, operating or other fees that have been deferred from the year in which they were originally due as a result of deferral or subordination.

“Independent” shall mean, in the case of an individual, a Person who is not a partner, Member, director, officer or employee of either the Corporation or any other Obligated Issuer and, in the case of a firm, shall not have a partner, Member, director, officer or employee who is a partner, Member, director, officer or employee of either the Corporation or any other Obligated Issuer.

“Independent Architect” shall mean an architect, engineer or firm of architects or engineers selected by the Corporation or any other Obligated Issuer and licensed by, or permitted to practice in, the state where the construction involved is located, which architect, engineer or firm of architects or engineers is Independent and shall have no interest, direct or indirect, in the Corporation or any other Obligated Issuer; it being understood that an

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arm’s-length contract with either the Corporation or any other Obligated Issuer for the performance of architectural or engineering services shall not in and of itself be regarded as creating an interest in or an employee relationship with such entity and that the term Independent Architect may include an architect or engineer or a firm of architects or engineers who otherwise meet the requirements of this definition and who also are under contract to construct the facility which they have designed.

“Independent Consultant” shall mean a Person who is Independent and is appointed by the Corporation or any other Obligated Issuer nationally recognized as qualified to pass upon questions relating to the financial affairs of organizations engaged in like operations to those of the Corporation and the other Obligated Issuers and having a favorable reputation for skill and experience in such financial affairs. See the heading “SUMMARY OF CERTAIN PROVISIONS OF THE THIRD SUPPLEMENT – Amendments to the Master Indenture” for a description of a new provision regarding selection of Independent Consultant applicable for so long as the Series 2018A Bonds and Series 2018A Master Note are Outstanding.

“Independent Insurance Consultant” shall mean a Person who is Independent, appointed by the Corporation qualified to survey risks and to recommend insurance coverage for organizations engaged in like operations to those of the Corporation and the other Obligated Issuers and having a favorable reputation for skill and experience in such surveys and such recommendations, and who may be a broker or agent with whom the Corporation or any other Obligated Issuer transacts business.

“Insurance Subsidiary” shall mean any corporation of which the Corporation or another Obligated Issuer is the sole voting Member which is in the business of providing insurance coverage to the Corporation or any other Obligated Issuer.

“Interest Rate Agreement” shall mean an interest rate swap, basis swap, index swap or option, exchange, cap, collar, option, floor, forward, futures contract or hedging agreement, arrangement or security, or combination of the foregoing, however denominated, including any option to enter into the foregoing, identified to the Master Trustee in a certificate of the Corporation as having been entered into by an Obligated Issuer for the purpose of reducing, modifying, converting or otherwise managing the Obligated Issuer’s risk of interest rate or interest rate index changes or interest rate or interest rate index exposures or costs or risk of changes or exposures to prices of commodities, securities, portfolios, products, supplies, goods or services. Obligations of an Obligated Issuer in respect of an Interest Rate Agreement shall not constitute Indebtedness under the Master Indenture.

“Interest Rate Agreement Payments” shall mean all payment obligations of the Obligated Issuers pursuant to an Interest Rate Agreement that is authenticated as a Note under the Master Indenture, or is secured by a Note under the Master Indenture.

“Issuer” shall mean the Corporation or another Obligated Issuer, depending on the context.

“Lien” shall mean any mortgage of, security interest in, lien, charge or encumbrance on or pledge of Property excepting, however, any lease and leaseback or similar arrangements entered into by an Obligated Issuer with a Related Issuer to the extent required in connection with the issuance of Related Bonds.

“Liquidity Requirement” shall have the meaning set forth under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Liquidity Covenant.”

“Long-Term” when used in connection with Indebtedness, shall mean Indebtedness having an original maturity greater than one year or renewable or extendible at the option of the Corporation or any other Obligated Issuer for a period greater than one year from the date of original issuance thereof.

“Market Value” shall mean (i) with respect to Net Plant, Property and Equipment: (a) the aggregate fair market value of such Net Plant, Property and Equipment as reflected in the most recent written report of an Independent appraiser and, in the case of real property, who is a member of the American Institute of Real Estate Appraisers (MAI), delivered to the Master Trustee (which report shall be dated not more than three years prior to the date as of which Market Value is to be calculated) increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such report to the date as of which Market Value is to be calculated; plus (b) the Book Value of any Net Plant, Property and Equipment acquired since

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the last such report increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such acquisition to the date as of which Market Value is to be calculated; minus (c) the greater of the Book Value or the fair market value (as reflected in such most recent appraiser’s report) of any Net Plant, Property and Equipment disposed of since the last such report increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such report to the date as of which Market Value is to be calculated, and (ii) with respect to any other Property the fair market value of such Property.

“Master Indenture” means the Amended and Restated Master Trust Indenture dated as of December 1, 2015 between the Corporation and the Master Trustee, as amended and supplemented from time to time.

“Master Mortgage” means the Third Amended and Restated Mortgage, Security Agreement and Fixture Filing dated as of December 1, 2015, from the Corporation in favor of the Master Trustee, as amended and supplemented from time to time.

“Master Trustee” means U.S. Bank National Association or its successor pursuant to the Master Indenture.

“Maximum Annual Debt Service” shall mean the Debt Service due in the then current or a future Fiscal Year in which Debt Service is the greatest.

“Member” shall mean, with respect to any corporation organized on a not-for-profit basis under state law, a Person so designated under such corporation’s Articles of Incorporation (or similar organizational document) or by- laws having the power to elect or appoint, together with any other Members, the Governing Body of such corporation.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns and, if Moody’s Investors Service shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Corporation with written notice to the Master Trustee.

“Mortgaged Property” shall have the meaning set forth in the Master Mortgage.

“Net Income Available for Debt Service” shall mean, as to any period of time, all Unrestricted Revenues of the Corporation and each other Obligated Issuer minus Total Expenses of the Corporation and each other Obligated Issuer other than depreciation, amortization and interest, all as determined on a pro forma consolidated or combined basis in accordance with accounting principles generally accepted in the United States of America or as otherwise specifically required.

“Net Plant, Property and Equipment” shall mean, with respect to the Corporation and each other Obligated Issuer, the entire complex of tangible long-lived assets used by the Corporation and each other Obligated Issuer as shown on the balance sheet of the Corporation and each other Obligated Issuer, net of accumulated depreciation, determined on a combined basis in accordance with accounting principles generally accepted in the United States of America.

“Net Proceeds” when used with respect to any insurance or condemnation award, shall mean the gross proceeds from the insurance or condemnation award remaining after payment of all expenses (including attorneys’ fees and expenses of any Related Bond Trustee or Related Issuer) incurred in the collection of such gross proceeds.

“Non-Recourse Indebtedness” means Long-Term Indebtedness for the purpose of financing the purchase or acquisition of real or tangible personal property secured by a lien on, or security interest in, the property being purchased or acquired and evidenced by an instrument which expressly provides that upon default in the payment of the principal thereof or interest thereon the obligee thereof may look only to the property securing the same and not to the credit of any Obligated Issuer nor to any other Property of any Obligated Issuer.

“Note” shall mean any obligation of an Obligated Issuer issued under the Master Indenture, as a joint and several obligation of each Obligated Issuer, which has been authenticated by the Master Trustee and which may be

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in any form set forth in a Supplemental Master Indenture, including, but not limited to, notes, direct note obligations, bonds, obligations, debentures, Interest Rate Agreements, loan agreements, leases or reimbursement agreements. Reference to a Series of Notes or to Notes of a Series shall mean a Series of Notes or Notes of a Series issued pursuant to a single Supplemental Master Indenture to the Master Indenture.

“Note Register” shall mean the register kept pursuant to the Master Indenture at the Principal Corporate Trust Office of the Master Trustee in which, subject to such reasonable regulations as it may prescribe, the Master Trustee shall provide on behalf of the Obligated Issuers for the registration and transfer of Notes.

“Noteholder” or “Holder” (when used with reference to any Note or Notes) shall mean the Person in whose name the Note is registered on the Note Register.

“Obligated Group” shall mean the Corporation and each other Obligated Issuer.

“Obligated Group Representative” shall mean the Corporation or such other Obligated Issuer as may have been designated pursuant to written notice to the Master Trustee, executed by all the Obligated Issuers.

“Obligated Issuer” shall mean the Corporation, each other Person named on the signature pages of the Master Indenture which has executed the Master Indenture and any Person which shall have become an Obligated Issuer pursuant to the provisions of the Master Indenture summarized under the headings “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – The Obligated Group – Becoming an Obligated Issuer and Member of the Obligated Group” and “ – The Obligated Group – Acceptance as an Obligated Issuer” and shall not have withdrawn as such pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – The Obligated Group – Withdrawal of Obligated Issuers.”

“Officer’s Certificate” shall mean a certificate signed by the Chair, the Vice Chair, the President, any Vice President, Executive Director or Chief Financial Officer of one or more Obligated Issuers.

“Opinion of Bond Counsel” shall mean an opinion in writing signed by legal counsel who shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers (as such term is defined within the definition of the term “Related Bonds”) and the exemption from federal income taxation of interest on such obligations.

“Opinion of Counsel” shall mean an opinion in writing signed by legal counsel who may be an employee of or counsel to the Corporation or any other Obligated Issuer.

“Outstanding,” when used in connection with Indebtedness, shall mean, as of any time. Indebtedness issued or incurred and not paid or for which payment has not been provided by deposit of money or securities with the Master Trustee and shall not include Notes surrendered for exchange pursuant to the Master Indenture or Notes for which replacement Notes have been issued pursuant to the Master Indenture, or Notes that the Master Indenture otherwise provides shall be deemed not to be Outstanding.

“Permitted Encumbrances” shall mean those encumbrances enumerated under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Creation of Liens.”

“Permitted Investments” means (i) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America, (ii) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America: Export - Import Bank, Farmers Home Administration, General Services Administration, U.S. Maritime Administration, Small Business Administration, Government National Mortgage Association (GNMA), U.S. Department of Housing & Urban Development (PHA’s) and Federal Housing Administration, (iii) bonds, notes or other evidences of indebtedness rated “AAA” by Standard & Poor’s and “Aaa” by Moody’s issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years, (iv) U.S. dollar denominated deposit accounts, federal funds and banker’s acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of “A-l” or “A-1+” by Standard & Poor’s and “P-l” by Moody’s and maturing no more than 360 days after the date of purchase (ratings on

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holding companies not considered as the rating of the bank), (v) commercial paper which is rated at the time of purchase in the single highest classification, “A-1+” by Standard & Poor’s and “P-l” by Moody’s, and which matures not more than 270 days after the date of purchase and (vi) investments in a money market fund rated “AAAm” or “AAAm—G” or better by Standard & Poor’s.

“Person” shall mean an individual, a corporation, a partnership, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, or a government or any agency or political subdivision thereof.

“Pledged Revenues” shall mean all rents, issues, profits, income, revenues, accounts and receipts of the Corporation or any other Obligated Issuer referred to in, and not excepted by the provisions summarized in clause (b) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Granting Clauses.”

“Principal Corporate Trust Office of the Master Trustee” shall mean the designated corporate trust office of the Master Trustee at which at any particular time its corporate trust business shall be administered. The present address of such principal office is 1555 N. RiverCenter Drive, Suite 203, Milwaukee, Wisconsin 53212.

“Projected Debt Service Coverage Ratio” means, for any future period, the ratio of forecasted Net Income Available for Debt Service for that period to the Maximum Annual Debt Service for the Long-Term Indebtedness expected to be outstanding during such period.

“Projected Rate” means the projected yield at par of an obligation, as set forth in the report of an Independent Consultant which report shall state that in determining the Projected Rate such Independent Consultant reviewed the yield evaluations at par of not less than three obligations selected by such Independent Consultant, the interest on which is excludable from gross income for federal income tax purposes (or, if it is not expected that it would be possible to issue such tax-exempt obligations to refinance the Indebtedness with respect to which debt service is being estimated or if it is not intended that the interest on the obligation for which the Projected Rate is being determined be excludable from gross income for federal income tax purposes, the obligations the interest on which is subject to federal income tax), which obligations such Independent Consultant states in its opinion are reasonable comparators to be utilized in developing such Projected Rate, and which obligations: (a) were outstanding on a date selected by the Independent Consultant which date so selected occurred during the 90-day period preceding the date of the calculation utilizing the Projected Rate in question, and (b) (i) if the obligation with respect to which such Projected Rate is being determined bears interest at a fixed rate, bear interest at a fixed rate, or (ii) if the obligation with respect to which such Projected Rate is being determined bears interest at a variable rate, bear interest at a variable rate, and (c) (i) if an Obligated Issuer has no commitment for credit enhancement for the obligation with respect to which such Projected Rate is being determined, are obligations of persons engaged in operations similar to those of the Obligated Group, have a credit rating similar to that of the Obligated Group and are not entitled to the benefits of any credit enhancement, or (ii) if an Obligated Issuer has a commitment for credit enhancement for the obligation with respect to which such Projected Rate is being determined, including without limitation any letter of credit or insurance policy, are entitled to the benefits of comparable credit enhancement; provided that the annual fees payable for such credit enhancement shall be taken into account when determining such Projected Rate, and (d) to the extent practicable, have a remaining term and amortization schedule substantially the same as the obligation with respect to which such Projected Rate is being determined.

“Property,” when used in connection with a particular Person, shall mean any and all rights, title and interests of such Person in and to any and all property (including cash) whether real or personal, tangible or intangible, and wherever situated, but not including Excluded Property.

“Property, Plant and Equipment” shall mean all Property of an Obligated Issuer which is considered property, plant and equipment of such Obligated Issuer under generally accepted accounting principles.

“Put Date” shall mean (i) any date on which an owner of Put Indebtedness may elect to have such Put Indebtedness paid, purchased or redeemed by or on behalf of the underlying obligor prior to its stated maturity date or (ii) any date on which Put Indebtedness is required to be paid, purchased or redeemed from the owner by or on behalf of the underlying obligor (other than at the option of the owner) prior to its stated maturity date, other than pursuant to any mandatory sinking fund or other similar fund or other than by reason of acceleration upon the occurrence of an event of default.

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“Put Indebtedness” shall mean Indebtedness which is (a) payable or required to be purchased or redeemed by or on behalf of the underlying obligor, at the option of the owner thereof, prior to its stated maturity date or (b) payable or required to be purchased or redeemed from the owner by or on behalf of the underlying obligor (other than at the option of the owner) prior to its stated maturity date, other than pursuant to any mandatory sinking fund or other similar fund or other than by reason of acceleration or required purchase upon the occurrence of an event of default.

“Qualified Accountants” means (a) Wipfli LLP, (b) a firm of certified public accountants of the size and type commonly referred to as nationally known certified public accountants or (c) a firm of independent public accountants selected by the Corporation.

“Rating Agency” shall mean Moody’s, Standard & Poor’s or Fitch.

“Refunding Indebtedness” shall mean any Additional Indebtedness including any CrossOver Refunding Indebtedness issued for the purpose of refunding any Outstanding Long-Term Indebtedness, Balloon Indebtedness, Non-Recourse Indebtedness or Put Indebtedness and financing the funding of related reserve funds, costs of issuance and other costs related to such refunding.

“Refunding Notes” shall mean any additional Notes that constitute Refunding Indebtedness.

“Related Bond Indenture” shall mean any indenture or other document pursuant to which a series of Related Bonds is issued or incurred.

“Related Bond Trustee” shall mean the trustee and its successors in the trusts created under any Related Bond Indenture.

“Related Bonds” shall mean the bonds, participation certificates, debentures or other obligations of any Related Issuer issued or incurred pursuant to a Related Bond Indenture, the proceeds of which are loaned or otherwise made available to any Obligated Issuer in consideration of the execution, authentication and delivery of a Note or Notes to such Related Issuer.

“Related Issuer” shall mean any state of the United States or any municipal corporation or political subdivision formed under the laws thereof or any body corporate and politic or any constituted authority or any agency or instrumentality of any of the foregoing empowered to issue or incur obligations on behalf thereof which is the issuer or obligor of any series of Related Bonds.

“Responsible Officer of the Master Trustee” shall mean the chairman and vice-chairman of the board of directors, the president, the chairman and vice-chairman of a standing committee of the board of directors, the chairman of the trust committee, every vice president or officer senior thereto, every assistant vice president, the secretary, every assistant secretary, the treasurer, every assistant treasurer, every corporate trust officer, every assistant corporate trust officer, and every other officer and assistant officer of the Master Trustee customarily performing functions similar to those performed by the persons who at the time shall be such an officer, respectively, or to whom any corporate trust matter is referred because of his knowledge of, and familiarity with, a particular subject.

“Secured Indebtedness” shall mean any Indebtedness secured by a Lien.

“Short-Term” when used in connection with Indebtedness, shall mean Indebtedness having an original maturity less than or equal to one year, and not renewable or extendible at the option of the obligor thereon for a term greater than one year beyond the date of original issuance.

“Stable Occupancy” means with respect to any facilities financed with Indebtedness for which the Master Trustee was furnished with a report of an Independent Consultant pursuant to the Master Indenture (or, if no Independent Consultant’s report was required by the Master Indenture, an Officer’s Certificate) occupancy of such facility at the level reflected as stabilized occupancy for that facility, in the Independent Consultant’s report or the Officer’s Certificate.

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“Standard & Poor’s” means Standard & Poor’s Ratings Service, a division of The McGraw Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Standard & Poor’s” shall be deemed to refer to any other nationally recognized securities rating agency which has been designated by the Corporation with written notice to the Master Trustee.

“Subordinated Indebtedness” shall mean Indebtedness which, with respect to any issue thereof, is evidenced by instruments, or issued under an indenture or other document, containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instrument evidencing such Indebtedness) substantially as set forth under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Subordinated Indebtedness.”

“Supplemental Master Indenture” shall mean an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture for the purpose of creating one or more series of Notes issued under the Master Indenture or amending or supplementing the terms of the Master Indenture.

“Total Expenses” shall mean total operating and non-operating expenses of the Corporation and each other Obligated Issuer, determined on a consolidated or combined basis in accordance with accounting principles generally accepted in the United States of America consistently applied; provided, however, that no determination of Total Expenses shall take into account: (a) minimum pension liability adjustments; (b) losses resulting from any reappraisal, revaluation or impairment of assets (other than bad debts), (c) unrealized losses from investments, (d) unrealized losses in respect of any Interest Rate Agreement, (e) any loss resulting from the early extinguishment of Indebtedness, (f) the equity in the losses from investments in affiliates, (g) any losses resulting from the sale, exchange or other disposition of investments, (h) any losses resulting from the sale or disposition of fixed or capital assets, (i) any other non-cash expenses and (j) any development, management, marketing, operating or other subordinated fees that have been deferred from the year in which they were originally due as a result of subordination.

“Unencumbered” shall mean not subject to a Lien other than a Lien which secures the Notes as contemplated by the provisions summarized in the first paragraph under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Creation of Liens.”

“Unrestricted Revenues” shall mean for any period, (i) in the case of any Obligated Issuer providing health care services and/or senior living services, the sum of (a) gross patient and resident service revenues less contractual allowances and provisions for uncollectible accounts, free care and discounted care, plus (b) all rents and income derived by any Obligated Issuer from the regular course of its operations including residents’ Entrance Fees, minus (x) amortization of deferred revenues on residents’ Entrance Fees but excluding any amounts reflecting the change in obligation to provide future services and use of facilities to current residents, and (y) Entrance Fees refunded to residents, plus (c) other operating revenues, plus (d) non-operating revenues, all as determined in accordance with accounting principles generally accepted in the United States of America consistently applied; and (ii) in the case of any other Obligated Issuer, gross revenues less sale discounts and sale returns and allowances, as determined in accordance with accounting principles generally accepted in the United States of America consistently applied; provided, however, that no determination of Unrestricted Revenues shall take into account: (a) earnings resulting from any reappraisal, revaluation or impairment of assets, (b) unrealized gains from investments, (c) unrealized gains in respect of any Interest Rate Agreement, (d) any gains from the early extinguishment of Indebtedness, (e) the equity in the earnings from investments in affiliates, (f) any gains resulting from the sale, exchange or other disposition of investments, (g) any gains or losses resulting from the sale, exchange or other disposition of fixed or capital assets, (h) gifts, grants, bequests or donations restricted as to use for a purpose inconsistent with the payment of Debt Service and (i) insurance (other than business interruption) and condemnation proceeds.

“Unsecured Indebtedness” shall mean any Indebtedness not secured by any Lien.

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SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE

General

The Master Indenture authorizes the Obligated Issuers to issue Notes which are joint and several obligations of the Obligated Issuers. The Notes are entitled to the benefit of certain operational and financial restrictions and other contractual obligations contained in the Master Indenture. Set forth below is a summary of certain provisions of the Master Indenture. The summary is not comprehensive and reference is made to the Master Indenture for a complete recital of its terms.

Granting Clauses

In consideration of the premises and the acceptance by the Master Trustee of the trusts created by the Master Indenture and of the purchase and acceptance of the Notes of each series by the Holders thereof that shall be issued under the Master Indenture and under Supplemental Master Indentures applicable thereto, and for other good and valuable considerations, to secure the payment of the principal of and premium, if any, and interest and Interest Rate Agreement Payments on such Notes according to their tenor and effect and to secure the performance and observance by the Corporation and each other Obligated Issuer of all the covenants expressed or implied therein and in the Master Indenture, Supplemental Master Indentures and each series of Notes issued under the Master Indenture and thereunder, the Corporation and each other Obligated Issuer pledge, assign and grant a security interest in the following described property (the “Master Trust Estate”) to the Master Trustee and its successors in trust and assigns forever, SUBJECT, HOWEVER, to Permitted Encumbrances:

A. Any funds or property held by the Master Trustee under the Master Indenture or any Supplemental Master Indenture.

B. Any and all right, title and interest of each Obligated Issuer in and to all rents, issues, income, revenues and receipts derived by each Obligated Issuer from all sources, including all right, title and interest and security interest, if any, of each Obligated Issuer in and to all moneys, earnings, revenues, rights to the payment of money and receivables, whether now owned or hereafter acquired and whether or not derived from the use or operation of the Facilities including, without limitation: (i) all resident and patient fees, third party payments, rents, issues, profits, income, revenues and receipts derived in any fashion from the Facilities; and (ii) all accounts, chattel paper and instruments owned by each Obligated Issuer and all proceeds therefrom, whether cash or non-cash, all as defined in Article 9 of the Wisconsin Uniform Commercial Code.

Excepting, however, from the foregoing (i) gifts, donations, grants, pledges, legacies, bequests, devises and contributions and investment earnings thereon restricted by the donor to uses inconsistent with use for payment of principal and interest on the Notes; (ii) revenue received pursuant to grants and contracts for sponsored programs of research or instruction; (iii) revenue received by each Obligated Issuer as billing agent for others, except for the fees received for services as billing agent; (iv) proceeds of borrowings; (v) proceeds of sale of property that is not a part of the Facilities upon foreclosure of, or in satisfaction of, a security interest; (vi) any moneys received by an Obligated Issuer from prospective residents or tenants in order to pay for customized improvements to those independent living units or other areas of the Facilities to be occupied or leased to such residents or tenants; (vii) payments or deposits under a Residency Agreement that by its terms or applicable law are required to be held in escrow or trust for the benefit of a resident until the conditions for the release of such payment or deposit have been satisfied and (viii) refunds of Entrance Fees owed to prior residents of reoccupied units.

C. Any and all other property, or interests therein, of every kind or description that may from time to time hereafter, by delivery or by writing of any kind, be sold, transferred, conveyed, assigned, hypothecated, endorsed, deposited, pledged, mortgaged, granted or delivered to or deposited with the Corporation or any other Obligated Issuer or the Master Trustee as additional security under the Master Indenture by the Corporation or any other Obligated Issuer or by anyone on behalf of any of them or with the written consent of any of them, or that pursuant to any of the provisions of the Master Indenture may come into the possession of or control of the Master Trustee or a receiver appointed pursuant to the Master Indenture, as such additional security.

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Series and Amount of Notes

The number or series of Notes that may be created under the Master Indenture is not limited. The aggregate principal or notional amount of Notes of each series that may be issued, authenticated and delivered under the Master Indenture is not limited except as may be set forth in the Supplemental Master Indenture and as restricted by the provisions of the Master Indenture including but not limited to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness.”

Payment of Principal, Premium, Interest and Interest Rate Agreement Payments on Notes and Guaranty of Notes

Each Obligated Issuer agrees in the Master Indenture, jointly and severally, that it will duly and punctually pay the principal of, the premium, if any, and the interest and Interest Rate Agreement Payments on each Note issued under the Master Indenture, and the payment of any other amounts payable thereunder or under the Master Indenture, on the dates, at the times and at the place and in the manner provided in such Note, the Supplemental Master Indenture relating thereto and the Master Indenture when and as the same become payable, whether at maturity, upon call for redemption, by acceleration of maturity or otherwise, according to the true intent and meaning thereof and of the Master Indenture. These agreements on the part of each Obligated Issuer shall be continuing, irrevocable, absolute and unconditional and shall remain in full force and effect until an Obligated Issuer shall withdraw as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – The Obligated Group Withdrawal of Obligated Issuers,” in which event they shall terminate only with respect to the withdrawing Obligated Issuer, or until the Master Indenture has been satisfied and discharged in the manner summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Satisfaction and Discharge of Master Indenture.” The obligation of each Obligated Issuer with respect to payments on Notes issued under the Master Indenture shall not be abrogated, prejudiced or affected by: (a) the granting of any extension, waiver or other concession given to the Corporation or any other Obligated Issuer by the Master Trustee, a Related Bond Trustee, or any other Noteholder, or by any compromise, release, abandonment, variation, relinquishment or renewal of any of the rights of the Master Trustee, a Related Bond Trustee or any Noteholder or anything done or omitted or neglected to be done by the Master Trustee or any such Related Bond Trustee or Noteholder in exercise of the authority, power and discretion vested in them by the Master Indenture, or by any other dealing or thing which, but for this provision, might abrogate, prejudice or affect such obligation; (b) the liability of the Corporation or any other Obligated Issuer ceasing for any cause whatsoever, other than the release of an Obligated Issuer upon withdrawal as an Obligated Issuer pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – The Obligated Group Withdrawal of Obligated Issuers;” or (c) any Obligated Issuer’s failure to become liable as, or losing eligibility to become, an Obligated Issuer according to the terms of the Master Indenture or of any Supplemental Master Indenture.

Covenants as to Corporate Existence, Maintenance of Properties, Etc.

The Corporation and each other Obligated Issuer, respectively, covenants in the Master Indenture to:

(a) subject to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Consolidation, Merger, Sale or Conveyance,” preserve its corporate existence as a corporation and all its rights and licenses to the extent necessary or desirable in the operation of its business and affairs and be qualified to do business in each jurisdiction where its ownership of Property or the conduct of its business requires such qualification; provided, however, that nothing contained in the Master Indenture shall be construed to obligate it to retain or preserve any of its rights or licenses no longer used or, in the judgment of its Governing Body, no longer useful in the conduct of its business;

(b) at all times cause its business to be carried on and conducted in an effective manner and its Property to be maintained, preserved and kept in good repair, working order and condition and all needful and proper repairs, renewals and replacements thereof to be made; provided, however, that nothing contained in the Master Indenture shall be construed (i) to prevent it from ceasing to operate any portion of its Property, if in the judgment of its Governing Body it is advisable not to operate the same for the time

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being, or if it intends to sell or otherwise dispose of the same and within a reasonable time endeavors to effect such sale or other disposition, or (ii) to obligate it to retain, preserve, repair, renew or replace any Property, leases, rights, privileges or licenses no longer used or, in the judgment of its Governing Body, no longer useful in the conduct of its business;

(c) conduct its affairs and carry on its business and operations in such manner as to comply with any and all applicable laws of the United States of America and the several states thereof and duly observe and conform to all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its Property; provided, nevertheless, that nothing contained in the Master Indenture shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof shall be contested in good faith;

(d) promptly pay all lawful taxes, governmental charges and assessments at any time levied or assessed and due upon or against it or its Property; provided, however, that it shall have the right to contest in good faith by appropriate proceedings any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof and shall have the right to pay taxes in installments; and provided further that such contest shall not materially impair the ability of the Obligated Issuers to meet their obligations under the Master Indenture;

(e) promptly pay or otherwise satisfy and discharge all of its obligations and Indebtedness (including, in addition to Indebtedness, Guaranties by any Obligated Issuer of Indebtedness of any other Obligated Issuer) and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Notes issued and Outstanding under the Master Indenture and the obligations to make payments on Notes pursuant to the provisions summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Payment of Principal, Premium, Interest and Interest Rate Agreement Payments on Notes and Guaranty of Notes”) whose validity, amount or collectability is being contested in good faith by appropriate proceedings, so long as such contest shall not materially impair the ability of the Obligated Issuers to meet their obligations under the Master Indenture;

(f) at all times comply with all terms, covenants and provisions contained in any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness and pay or cause to be paid, or to be renewed, refunded or extended or to be taken up, by it, all of its Liens, as and when the same shall become due and payable; and

(g) procure and maintain all necessary licenses and permits.

Restrictions as to Creation of Liens

(a) The Corporation and each other Obligated Issuer, respectively, agrees in the Master Indenture that it will not create or suffer to be created or exist any Lien upon Property other than Excluded Property now owned or hereafter acquired by it (i) except for Permitted Encumbrances whenever created, all of which may be superior to the lien of the Master Indenture, (ii) other than on Property conveyed in the ordinary course of business or pursuant to the provisions of the Master Indenture summarized in paragraph (b) or (c) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Sale, Lease, or Other Disposition of Property” and (iii) other than on any Property or interest therein, if, in each instance and by the instrument creating such Lien, each series of Notes issued and Outstanding under the Master Indenture is directly secured thereby equally and ratably by such Lien.

(b) Permitted Encumbrances shall consist of the following:

(i) liens arising by reason of good faith deposits with the Corporation or any other Obligated Issuer in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by the Corporation or any other Obligated Issuer to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

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(ii) statutory rights of the United States of America to recover against the Corporation or any other Obligated Issuer by reason of federal funds made available under 42 U.S.C. § 291 et seq., and similar rights under federal and state statutes;

(iii) any lien arising by reason of deposits to enable the Corporation, any other Obligated Issuer or an Insurance Subsidiary to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with worker’s compensation, unemployment insurance, old age pensions or other social security, or to share in the privileges or benefits required for companies participating in such arrangements;

(iv) any judgment lien against the Corporation or any other Obligated Issuer so long as such judgment is being contested and execution thereon is stayed, and so long as such lien or contest shall not materially impair the ability of the Obligated Issuers to meet their obligations under the Master Indenture;

(v) (A) rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law, affecting any Property, to (1) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of such Property or materially and adversely affect the value thereof, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, such Property, provided that the exercise of such right would not materially impair the use of such Property or materially and adversely affect such Property; (B) any liens on any Property for taxes, assessments, levies, fees, water and sewer rents, and other governmental and similar charges and any liens of mechanics, materialmen and laborers for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics, materialmen and laborers, have been due for less than 60 days; (C) rights reserved to or vested in any municipality or public authority to control or regulate any Property or to use such Property in any manner, which rights do not materially impair the use of such Property or materially and adversely affect the value thereof, and (D) to the extent that it affects title to any Property, the Master Indenture;

(vi) any Lien described in Annex II to the Master Indenture which is existing on the date of the Master Indenture, provided that no Lien so described may be modified to apply to any Property of the Corporation or any other Obligated Issuer not subject to such Lien on the date of the Master Indenture, and provided further that no Additional Indebtedness may be incurred which is secured by such Lien;

(vii) any Lien to which the Property of an Obligated Issuer is subject at the time it becomes an Obligated Issuer, provided that at the time of becoming an Obligated Issuer, (a) the requirements of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Consolidation, Merger, Sale or Conveyance” or in paragraph (a) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – The Obligated Group – Acceptance as an Obligated Issuer” have been met, (b) no Lien so described may be modified to apply to any Property of any Obligated Issuer not subject to such Lien on the date of such Obligated Issuer’s joining as an Obligated Issuer, (c) no Additional Indebtedness may be thereafter incurred which is secured by such Lien and (d) no Lien so described may be extended or replaced by another Lien;

(viii) any Lien or restriction on use, expressed or implied, on Property of an Obligated Issuer received as a gift, pursuant to the terms of such gift;

(ix) Liens on moneys deposited by patients, residents or others with the Corporation or any Obligated Issuer as security for or as prepayment for the cost of patient or resident care or other services;

(x) Liens arising under law or by contract with respect to initial deposits made under life-care contracts;

(xi) any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose

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at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license;

(xii) leases which relate to Property of the Obligated Group which is of a type that is customarily the subject of such leases, such as office space for physicians and educational institutions, food service facilities, parking facilities, gift shops, pharmacy and similar departments; leases entered into in accordance with the disposition of Property provisions of the Master Indenture; leases, licenses or similar rights to use property to which the Corporation or another Obligated Issuer is a party and any renewals and extensions thereof; and any leases, licenses or similar rights to use Property whereunder an Obligated Issuer is lessee, licensee or the equivalent thereof upon fair and reasonable terms no less favorable to the lessee or licensee than would obtain in a comparable arm’s-length transaction;

(xiii) utility, access and other easements and rights-of-way, restrictions, encumbrances and exceptions which do not materially interfere with or materially impair the operation of the Property affected thereby (or, if such Property is not being then operated, the operation for which it was designed or last modified);

(xiv) such Liens, defects, irregularities of title and encroachments on adjoining property as normally exist with respect to property similar in character to the Property involved and which do not materially adversely affect the value of, or materially impair, the Property affected thereby for the purpose for which it was acquired or is held by the owner thereof, including without limitation statutory liens granted to banks or other financial institutions, which liens have not been specifically granted to secure Indebtedness and which do not apply to Property which has been deposited as part of a plan to secure Indebtedness;

(xv) zoning laws and similar restrictions which are not violated by use or operation of the Property affected thereby;

(xvi) Liens on Property due to rights of third party payors for recoupment of excess reimbursement paid;

(xvii) any security interest in any rebate account, depreciation reserve, debt service or interest reserve, debt service fund or any similar fund established pursuant to the terms of any Supplemental Master Indenture or Related Bond Indenture in favor of the Master Trustee, a Related Bond Trustee, a Related Issuer or the holder of the Indebtedness issued pursuant to such Supplemental Master Indenture or Related Bond Indenture;

(xviii) any Lien on any Related Bond or any evidence of Indebtedness of any Obligated Issuer acquired by or on behalf of any Obligated Issuer which secures Commitment Indebtedness and only Commitment Indebtedness;

(xix) any purchase money security interest in, or similar security interest arising under an installment sale, lease or financing lease of personal property;

(xx) leases and residency agreements pursuant to which the residents of the Facilities of an Obligated Issuer occupy their units;

(xxi) Liens securing Non-Recourse Indebtedness without limit;

(xxii) Liens securing Indebtedness or Interest Rate Agreements if the Book Value or, at the option of the Corporation, the Market Value, of the Property subject to the Lien does not exceed 10% of the Book Value or, at the option of the Corporation, the Market Value of the Unencumbered Net Plant, Property and Equipment of the Obligated Issuers on a combined basis, based on the most recently available audited financial statements of the Obligated Group;

(xxiii) Liens on funds or securities posted in a collateral account held by a Counterparty or by a third party custodian therefor securing the obligations of an Obligated Issuer under an Interest Rate

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Agreement other than the obligation to make termination payments, indemnification payments, gross-up payments, payments of expenses, default interest payments or similar non-scheduled payments with respect to an Interest Rate Agreement; and

(xxiv) Liens securing Indebtedness on the Obligated Issuers’ accounts receivable (and proceeds thereof) arising as a result of a pledge or sale of such accounts receivable with or without recourse, which Lien may be prior to, on a parity with or subordinate to the security interest in these accounts created by the Master Indenture, provided that the principal amount of the Indebtedness secured by any such lien does not exceed the face amount of such accounts receivable sold and the aggregate principal amount of all such Indebtedness so secured as permitted by this clause (xxiv) does not exceed 15% of the Unrestricted Revenues of the Obligated Group based on the most recent Fiscal Year for which audited financial statements are available. The Master Trustee is authorized and directed to execute and deliver any documents the Corporation may reasonably request to evidence the priority of the security interest in accounts permitted by the provisions of the Master Indenture summarized in this paragraph (b).

Restrictions as to Incurrence of Additional Indebtedness

The Corporation and each other Obligated Issuer, respectively, agrees in the Master Indenture that it will not incur any Additional Indebtedness, other than the following Additional Indebtedness, if incurred at any time when there shall not exist any Event of Default of the Corporation or such Obligated Issuer under the Master Indenture or under any Related Bond Indenture (unless such Additional Indebtedness is to be incurred to cure such Event of Default):

(a) Long-Term Additional Indebtedness provided that the Corporation shall have delivered to the Master Trustee either:

(i) Report on Historical Pro Forma Coverage. An Officer’s Certificate to the effect that for the most recently ended Fiscal Year for which audited financial statements are available the Historical Pro Forma Debt Service Coverage Ratio was not less than 1.20:1 for all Outstanding Long-Term Indebtedness (exclusive of any Outstanding Long-Term Indebtedness which is to be refunded or redeemed with proceeds of the Indebtedness proposed to be incurred) and the Long- Term Indebtedness then proposed to be incurred; or

(ii) Reports on Historical and Pro Forma Coverage. (A) An Officer’s Certificate to the effect that for the most recently ended Fiscal Year for which audited financial statements are available the Historical Debt Service Coverage Ratio was not less than 1.20:1 for all Outstanding Long-Term Indebtedness (not including the Long-Term Indebtedness then proposed to be incurred); and (B) a written report of an Independent Consultant prepared in accordance with industry standards (which report is not objected to by the Master Trustee) to the effect that the Projected Debt Service Coverage Ratio of the Obligated Group is not less than 1.20:1 for the next succeeding Fiscal Year following the later of (I) the estimated completion of the acquisition, construction, renovation or replacement being paid for with the proceeds of such Additional Indebtedness, or (II) the first full Fiscal Year following Stable Occupancy in the case of construction, renovation or replacement of senior housing facilities being financed with the proceeds of such Additional Indebtedness, which Stable Occupancy shall be projected to occur no later than during the fourth full Fiscal Year following the incurrence of such Additional Indebtedness or (III) the Fiscal Year in which such Additional Indebtedness for other purposes is being incurred; provided that such report shall include forecast balance sheets, statements of revenues and expenses and statements of changes in financial position for such Fiscal Year and a statement of the relevant assumptions upon which such forecasted statements are based, which financial statements must indicate that sufficient revenues and cash flow could be generated to pay the operating expenses of the Obligated Group’s proposed and existing Facilities and the debt service on the Obligated Group’s other existing Indebtedness during such Fiscal Year.

provided, however, that in the event that an Independent Consultant shall deliver a report to the Master Trustee to the effect that state or federal laws or regulations or administrative interpretations of such laws or regulations then in existence do not permit or by their application make it impracticable for the

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Obligated Issuers to produce the required ratios set forth above, then such ratios shall be reduced to the highest practicable ratios then permitted by such laws or regulations but in no event less than 1.00.

(b) Completion Indebtedness if there is delivered to the Master Trustee: (i) an Officer’s Certificate stating that at the time the original Indebtedness for the facilities to be completed was incurred, the Corporation or other Obligated Issuer had reason to believe that the proceeds of such Indebtedness together with other moneys then expected to be available would provide sufficient moneys for the completion of such facilities; (ii) a statement of an Independent Architect or an expert acceptable to the Master Trustee setting forth the amount estimated to be needed to complete the facilities; (iii) an Officer’s Certificate stating that the proceeds of such Completion Indebtedness to be applied to the completion of the facilities, together with other moneys available therefor, will be in an amount not less than the amount set forth in the statement of an Independent Architect referred to in (ii), which amount shall be no more than 10% of the Indebtedness originally incurred to finance the construction of the facilities.

(c) Refunding Indebtedness, provided that, the requirements of the Master Indenture summarized in paragraph (a) under this heading are satisfied or the Corporation has delivered an Officer’s Certificate to the Master Trustee certifying that the Maximum Annual Debt Service on all Long-Term Indebtedness will not be increased by more than 10% by such refunding.

(d) Balloon Indebtedness without limit if:

(i) there is in effect at the time the Balloon Indebtedness is incurred a binding commitment by a financial institution that is generally regarded as responsible and that commitment provides for repayment of amounts drawn under it over a term of at least 18 months commencing with the last day of each consecutive twelve-month period during which 25% or more of the Balloon Indebtedness matures to provide financing sufficient to pay the portion of the Balloon Indebtedness coming due during that twelve-month period (the “Balloon Amount”) and (ii) the conditions summarized in clause (i) or (ii) in paragraph (a) under this heading are met when it is assumed that, with respect to the Balloon Amount (A) the Balloon Amount is Long- Term Indebtedness maturing over a term equal to the term of the Balloon Amount plus the term provided in the commitment for the amortization of Indebtedness incurred thereunder or a term of 30 years from the date of issuance of the Balloon Indebtedness, whichever is greater, and (B) the Balloon Amount bears interest on the unpaid principal balance at the rate set forth in the commitment and is payable in accordance with the commitment if the term of the Balloon Amount plus the term provided in the commitment for the amortization of Indebtedness incurred thereunder is greater than 30 years, or, if the term of the Balloon Amount plus the term provided in the commitment for the amortization of Indebtedness incurred thereunder is not greater than 30 years, the Balloon Amount is payable on a level debt service basis over a 30-year period and bears interest at the Projected Rate based upon that period; or

(ii) (a) such Balloon Indebtedness has a remaining term in excess of five years; (b) the Corporation or the Obligated Issuer incurring such Balloon Indebtedness, respectively, establishes in an Officer’s Certificate filed with the Master Trustee an amortization schedule for the Balloon Indebtedness that provides for payments of principal and interest for each Fiscal Year that are not less than the amounts required to make any actual payments required to be made in the Fiscal Year by the terms of the Balloon Indebtedness; (c) the Corporation or the Obligated Issuer incurring the Balloon Indebtedness, respectively, agrees in the Officer’s Certificate to cause to be deposited each Fiscal Year with a bank or trust company (pursuant to an agreement that is between the Corporation or an Obligated Issuer and the bank or trust company) the amount of principal shown on the amortization schedule net of any amount of principal actually paid on the Balloon Indebtedness during that Fiscal Year (other than from amounts on deposit with the bank or trust company) which deposit shall be made prior to any required actual payment during that Fiscal Year if the amounts on deposit are intended to be the source of actual payments; and (d) the conditions summarized in clause (i) or (ii) in paragraph (a) under this heading are met with respect to such Balloon Indebtedness when it is assumed that the Balloon Indebtedness is Long-Term Indebtedness which is actually payable in accordance with such amortization schedule.

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(e) Put Indebtedness if:

(i) (a) there is in effect at the time such Put Indebtedness is incurred a binding commitment by a financial institution that is generally regarded as responsible, which commitment provides for the amortization of Indebtedness incurred under the commitment over a term of at least 18 months commencing with the next succeeding Put Date, to provide financing sufficient to pay such Put Indebtedness on any Put Date occurring during the term of that commitment, and (b) the conditions summarized in clause (i) or (ii) in paragraph (a) under this heading are met with respect to the Put Indebtedness when it is assumed that the Put Indebtedness is Long-Term Indebtedness that bears interest at the Project Rate and is payable on a level debt service basis over a 30-year period; or

(ii) (a) the aggregate principal amount of the Put Indebtedness to be incurred, together with the outstanding principal amount of Put Indebtedness already incurred pursuant to the provisions of the Master Indenture summarized in this clause (ii), does not exceed 20% of the Unrestricted Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available and (b) the conditions summarized in clause (i) or (ii) in paragraph (a) under this heading are met with respect to the Put Indebtedness when it is assumed that the Put Indebtedness is Long-Term Indebtedness that bears interest at the Projected Rate and is payable on a level debt service basis over a 30-year period.

(f) Non-Recourse Indebtedness and Subordinated Indebtedness without limit.

(g) Commitment Indebtedness without limit.

(h) Any other Additional Indebtedness provided at the time of incurrence of such Additional Indebtedness the aggregate principal amount of all Outstanding Additional Indebtedness incurred pursuant to the provisions of the Master Indenture summarized in this clause (h) does not exceed 15% of Unrestricted Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available.

(i) Short-Term Indebtedness (other than accounts payable as summarized in paragraph (j) under this heading), in a total principal amount which at the time incurred does not, together with the principal amount of all other such Short-Term Indebtedness of the Obligated Group then outstanding under this clause (i) but excluding the principal payable on all Indebtedness during the next succeeding 12 months and also excluding such principal to the extent that amounts are on deposit in an irrevocable escrow and such amounts (including, where appropriate, the earnings or other increments to accrue thereon) are required to be applied to pay such principal and such amounts so required to be applied are sufficient to pay such principal, exceed 15% of the Unrestricted Revenues of the Obligated Group for the most recent Fiscal Year for which audited financial statements are available; provided, however, that for a period of 20 consecutive calendar days in each Fiscal Year the total amount of such Short-Term Indebtedness of the Obligated Group outstanding under this clause (i) shall be not more than 5% of the Unrestricted Revenues of the Obligated Group during the preceding Fiscal Year plus such additional amount as the Obligated Group Agent certifies in an Officer’s Certificate is (1) attributable to Short-Term Indebtedness incurred to offset a temporary delay in the receipt of funds due from third party payors and (2) in the minimum amount reasonably practicable taking into account such delay. For the purposes of this clause (i), Short-Term Indebtedness shall not include overdrafts to banks to the extent there are immediately available funds of the Obligated Group sufficient to pay such overdrafts and such overdrafts are incurred and corrected in the normal course of business.

(j) Indebtedness incurred in connection with a sale or pledge of accounts receivable with or without recourse by any member of the Obligated Group consisting of an obligation to repurchase all or a portion of such accounts receivable upon certain conditions, provided that the principal amount of such Indebtedness permitted by the Master Indenture shall not exceed the aggregate sale price of such accounts receivable received by such member of the Obligated Group and the aggregate principal amount of all such Indebtedness does not exceed 15% of the Unrestricted Revenues of the Obligated Group based on the most recent Fiscal Year for which audited financial statements are available.

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Indebtedness may be incurred under any of provisions summarized in paragraphs (a) through (j) under this heading even though other Indebtedness is simultaneously being incurred under a different paragraph summarized under this heading.

Calculation of Debt Service

The various calculations of the amount of Indebtedness of a Person, the amortization schedule of such Indebtedness and the Debt Service payable with respect to such Indebtedness for future periods required under certain provisions of the Master Indenture shall be made in a manner consistent with the provisions of the Master Indenture summarized under this heading and under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness.” The Projected Rate and other assumptions utilized with respect to Indebtedness at the time compliance with the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” was first calculated shall continue to be utilized for the calculation of Debt Service payable with respect to such Indebtedness for future periods unless such Indebtedness is reclassified as summarized under this heading.

In determining the amount of Debt Service payable on Indebtedness in the course of the various calculations required under certain provisions of the Master Indenture, except as otherwise summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” with respect to interest rate assumptions, if the terms of the Indebtedness being considered are such that interest thereon for any future period of time is expressed to be calculated at a varying rate per annum, a formula rate or a fixed rate per annum based on a varying index, then for the purpose of making such determination of Debt Service, interest on such Indebtedness for such period (the “Determination Period”) shall be computed by assuming that the rate of interest applicable to the Determination Period is equal to the average annual rate of interest (calculated in the manner in which the rate of interest for the Determination Period is expressed to be calculated) that was or would have been in effect for the 12-month period immediately preceding the date on which such calculation is made; provided, however, that if such average annual rate of interest cannot be calculated for such entire 12-month period but can be calculated for a shorter period, then the assumed interest rate for the Determination Period shall be the average annual rate of interest that was or would have been in effect for such shorter period; and provided further, that if such average annual rate of interest cannot be calculated for any preceding period of time, then the assumed interest rate for the Determination Period shall be the initial annual rate of interest which is actually applicable to such Indebtedness upon the incurrence thereof. No Indebtedness shall be deemed to arise when variable rate Indebtedness is converted to Indebtedness which bears interest at a fixed rate, or when fixed rate Indebtedness is converted to Indebtedness which bears interest at a variable rate, or when the method of computing the variable rate on variable rate Indebtedness is changed if any such conversion is in accordance with the provisions applicable to such Indebtedness in effect immediately prior to such conversion.

Except for the purpose of calculating any historical Debt Service or for determining whether a Guaranty may be incurred, in which case the guarantor’s Debt Service under a Guaranty shall be deemed to be the actual amount paid (for historical) or payable (for incurrence) on such Guaranty by the guarantor, a guarantor shall be considered liable only for 20% of the annual debt service requirement on the Indebtedness guaranteed for future periods; provided, however, if the guarantor has been required by reason of its guaranty to make a payment in respect of such Indebtedness within the immediately preceding 24 months, the guarantor shall be considered liable in future periods for 100% of the annual debt service requirement on the Indebtedness guaranteed.

Balloon Indebtedness incurred pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” shall be deemed payable in accordance with the assumptions summarized in paragraph (d) under said heading.

Put Indebtedness incurred pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” shall be deemed payable in accordance with the assumptions summarized in paragraph (e) under said heading; provided that if the option of the holder to require that such Put Indebtedness be paid, purchased or redeemed prior to its stated maturity date has expired as of the date of calculation, such Put

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Indebtedness shall be deemed payable in accordance with its terms. No Indebtedness shall be deemed to arise when the terms upon which Put Indebtedness may be or is required to be tendered for purchase are changed, if such change is in accordance with the provisions applicable to such Put Indebtedness in effect immediately prior to such change.

Notes issued to secure Indebtedness permitted to be incurred pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” shall not be treated as Additional Indebtedness.

No debt service shall be deemed payable with respect to Commitment Indebtedness until such time as funding occurs under the commitment which gave rise to such Commitment Indebtedness, except to the extent that the terms of such Commitment Indebtedness are to be considered pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” in determining the amortization schedule and debt service payable with respect to the Indebtedness supported by the commitment which gave rise to such Commitment Indebtedness. From and after such funding, the amount of such debt service shall be calculated in accordance with the actual amount required to be repaid on such Commitment Indebtedness and the actual interest rate and amortization schedule applicable thereto, utilizing the various assumptions summarized under this heading and under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness.” No Additional Indebtedness shall be deemed to arise when any funding occurs under any such commitment or any such commitment is renewed upon terms which provide for substantially the same terms of repayment of amounts disbursed pursuant to such commitment as obtained prior to such renewal.

In making any determination of or with regard to Debt Service under the Master Indenture, the Master Trustee may rely on such opinions or reports of Independent Consultants.

The Corporation or any other Obligated Issuer may elect to have Indebtedness issued pursuant to one provision summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” classified as having been incurred under another provision summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” by demonstrating compliance with such other provision on the assumption that such Indebtedness is being reissued on the date of delivery of the materials required to be delivered under such other provision including the certification of any applicable Projected Rate. From and after such demonstration, such Indebtedness shall be deemed to have been incurred under the provision with respect to which such compliance has been demonstrated until any subsequent reclassification of such Indebtedness.

If any Obligated Issuer enters an Interest Rate Agreement with a Counterparty requiring the Obligated Issuer to pay a fixed interest rate on a notional amount or requiring the Obligated Issuer to pay a variable interest rate on a notional amount, and the Obligated Issuer has made a determination that the Interest Rate Agreement was entered for the purpose of providing substitute interest payments (or a portion thereof) for Indebtedness of a particular maturity or maturities in a principal amount equal to the notional amount of the Interest Rate Agreement, then during the term of the Interest Rate Agreement and so long as the Counterparty under the Interest Rate Agreement is not in default under the Interest Rate Agreement, then, for purposes of any calculation of Debt Service, the interest rate (or portion thereof) on the Indebtedness of that maturity or maturities will be determined as if the Indebtedness bore interest at the fixed interest rate or the variable interest rate, as the case may be, payable by the Obligated Issuer after giving effect to the Interest Rate Agreement. Any obligations under the Interest Rate Agreement, whether or not secured by a Note, will not be separately included in any calculation of Debt Service payable on Indebtedness. No Additional Indebtedness is deemed to arise when an Interest Rate Agreement is entered or terminated.

Historical Debt Service Coverage Ratio

The Obligated Group shall set rates and charges for its facilities such that the Historical Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.10:1. If the Historical Debt Service Coverage Ratio, as calculated at the end of any Fiscal Year is below 1.10:1, the Corporation shall retain an

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Independent Consultant at the end of each such Fiscal Year to make recommendations to increase the Historical Debt Service Coverage Ratio for the subsequent Fiscal Years to at least 1.10:1; provided, however, that in the event that an Independent Consultant shall deliver a report to the Master Trustee to the effect that state or federal laws or regulations or administrative interpretations of such laws or regulations then in existence do not permit or by their application make it impracticable for the Obligated Group to produce a Historical Debt Service Coverage Ratio of 1.10:1, then the required Historical Debt Service Coverage Ratio shall be reduced to the highest practicable ratio permitted by the laws or regulations then in effect but in no event less than 1.00 for such subsequent Fiscal Year. Each Obligated Issuer, respectively, agrees in the Master Indenture that it will, to the extent feasible, follow the recommendations of the Independent Consultant. So long as the Corporation shall retain an Independent Consultant at the end of each Fiscal Year in which the Historical Debt Service Coverage Ratio of the Obligated Group is below 1.10:1 and each Obligated Issuer shall follow such Independent Consultant’s recommendations for the subsequent Fiscal Year to the extent feasible, and so long as the Historical Debt Service Coverage Ratio of the Obligated Group is not less than 1.00 for the subsequent Fiscal Year, the provisions of the Master Indenture summarized under this heading shall be deemed to have been complied with for such subsequent Fiscal Year even if the Historical Debt Service Coverage Ratio is below 1.10:1, and those circumstances will not constitute an Event of Default under the Master Indenture.

See the heading “SUMMARY OF CERTAIN PROVISIONS OF THE THIRD SUPPLEMENT – Amendments to Master Indenture” for the description of an amendment to the foregoing provision.

Sale, Lease or Other Disposition of Property

(a) The Corporation and each other Obligated Issuer, respectively, agrees in the Master Indenture that, except as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Consolidation, Merger, Sale or Conveyance,” it will not sell, lease or otherwise dispose of any of its Property (other than Excluded Property), except in the ordinary course of business, except to another Obligated Issuer or except as permitted by the provisions of the Master Indenture summarized in paragraph (b) or (c) under this heading, unless the Corporation shall certify to the Master Trustee in an Officer’s Certificate that: (i) in the judgment of the Corporation and each other Obligated Issuer which is the owner of such Property, such Property, has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary, provided the sale, lease, removal or other disposition thereof will not materially impair the structural soundness, efficiency or economic value of its remaining Property; or (ii) immediately after such transaction, the condition described in paragraph (a) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” would be met for the incurrence of one dollar of Long-Term Additional Indebtedness after giving effect to such transaction.

(b) The Corporation or any other Obligated Issuer may sell, lease or otherwise dispose of its Property (other than in the ordinary course of business and other than Excluded Property which can be disposed of without limit), without satisfying the conditions that must be certified pursuant to the provisions of the Master Indenture summarized in paragraph (a) under this heading, if such Property is sold, leased or otherwise disposed of pursuant to the provisions of the Master Indenture summarized in this paragraph (b) and the aggregate Book Value or Market Value, as elected by the Obligated Group Representative of the Property sold, leased or otherwise disposed of pursuant to the provisions of the Master Indenture summarized in this paragraph (b) in any Fiscal Year does not exceed 1% of the total assets of the Obligated Group as of the beginning of that Fiscal Year (as shown on the most recent audited financial statements of the Obligated Group).

(c) The Corporation or any other Obligated Issuer may sell, lease or otherwise dispose of its Property (other than in the ordinary course of business and other than Excluded Property which can be disposed of without limit), without satisfying the conditions that must be certified pursuant to the provisions of the Master Indenture summarized in paragraph (a) under this heading, if such Property is sold, leased or otherwise disposed of pursuant to the provisions of the Master Indenture summarized in this paragraph (c) and the aggregate Book Value or Market Value, as elected by the Obligated Group Representative of the Property sold, leased or otherwise disposed of pursuant to the provisions of the Master Indenture summarized in this paragraph (c) in any Fiscal Year does not exceed 3% of the total assets of the Obligated Group as of the beginning of that Fiscal Year (as shown on the most recent audited financial statements of the Obligated Group) and the Historical Debt Service Coverage Ratio was not less than 1.30:1 for the last Fiscal Year for which audited financial statements have been delivered to the Master

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Trustee, provided that in calculating the Historical Debt Service Coverage Ratio for purposes of the provisions summarized under this heading, the Net Income Available for Debt Service will be reduced by one year’s estimated earnings attributable to the Property disposed of, at the option of the Obligated Group Representative, either (1) based on the current budget, as certified in an Officer’s Certificate, or (2) based on the actual earnings on the transferred Property, as certified in a report of a Consultant; and as of the end of the last Fiscal Year for which audited financial statements have been delivered to the Master Trustee as required pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information,” the Obligated Group had not less than 180 Days’ Cash on Hand after giving effect to the transaction. If the Historical Debt Service Coverage Ratio is not less than 1.30:1, the foregoing percentage of the total Book Value or Market Value may be increased as follows under the following conditions: (1) to 5%, if Days’ Cash on Hand would not be less than 300 after the effect of such sale, lease or disposition of assets; or (2) to 7.5%, if Days’ Cash on Hand would not be less than 400 after the effect of such sale, lease or disposition of assets; or (3) to 10%, if Days’ Cash on Hand would not be less than 500 after the effect of such sale, lease or disposition of assets.

(d) If the Property to be disposed in accordance with the provisions of the Master Indenture summarized under this heading is Mortgaged Property, the Master Trustee shall, upon the request of the Obligated Group Representative, release such Mortgaged Property from the Master Mortgage pursuant to the terms of the Master Mortgage and from any Uniform Commercial Code financing statement in connection with such disposition of such Property.

Consolidation, Merger, Sale or Conveyance

(a) The Corporation and each other Obligated Issuer, respectively, covenants in the Master Indenture that it will not merge or consolidate with any other corporation not an Obligated Issuer or sell or convey all or substantially all of its assets to any Person not an Obligated Issuer unless: (i) either (A) such Obligated Issuer shall be the surviving corporation, or (B) the successor corporation (if other than such Obligated Issuer) shall be a corporation organized and existing under the laws of the United States of America or a state thereof and such corporation shall expressly assume in writing all of the obligations of such Obligated Issuer to pay principal of and interest and Interest Rate Agreement Payments on the Notes issued under the Master Indenture, and the due and punctual performance and observance of all of the covenants and conditions of the Master Indenture to be performed or observed by such Obligated Issuer by a Supplemental Master Indenture satisfactory to the Master Trustee, executed and delivered to the Master Trustee by such corporation; (ii) assuming that any Indebtedness of any successor or acquiring corporation is Indebtedness of such Obligated Issuer and that the Unrestricted Revenues and Total Expenses of the Obligated Issuer for such most recent Fiscal Year include the Unrestricted Revenues and Total Expenses of such other corporation, immediately after such merger or consolidation, sale or conveyance, the Historical Pro Forma Debt Service Coverage Ratio of the Obligated Group based on the most recent Fiscal Year for which audited financial statements delivered to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information” would be not less than 1.20:1; (iii) immediately after such merger or consolidation, or such sale or conveyance, no member of the Obligated Group would be in default in the performance or observance of any covenant or condition of any Related Bonds or the Master Indenture; and (iv) if all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or fully provided for, there shall be delivered to the Master Trustee an Opinion of Bond Counsel to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance would not adversely affect the validity of such Related Bonds or the exemption otherwise available from federal or state income taxation of interest payable on such Related Bonds.

(b) In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for such Obligated Issuer, with the same effect as if it had been named in the Master Indenture as the Corporation or another Obligated Issuer, as the case may be. Such successor corporation thereupon may cause to be signed, and may issue in its own name Notes issuable under the Master Indenture; and upon the order of such successor corporation, instead of such Obligated Issuer, and subject to all the terms, conditions and limitations in the Master Indenture prescribed, the Master Trustee shall authenticate and shall deliver Notes that such successor corporation shall have caused to be signed and delivered to the Master Trustee. All Outstanding Notes so issued by such successor corporation under the Master Indenture shall in all respects have the same legal rank and benefit under the Master Indenture as Notes

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theretofore or thereafter issued in accordance with the terms of the Master Indenture as though all of such Notes had been issued under the Master Indenture at the date of the execution of the Master Indenture.

(c) In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Notes thereafter to be issued as may be appropriate.

(d) The Master Trustee, subject to the provisions of the Master Indenture, may receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of the Master Indenture and that it is proper for the Master Trustee to join in the execution of the Supplemental Master Indenture as summarized under this heading.

(e) Any corporation which controls the Corporation (the “New Parent”) may assume all obligations, rights and duties and succeed to all interests of the Corporation under the Master Indenture, and upon completion of such assumption will be the “Corporation” under the Master Indenture if (i) there shall be filed with the Master Trustee (1) a resolution of the Governing Body of the New Parent agreeing to assume all obligations, rights and duties of the Corporation under the Master Indenture, approving the form of and authorizing the execution of the document mentioned in clause (2) below, (2) a document executed by the Corporation and the New Parent evidencing such assumption, (3) an Opinion of Bond Counsel to the effect that such assumption will not adversely affect any exclusion from gross income for federal income tax purposes of interest payable on any Related Bond to which that interest would otherwise be entitled and (4) an Officer’s Certificate certifying compliance with the requirements of the Master Indenture summarized under this heading and (ii) the requirements of clauses (a) through (d) summarized under this heading shall have been met to the same extent as if the New Parent and the Corporation had merged.

Filing of Financial Statements, Certificate of No Default, Other Information

The Corporation and each other Obligated Issuer, respectively, covenants in the Master Indenture as follows:

(a) as soon as practicable but in no event later than 150 days after the end of each Fiscal Year, the Corporation shall file, or cause to be filed, with the Master Trustee, with each Noteholder who may have so requested or on whose behalf the Master Trustee may have so requested, with each Related Issuer, with each Rating Agency maintaining a rating on any issue of Related Bonds and with each underwriter who has underwritten the sale of a series of Related Bonds who may have so requested: (i) a combined or consolidated and consolidating revenue and expense statement of the Corporation and each other Obligated Issuer for such Fiscal Year (all material inter-company transactions and balances shall be eliminated in the preparation of the combined statements), and (ii) a combined or consolidated and consolidating balance sheet presented on the basis described in (i) above as of the end of such Fiscal Year, showing in each case in comparative from the financial figures for the preceding Fiscal Year, accompanied by an opinion of Qualified Accountants which states that such financial statements have been presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States.

(b) as soon as practicable but in no event later than 150 days after the end of each Fiscal Year, the Corporation shall file with the Master Trustee, with each Noteholder who may have so requested or on whose behalf the Master Trustee may have so requested, with each Related Issuer, with each Rating Agency maintaining a rating on any issue of Related Bonds and with each underwriter who has underwritten the sale of a series of Related Bonds who may have so requested: (i) a certificate of Qualified Accountants stating whether or not, to the best knowledge of the signers, the Obligated Issuers are in default in the performance of the Historical Debt Service Coverage Ratio covenant summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Historical Debt Service Coverage Ratio,” the Days Cash on Hand covenant summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Liquidity Covenant” or in the performance of any other financial covenant contained in the Master Indenture as amended or supplemented from time to time insofar as they relate to accounting matters, and, if so, specifying each such default of which the signers may have knowledge, and (ii) an Officer’s Certificate stating whether or not, to the best knowledge of the signers, the Obligated Group is in compliance with all of the terms,

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provisions and conditions of the Master Indenture or if not, specify all such defaults and the nature of the Master Indenture; calculating and certifying the Historical Debt Service Coverage Ratio and Days Cash on Hand covenant; and providing an executive summary of any actuarial reports received by the Obligated Group during the preceding Fiscal Year, if any;

(c) within 45 days after the completion of each fiscal quarter ended March 31, June 30 and September 30 and within 60 days after completion of each fiscal quarter ended December 31, the Corporation shall file with the Master Trustee, with each Noteholder who may have so requested or on whose behalf the Master Trustee may have so requested, with each Related Issuer, with each Rating Agency maintaining a rating on any issue of Related Bonds and with each underwriter who has underwritten the sale of a series of Related Bonds who may have so requested: quarterly unaudited financial statements of the Obligated Group, including a statement of cash flows, a consolidated or consolidating statement of operations and net assets of the Obligated Group during such period and a consolidated or consolidating balance sheet as of the end of each such fiscal quarter with a comparison to the operating budget, all prepared in reasonable detail and certified, subject to year-end adjustment, by an officer of the Obligated Group Representative;

(d) if an Event of Default shall have occurred and be continuing, the Corporation and each other Obligated Issuer shall (i) file with the Master Trustee other financial statements and information concerning the operations and financial affairs of the Corporation and each Obligated Issuer as the Master Trustee may from time to time reasonably request, excluding donor records, resident records and personnel records and (ii) provide access to the Facilities of each Obligated Issuer for the purpose of inspection by the Master Trustee during regular business hours as the Master Trustee may reasonably request; and

(e) within 10 days after the Corporation’s receipt thereof, the Corporation will file with the Master Trustee a copy of each report which any provision of the Master Indenture requires to be prepared by an Independent Consultant or an Independent Insurance Consultant.

To the extent that accounting principles generally accepted in the United States of America would require consolidation of certain financial information of entities which are not Obligated Issuers with financial information of one or more Obligated Issuers, consolidated financial information with respect to entities which are not Obligated Issuers may be delivered in satisfaction of the requirements of the Master Indenture summarized under this heading so long as: (a) supplemental information in sufficient detail to separately identify the information with respect to the Obligated Issuers is delivered to the Master Trustee with the audited financial statements; (b) such supplemental information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements delivered to the Master Trustee and, in the opinion of the accountant, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole; and (c) such supplemental information is used for the purposes of the Master Indenture or for any agreement, document or certificate executed and delivered in connection with or pursuant to the Master Indenture.

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

Without limiting the foregoing, each member of the Obligated Group will permit, upon reasonable notice, the Master Trustee or any such Related Bond Trustee (or such persons as they may designate) to visit and inspect, at the expense of such Person, its Property and to discuss the affairs, finances and accounts of the Obligated Group with its officers and independent accountants, all at such reasonable times and locations and as often as the Master Trustee or such Related Bond Trustee may reasonably desire.

The Obligated Group Representative may designate a different Fiscal Year for the members of the Obligated Group by delivering a notice to the Master Trustee designating the first and last day of such new Fiscal Year and whether or not there will be any interim fiscal period (the “Interim Period”) of a duration of greater than or

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

Insurance

Subject to their rights to enter into a program of self insurance in compliance with the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Reduction of Insurance Coverage; Self Insurance,” the Corporation and each other Obligated Issuer, respectively, agrees in the Master Indenture that it will maintain, or cause to be maintained, insurance covering such risks (including, but not limited to, public liability, fire and extended coverage and malpractice) and in such amounts as is customary in the case of corporations engaged in the same or similar activities and similarly situated as the Corporation and each other Obligated Issuer which is adequate to protect it and its Properties and operations. The insurance or self insurance program required to be maintained pursuant to the Master Indenture shall be subject to the review of an Independent Insurance Consultant each Fiscal Year and the Corporation and each other Obligated Issuer, respectively, agrees in the Master Indenture that it will follow any recommendations of the Independent Insurance Consultant to the extent feasible. In order to establish compliance with the provisions of the Master Indenture summarized under this heading and under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Reduction of Insurance Coverage; Self Insurance,” the Corporation and each other Obligated Issuer, respectively, agrees in the Master Indenture that it will deliver or cause to be delivered to the Master Trustee within 150 days of the end of each Fiscal Year, a report of the Independent Insurance Consultant setting forth a description of the insurance maintained, or caused to be maintained, by such Obligated Issuer pursuant to the provisions of the Master Indenture summarized under this heading and then in effect and stating whether, in the opinion of the Independent Insurance Consultant, such insurance and any reduction or elimination of the amount of any insurance coverage during the period covered by such report complies with the requirements of the Master Indenture summarized under this heading and under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Reduction of Insurance Coverage; Self Insurance” and adequately protects such Obligated Issuer and its Properties and operations provided with respect to any self insurance that such report shall be by an independent actuary. Such report shall also set forth any recommendations of the Independent Insurance Consultant as to additional insurance, if any, reasonably required (during the period preceding the next such report) for the protection referred to in the next preceding sentence in light of available insurance coverage in the health care industry (or other industry applicable to an Obligated Issuer).

Reduction of Insurance Coverage; Self Insurance

(a) If the Corporation or any other Obligated Issuer has or hereafter obtains any of the following types of insurance, whether from an Insurance Subsidiary or other insurer, it must secure the concurrence of an Independent Insurance Consultant before it may reduce or eliminate the amounts of its insurance coverage for the following types of insurance: (i) comprehensive general public liability insurance, including product liability, blanket contractual liability and automobile insurance including owned, non-owned and hired automobiles (excluding collision and comprehensive coverage thereon), (ii) professional liability or medical malpractice insurance, (iii) worker’s compensation insurance and (iv) boiler insurance.

(b) In making its decision whether to concur in such reductions or eliminations, the Independent Insurance Consultant shall make an estimate of the added financial risk, if any, assumed by the Corporation or the

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Obligated Issuer, as the case may be, as a result of the lower or amended coverage; it shall consider the availability of commercial insurance, the terms upon which such insurance is available and the cost of such available insurance, and the effect of such terms and such cost upon such Obligated Issuer and charges for its services; and it shall determine whether the additional financial risk, if any, being assumed by such Obligated Issuer, is prudent in light of the savings to be realized from lowered insurance premiums or in light of the general availability of such coverage.

(c) Before the Corporation or any other Obligated Issuer may enter into a program of self insurance (i.e. a program not involving a contract of insurance issued by an insurer licensed by the Commissioner of Insurance of the State of Wisconsin) against any particular risk for which it is not on the date of the Master Indenture self- insuring, it must receive a certificate from an Independent Insurance Consultant to the effect that adequate reserves for such insurance program are deposited and maintained with an independent corporate trustee if recommended by the Independent Insurance Consultant. The Corporation or any other Obligated Issuer may not enter into a program of self insurance against risks of damage to property, plant and equipment, including business interruption insurance.

Damage or Destruction

Each Obligated Issuer agrees in the Master Indenture to notify the Master Trustee immediately in the case of the destruction of its Facilities or any portion thereof as a result of fire or other casualty, or any damage to such Facilities or portion thereof as a result of fire or other casualty, the Net Proceeds of which are estimated to exceed 5% of the Book Value or, at the option of the Obligated Group Representative, the Market Value, of the Net Property, Plant and Equipment of the Obligated Issuers at the end of the most recent Fiscal Year for which audited financial statements are available.

In the event such Net Proceeds exceed the amount described above, the Obligated Issuer suffering such casualty or loss shall deposit such Net Proceeds with the Master Trustee and within 12 months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Master Trustee one of the following three options, subject to the approval of the Master Trustee (which approval may not be unreasonably withheld):

(a) Option A-Repair and Restoration. Such Obligated Issuer may elect to replace, repair, reconstruct, restore or improve any of the Facilities of the Obligated Group or acquire additional Facilities for the Obligated Group or repay Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds. In such event such Obligated Issuer shall proceed forthwith to replace, repair, reconstruct, restore or improve Facilities of the Obligated Group or to acquire additional Facilities. So long as the Obligated Issuers are not in default under the Master Indenture, any Net Proceeds of insurance relating to such damage or destruction received by the Master Trustee shall be released from time to time by the Master Trustee to such Obligated Issuer upon the receipt by the Master Trustee of: (1) an Officer’s Certificate of such Obligated Issuer specifying the expenditures made or to be made or the Indebtedness incurred in connection with such repair, reconstruction, restoration, improvement or acquisition and stating that such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such replacement, repair, reconstruction, restoration, improvement or acquisition; and (2) if such expenditures were or are to be made or such Indebtedness was incurred for the construction or renovation of Facilities, the written approval of such Officer’s Certificate by an Independent Architect.

It is further understood and agreed that in the event such Obligated Issuer shall elect this Option A, such Obligated Issuer shall complete the replacement, repair, reconstruction, restoration, improvement and acquisition of the Facilities, whether or not the Net Proceeds of insurance received for such purposes are sufficient to pay for the same.

(b) Option B-Prepayment of Notes. Such Obligated Issuer may elect to have all or a portion of the Net Proceeds payable as a result of such damage or destruction applied to the prepayment of the Notes designated by the Corporation. In such event such Obligated Issuer shall, in its notice of election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds, when and as received, to the prepayment of the Notes provided that if in any such case less than all of the Notes are redeemed the Obligated Group shall have first provided the Master Trustee with a certificate of an Independent Architect or Independent Consultant stating (i) that the property that was damaged is not essential to the Obligated

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Group’s use or occupancy of its Facilities and the damage will not operate to materially reduce the revenues of the Obligated Group or (ii) that the damaged facility has been restored to a condition substantially equivalent to its condition prior to the damage or condemnation. Notwithstanding the foregoing, if the Notes designated by the Corporation for prepayment secure an issue of Related Bonds the Obligated Group further agrees in the Master Indenture to comply with the provisions of the Related Bond Indenture for the prepayment of the Related Bonds and the Notes designated for prepayment by the Corporation pursuant to the provisions of the Master Indenture summarized under this heading are not deemed prepaid pursuant to the provisions summarized under this heading unless their prepayment results in a corresponding prepayment of the Related Bonds.

(c) Option C-Partial Restoration and Partial Prepayment of Notes. Such Obligated Issuer may elect to have a portion of such Net Proceeds applied to the replacement, repair, reconstruction, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group or the repayment of Indebtedness incurred for any such purpose pending the receipt of such Net Proceeds with the remainder of such Net Proceeds to be applied to prepay Notes, in which event such Net Proceeds to be used for replacement, repair, reconstruction, restoration, improvement and acquisition shall be applied as summarized in subparagraph (a) under this heading and such Net Proceeds to be used for prepayment of the Notes shall be applied as summarized in subparagraph (b) under this heading.

The foregoing notwithstanding, no Obligated Issuer will be required to comply with the provisions of the Master Indenture summarized under this heading to the extent that the Facilities damaged or destroyed were pledged as security for Non-Recourse Indebtedness incurred in accordance with the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Incurrence of Additional Indebtedness” and the documents pursuant to which such Indebtedness was incurred require Net Proceeds to be applied in a manner inconsistent with the provisions of the Master Indenture summarized under this heading or if the Facilities damaged or destroyed are subject to no Liens other than Liens summarized in clause (xxiv) of paragraph (b) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Creation of Liens.”

Condemnation

The Master Indenture contains provisions similar to those described under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Damage or Destruction” which apply in the case of a condemnation, taking or payment received in a sale consummated under threat of condemnation.

Liquidity Covenant

The Obligated Group covenants in the Master Indenture that it will calculate the Days Cash on Hand of the Obligated Group as of December 31 of each Fiscal Year (a “Testing Date”). The Obligated Group shall include such calculation as of December 31 in the Officer’s Certificate delivered pursuant to the provisions of the Master Indenture summarized in clause (b)(ii) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information.”

Each Obligated Issuer is required to conduct its business so that on each Testing Date the Obligated Group shall maintain no less than 180 Days Cash on Hand on each Testing Date (the “Liquidity Requirement”).

If the amount of Days Cash on Hand as of any Testing Date is less than the Liquidity Requirement, the Obligated Group Representative shall, within 45 days after delivery of the Officer’s Certificate disclosing such deficiency, deliver an Officer’s Certificate approved by a resolution of the Governing Body of the Obligated Group Representative to the Master Trustee setting forth in reasonable detail the reasons for such deficiency and adopting a specific plan setting forth steps to be taken designed to raise the level of the Days Cash on Hand to the Liquidity Requirement for future periods.

If the Obligated Group has not raised the level of the Days Cash on Hand to the Liquidity Requirement by the Testing Date immediately subsequent to the delivery of the Officer’s Certificate required in the preceding paragraph, the Obligated Group Representative shall, within 30 days after delivery of the Officer’s Certificate

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disclosing such deficiency, select an Independent Consultant to make recommendations with respect to the rates, fees and charges of the Obligated Group and the Obligated Group’s methods of operation and other factors affecting its financial condition in order to increase the Days Cash on Hand to the Liquidity Requirement for future periods. A copy of the Independent Consultant’s report and recommendations, if any, shall be filed with the Master Trustee within 60 days after the date such Independent Consultant is retained. Each member of the Obligated Group shall follow each recommendation of the Independent Consultant applicable to it to the extent feasible (as determined in the reasonable judgment of the Governing Body of the member of the Obligated Group) and permitted by law.

Notwithstanding any other provision of the Master Indenture, failure of the Obligated Group to achieve the Liquidity Requirement for any Testing Date shall not constitute an event of default under the Master Indenture if the Obligated Group takes all action necessary to comply with the procedures set forth above for adopting a plan or retaining an Independent Consultant and follows each recommendation contained in such plan or Independent Consultant’s report to the extent feasible (as determined by the Governing Body of the Obligated Group Representative) and permitted by law.

Events of Default

Event of Default, as used in the Master Indenture, shall mean any of the events summarized under this heading, whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:

(a) There shall be a failure to make any payment of the principal of, the premium, if any, interest on any Notes issued and Outstanding under the Master Indenture or any Interest Rate Agreement Payments when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, in accordance with the terms thereof, of the Master Indenture and any Supplemental Master Indenture; or

(b) The Corporation or any other Obligated Issuer shall fail duly to observe or perform any covenant or agreement on its part contained in the Master Indenture, the Master Mortgage, any Supplemental Master Indenture (other than a failure that would result in a default pursuant to the provisions of the Master Indenture summarized in clause (a), (d) or (e) under this heading) (as amended in the Third Supplement to include clause (h)) for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Corporation and the other Obligated Issuers by the Master Trustee, or to the Corporation, the other Obligated Issuers and the Master Trustee by the Holders of at least 25% in aggregate principal amount of Notes then Outstanding except that, if such failure can be remedied but not within such thirty (30) day period, such failure shall not become an Event of Default for so long as the Corporation and the other Obligated Issuers shall diligently proceed to remedy same in accordance with and subject to any directions or limitations of time established by the Master Trustee; or

(c) Any representation or warranty made by the Corporation or any other Obligated Issuer in the Master Indenture or in any statement or certificate furnished to the Master Trustee by the Corporation or any other Obligated Issuer pursuant to the Master Indenture proves untrue in any material respect as of the date of its issuance or making thereof for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Corporation and the other Obligated Issuers by the Master Trustee, or to the Corporation, the other Obligated Issuers and the Master Trustee by the Holders of at least 25% in aggregate principal amount of Notes then Outstanding except that, if such failure can be remedied but not within such thirty (30) day period, such failure shall not become an Event of Default for so long as the Corporation and the other Obligated Issuers shall diligently proceed to remedy same in accordance with and subject to any directions or limitations of time established by the Master Trustee; or

(d) The Corporation or any other Obligated Issuer shall default in the payment of any Indebtedness for borrowed money (other than Notes issued and Outstanding under the Master Indenture) in an amount which exceeds the greater of $1,000,000 or 10% of the unrestricted net assets of the Obligated Group for its most recently completed Fiscal Year for which audited financial statements are available,

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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 issued, or by which there may be secured or evidenced, any Indebtedness, whether such Indebtedness now exists or shall hereafter be created, shall occur, which default in payment or event of default shall result in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, provided, however, that such default shall not constitute an Event of Default within the meaning of the provisions of the Master Indenture summarized under this heading if within the time allowed for service of a responsive pleading in any proceeding to enforce payment of the Indebtedness under the laws of the state having jurisdiction or other laws governing such proceeding (i) the Obligated Issuers in good faith commence proceedings to contest the existence or payment of such Indebtedness, and (ii) sufficient moneys are escrowed with a bank or trust company for the payment of such Indebtedness; or

(e) (i) without the consent of the Corporation or any other Obligated Issuer, a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Corporation or any other Obligated Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization or arrangement of the Corporation or any other Obligated Issuer under the Federal Bankruptcy Code or any other similar applicable federal or state law, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or, without the consent of the Corporation or any other Obligated Issuer, a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of the Corporation or any other Obligated Issuer or of its Property, or for the winding up or liquidation of its affairs, shall have been entered and such decree or order shall have remained in force undischarged and unstayed for a period of 90 days and (ii) the Obligated Issuers shall have failed to deposit with the Master Trustee within 15 calendar days of the end of such 90 day period either (A) an amount sufficient to pay in full all Notes of such Obligated Issuer or (B) if acceptable to the Master Trustee in its sole discretion, and then only under such terms and conditions as the Master Trustee in its sole discretion shall prescribe, a Note or Notes executed by one or more other Obligated Issuers in substitution for the Note or Notes of such Obligated Issuer;

(f) (i) the Corporation or any other Obligated Issuer shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the institution of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or arrangement under the Federal Bankruptcy Code or any other similar applicable federal or state law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of it or of its Property, or shall make assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Corporation or any other Obligated Issuer in furtherance of any of the aforesaid purposes and (ii) the Obligated Issuers shall have failed to deposit with the Master Trustee within 15 calendar days of such an event either (A) an amount sufficient to pay in full all Notes of such Obligated Issuer or (B) if acceptable to the Master Trustee in its sole discretion, and then only under such terms and conditions as the Master Trustee in its sole discretion shall prescribe, a Note or Notes executed by one or more other Obligated Issuers in substitution for the Note or Notes of such Obligated Issuer; or

(g) any judgment, writ or warrant of attachment or of any similar process shall be entered or filed against any member of the Obligated Group or against any Property of any member of the Obligated Group and remains unvacated, unpaid, unbonded, unstayed or uncontested in good faith for a period of 90 days; provided, however, that none of the foregoing shall constitute an event of default unless the amount of such judgment, writ, warrant of attachment or similar process, together with the amount of all other such judgments, writs, warrants or similar processes so unvacated, unpaid, unbonded, unstayed or uncontested, exceeds the greater of $1,000,000 or 10% of the unrestricted net assets of the Obligated Group.

See the heading “SUMMARY OF CERTAIN PROVISIONS OF THE THIRD SUPPLEMENT – Amendments to Master Indenture” for a description of an amendment to add an Event of Default to the foregoing provision.

The provisions of the Master Indenture summarized in clause (b) under this heading are subject to the following limitations: If by reason of force majeure, any Obligated Issuer is unable in whole or in part to carry out

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its agreements on its part contained in the Master Indenture, such Obligated Issuer shall not be deemed in default during the continuance of such disability. The term “force majeure” includes the following: acts of God; strikes; lockouts or other employee disturbances; acts of public enemies; orders of any kind of the government of the United States of America, the state or states in which such Obligated Issuer is doing business, or any of their departments, agencies, political subdivisions or officials, or any civil or military authority; insurrections; riots; epidemics; storms; floods; washouts; droughts; civil disturbances; explosions, breakage or accident to machinery, transmission pipes or canals; partial or entire failure of utilities; or similar acts or events other than financial not within the control of the Obligated Issuer.

Remedies for Certain Defaults

Upon the occurrence of an Event of Default summarized in clauses (a), (d), (e) and (f) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default” (as amended in the Third Supplement to include clause (h)), then and in each and every such case, unless the principal of and termination payments (in the case of Interest Rate Agreements that are authenticated as Notes or secured by Notes) on Notes shall have already become due and payable, the Master Trustee may, and if requested by the Holders of not less than 25% in aggregate principal amount of all Notes then Outstanding, the Master Trustee shall, and upon the occurrence of an Event of Default summarized in clause (b) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default” and if requested by the holders of not less than 25% in aggregate principal amount of all Notes then Outstanding the Master Trustee shall, by notice in writing to the Obligated Issuers declare the principal of and termination payments (in the case of Interest Rate Agreements that are authenticated as Notes or secured by Notes) on all such Notes to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Master Indenture or in such Notes contained to the contrary notwithstanding. In such event, there shall be due and payable on the Notes an amount equal to the aggregate principal amount of and termination payments (in the case of Interest Rate Agreements that are authenticated as Notes or secured by Notes) on all such Notes, plus all interest and other amounts accrued thereon and, to the extent permitted by applicable law, interest on such amounts to the date of payment. This provision, however, is subject to the condition that if, at any time after the principal of all Notes and termination payments (in the case of Interest Rate Agreements that are authenticated as Notes or secured by Notes) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as provided in the Master Indenture, the Obligated Issuers shall pay or shall deposit with the Master Trustee a sum sufficient to pay all matured installments of interest upon all such Notes and the principal and premium, if any, and Interest Rate Agreement Payments of all such Notes that shall have become due otherwise than by acceleration (with interest on overdue installments of interest and on such principal and premium, if any, and Interest Rate Agreement Payments at the respective rates borne by such Notes to the date of such payment or deposit) and the expenses of the Master Trustee, and any and all Events of Default under the Master Indenture, other than the nonpayment of principal of and accrued interest on such Notes that shall have become due by acceleration, shall have been remedied, then and in every such case the Holders of a majority in aggregate principal amount of all Notes then Outstanding, by written notice to the Obligated Issuers and to the Master Trustee, or the Master Trustee by written notice to the Obligated Issuers, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or affect any subsequent Event of Default, or shall impair any right consequent thereon.

The Master Trustee, in its own name and as trustee of an express trust shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Master Trustee, its agents, attorneys and counsel, and any expenses incurred by the Master Trustee other than as a result of its gross negligence or bad faith. The Master Trustee may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Corporation and each other Obligated Issuer, and collect in the manner provided by law out of the Property of the Corporation and each other Obligated Issuer, wherever situated, the moneys adjudged or decreed to be payable. The Master Trustee, upon the bringing of any action or proceeding at law or in equity pursuant to the provisions of the Master Indenture summarized under this heading as a matter of right, without notice and without giving bond to the Corporation or any other Obligated Issuer, may, to the extent permitted by law, have a receiver appointed for all of the Property of the Corporation and each other Obligated Issuer pending such action or proceeding with such powers as the court making such appointment shall confer.

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In addition, immediately upon the occurrence of an Event of Default summarized in clause (a) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default,” the Corporation and each other Obligated Issuer shall deposit all of their respective Pledged Revenues with the Master Trustee daily until the arrears which caused the Event of Default are satisfied. At the discretion of the Master Trustee, all or any portion of such Pledged Revenues may be released to the Corporation and each other Obligated Issuer to pay the expenses of operating their respective Facilities.

Additional Remedies and Enforcement of Remedies

(a) Upon the occurrence and continuance of any Event of Default summarized in clauses (a) through (f) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default” (as amended in the Third Supplement to refer to clauses (a) through (h)), the Master Trustee may, and upon the written request of the Holders of not less than 25% in aggregate principal amount of the Notes then Outstanding, together with indemnification of the Master Trustee to its satisfaction therefor, shall proceed forthwith to protect and enforce its rights and the rights of the Holders under the Master Indenture by such suits, actions or proceedings as the Master Trustee, being advised by counsel, shall deem expedient, including but not limited to:

(i) Enforcement of the rights of the Holders to collect and enforce the payment of amounts due or becoming due under the Notes and the Master Indenture, including the joint and several liability of the Obligated Issuers for the payment of principal and interest and Interest Rate Agreement Payments on Outstanding Notes;

(ii) Suit upon all or any part of the Notes;

(iii) Civil action to require any Person holding moneys, documents or other Property pledged to secure payment of amounts due or to become due on the Notes to account as if it were the trustee of an express trust for the Noteholders;

(iv) Civil action to enjoin any acts or things which may be unlawful or in violation of the rights of the Noteholders and to compel the performance of any action required by the Master Indenture;

(v) Upon bringing any such suit or other proceeding, as a matter of right and without notice or giving bond, to the extent permitted by law, have a receiver appointed of all or any part of the Property of any Obligated Issuer pending such suit or other proceeding with such powers as the court making such appointment shall confer; and

(vi) Enforcement of any other rights or remedy of the Noteholders conferred by law or equity or by the Master Indenture or by the Master Mortgage including, without limitation, foreclosure upon the Master Mortgage and exercise of remedies of a secured party under Article 9 of the Uniform Commercial Code with respect to personal property pledged to secure Notes and the Master Indenture.

(b) Regardless of the happening of an Event of Default, the Master Trustee may, and if requested in writing by the Holders of not less than 25% in aggregate principal amount of the Notes then Outstanding, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (i) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation of the Master Indenture, or (ii) to preserve or protect the interests of the Noteholders, provided that such request and the action to be taken by the Master Trustee are not in conflict with any applicable law or the provisions of the Master Indenture and, in the sole judgment of the Master Trustee, not unduly prejudicial to the interest of the Noteholders not making such request.

Suit by Trustee

All rights of action and rights to assert claims under any Note may be enforced by the Master Trustee without the possession of such Note in any trial or other proceedings instituted by the Master Trustee. In any proceedings brought by the Master Trustee (and also any proceedings involving the interpretation of any provision of the Master Indenture to which the Master Trustee shall be a party) the Master Trustee shall be held to represent all the holders of Notes, and it shall not be necessary to make any holders of Notes parties to such proceedings.

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Application of Moneys Collected

Any amounts collected by the Master Trustee shall be applied, for the equal and ratable benefit of the holders of Notes of all series then due and payable by acceleration or otherwise in the order following, at the date or dates fixed by the Master Trustee for the distribution of such moneys, upon presentation of such Notes and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

(a) to the payment of costs and expenses of collection, and of all amounts payable to the Master Trustee pursuant to the Master Indenture;

(b) to fund any deficiency in any fund or account created by a Related Bond Indenture or otherwise to provide for the payment of amounts required to be paid to the United States pursuant to Section 148 of the Code with respect to any Related Bonds if doing so will prevent owners or holders of the Related Bonds from losing the ability to exclude from their gross incomes interest paid on the Related Bonds for federal income tax purposes;

(c) unless the principal of all of the Notes shall have become or shall have been declared due and payable, all such moneys shall be applied in the following order:

FIRST: to the payment to the persons entitled thereto of all installments of interest and scheduled payments on Interest Rate Agreements then due and payable in the order in which such installments shall have become due and payable 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 preference except as to any difference in the respective rates of interest specified in the Notes; and

SECOND: to the payment to the persons entitled thereto of the unpaid principal of and termination payments on (in the case of Interest Rate Agreements authenticated as Notes under the Master Indenture or secured by Notes under the Master Indenture) any of the Notes which shall have become due and payable (other than Notes previously called for redemption for the payment of which moneys are held pursuant to the provisions of the Master Indenture) in the order of their due dates, and, if the amount available shall not be sufficient to pay in full such amounts due and payable on any particular date, then to the payment of such amounts, ratably, according to the amount of such amounts due on that date, to the persons entitled thereto without any discrimination or preference; and

(d) if the principal of and termination payments on (in the case of Interest Rate Agreements authenticated as Notes under the Master Indenture or secured by Notes under the Master Indenture) all the Notes shall have become or shall have been declared due and payable, moneys shall be applied to the payment of the principal and interest and Interest Rate Agreement Payments then due and unpaid upon the Notes, (other than for Notes previously called for redemption for the payment of which moneys are held pursuant to the provisions of the Master Indenture) without preference or priority of any principal, termination payments (in the case of Interest Rate Agreements authenticated as Notes under the Master Indenture or secured by Notes under the Master Indenture), interest or Interest Rate Agreement Payments over any of the other of such amounts, or of any installment of any such amounts over any other installment of any such amounts, or of any Note over any other Note, ratably, according to the amounts due respectively for such amounts, to the persons entitled thereto without any discrimination or preference except as to any differences in the respective rates of interest specified in the Notes;

(e) to the payment of any other sums required to be paid by the Corporation or any other Obligated Issuer pursuant to any provisions of the Master Indenture or any of the Notes; and

(f) to the payment of the remainder, if any, to the Obligated Issuers, their successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

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Suit by Noteholders

Unless otherwise provided in the applicable Supplemental Master Indenture, no Noteholder shall have any right by virtue of any provision of the Master Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to the Master Indenture or for the appointment of a receiver or trustee, or any other remedy under the Master Indenture, unless such Noteholder previously shall have given to the Master Trustee written notice of default and of the continuance thereof, as provided in the Master Indenture, and unless also the Holders of not less than 25% in aggregate principal amount of all series of Notes then Outstanding shall have made written request upon the Master Trustee to institute such action, suit or proceeding in its own name as Master Trustee under the Master Indenture and shall have offered to the Master Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Master Trustee, for 30 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction inconsistent with such written request shall have been given to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Direction of Proceedings and Waiver of Defaults by Noteholders;” it being understood and intended, and being expressly covenanted by the taker and Holder of a Note with every other taker and Holder of a Note and the Master Trustee, that no one or more Noteholders shall have any right in any manner whatever by virtue or by availing of any provision of the Master Indenture to affect, disturb or prejudice the rights of any other Noteholders or to obtain or seek to obtain priority over or preference to any other such Noteholder, or to enforce any right under the Master Indenture, except in the manner in the Master Indenture provided and for the equal, ratable and common benefit of all Noteholders. For the protection and enforcement of the provisions of the Master Indenture summarized under this heading, each and every Noteholder and the Master Trustee shall be entitled to such relief as can be given either at law or in equity.

The Noteholder instituting a suit, action or proceeding in compliance with the provisions of the Master Indenture summarized under this heading shall be entitled in such suit, action or proceeding to such amounts as shall be sufficient to cover the costs and expenses of collection, including, to the extent permitted by applicable law, a reasonable compensation to its attorneys.

Notwithstanding any other provisions in the Master Indenture, the right of a Noteholder to receive payment of the principal of and interest and Interest Rate Agreement Payments on such Note, on or after the respective due dates expressed in such Note, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Noteholder.

Direction of Proceedings and Waiver of Defaults by Noteholders

The Holders of a majority in aggregate principal amount of Notes then Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Master Trustee, or exercising any trust or power conferred on the Master Trustee; provided, however, that, subject to the Master Indenture, the Master Trustee shall have the right to decline to follow any such direction if the Master Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken, or if the Master Trustee in good faith shall, by a Responsible Officer or Officers of the Master Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability, and provided further that nothing in the Master Indenture shall impair the right of the Master Trustee in its discretion to take any action deemed proper by the Master Trustee and which is not inconsistent with such direction by the Noteholders.

Prior to the declaration of the maturity of Notes pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Remedies for Certain Defaults,” the Holders of 25% or more in aggregate principal amount of Notes then Outstanding may on behalf of the Holders of all Notes waive any past Event of Default and its consequences, except a default in the payment of the principal of or interest or Interest Rate Agreement Payments on such Notes or in respect of a covenant or provision of the Master Indenture which under the Master Indenture cannot be modified or amended without the consent of all the Holders of such Notes then Outstanding. In the case of any such waiver the Corporation, each other Obligated Issuer, the Master Trustee and the Noteholders of all series shall be restored to their former positions and rights under the Master Indenture, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

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Remedies Cumulative

No remedy in the Master Indenture conferred upon or reserved to the Master Trustee or the Noteholders entitled to the benefits of the Master Indenture is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative, and shall be in addition to every other remedy given under the Master Indenture or now or hereafter existing at law or in equity or by statute; and the employment of any remedy under the Master Indenture or otherwise, shall not prevent the concurrent employment of any other appropriate remedy or remedies.

Notice of Default

The Master Trustee shall, within 10 days after the occurrence of an Event of Default, mail to all Noteholders as the names and addresses of such Noteholders appear in the Note Register notice of such Event of Default known to the Master Trustee, unless such Event of Default shall have been cured before the giving of such notice (the term “Event of Default” for the purposes of the provisions of the Master Indenture summarized under this heading being defined to be the events specified under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default” not including any periods of grace provided for under said heading) and provided that, except in the case of default in the payment of the principal of or premium, if any, or interest and Interest Rate Agreement Payments on any of the Notes and the Events of Default specified in clauses (d) and (e) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default,” the Master Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Master Trustee in good faith determines that the withholding of such notice is in the interest of the Noteholders.

Resignation, Removal and Successor Trustee

The Master Trustee may resign at any time without cause by giving at least 30 days’ prior written notice to the Obligated Issuers and to each Noteholder, as the names and addresses of such Noteholders appear on the register maintained pursuant to the Master Indenture, such resignation to be effective upon the acceptance of such trusteeship by a successor. In addition, the Master Trustee may be removed without cause at the direction of the Corporation (so long as no Event of Default under the Master Indenture has occurred and is continuing, and no event has occurred which, with the giving of notice or the passage of time or both, will become an Event of Default) or the Holders of more than 50% in aggregate principal amount of Notes then Outstanding, delivered to the Obligated Issuers and the Master Trustee, and the Master Trustee shall promptly give notice thereof in writing to each Noteholder as provided above. Such removal of the Master Trustee shall not be effective until the acceptance of such trusteeship by a successor. In the case of the resignation or removal of the Master Trustee, a successor Trustee may be appointed at the direction of the Corporation (so long as no Event of Default under the Master Indenture has occurred and is continuing, and no event has occurred which, with the giving of notice or the passage of time or both, will become an Event of Default) or, if an Event of Default under the Master Indenture has occurred and is continuing or an event has occurred which with the giving of notice or the passage of time or both will become an Event of Default, the Holders of more than 50% in aggregate principal amount of Notes then Outstanding. If a successor Trustee shall not have been appointed within 30 days after such notice of resignation or removal, the Master Trustee, the Corporation, any other Obligated Issuer or any Noteholder may apply to any court of competent jurisdiction to appoint a successor to act until such time, if any, as a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided.

Evidence of Action by Noteholders; Related Bondholders Deemed Noteholders

Whenever in the Master Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of Notes may take any action (including the making of any demand or request, the giving of any notice, consent, or waiver or the taking of any other action), (i) the fact that at the time of taking any such action the Holders of such specified percentage have joined therein shall be evidenced by any instrument or any number of instruments of similar tenor executed by such Holders in person or by agent or proxy appointed in writing and (ii) subject to the provisions of any Supplemental Master Indenture to the contrary, in determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in taking any such action, Notes owned or held by a Related Bond Trustee as security for the payment of Related Bonds shall be disregarded and deemed not Outstanding for the purposes of such determination and each Holder of such a Related Bond then outstanding under

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the Related Bond Indenture shall, for the purposes of such determination, be deemed to hold a Note then Outstanding in a principal amount equal to the aggregate principal amount of such Related Bonds then Outstanding. For the purposes of the Master Indenture, unless a Related Bond Trustee elects to the contrary or contrary provision is made in a Related Bond Indenture or any Supplemental Master Indenture, each Related Bond Trustee shall be deemed the holder of the Note or Notes pledged to secure the Related Bonds with respect to which such Related Bond Trustee is acting as trustee. If such a Related Bond Trustee so elects or the Related Bond Indenture so provides, the holders of each series of Related Bonds shall be deemed the holders of the Notes to the extent of the principal amount of the Notes to which their Bonds relate.

Supplemental Master Indentures without Consent of Noteholders

(a) The Corporation, when authorized by its Board of Directors, and each other Obligated Issuer, and the Master Trustee may from time to time and at any time enter into one or more Supplemental Master Indentures for one or more of the following purposes:

(i) to evidence the succession of another corporation to the Corporation or any other Obligated Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Corporation or any other Obligated Issuer pursuant to the Master Indenture;

(ii) to add to the covenants of the Corporation or any other Obligated Issuer such further covenants, restrictions or conditions as the Master Trustee shall consider to be for the protection of the holders of Notes issued under the Master Indenture, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions an Event of Default permitting the enforcement of all or any of the several remedies provided in the Master Indenture as in the Master Indenture set forth; provided, however, that in respect of any such additional covenant, restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Master Trustee upon such default;

(iii) to cure any ambiguity or to correct or supplement any provision contained in the Master Indenture or in any Supplemental Master Indenture which may be defective or inconsistent with any other provision contained in the Master Indenture or in any Supplemental Master Indenture, or to make any other changes that, in the Master Trustee’s judgment, shall not impair the security of the Master Indenture or adversely affect the interest of the Noteholders;

(iv) to modify or supplement the Master Indenture in such manner as may be necessary or appropriate to qualify the Master Indenture under the Trust Indenture Act of 1939 as then amended (the “1939 Act”), or under any similar federal statute hereafter enacted, or as may be necessary to comply with any applicable state securities laws which require the Master Indenture to comport with any requirements of the 1939 Act regardless of the applicability of the 1939 Act to the Master Indenture, including provisions whereby the Master Trustee accepts such powers, duties, conditions and restrictions under the Master Indenture and the Corporation and each other Obligated Issuer undertakes such covenants, conditions or restrictions additional to those contained in the Master Indenture as would be necessary or appropriate so to qualify the Master Indenture or so to comply with such state securities laws;

(v) to provide for the issuance of additional Notes pursuant to the Master Indenture;

(vi) to add new Obligated Issuers, pursuant to the Master Indenture and, if applicable, to add details with respect to existing Liens applicable to the new Obligated Issuers, pursuant to the provisions of the Master Indenture summarized in clause (vii) of paragraph (b) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Restrictions as to Creation of Liens;” and

(vii) to evidence the withdrawal of Obligated Issuers pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – The Obligated Group.”

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(b) The Master Trustee is authorized by the Master Indenture to join with the Corporation and each other Obligated Issuer in the execution of any Supplemental Master Indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, mortgage, pledge or assignment of any Property thereunder, but the Master Trustee shall not be obligated to enter into any such Supplemental Master Indenture that affects the Master Trustee’s own rights, duties or immunities under the Master Indenture or otherwise.

(c) Any Supplemental Master Indenture authorized by the provisions of the Master Indenture summarized under this heading may be executed by the Corporation, by each other Obligated Issuer without adoption of resolutions by the Governing Body of such other Obligated Issuers, and by the Master Trustee without the consent of the Noteholders, notwithstanding any of the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Supplemental Master Indentures with Consent of Noteholders.”

Supplemental Master Indentures with Consent of Noteholders

With the consent (evidenced as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Evidence of Action by Noteholders; related Bondholders Deemed Noteholders”) of consent of the Holders of not less than a majority in aggregate principal amount of Notes then Outstanding, the Corporation and each other Obligated Issuer, when authorized by resolution of the Board of Directors and the Governing Bodies, respectively, and the Master Trustee may from time to time and at any time enter into a Supplemental Master Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Master Indenture or of any Supplemental Master Indenture or of modifying in any manner the rights of the Noteholders; provided, however, that no such Supplemental Master Indenture shall, (i) without the consent of the Holders of all Notes then Outstanding which are affected thereby, (A) effect a change in the times, amounts or currency of payment of the principal of, premium, if any, or interest and Interest Rate Agreement Payments on any Note or a reduction in the principal or notional amount or redemption price of any Note or the rate of interest thereon, or rates established in an Interest Rate Agreement or any other amounts payable thereon, (B) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such Supplemental Master Indenture or (C) except as otherwise provided in the Master Indenture, permit the preference or priority of any Note or Notes over any other Note or Notes or (ii) release any portion of the Master Trust Estate or any other collateral given to secure the Notes except as specifically provided in the documents pursuant to which the interest in the collateral is given.

Upon the request of the Corporation and each other Obligated Issuer, accompanied by a copy of a resolution of each Governing Body certified by the Secretary or an Assistant Secretary of each Obligated Issuer authorizing the execution of any such Supplemental Master Indenture, and upon the filing with the Master Trustee of evidence of the consent of the Noteholders as aforesaid, the Master Trustee shall join with the Corporation and each other Obligated Issuer in the execution of such Supplemental Master Indenture unless such Supplemental Master Indenture affects the Master Trustee’s own rights, duties or immunities under the Master Indenture or otherwise, in which case the Master Trustee may in its discretion, but shall not be obligated to, enter into such Supplemental Master Indenture.

It shall not be necessary for the consent of the Noteholders pursuant to the provisions of the Master Indenture summarized under this heading to approve the particular form of any proposed Supplemental Master Indenture, but it shall be sufficient if such consent shall approve the substance thereof.

Promptly after the execution by the Corporation, each other Obligated Issuer and the Master Trustee of any Supplemental Master Indenture pursuant to the provisions of the Master Indenture summarized under this heading, the Corporation shall notify each Noteholder, setting forth in general terms the substance of such Supplemental Master Indenture. Any failure of the Corporation to provide such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Master Indenture.

Supplemental Master Indentures Creating Series of Notes

The Corporation or any other Obligated Issuer, when authorized by a resolution of the Governing Body of the entity planning to create a series of Notes, and the Master Trustee may from time to time enter into a

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Supplemental Master Indenture in order to create a series of Notes. Such Supplemental Master Indenture shall, with respect to the series of Notes created thereby, set forth the date thereof, and the date or dates upon which principal of and premium, if any, and interest and Interest Rate Agreement Payments on such Notes shall be payable, and shall contain such other terms and provisions as shall be established in the Supplemental Master Indenture. Any Supplemental Master Indenture authorized by the provisions of the Master Indenture summarized under this heading may be executed without the consent of the Noteholders, notwithstanding the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Supplemental Master Indentures with Consent of Noteholders.”

Conditions to Issue of Notes

With respect to each series of Notes, simultaneously with or prior to the execution, authentication and delivery of such Notes pursuant to the Master Indenture: (a) all requirements and conditions to the issuance of such Notes, if any, set forth in the Supplemental Master Indenture shall have been complied with and satisfied; (b) the Issuer of such Notes shall have delivered to the Master Trustee an Opinion of Counsel to the effect that registration of such Notes under the Securities Act of 1933, as amended, is not required, or, if such registration is required, that the Obligated Issuers have complied with all applicable provisions of said Act; and (c) the Corporation and the applicable Obligated Issuer shall have delivered to the Master Trustee an Officer’s Certificate stating that, to the best of the knowledge of the signer thereof, each of the persons in whose name such a Note is to be registered upon the original issuance thereof is not acquiring the interest represented by such a Note directly or indirectly with the assets of, or in connection with any arrangement or understanding by it in any way involving any employee benefit plan with respect to which (i) any employee of any Obligated Issuer or the Master Trustee, in its individual capacity, is a participant or (ii) any Obligated Issuer or the Master Trustee, in its individual capacity, or any of their affiliates is otherwise a party in interest, all within the meaning of the Employee Retirement Income Security Act of 1974, as amended.

The Obligated Group

Becoming an Obligated Issuer and Member of the Obligated Group. Subject to meeting the criteria with respect to acceptance summarized under the subheading “Acceptance as an Obligated Issuer” below, any Person may, with the consent of the Corporation, become an Obligated Issuer and a member of the Obligated Group.

Acceptance as an Obligated Issuer. Prior to becoming an Obligated Issuer under the Master Indenture, a Person shall in each case deliver to the Master Trustee and each Related Issuer a written instrument in the form of the Acceptance of a New Obligated Issuer attached to the Master Indenture. In addition, a Person may not become an Obligated Issuer unless the Corporation shall deliver to the Master Trustee an Officer’s Certificate to the effect that: (a) giving effect to the proposed inclusion of the Obligated Issuer at the beginning of the most recently completed Fiscal Year for which audited financial statements have been delivered to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information,” (i) the Historical Debt Service Coverage Ratio of the Obligated Group, taking the Person becoming an Obligated Issuer into account, would be not less than 1.20:1 and (ii) the Obligated Group would be in compliance with the Liquidity Requirement summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Liquidity Covenant” based on the most recent audited financial statements delivered to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information” or that the number of Days Cash on Hand of the Obligated Group, taking the Person becoming an Obligated Issuer into account, is greater than the number of Days Cash on Hand would be without such Person becoming an Obligated Issuer; (b) giving effect to the inclusion of the proposed Obligated Issuer, no Event of Default would occur and be continuing under the Master Indenture or any Related Bond Indenture; and (c) if any Related Bonds were rated by a Rating Agency prior to the Person becoming a member of the Obligated Group, evidence from such Rating Agency, satisfactory to the Master Trustee, that the rating(s) on such Related Bonds will not be reduced or withdrawn as a result of such Person becoming an Obligated Issuer.

Each such Acceptance shall be accompanied by a Supplemental Master Indenture duly executed and delivered pursuant to the provisions of the Master Indenture summarized in clause (vi) of the first paragraph under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Supplemental Master

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Indentures without Consent of Noteholders” and by an Opinion of Counsel, addressed to and reasonably satisfactory to the Master Trustee to the effect that all conditions precedent to the addition of a member to the Obligated Group, as set forth in the Master Indenture, have been satisfied, each such Person has the corporate power and authority to execute and deliver the Acceptance of a New Obligated Issuer and the Supplemental Master Indenture and to perform its obligations under such instruments and such instruments have been duly authorized, executed and delivered by such Person and constitute valid and binding obligations of each of such parties, enforceable in accordance with their terms, except as limited by bankruptcy laws, insolvency laws and other similar laws affecting creditors’ rights generally.

It shall be a condition precedent to the consummation of any transaction involving an instrument to be executed and delivered to the Master Trustee in accordance with the provisions of the Master Indenture summarized under this subheading and under the subheading “Becoming an Obligated Issuer and Member of the Obligated Group” that the Master Trustee shall also have received upon request by the Master Trustee an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that the consummation of such transaction would not adversely affect the exclusions under the Code of the interest payable on any issue of Related Bonds then outstanding from the gross income of the owners of the Related Bonds for federal income tax purposes.

Upon consummation of any transaction in accordance with the provisions of the Master Indenture summarized under this subheading and under the subheading “Becoming an Obligated Issuer and Member of the Obligated Group,” (i) Annex II to the Master Indenture is amended to include a description of any existing liens to be included as Permitted Encumbrances of the type described in clauses (vi), (vii) and (xiv) of the definition thereof and (ii) Annex III of the Master Indenture is amended to include a description of the Property of the Person becoming an Obligated Issuer which is to be considered Excluded Property (provided that such Property may be treated as Excluded Property only if such Property is real or tangible personal property and the primary operations of such Person are not conducted upon such real property).

Effects of Becoming an Obligated Issuer. Upon any Person becoming an Obligated Issuer as summarized under the subheading “Becoming an Obligated Issuer and Member of the Obligated Group,” (i) the Person shall be jointly and severally liable for the payment of principal and interest and Interest Rate Agreement Payments on all of the Outstanding Notes and (ii) the Person shall be required to perform the various covenants applicable to Obligated Issuers contained in the Master Indenture.

Obligated Issuer Remains an Obligated Issuer. A Person becoming an Obligated Issuer pursuant to the provisions of the Master Indenture summarized under the subheading “Becoming an Obligated Issuer and Member of the Obligated Group” shall remain an Obligated Issuer until such time as the Master Indenture shall be discharged pursuant to the Master Indenture or is permitted to withdraw pursuant to the provisions of the Master Indenture summarized under the subheading “Withdrawal of Obligated Issuers” below.

Withdrawal of Obligated Issuers. An Obligated Issuer may not withdraw from the terms of the Master Indenture and the obligation of such Obligated Issuer under the Master Indenture unless, in each case, the Obligated Issuer shall deliver to the Master Trustee and each Related Issuer a written instrument in the form of a Withdrawal of an Obligated Issuer attached to the Master Indenture. In addition an Obligated Issuer may not withdraw unless the Corporation shall deliver to the Master Trustee an Officer’s Certificate to the effect that: (a) giving effect to the proposed withdrawal of the Obligated Issuer, as if such withdrawal had occurred at the beginning of the most recently completed Fiscal Year for which audited financial statements have been delivered to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information,” (i) the Historical Debt Service Coverage Ratio of the Obligated Group, taking such cessation into account, would be not less than 1.20:1 and (ii) the Obligated Group would be in compliance with the Liquidity Requirement summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Liquidity Covenant” based on the most recent audited financial statements delivered to the Master Trustee pursuant to the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Filing of Financial Statements, Certificate of No Default, Other Information” or that the number of Days Cash on Hand of the Obligated Group, taking such cessation into account, is greater than the number of Days Cash on Hand would be immediately prior to such cessation; and (b) giving effect to the proposed withdrawal of the Obligated Issuer, no Event of Default would occur and be continuing under the Master Indenture or any Related Bond Indenture; and (c) the Obligated Issuer proposing to

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withdraw has no series of Notes Outstanding or any such Note has been reissued or assumed by an Obligated Issuer which is not withdrawing in accordance with the provisions of the Master Indenture as if it were new Indebtedness and all applicable provisions of law pursuant to which the Note and any other Indebtedness secured by the Note and any Related Bonds were issued or incurred; and (d) if any Related Bonds were rated by a Rating Agency prior to the Person withdrawing from the Obligated Group, evidence from such Rating Agency, satisfactory to the Master Trustee, that the rating(s) on such Related Bonds will not be reduced or withdrawn as a result of such Person withdrawing from the Obligated Group.

Each such withdrawal shall be accompanied by a Supplemental Master Indenture duly executed and delivered pursuant to the provisions of the Master Indenture summarized in clause (vii) of the first paragraph under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Supplemental Master Indentures without Consent of Noteholders and by an Opinion of Counsel, addressed to and reasonably satisfactory to the Master Trustee to the effect that all conditions precedent to the withdrawal of a member of the Obligated Group, as set forth in the Master Indenture, have been satisfied and that any reissued or assumed Note referred to in clause (c) under this heading is a valid and enforceable obligation under the terms of the Master Indenture.

Satisfaction and Discharge of the Master Indenture

If (i) all Notes theretofore authenticated (other than any Notes which shall have been mutilated, destroyed, lost or stolen and which shall have been replaced or paid as provided in the Master Indenture) and not theretofore canceled are delivered to the Master Trustee for cancellation, or (ii) all Notes not theretofore canceled or delivered to the Master Trustee for cancellation shall have become due and payable and payment thereof shall have been provided for by a deposit of money in accordance with the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Providing for Payment of Notes,” or (iii) the Corporation or any Obligated Issuer shall deposit with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between the Corporation or any Obligated Issuer and such bank or trust company in form acceptable to the Master Trustee) as trust funds the entire amount of moneys or Defeasance Obligations (as defined under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Providing for Payment of Notes”) or both which, together in the case of Defeasance Obligations with the income or increment to accrue thereon, will be sufficient to pay at maturity or upon redemption, or termination in the case of Interest Rate Agreements authenticated as Notes under the Master Indenture secured by Notes under the Master Indenture, or combination of payment, redemption and termination, all Notes not theretofore canceled or delivered to the Master Trustee for cancellation, including principal and interest and Interest Rate Agreement Payments due or to become due to such date of maturity, redemption or termination or combination thereof, as the case may be, and if in any such case the Corporation or any Obligated Issuer shall also pay or cause to be paid all other sums payable under the Master Indenture by the Corporation or any Obligated Issuer, then the Master Indenture, shall cease to be of further effect, and the Master Trustee, on demand of the Corporation or any Obligated Issuer, and at the cost and expense of the Corporation and the Obligated Issuers, shall execute proper instruments acknowledging satisfaction of and discharging the Master Indenture. The Corporation and each Obligated Issuer agrees in the Master Indenture to reimburse the Master Trustee for any costs of expenses theretofore and thereafter reasonably and properly incurred by the Master Trustee in connection with the Master Indenture or such Notes.

Providing for Payment of Notes

Payment of one or more series of, but less than all, Notes may be provided for by the deposit with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between the Corporation or any Obligated Issuer and such bank or trust company in form acceptable to the Master Trustee) as trust funds of moneys or Defeasance Obligations or both. The moneys and the maturing principal and interest income on such Defeasance Obligations, if any, shall be sufficient, as evidenced by a certificate of independent certified public accountants acceptable to the Master Trustee, to pay the principal of and interest or Interest Rate Agreement Payments on such Notes. The moneys and Defeasance Obligations shall be held by the Master Trustee or other bank or trust company irrevocably in trust for the holders of such Notes solely for the purpose of paying the principal of and interest or Interest Rate Agreement Payments on such Notes as the same shall mature, come due or become payable upon prior redemption, and, if applicable, upon simultaneous direction, expressed to be irrevocable, to the Master Trustee as to the dates upon which any such Notes are to be redeemed prior to their respective maturities.

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As used in the Master Indenture, Defeasance Obligations shall mean non-callable: (a) direct general obligations of, or obligations the payment of principal and interest on which is unconditionally guaranteed by, the United States of America; (b) evidences of ownership of proportionate interests in future interest and principal payments on specified obligations described in (a) held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor on the underlying obligations described in (a), and which underlying obligations are not available to satisfy any claim of the custodian or any person claiming through the custodian or to whom the custodian may be obligated; (c) evidences of indebtedness issued by any of the following: Bank for Cooperatives; Federal Home Loan Banks, Federal Home Loan Mortgage Corporation (including participation certificates); Federal Land Banks; Federal Financing Banks; or any other agency or instrumentality of the United States of America created by an act of Congress which is substantially similar to the foregoing in its legal relationship to the United States of America; (d) debt obligations, whether or not interest thereon is exempt from federal income taxes, which, at the time of deposit, are rated by Moody’s and Standard & Poor’s in the highest long-term debt rating category of such rating agency or, if such debt obligations are then being rated by Moody’s or Standard & Poor’s but not both, are rated by Moody’s or Standard & Poor’s in the highest long-term debt rating category of such rating agency, without regard to any refinement or gradation of such rating category by numerical modifier or otherwise; provided, that if any Note or Related Bond being provided for is then rated by Moody’s or Standard & Poor’s, the obligations deposited must be rated by each rating agency having a rating in effect on such Notes or Related Bonds in a rating category no lower than that in effect on such Notes or Related Bonds; and (e) Obligations described in Section 103(a) of the Code, provision for the payment of the principal of, premium, if any, and interest on which shall have been made by the irrevocable deposit with a bank or trust company acting as a trustee or escrow agent for holders of such obligations of securities described in clauses (a) or (b) the maturing principal of and interest on which, when due and payable, will provide sufficient moneys to pay when due the principal of, premium, if any, and interest on such obligations, and which securities described in clauses (a) or (b) are not available to satisfy any other claim, including any claim of the trustee or escrow agent or of any person claiming through the trustee or escrow agent or to whom the trustee or escrow agent may be obligated, including in the event of the insolvency of the trustee or escrow agent or proceedings arising out of such insolvency.

Notwithstanding the foregoing provisions of the Master Indenture summarized under this heading, the Supplemental Master Indenture or Related Bond Indenture pursuant to which a Series of Notes or Related Bonds, respectively, is issued may preclude providing for the payment thereof through the deposit of one or more types of Defeasance Obligations described in the preceding paragraph, and as to such Series of Notes or Related Bonds, respectively, the provisions of such Supplemental Master Indenture or Related Bond Indenture shall control.

If payment of a Series of Notes is provided for in compliance with the provisions of the Master Indenture summarized under this heading, the Master Trustee shall mail a notice so stating to each Holder of a registered Note so provided for.

Notes the payments of which has been provided for in accordance with the provisions of the Master Indenture summarized under this heading shall no longer be deemed Outstanding under the Master Indenture or secured by the Master Indenture, and the Holders thereof shall thereafter be entitled to payment only from the moneys or obligations deposited in trust to provide for the payment of such Notes.

Payment of Notes after Discharge of Lien

Notwithstanding the discharge of the lien of the Master Indenture, the Master Trustee shall nevertheless retain such rights, powers and duties under the Master Indenture as may be necessary and convenient for the payment of amounts due or to become due on the Notes and the registration, transfer, exchange and replacement of Notes as provided in the Master Indenture. Nevertheless, any moneys held by the Master Trustee or any paying agent for the payment of amounts due on any Note remaining unclaimed for five years after the principal of and Interest Rate Agreement Payments on all Notes has become due and payable, whether at maturity or upon proceedings for redemption or by declaration as provided in the Master Indenture, shall then be paid to the respective Obligated Issuers and the Holders of any Notes not theretofore presented for payment shall thereafter be entitled to look only to the Obligated Group for payment thereof and all liability of the Master Trustee or any paying agent with respect to such moneys thereupon cease.

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Subordinated Indebtedness

In the provisions summarized below, the term “debentures” is, for convenience, used to designate the instruments issued to evidence subordinated indebtedness.

All debentures issued under the Master Indenture shall be issued subject to the following provisions and each person taking or holding any such debenture whether upon original issue or upon transfer or assignment thereof accepts and agrees to be bound by such provisions.

All debentures issued under the Master Indenture shall, to the extent and in the manner set forth in the Master Indenture, be subordinated as set forth in the Master Indenture to all Superior Indebtedness as defined under this heading. For all purposes under this heading the term “Superior Indebtedness” shall mean all payment obligations under the Master Indenture, as from time to time heretofore or hereafter amended and supplemented, any Notes issued thereunder and all other Indebtedness (as defined therein) specifically made superior to all debentures issued under the Master Indenture.

No payment on account of principal, premium, if any, sinking funds or interest on the debentures shall be made, nor shall any property or assets be applied to the purchase or other acquisition or retirement of the debentures, unless full payment of amounts then due and payable for principal, premium, if any, sinking funds and interest on Superior Indebtedness has been made or duly provided for in accordance with the terms of such Superior Indebtedness. No payment on account of principal, premium, if any, sinking funds or interest on the debentures shall be made, nor shall any property or assets be applied to the purchase or other acquisition or retirement of the debentures, if, at the time of such payment application or immediately after giving effect thereto, (i) there shall exist a default of the issuer of the debentures in the payment of principal, premium, if any, sinking funds or interest with respect to any Superior Indebtedness, or (ii) there shall have occurred an event of default (other than a default in the payment of principal, premium, if any, sinking funds or interest) of the issuer of the debentures with respect to any Superior Indebtedness, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof and written notice of such occurrence shall have been given to the issuer of the debentures pursuant to the instrument under which such Superior Indebtedness is outstanding and such event of default shall not have been cured or waived or shall not have ceased to exist.

Upon (i) any acceleration or maturity of the principal amount due on the debentures or (ii) any payment or distribution of any kind or character, whether in cash, property or securities, upon any dissolution or winding-up or total or partial liquidation, reorganization or arrangement of the issuer of the debentures, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due from the issuer of the debentures upon all Superior Indebtedness, shall first be paid in full, or payment thereof provided for in accordance with the terms of such Superior Indebtedness, before any payment is made on account of the principal, premium, if any, or interest on the indebtedness evidenced by the debentures, and upon any such dissolution or winding-up or liquidation, reorganization or arrangement, any payment or distribution of any kind or character, whether in cash, property or securities, to which the holders of the debentures or the Master Trustee under the Master Indenture would be entitled, except for the provisions of the Master Indenture, shall be paid by the issuer of the debentures, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, to the Master Trustee with respect to any Notes issued under the Master Indenture, and to the creditor of any other Superior Indebtedness, on a pro rata basis, to the extent necessary to pay all Superior Indebtedness of the issuer of the debentures in full after giving effect to any concurrent payment or distribution to the Master Trustee or other creditor of Superior Indebtedness for the holders of Superior Indebtedness, before any payment or distribution is made to the holders of the indebtedness evidenced by the debentures or to the Master Trustee under the Master Indenture.

In the event that, in violation of any of the foregoing provisions, any payment or distribution of any kind or character, whether in cash, property or securities, shall be received by the Master Trustee under the Master Indenture or by the holders of the debentures before all Superior Indebtedness then due from the issuer of the debentures is paid in full or provision is made for such payment in accordance with the terms of such Superior Indebtedness, such payment or distribution shall be held in trust for the benefit of, and

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shall be paid over or delivered to the Master Trustee, with respect to Notes issued under the Master Indenture, and by the creditor of any other Superior Indebtedness, on a pro rata basis, for application to the payment of all Superior Indebtedness remaining unpaid to the extent necessary to pay all such Superior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to the Master Trustee or other creditor of Superior Indebtedness for the holders of such Superior Indebtedness.

No present or future holder of Superior Indebtedness shall be prejudiced in his right to enforce subordination of the indebtedness evidenced by the debentures by any act or failure to act on the part of the issuer of the debentures or any one in custody of its assets or property.

The foregoing subordination provisions shall be for the benefit of the holders of Superior Indebtedness and may be enforced by the Master Trustee or other creditor of Superior Indebtedness against the holders of debentures or any trustee therefor; provided, however, that the indentures or other instruments creating or evidencing Subordinated Indebtedness or pursuant to which any Subordinated Indebtedness is issued shall provide: (i) that the foregoing provisions are solely for the purpose of defining the relative rights of the holders of “Superior Indebtedness” (as defined therein) on the one hand and the holders of the Subordinated Indebtedness on the other hand, and that nothing therein shall impair, as between the issuer of the debentures and the holders of the Subordinated Indebtedness, the obligation of the issuer of the debentures, which is unconditional and absolute, to pay to the holders thereof the principal thereof, premium, if any, and interest thereon in accordance with its terms, nor shall anything therein prevent the holders of the Subordinated Indebtedness or any trustee on their behalf from exercising all remedies otherwise permitted by applicable law or under such Subordinated Indebtedness upon default thereunder, subject to the rights set forth above of the holders of “Superior Indebtedness” to receive cash, property or securities otherwise payable or deliverable to the holders of the Subordinated Indebtedness, (ii) that upon payment or distribution of assets of the issuer of the debentures of the character referred to in the fourth paragraph of the foregoing provisions, the Master Trustee under any indenture relating to Subordinated Indebtedness shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding-up, liquidation, reorganization or arrangement proceedings are pending, and upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making any such payment or distribution, delivered to said trustee for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of “Superior Indebtedness” and other Indebtedness of the issuer of the debentures, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to the foregoing provisions, and (iii) that the Master Trustee under any indenture relating to Subordinated Indebtedness and any paying agent therefor shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by such trustee or such paying agent, unless and until such trustee or such paying agent, as the case may be, shall have received written notice thereof from the issuer of the debentures or from one or more holders of “Superior Indebtedness,” or from the Master Trustee.

SUMMARY OF CERTAIN PROVISIONS OF THE FIRST SUPPLEMENT

First Supplement Definitions

“First Supplement” means the First Supplemental Master Trust Indenture dated as of December 1, 2012 between the Corporation and the Master Trustee.

“Series 2012A Bonds” means the Wisconsin Health and Educational Facilities Authority Adjustable Rate Revenue Bonds, Series 2012A (Saint John’s Communities, Inc.).

“Series 2012A Master Note” means the Direct Note Obligation, Series 2012A, issued by the Corporation to the Wisconsin Health and Educational Facilities Authority.

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First Supplement Provisions

The purpose of the First Supplement is to provide for the issuance by the Corporation of its Series 2012A Master Note pursuant to the Master Indenture. The Series 2012A Master Note evidences the obligations of the Corporation to repay the Authority amounts loaned to the Corporation derived from the issuance of the Series 2012A Bonds. Under the terms of the First Supplement, BMO Harris Bank, N.A., the purchaser of the Series 2012A Bonds, for so long as it is the sole registered owner of the Series 2012A Bonds, is deemed the holder of the Series 2012A Master Note for all purposes under the Master Indenture.

SUMMARY OF CERTAIN PROVISIONS OF THE SECOND SUPPLEMENT

Second Supplement Definitions

“Second Supplement” means the Second Supplemental Master Trust Indenture dated as of December 1, 2015 between the Corporation and the Master Trustee.

“Series 2015 Master Notes” means, collectively, the Series 2015A Master Note and the Series 2015B Master Note.

“Series 2015A Bonds” means the Wisconsin Health and Educational Facilities Authority Adjustable Rate Revenue Bonds, Series 2015A (Saint John’s Communities, Inc.).

“Series 2015A Master Note” means the Direct Note Obligation, Series 2015A, issued by the Corporation to the Wisconsin Health and Educational Facilities Authority.

“Series 2015B Bonds” means the Wisconsin Health and Educational Facilities Authority Revenue Bonds, Series 2015B (Saint John’s Communities, Inc.)

“Series 2015B Master Note” means the Direct Note Obligation, Series 2015B, issued by the Corporation to the Wisconsin Health and Educational Facilities Authority.

Second Supplement Provisions

The purpose of the Second Supplement is to provide for the issuance by the Corporation of its Series 2015A Master Note and Series 2015B Master Note pursuant to the Master Indenture. The Series 2015A Master Note evidences the obligations of the Corporation to repay the Authority amounts loaned to the Corporation derived from the issuance of the Series 2015A Bonds. Under the terms of the Second Supplement, BMO Harris Bank, N.A., the purchaser of the Series 2015A Bonds, for so long as it is the sole registered owner of the Series 2015A Bonds, is deemed the holder of the Series 2015A Master Note for all purposes under the Master Indenture. The Series 2015B Master Note evidences the obligations of the Corporation to repay the Authority amounts loaned to the Corporation derived from the issuance of the Series 2015B Bonds.

Restatement of Master Indenture

With the deemed consent of the Holders of the Series 2015A Master Note and Series 2015B Master Note, which constitute not less than a majority in aggregate principal amount of Notes Outstanding under the Master Indenture as of their issuance date, and the written consent of the deemed Holder of the Series 2012A Master Note issued in connection with the Series 2012A Bonds, pursuant to the Second Supplement the Corporation and Master Trustee will amend and restate the Master Indenture. Upon the issuance of the Series 2015 Master Notes and receipt of all consents, Master Notes issued and Outstanding under the Master Indenture, including the Series 2012A Master Note, will be entitled to the benefits of, secured by, and governed by the terms of the amended and restated Master Indenture.

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SUMMARY OF CERTAIN PROVISIONS OF THE THIRD SUPPLEMENT

Third Supplement Definitions

“Third Supplement” means the Third Supplemental Master Trust Indenture dated as of April 1, 2018 between the Corporation and the Master Trustee.

“Series 2018 Master Notes” means, collectively, the Series 2018A Master Note and the Series 2018B Master Note.

“Series 2018A Bonds” means the Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project).

“Series 2018A Master Note” means the Promissory Note, Series 2018A, issued by the Corporation to the Wisconsin Health and Educational Facilities Authority.

“Series 2018B Bonds” means the Wisconsin Health and Educational Facilities Authority Adjustable Rate Revenue Bonds, Series 2018B (Saint John’s Communities, Inc. Project).

“Series 2018B Master Note” means the Promissory Note, Series 2018B, issued by the Corporation to the Wisconsin Health and Educational Facilities Authority.

Third Supplement Provisions

The purpose of the Third Supplement is to provide for the issuance by the Corporation of its Series 2018A Master Note and Series 2018B Master Note pursuant to the Master Indenture. The Series 2018A Master Note evidences the obligations of the Corporation to repay the Authority amounts loaned to the Corporation derived from the issuance of the Series 2018A Bonds. The Series 2018B Master Note evidences the obligations of the Corporation to repay the Authority amounts loaned to the Corporation derived from the issuance of the Series 2018B Bonds. Under the terms of the Second Supplement, BMO Harris Bank, N.A., the purchaser of the Series 2018B Bonds, for so long as it is the sole registered owner of the Series 2018B Bonds, is deemed the holder of the Series 2018B Master Note for all purposes under the Master Indenture.

Amendments to Master Indenture

Based on the written consent of the deemed Holder of the Series 2012A Master Note issued in connection with the Series 2012A Bonds and the deemed Holder of the Series 2015A Master Note issued in connection with the Series 2015A Bonds, which constitute not less than a majority in aggregate principal amount of Notes Outstanding under the Master Trust Indenture prior to the issuance date of the Series 2018 Master Notes, the Corporation and the Master Trustee amend Section 5.7 of the Master Trust Indenture to add additional language to the end of such Section as follows:

“Notwithstanding the foregoing, in the event that the Corporation or any other Obligated Issuer incurs Additional Indebtedness which is to be used, in whole or in part, for the construction or addition of facilities that will generate Entrance Fees (the “Project”), and the Initial Entrance Fees received from such Project financed in whole or in part with the proceeds of such Additional Indebtedness are to be applied to, or set aside for, the payment of principal on such Additional Indebtedness applicable to the Project, then solely for purposes of calculating the Historical Debt Service Coverage Ratio required by this Section 5.7, during an Exclusion Period, (i) the Initial Entrance Fees received and limited to the amount of the Additional Indebtedness shall be excluded from the calculation of Net Income Available for Debt Service and (ii) the payment of the portion of such Additional Indebtedness funded from the Initial Entrance Fees (whether through regularly scheduled payment, mandatory or optional redemption or otherwise) shall be excluded from the calculation of Debt Service. For purposes of this paragraph of Section 5.7, (a) an “Exclusion Period” shall mean the period commencing with the Fiscal Year of the date of incurrence of the Additional Indebtedness and ending with the first full Fiscal Year after the first to occur of (i) the final date the applicable Initial Entrance Fees to be applied to the payment of the Additional

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Indebtedness have been so applied to the payment of the principal of the Additional Indebtedness used to finance the Project and (ii) Stable Occupancy with respect to the Project, and (b) “Initial Entrance Fees” shall mean (i) the Entrance Fees received upon initial occupancy of any unit in the Project not previously occupied and (ii) any deposits received prior to initial occupancy which are credited against Entrance Fees due upon occupancy.

The foregoing paragraph shall be applicable solely for purposes of the Historical Debt Service Coverage Ratio requirement under this Section 5.7, and shall not be applicable to any other provisions of the Master Trust Indenture, including but not limited to, the provisions for the incurrence of Additional Indebtedness under Section 5.5 , the sale, lease or disposition of property under Section 5.8, the acceptance of an Obligated Issuer under Section 11.2 or the withdrawal of an Obligated Issuer under Section 11.5 hereof.”

As a condition to the purchase of the Series 2018A Bonds, certain modifications to the Master Trust Indenture have been requested. In order to accomplish the request, the Corporation and the Master Trustee agree that the Master Trust Indenture is amended as follows:

New Section 5.18 is added to the Master Trust Indenture, but only for so long as the Series 2018A Bonds and Series 2018A Master Note are Outstanding, as follows:

“Section 5.18. Selection of Independent Consultant. Upon selecting an Independent Consultant as required under the provisions of Section 5.7 and Section 5.17 of the Master Indenture, the Obligated Group Representative will notify the Master Trustee of such selection. The Master Trustee is required to, as soon as practicable but in no case longer than five (5) Business Days after receipt, notify the Holders of all Notes Outstanding under the Master Indenture of such selection. Such notice shall (i) include the name of the Independent Consultant and a brief description of the Independent Consultant, (ii) state the reason such Independent Consultant is being engaged, including a description of the covenant(s) of the Master Indenture that require the Independent Consultant to be engaged, and (iii) state that the Holder of the Notes will be deemed to have consented to selection of the Independent Consultant named in such notice unless such Note Holder submits an objection to the Independent Consultant in writing (in a manner acceptable to the Master Trustee) to the Master Trustee within 14 days of the date that the notice is sent to the Note Holders. No later than two (2) Business Days after the end of the objection period, the Master Trustee is required to notify the Obligated Group of the number of objections. If more than 70% in aggregate principal amount of the Holders of the Outstanding Notes have been deemed to consent to the selection of the Independent Consultant, the Obligated Group Representative is required to engage the Independent Consultant within five (5) Business Days. If 30% or more in aggregate principal amount of the owners of the Notes Outstanding have submitted an objection to the Independent Consultant selected, the Obligated Group Representative shall select another Independent Consultant which may be engaged upon compliance with the foregoing procedures described herein.”

Section 6.1 of the Master Trust Indenture is amended to add an additional event of default as subsection (h) to such Section as follows:

“(h) There shall be the acceleration of any Indebtedness for borrowed money secured by a Note issued and Outstanding hereunder in a principal amount in excess of $3,000,000.”

As a result of the foregoing amendment to Section 6.1, references to the event of default added as (h) shall be added to the events of default, remedies and enforcement provisions of the Master Trust Indenture as described under “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Events of Default”, “– Remedies for Certain Defaults” and “– Additional Remedies and Enforcement of the Remedies” herein.

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SUMMARY OF CERTAIN PROVISIONS OF THE MASTER MORTGAGE

Master Mortgage Definitions

“Default” as used in the Master Mortgage means the occurrence of an event which, with the lapse of time or the giving of notice or both, is an Event of Default.

“Leases” has the meaning attributed to it under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER MORTGAGE – Collateral Assignment.”

“Obligations” as used in the Master Mortgage means the obligations described in clauses (a), (b), (c) and (d) of the first paragraph under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER MORTGAGE – Mortgage and Grant of Security Interest.”

Mortgage and Grant of Security Interest

To (a) secure the timely payment of the principal of, premium, if any, and interest on the Master Notes, (b) secure the payment of all other amounts which may become due under the Master Indenture or the Master Mortgage, (c) secure the performance by the Corporation and the other members of the Obligated Group of all the covenants, conditions, stipulations and agreements contained in the Master Indenture and the Master Mortgage, (d) secure the repayment of any amounts which may be advanced by the Master Trustee pursuant to the Master Indenture or the Master Mortgage and (e) charge the properties, interests and rights described in the Master Mortgage with that payment, performance and observance, the Corporation, for valuable consideration the receipt and sufficiency of which is acknowledged, mortgages, conveys and grants a security interest to the Master Trustee, its successors and assigns forever, all of its right, title and interest in and to the following property (collectively, the “Mortgaged Property”):

The Mortgaged Real Estate (as more particularly described in Master Mortgage) together with the following property, rights and interests all of which are pledged primarily and on a parity with the Mortgaged Real Estate and not secondarily (and are, together with the Mortgaged Real Estate, including rights now owned or hereafter acquired, referred to as the “Mortgaged Real Estate”): (i) all (a) buildings, structures and improvements which are now or hereafter situated on the Mortgaged Real Estate, (b) fixtures which now or hereafter are located in or on, are attached to, are used or intended to be used in connection with or in the operation of the Mortgaged Real Estate, the buildings, structures or other improvements located on it or in connection with any construction being conducted or which may be conducted on it and (c) extensions, additions, improvements, substitutions and replacements to any of the foregoing located on the Mortgaged Real Estate (collectively, the “Improvements”); (ii) all easements, rights of way, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights and powers, and all estates, rights, titles, interests, privileges and appurtenances in any way belonging, relating or appertaining to the Mortgaged Real Estate or which hereafter in any way belong, relate or are appurtenant to it, whether now owned or hereafter acquired by the Corporation, and the reversions, remainders, rents, issues and profits of the Mortgaged Real Estate, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law as well as in equity, of the Corporation of, in and to the Mortgaged Real Estate; and (iii) all rents, royalties, issues, profits, revenue, income and other benefits from the Mortgaged Real Estate whenever derived.

The Mortgaged Equipment including all items of machinery, equipment (including furniture), fixtures and other tangible personal property (other than disposable and consumable supplies) now owned or hereafter acquired as owner by the Corporation and located on or installed in the Mortgaged Real Estate, together with all additions, substitutions and replacements for any of them (collectively, the “Mortgaged Equipment”).

Pursuant to the Master Mortgage Corporation grants to Master Trustee, as security for the Obligations, a security interest in the Mortgaged Equipment to the extent such Mortgaged Equipment may be subject to the Wisconsin Uniform Commercial Code (“Uniform Commercial Code”). Certain of the Mortgaged Equipment is or will become “fixtures” (as such term is defined in the Uniform Commercial Code) on the Mortgaged Real Estate, and the Master Mortgage, upon being filed for record in the Register of Deeds office in the county where such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with applicable provisions of the Uniform Commercial Code upon any of the Mortgaged Equipment that is or may become fixtures.

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All proceeds of the Mortgaged Real Estate or the Mortgaged Equipment whenever obtained including without limitation (a) all judgments, awards of damages and settlements hereafter made resulting from the condemnation or taking of the Mortgaged Property or any portion of it under the power of eminent domain, (b) claims for proceeds or any proceeds of any policies of insurance maintained with respect to the Mortgaged Property and (c) the proceeds of any sale, option or contract to sell the Mortgaged Property or any portion of it.

Representations of the Corporation

The Corporation represents and warrants that it is the lawful owner and is now lawfully seized and possessed of the Mortgaged Property (other than that not presently in existence) free and clear of all liens, security interests, charges or encumbrances whatever except Permitted Encumbrances and has full power and lawful authority to mortgage and grant a security interest in the Mortgaged Property to the Master Trustee. The Master Mortgage constitutes a direct and valid lien on and security interest in the Mortgaged Property subject only to Permitted Encumbrances. The Corporation warrants that the recitals of fact and statements contained in the Master Mortgage with respect to the Corporation are true. The Corporation has the right, full power and due and lawful authority to execute and deliver the Master Mortgage. The Corporation has taken all action required by law and by its Bylaws and Articles of Incorporation necessary to make the Master Mortgage the valid, binding, and legal obligation of the Corporation. The lien and security interest created by the Master Mortgage are and will be kept a first lien and security interest upon the Mortgaged Property (subject only to Permitted Encumbrances), and the Corporation will forever warrant and defend the same to the Master Trustee, its successors and assigns, against any and all claims and demands whatsoever.

Payment and Performance

The Corporation agrees in the Master Mortgage to (a) pay when due the principal of, premium, if any, and interest on the Obligations, including the Master Notes and (b) punctually perform and observe all of the terms, provisions, covenants and conditions to be performed or observed by the Corporation under the Master Mortgage and the Master Indenture.

Repairs, Maintenance and Alterations

The Corporation at its own cost and expense will keep the Mortgaged Property in good repair and order, reasonable wear and tear excepted, and in as reasonably safe condition as its operation will permit, will make all necessary repairs to the Mortgaged Property, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen, and will make all necessary replacements or renewals.

The Corporation has the right, from time to time at its sole cost and expense, to make additions, alterations, demolitions and other changes, whether structural or nonstructural (collectively, the “Alterations”) in or to the Mortgaged Property; provided that (i) no buildings constituting part of the Mortgaged Property may be demolished unless the Master Trustee is furnished with an Officer’s Certificate certifying that the demolition will not have a material adverse effect on the Net Income Available for Debt Service (determined as provided in the Master Indenture) of the Obligated Group and no building constituting a substantial part of the Mortgaged Property may be demolished as part of a project to replace the building or to relocate the operations conducted in it unless the replacement building or the relocated operations, as the case may be, are located on or in the Mortgaged Property, (ii) all the Alterations must be located wholly within the boundary lines of Mortgaged Real Estate and (iii) the Alteration will not result in an Event of Default under the Master Indenture.

With respect to any repairs, construction, restoration, replacement or alterations performed upon the Mortgaged Property by the Corporation during the term of the Master Mortgage in accordance with or as required by any provisions of the Master Mortgage, the Corporation agrees in the Master Mortgage that (i) no work will be undertaken until the Corporation has obtained and paid for all required municipal and other governmental permits and authorizations of the various municipal departments and governmental subdivisions having jurisdiction and (ii) all work will be done promptly, in good workmanlike manner, in compliance with applicable building and zoning laws and all applicable laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments and their appropriate departments, commissions, boards and officers, will not violate the provisions of any policy of insurance covering the Mortgaged Property and will proceed to completion with reasonable dispatch.

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Maintenance of Lien and Recording

The Corporation will, at its expense, take all actions necessary to maintain and preserve the existence and the priority of the lien and security interest of the Master Mortgage on the Mortgaged Property so long as any Master Notes are outstanding, provided however, that the Master Trustee shall be responsible for filing UCC continuation statements with respect to the Mortgaged Equipment, at the Corporation’s expense; provided that a copy of the filed initial financing statement is timely delivered to the Master Trustee.

The Corporation agrees in the Master Mortgage that it will immediately after the execution and delivery of the Master Mortgage and thereafter from time to time at the request of the Master Trustee cause the Master Mortgage and any financing statements in respect of it to be filed, registered and recorded in the manner and in the places as may be required by law in order to publish notice of and fully to protect the existence and the priority of the lien and security interest of the Master Mortgage upon, and the title of the Corporation to, the Mortgaged Property.

Release of Mortgaged Property

The Corporation may dispose of Property that constitutes Mortgaged Property in accordance with the provisions of the Master Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Sale, Lease or Other Disposition of Property,” and the Master Trustee shall release such Property from the lien of the Master Mortgage. Any documentation required in connection with any such release shall be prepared by the Corporation. In the event that any Mortgaged Property becomes Excluded Property as that term is defined in the Master Indenture, the Master Trustee shall release such Excluded Property from the lien of the Master Mortgage.

Defaults

The occurrence and continuing of any event of default under the Master Indenture is an Event of Default under the Master Mortgage.

Remedies

(a) Upon the occurrence of an Event of Default the Master Trustee has the rights, powers and remedies described in the Master Indenture, including the power to declare the principal of all Master Notes to be due and payable immediately and to enforce the rights of the holders of the Master Notes and the rights of the Master Trustee with respect to any collateral securing the payment of amounts due or becoming due under the Master Notes and the Master Indenture (including the Master Mortgage).

(b) Upon the occurrence of an Event of Default the Corporation agrees, immediately upon the demand of the Master Trustee, to surrender to the Master Trustee, and the Master Trustee is entitled to take actual possession of, the Mortgaged Property or any part of it, personally or by its agents or attorneys. The Master Trustee, in its discretion, thereupon may enter upon and take and maintain possession of all or any part of the Mortgaged Property together with all documents, books, records, papers, and accounts of the Corporation or the then owner of the Mortgaged Property relating to the Mortgaged Property (other than patient records subject to state or federal confidentiality requirements) and exclude the Corporation, the then current owner and the agents of either of them from the Mortgaged Property. The Master Trustee may also on behalf of the Corporation or the then current owner or in its own name as mortgagee and under the powers granted by the Master Mortgage, at the expense of the Corporation, (i) use, hold, operate, manage and control all or any part of the Mortgaged Property and conduct business from it, either personally or by its agents, (ii) make all necessary or proper repairs, renewals, replacements, alterations, additions and improvements to the Mortgaged Property or complete any Improvements as the Master Trustee, in its sole discretion, determines advisable, (iii) pay all taxes, assessments and other charges now due and unpaid and which may hereafter become due and a charge or lien upon the Mortgaged Property, (iv) execute and comply with all applicable laws, rules, orders, ordinances and requirements of any and all governmental authorities affecting the Mortgaged Property and pay the costs thereof, (v) employ an agent or agents to rent and manage the Mortgaged Property and to collect the rents and other revenues thereof and pay the reasonable value of its or their services, (vi) rent or lease the whole or part of the Mortgaged Property for such term or terms and on such conditions as may seem proper to the Master Trustee, including entering into leases for terms expiring beyond the

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maturity of the Obligations, and cancel any lease or sublease for any cause or on any ground which would entitle the Corporation to cancel it, (vii) insure and reinsure the Mortgaged Property against all risks including those incidental to the Master Trustee’s possession, operation and management of it and (viii) receive all rents, revenues, income and profits from the Mortgaged Property and, after deducting any and all expenses associated with the Master Trustee’s activities related to the Mortgaged Property, including compensation for the services of the Master Trustee and for any counsel, agents and experts retained by it, apply the balance of the funds available to it as provided in the Master Indenture.

(c) No provision of the Master Mortgage is to be construed as constituting the Master Trustee a mortgagee in possession in the absence of the actual taking of possession of the Mortgaged Property.

(d) Upon the occurrence of an Event of Default the Master Trustee, with or without entry into the Mortgaged Property, personally or by attorney, may in its discretion proceed to protect and enforce its rights by a suit or suits in equity or at law, either for damages or for the specific performance of any covenant or agreement contained in the Master Notes, the Master Indenture or the Master Mortgage, or in aid of the execution of any power herein or therein granted, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy as the Master Trustee shall deem appropriate to protect and enforce any of its rights or duties under the Master Mortgage, provided, however, that all costs incurred by the Master Trustee pursuant to the Master Mortgage shall be paid to the Master Trustee by the Corporation on demand.

(e) Upon the occurrence of an Event of Default the Corporation consents to and irrevocably authorizes and directs the tenants under the Leases and any successor to the interest of the tenants, upon demand and notice from the Master Trustee of the Master Trustee’s right to receive the rents and other amounts under such Lease, to pay to the Master Trustee the rents and other amounts due or to become due under the Leases, and the tenants have the right to rely upon such a demand and notice from the Master Trustee without any obligation or right to determine the actual existence of the Master Trustee’s right to receive such rents and other amounts, notwithstanding any notice from or claim of the Corporation to the contrary. The Corporation does not have any right or claim against any tenant for any such rents and other amounts so paid by the tenant to the Master Trustee.

(f) None of the Master Trustee’s remedies under the Master Mortgage is exclusive of any other remedy or remedies. Each remedy given to the Master Trustee is cumulative and is in addition to every other remedy which is given or which now or hereafter exists at law, in equity or by statute.

(g) No delay or omission by the Master Trustee in the exercise of any right or power accruing upon an Event of Default impairs the right or power or is a waiver of or acquiescence in any Event of Default. Every right and power given by the Master Mortgage to the Master Trustee may be exercised from time to time and as often as may be deemed expedient by the Master Trustee.

(h) No waiver of any Event of Default extends to or affects any subsequent Event of Default or impairs any rights or remedies consequent thereon.

(i) Except as otherwise specifically required by the Master Mortgage, notice of the exercise of any right, remedy or power granted to the Master Trustee by the Master Mortgage is not required to be given.

Waiver of Right of Redemption and Other Rights

To the full extent permitted by law, the Corporation (a) agrees in the Master Mortgage that it will not insist upon, plead or in any manner claim or take any advantage of any stay, exemption or extension law or any so called “Moratorium Law” now or at any time hereafter in force, (b) agrees in the Master Mortgage that it will not claim, take or insist upon any benefit or advantage of or from any law now or hereafter in force providing for the valuation or appraisement of the Mortgaged Property or any part of it prior to any sale or sales of it made pursuant to any provisions of the Master Mortgage or any decree, judgment or order of a court of competent jurisdiction, (c) agrees in the Master Mortgage that it will not, after a sale or sales, claim or exercise any rights under any statute now or hereafter in force to redeem the property sold or any part of it or relating to the marshalling of the Mortgaged Property upon foreclosure sale or other enforcement of the Master Mortgage, (d) expressly waives any and all rights or redemption from sale under any order or decree of foreclosure of the Master Mortgage on its own behalf, on behalf of all persons claiming or having an interest (direct or indirect) by, through or under the Corporation and on

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behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date of the Master Mortgage and (e) agrees in the Master Mortgage that it will not, by invoking or utilizing any applicable law or otherwise, hinder, delay or impede the exercise of any right, power or remedy granted in the Master Mortgage or elsewhere or delegated to the Master Trustee but will suffer and permit the exercise of every right, power and remedy granted in the Master Mortgage as though no such law or laws have been or will have been made or enacted.

Remedies Subject to Provisions of Law

All rights, remedies and powers provided by the Master Mortgage may be exercised only to the extent that the exercise of them does not violate any applicable provision of law and all the provisions of the Master Mortgage are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render the Master Mortgage invalid or unenforceable under the provisions of any applicable law.

Remedies Under Uniform Commercial Code

In addition to any other remedies provided for by the Master Mortgage or by law, the Master Trustee has the rights of a secured party and the Corporation has the rights of a debtor under the Uniform Commercial Code of Wisconsin with respect to the Mortgaged Equipment (and proceeds thereof) upon the occurrence and continuance of an Event of Default.

Supplements and Amendments Without the Consent of Noteholders

The Corporation and the Master Trustee may from time to time and at any time enter into one or more supplements and amendments to the Master Mortgage for one or more of the following purposes:

(i) to evidence the succession of another corporation to the Corporation, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Corporation pursuant to the Master Mortgage if, but only if, similar amendments are concurrently being made to the Master Indenture as provided in the Master Indenture,

(ii) to add to the covenants of the Corporation such further covenants, restrictions or conditions as the Master Trustee shall consider to be for the protection of the holders of the Master Notes, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions an Event of Default permitting the enforcement of all or any of the several remedies provided in the Master Indenture; provided, however, that in respect of any such additional covenant, restriction or condition such amendment or supplement may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Master Trustee upon such default,

(iii) to cure any ambiguity or to correct or supplement any provision contained herein or in any other amendment or supplement to the Master Mortgage which may be defective or inconsistent with any other provision contained herein or in any other amendment or supplement to the Master Mortgage, or to make any other changes that shall not impair the security of the Master Mortgage or the Master Indenture or adversely affect the interest of the holders of the Master Notes,

(iv) to modify or supplement the Master Mortgage as may be necessary to comply with any applicable state securities laws which require the Master Mortgage to comport with any requirements of the Trust Indenture Act of 1939, as amended (the “Act”), regardless of the applicability of the Act hereto, including provisions whereby the Master Trustee accepts such powers, duties, conditions and restrictions hereunder and the Corporation undertakes such covenants, conditions or restrictions additional to those contained in the Master Mortgage as would be necessary or appropriate the Master Mortgage so to comply with such state securities laws,

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(v) to release Property from the lien of the Master Mortgage as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER MORTGAGE – Release of Mortgaged Property,” and

(vi) to provide for the issuance of additional Master Notes pursuant to the Master Indenture.

The Master Trustee is authorized by the Master Mortgage to join with the Corporation in the execution of any amendment or supplement to the Master Mortgage, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, mortgage, pledge or assignment of any Property thereunder, but the Master Trustee shall not be obligated to enter into any such amendment or supplement to the Master Mortgage that affects the Master Trustee’s own rights, duties or immunities under the Master Mortgage or otherwise.

Any amendment or supplement to the Master Mortgage authorized by the provisions of the Master Mortgage summarized under this heading may be executed by the Corporation and by the Master Trustee without the consent of the holders of the Master Notes, notwithstanding any of the provisions of the Master Mortgage summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER MORTGAGE – Supplements and Amendments with Consent of Noteholders.”

Supplements and Amendments with Consent of Noteholders

With the consent (evidenced as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE – Evidence of Action by Noteholders; Related Bondholders Deemed as Noteholders) of the holders of the Master Notes of not less than majority in aggregate principal amount of Master Notes then Outstanding, the Corporation, when authorized by resolution of its Board of Directors, and the Master Trustee may from time to time and at any time enter into supplements and amendments to the Master Mortgage for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Master Mortgage or of any other supplement or amendment to the Master Mortgage or of modifying in any manner the rights of the holders of the Master Notes; provided, however, that no such supplements and amendments to the Master Mortgage shall, without the consent of the holders of all Master Notes then Outstanding which are affected thereby, (i) effect a change in the times, amounts or currency of payment of the principal of, premium, if any, or interest on any Master Note or a reduction in the principal amount or redemption price of any Master Note or the rate of interest thereon, or any other amounts payable thereon, (ii) reduce the aforesaid percentage of Master Notes, the holders of which are required to consent to any such supplements and amendments to the Master Mortgage, (iii) permit the preference or priority of any Master Note or Master Notes over any other Master Note or Master Notes or (iv) release any portion of the Mortgaged Property or Trust Estate or any other collateral given to secure the Master Notes except as specifically provided in the documents pursuant to which the interest in the collateral is given.

Upon the request of the Corporation, accompanied by a copy of a resolution of the Board of Directors authorizing the execution of the amendment or supplement to the Master Mortgage, and upon the filing with the Master Trustee of evidence of the consent of the holders of the Master Notes as aforesaid, the Master Trustee shall join with the Corporation in the execution of such amendment or supplement to the Master Mortgage unless such amendment or supplement to the Master Mortgage affects the Master Trustee’s own rights, duties or immunities under the Master Mortgage or the Master Indenture or otherwise, in which case the Master Trustee may in its discretion, but shall not be obligated to, enter into such amendment or supplement to the Master Mortgage.

It shall not be necessary for the consent of the holders of the Master Notes pursuant to the provisions of the Master Mortgage summarized under this heading to approve the particular form of any proposed amendment or supplement to the Master Mortgage, but it shall be sufficient if such consent shall approve the substance thereof.

Promptly after the execution by the Corporation and the Master Trustee of any amendment or supplement to the Master Mortgage pursuant to the provisions of the Master Mortgage summarized under this heading, the Corporation shall mail to each holder of the Master Notes a letter setting forth in general terms the substance of such amendment or supplement to the Master Mortgage. Any failure of the Corporation to publish such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment or supplement to the Master Mortgage.

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Defeasance

If the Corporation shall pay and discharge or provide, in a manner satisfactory to the Master Trustee and consistent with the Master Indenture, for the payment and discharge of the whole amount of the principal of, premium, if any, and interest on Master Notes at the time outstanding, and shall pay or cause to be paid all other sums payable hereunder, or shall make arrangements satisfactory to the Master Trustee for such payment and discharge, then and in that case all property, rights and interest conveyed or assigned or pledged by the Master Indenture shall revert to the Corporation, and the estate, right, title and interest of the Master Trustee therein shall thereupon cease, terminate and become void; and the Master Mortgage, and the covenants of the Corporation contained herein, shall be discharged and the Master Trustee in such case on demand of the Corporation and at its cost and expense, shall execute and deliver to the Corporation a proper instrument or proper instruments acknowledging the satisfaction and termination of the Master Mortgage, and shall convey, assign and transfer or cause to conveyed, assigned or transferred, and shall deliver or cause to be delivered, to the Corporation, all property, including money, then held by the Master Trustee other than money deposited with the Master Trustee for the payment of the principal of and premium, if any, or interest on the Master Notes together with the Master Notes marked paid or canceled.

Collateral Assignment

To further secure the payment of the Obligations, pursuant to the Master Mortgage the Corporation collaterally assigns and transfers to the Master Trustee, its successors and assigns, all of its right, title and interest in, to and under (a) any and all leases or agreements for the use or occupancy of the whole or any part of the Mortgaged Property, whether such leases and agreements are now or at any time hereafter existing (collectively, the “Leases”), including all amendments and supplements to and renewals and extensions of the Leases, (b) all rents, earnings, income and profits arising from the Mortgaged Property or from the Leases, (c) any and all guarantees under any of the Leases, (d) all proceeds payable under any policy of insurance covering loss of rents for any cause and (e) all rights, powers, privileges, options and other benefits of the Corporation, as lessor, under the Leases, including, but not limited to (i) the right upon the occurrence and continuance of an event of default thereunder to receive and collect all rents, income, revenues, issues, profits, condemnation awards, moneys and security payable or receivable under the Leases, whether as rent or otherwise and (ii) the right to make all waivers and agreements, to give and receive all notices, consents and releases, to take such action upon the happening of a default under the Leases, including the commencement, conduct and consummation of proceedings at law or in equity as shall be permitted under any provisions of any Lease or by law, and to do any and all other things whatsoever which the Corporation is or may become entitled to do.

This assignment is given as collateral security and the execution and delivery of the Master Mortgage shall not in any way impair or diminish the obligations of the Corporation, nor shall this assignment impose any obligation on the Master Trustee to perform any provision of any contract pertaining to the Mortgaged Property or any responsibility for the nonperformance thereof by Corporation or any other person. This assignment is given as a primary pledge and assignment of the rights described herein and such assignment shall not be deemed secondary to the Master Mortgage. The Master Trustee shall have the right to exercise any rights under this assignment before, together with, or after exercising any other rights under the Master Mortgage.

To the extent permitted by applicable law, the security interest created specifically by the Master Mortgage is intended to cover and include any leases or other agreements related to occupancy of the Mortgaged Property between Corporation, as lessor, and various tenants or residents named therein, as lessees, including all extended terms and all extensions and renewals of the terms thereof, as well as any amendments to or replacement of said leases, together with all of the right, title, and interest of Corporation, as lessor thereunder, including, without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive, and receipt for any and all of the rents, income, revenues, issues and profits, and moneys payable as damages or in lieu of the rent and moneys payable as the purchase price of the premises or any part thereof or of awards or claims for money and other sums of money payable or receivable thereunder, howsoever payable, and to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which Corporation or any lessor is or may become entitled to do under the Leases.

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Rights of Corporation

Notwithstanding anything in the Master Mortgage, so long as no Event of Default shall have occurred and be continuing, the Corporation shall have the right to occupy the Mortgaged Property as landlord or otherwise, to collect, use and enjoy the rents, issues, profits and other sums payable under and by virtue of the Leases and to enforce the covenants of the Leases, it being agreed that the assignment made by the Master Mortgage is for collateral purposes only.

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APPENDIX F

Summary of the Bond Indenture and the Loan Agreement

TABLE OF CONTENTS Page

SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND LOAN AGREEMENT Definitions of Certain Terms ...... 1

SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE Granting Clauses ...... 7 Authorization and Issuance of the Series 2018A Bonds ...... 7 Use of Proceeds from the Sale of the Series 2018A Bonds ...... 7 Bond Fund ...... 7 Project Fund ...... 8 Completion of the Project ...... 9 Non-presentment of Bonds ...... 9 Debt Service Reserve Fund ...... 9 Investments Generally ...... 10 Discharge ...... 11 Redemption After Satisfaction of Bond Indenture ...... 13 Events of Default ...... 14 Acceleration and Other Remedies ...... 14 Right to Direct Proceedings ...... 15 Application of Proceeds ...... 15 Remedies Vested in Bond Trustee...... 17 Rights and Remedies of the Registered Owners ...... 17 Termination of Proceedings ...... 17 Waivers of Events of Default ...... 17 Removal of the Bond Trustee ...... 18 Supplemental Bond Indentures Not Requiring the Consent of the Registered Owners...... 18 Supplemental Bond Indentures Requiring the Consent of the Registered Owners ...... 19 Consent of Borrower; Opinion ...... 19 Amendments to Certain of the Borrower’s Documents Not Requiring the Consent of the Registered Owners ...... 20 Amendments to Certain of the Borrower’s Documents Requiring the Consent of the Registered Owners ...... 20

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT Loan of Proceeds ...... 21 Deposits in Respect of the Series 2018A Master Note ...... 21 Obligation of the Borrower Unconditional ...... 21 Pledge of the Loan Agreement and the Series 2018A Master Note ...... 21 Agreement to Complete the Project; Changes to Project ...... 21 Establishment of the Completion Date ...... 21 Project Fund Insufficiency ...... 21 Inspection of the Bond Financed Property ...... 22 Sufficient Revenues ...... 22 Financial Information and Reports ...... 22 Maintenance of Tax Status ...... 22 Maintenance of Existence...... 22 Tax Exempt Bonds ...... 22 Maintenance of Status as a Member of the Obligated Group ...... 23 Debt Service Reserve Fund ...... 23 Events of Default ...... 23 Remedies ...... 24 Waivers of Events of Default ...... 24 Remedies Subject to Law ...... 24

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SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE AND LOAN AGREEMENT

Brief descriptions of the Bond Indenture and the Loan Agreement are set forth below. Those descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to those documents are qualified in their entirety by reference to each document, copies of which are available for review prior to the issuance and delivery of the Series 2018A Bonds at the offices of the Authority and thereafter at the offices of the Bond Trustee.

DEFINITIONS OF CERTAIN TERMS

“Act” means Chapter 231 of the Wisconsin Statutes, as amended.

“Authority” means the Wisconsin Health and Educational Facilities Authority.

“Authority’s Documents” means the Loan Agreement, the Bond Purchase Agreement, the Bond Indenture, the Tax Exemption Agreement and the Series 2018A Bonds.

“Authorized Borrower Representative” means the person identified in a written certificate that is signed by an officer of the Borrower, that contains a specimen of the Authorized Borrower Representative’s signature and that has been delivered to the Bond Trustee. Authorized Borrower Representative includes any alternate or alternates designated in the certificate in the same manner. An Authorized Borrower Representative may be an employee of the Borrower.

“Bond Counsel” means Counsel acceptable to the Authority whose legal opinions on municipal bond issues are nationally recognized.

“Bond Financed Property” means any and all land, equipment, improvements and other real or personal property of the Borrower financed, directly or indirectly, with the proceeds of the Combined Bonds, including without limitation the Project.

“Bond Fund” means the fund by that name created by the Bond Indenture.

“Bond Indenture” means the Bond Trust Indenture dated as of April 1, 2018 between the Authority and the Bond Trustee, as amended from time to time.

“Bond Indenture Funds” means the Bond Fund, the Project Fund, the Debt Service Reserve Fund and any other funds or accounts created under the Bond Indenture and does not include the Rebate Fund created pursuant to the Tax Exemption Agreement.

“Bond Interest Payment Date” means each date on which a payment of interest on the Bonds is due.

“Bond Principal Payment Date” means each date on which a payment of principal (whether upon maturity, redemption, acceleration or otherwise) on the Bonds is due.

“Bond Purchase Agreement” means the Bond Purchase Agreement dated March 14, 2018 among the Authority, the Borrower and Piper Jaffray & Co., the initial purchaser of the Bonds.

“Bond Trustee” means the bond trustee at the time serving under the Bond Indenture. The initial Bond Trustee is U.S. Bank National Association.

“Bonds” or “Series 2018A Bonds” means the Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project). F-1

“Borrower” means Saint John’s Communities, Inc.

“Borrower’s Closing Certificate” means the Officer’s Certificate of the Borrower dated the date of and delivered at the time of the issuance and delivery of the Bonds.

“Borrower’s Documents” means the Loan Agreement, the Series 2018A Master Note, the Bond Purchase Agreement, the Tax Exemption Agreement and all other documents (other than the Master Indenture) to which the Borrower is a party related to the issuance of the Bonds.

“Business Day” means a day that is not (a) a Saturday, Sunday or legal holiday or (b) a day on which banking institutions are required or authorized to be closed in the city or cities in which the designated corporate trust office of the Bond Trustee is located or (c) a day on which The New York Stock Exchange is closed for the entire day or Federal Reserve Banks are closed.

“Code” means the Internal Revenue Code of 1986, as amended from time to time. Each reference to a section of the Code herein shall be deemed to include the United States Treasury Regulations relating to such section, which section and regulations are applicable to the Series 2018A Bonds or the use of the proceeds thereof.

“Combined Bonds” means, collectively, the Series 2018A Bonds and the Series 2018B Bonds.

“Completion Certificate” means a certificate signed by the Authorized Borrower Representative (a) stating, without prejudice as to rights against third parties, the Completion Date and that all costs and expenses incurred in connection with the Project and expected to be paid with proceeds of the Bonds have been paid except for specified amounts that either are not yet due and payable or the Borrower is contesting in good faith by appropriate proceedings, (b) stating that all permits for the occupancy and use of the Project have been obtained, if applicable, and (c) either (i) demonstrating that the weighted average maturity of the Combined Bonds does not exceed 120% of the average reasonably expected economic life of the Bond Financed Property (taking into account any additions to or deletions from the Project as originally contemplated in the Tax Exemption Agreement), calculated in accordance with Section 147 of the Code or (ii) containing the agreement of the Borrower to sufficiently shorten the weighted average maturity of the Combined Bonds so that the condition described in (i) will be met through a redemption or defeasance of a portion, if necessary, of the Series 2018A Bonds and/or the Series 2018B Bonds.

“Completion Date” means the date (as specified in the Completion Certificate) on which the Project and all other necessary facilities related to the Project were substantially completed to the satisfaction of the Borrower.

“Construction Account” means the account by that name in the Project Fund created by the Bond Indenture.

“Counsel” means an attorney admitted to practice before the highest court of any state.

“Debt Service Reserve Fund” means the fund of that name created by the Bond Indenture.

“Debt Service Reserve Fund Requirement” means the least of: (a) the maximum amount of principal and interest due on the Outstanding Series 2018A Bonds in the then current or any succeeding bond year, (b) 10% of the face amount of the Series 2018A Bonds if the original issue discount on the Series 2018A Bonds is less than 2% of the stated redemption price of the Series 2018A Bonds at maturity or 10% of the issue price of the Series 2018A Bonds net of accrued interest if the original issue discount on the Series 2018A Bonds exceeds that amount or (c) 125% of the average annual principal and interest requirements on the Series 2018A Bonds.

“Default” means the occurrence of an event that, with the lapse of time or the giving of notice or both, would constitute an Event of Default.

“Defeasance Obligations” means noncallable U.S. Government Obligations not redeemable at the option of the issuer or anyone acting on its behalf prior to maturity.

“DTC” means The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York.

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“Event of Default” as used in or with reference to (a) the Loan Agreement has the meaning attributed to it under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT - Events of Default,” (b) the Bond Indenture has the meaning attributed to it under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Events of Default,” (c) the Master Indenture has the meaning attributed to it under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Events of Default” in Appendix C of this Official Statement and (d) other documents has the meaning attributed to it in them.

“Event of Taxability” means any act, omission or event that results in the interest paid or payable on any Bond being includable for federal income tax purposes in the gross income of any owner.

“Excess Funds” means any money that is or that the Borrower has determined will be on deposit in the Construction Account on or after the date on which the Completion Certificate is delivered to the Bond Trustee other than amounts retained in the Construction Account to pay Project Costs not then due or that the Borrower is contesting in good faith by appropriate proceedings.

“Excess Funds Account” means the account by that name in the Bond Fund created by the Bond Indenture.

“Executive Director” means the Executive Director or Associate Executive Director of the Authority, a duly authorized acting Executive Director or Associate Executive Director of the Authority or the officer succeeding to the duties presently exercised by the Executive Director or Associate Executive Director of the Authority.

“Facility” or “Facilities” means the senior living and related facilities of the Borrower, including without limitation the Bond Financed Property and all additions and improvements to the foregoing.

“Financial Statement Recipients” means the Authority, the Bond Trustee, the Purchaser and any firm or corporation that has, at the request of the Borrower, assigned a credit rating to the Bonds.

“Interest Account” means the account by that name in the Bond Fund created by the Bond Indenture.

“Issuing Expenses” means costs to the extent incurred in connection with, and allocable to, the issuance of the Combined Bonds. For example, issuance costs include the following costs but only to the extent incurred in connection with, and allocable to, the borrowing: underwriter’s spread; counsel fees; financial advisory fees; fees paid to an organization to evaluate the credit quality of an issue; trustee fees; paying agent fees; bond registrar, certification, and authentication fees; accounting fees; printing costs for bonds and offering documents; public approval process costs; engineering and feasibility study costs; guarantee fees, other than for “qualified guarantees”; and similar costs.

“Issuing Expenses Account” means the account by that name in the Project Fund created by the Bond Indenture.

“Letter of Representations” means the Blanket Issuer Letter of Representations dated October 16, 1997 between the Authority and DTC.

“Loan Agreement” means the Loan Agreement dated as of April 1, 2018 between the Borrower and the Authority, as amended from time to time in accordance with the terms of the Loan Agreement.

“Master Indenture” has the meaning attributed to it in Appendix C of this Official Statement.

“Master Trustee” has the meaning attributed to it in Appendix C of this Official Statement.

“Member” or “Member of the Obligated Group” means any Person who is a Member of the Obligated Group pursuant to the terms of the Master Indenture.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Borrower, with written notice to the Bond Trustee and the Authority.

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“Obligated Group” means the Member or Members of the Obligated Group created under the Master Indenture.

“Officer’s Certificate” means (a) with respect to the Authority, a certificate of the Authority signed by the Chairperson, Vice Chairperson, Executive Director or by any other person designated by resolution of the Authority to act for any of those officers, either generally or with respect to the execution of any particular document or other specific matter, if a certified copy of the resolution has been filed with the Bond Trustee and (b) with respect to any corporation, including the Borrower, a certificate of the corporation signed (i) by the president, by any vice president or by any other person designated by resolution of the board of directors of the corporation, either generally or with respect to the execution of any particular document or other specific matter, if a copy of the resolution has been filed with the Bond Trustee or (ii) by an Authorized Borrower Representative.

“Opinion of Bond Counsel” means a written opinion of Bond Counsel.

“Opinion of Counsel” means a written opinion of Counsel selected and paid by the Borrower.

“Outstanding” when used with reference to the Bonds means all Bonds that have been authenticated and delivered by the Bond Trustee under the Bond Indenture except: (a) Bonds or portions of Bonds that have been canceled after (i) purchase in the open market, (ii) payment at maturity or redemption prior to maturity or (iii) delivery to the Bond Trustee by the Borrower under the Bond Indenture, (b) Bonds for the payment or redemption of which there has been deposited with the Bond Trustee, in trust, cash or Defeasance Obligations in an amount sufficient, including in the case of Defeasance Obligations the income or increment to accrue on them, but without reinvestment, to pay or redeem (when redeemable) the Bonds at or before their respective maturity dates, including interest that has accrued on the Bonds and will accrue through the final payment or redemption of the Bonds and any redemption premium on them, provided that if the Bonds are to be redeemed prior to their maturity irrevocable notice of the redemption has been given or irrevocable arrangements satisfactory to the Bond Trustee have been made for the giving of a notice of redemption and provided further that the requirements summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – Discharge” have been satisfied with respect to such Bonds, (c) Bonds in lieu of which other Bonds have been authenticated under the Bond Indenture and (d) for purposes of any agreement, acceptance, approval, waiver, consent, request or other action to be taken under the Loan Agreement or the Bond Indenture by the Registered Owners of a specified percentage of principal amount of Bonds, Bonds held by or for the account of the Authority, the Borrower or any Person controlling, controlled by or under common control with any of them, unless such parties own 100% of the outstanding Bonds.

“Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, or a government or any agency or political subdivision thereof.

“Prepayment Account” means the account by that name in the Bond Fund created by the Bond Indenture.

“Principal Account” means the account by that name in the Bond Fund created by the Bond Indenture.

“Principal Trust Office” means the designated corporate trust office of the Bond Trustee. The address of the Principal Trust Office is initially the address which the Bond Trustee has designated as its address for receiving notices under the Loan Agreement and the Bond Indenture.

“Project” means, collectively, the acquisition, construction, renovation and equipping of certain life care, residential, community based residential, residential care apartment complex, and skilled nursing facilities owned or operated by the Borrower and located at the Wisconsin locations identified in the notice of public hearing related to the Bonds (a copy of which is attached to the Tax Exemption Agreement), all as more specifically detailed in the Tax Exemption Agreement.

“Project Cost” means any costs of the Project that are or will be capitalized on the books of the Borrower and that are permitted to be financed under the Act and the Code, the payment of which will not cause an Event of Taxability to occur and that are not Issuing Expenses.

“Project Fund” means the fund by that name created by the Bond Indenture.

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“Purchaser” means the initial purchaser(s) of the Bonds, whether one or more, as identified in the Bond Purchase Agreement.

“Qualified Investments” means, subject to the provisions of the Tax Exemption Agreement, (a) U.S. Government Obligations and bonds or securities issued or guaranteed as to principal and interest by a commission, board or other instrumentality of the federal government; (b) short-term discount obligations of the Federal National Mortgage Association; (c) certificates of deposit or time deposits constituting direct obligations of any bank the full amount of which is insured by the Federal Deposit Insurance Corporation; (d) time deposits in any credit union, bank, savings bank, trust company or savings and loan association that is authorized to transact business in the State if the time deposits mature in not more than three years; (e) bonds or securities of any county, city, drainage district, technical college district, village, town or school district of the State; (f) any security that matures or that may be tendered for purchase at the option of the holder within not more than seven years of the date on which it is acquired, if that security has a rating which is the highest or second highest rating category assigned by S&P, Moody’s or other similar nationally recognized rating agency or if that security is senior to, or on a parity with, a security of the same issuer that has such a rating; (g) securities of an open-end management investment company or investment trust if the investment company or investment trust does not charge a sales load, if the investment company or investment trust is registered under the Investment Company Act of 1940, 15 USC 80a-1 to 80a-64, and if the portfolio of the investment company or investment trust is limited to the following: (i) bonds and securities issued by the federal government or a commission, board or other instrumentality of the federal government, (ii) bonds that are guaranteed as to principal and interest by the federal government or a commission, board or other instrumentality of the federal government and (iii) repurchase agreements that are fully collateralized by bonds or securities described under (i) or (ii); and (h) any other obligation or security that constitutes a permitted investment for money of the Authority as a result of an amendment of the Act subsequent to April 1, 2018 if the prior written consent of the Authority is obtained.

“Rebate Fund” means the fund by that name created by the Tax Exemption Agreement.

“Redemption Notice Information” means information in a written and dated notice from the Bond Trustee that (a) identifies the Bonds to be redeemed by the name of the issue (including the name of the issuer and any series designation), CUSIP number, if any, date of issue, interest rate, maturity date and any other descriptive information the Bond Trustee deems desirable to accurately identify the Bonds to be redeemed and, if only a portion of some Bonds will be redeemed, the certificate numbers and the principal amount of those Bonds to be redeemed, (b) identifies the date on which the notice is given and the date on which the Bonds will be redeemed, (c) states the price at which the Bonds will be redeemed, (d) states that interest on the Bonds or the portions of them called for redemption will stop accruing from the redemption date if funds sufficient for their redemption and available for that purpose are or will be on deposit with the Bond Trustee on the redemption date, (e) states that payment for the Bonds will be made on the redemption date at the Principal Trust Office of the Bond Trustee during normal business hours upon the surrender of the Bonds to be redeemed in whole or in part and (f) identifies by name and phone number a representative of the Bond Trustee who may be contacted for more information. For so long as the Bonds are in a book-entry system, Redemption Notice Information also includes the information and procedures described in the Letter of Representations.

“Registered Owner” or “Owner” or “holder” or “Bondholder” when used with reference to a Bond means the person who is the registered owner of a Bond or that person’s legal representative.

“Registered Owner’s Address” means the address, that a Registered Owner may change upon written request to the Bond Trustee, of the Registered Owner of any Bond as it appears in the Registration Books.

“Registration Books” means books maintained by the Bond Trustee on behalf of the Authority at the Principal Trust Office of the Bond Trustee for the purpose of recording the registration, transfer, exchange or replacement of any of the Bonds.

“Revenues” means (a) all payments, income and revenues derived pursuant to the terms of the Loan Agreement (except to the extent included in the Unassigned Rights) including all payments made by the Borrower or any other Member of the Obligated Group in respect of the Series 2018A Master Note, (b) all amounts realized upon recourse to the Loan Agreement or any collateral given by the Borrower to secure the Borrower’s obligations under the Loan Agreement, (c) all amounts realized upon recourse to the Master Indenture that are available pursuant to the Master Indenture to pay amounts due on the Series 2018A Master Note and (d) the money and securities (including

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the earnings from the investment of them) held by the Bond Trustee in the trust funds established under the Bond Indenture (which does not include the Rebate Fund).

“S&P” means S&P Global Ratings, a corporation existing under the laws of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Borrower, with written notice to the Bond Trustee and the Authority.

“Series 2018A Bonds” or “Bonds” means $83,725,000 Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project) initially authorized to be issued by the Authority pursuant to the terms and conditions of the Bond Indenture.

“Series 2018A Capitalized Interest” means an amount to be applied to the payment of interest on the Series 2018A Bonds (a) that does not exceed the interest that has accrued on the portion of the Series 2018A Bonds allocable to the Project through the completion of the Project and, if the Project is made up of two or more discrete parts, through the completion of the applicable part, (b) that is or will be capitalized on the books of the Borrower, (c) that will be treated, in accordance with generally accepted accounting principles, as a part of the cost of the asset to which it relates and (d) the payment of which will not adversely affect the validity of the Series 2018A Bonds or cause an Event of Taxability to occur.

“Series 2018A Capitalized Interest Account” means the account by that name in the Project Fund created by the Bond Indenture.

“Series 2018A Master Note” means the Borrower’s Promissory Note, Series 2018A issued pursuant to the Master Indenture.

“Series 2018B Bonds” means the Wisconsin Health and Educational Facilities Authority Adjustable Rate Revenue Bonds, Series 2018B (Saint John’s Communities, Inc.).

“State” means the State of Wisconsin.

“Tax Exemption Agreement” means the Tax Exemption Certificate and Agreement among the Authority, the Borrower, and the Bond Trustee dated the date of issuance and delivery of the Series 2018A Bonds.

“Third Supplement” means the Third Supplemental Master Trust Indenture dated as of April 1, 2018 between the Borrower and the Master Trustee, as amended from time to time.

“Unassigned Rights” means the Authority’s rights (a) to receive indemnity, payments for its expenses and other payments under the Loan Agreement or any other document associated with the issuance of any Bonds specifically including but not limited to its rights to receive payments under the Loan Agreement, (b) subject to the terms of the Loan Agreement, to execute and deliver amendments to the Loan Agreement and the Bond Indenture and to receive notices and other documents and to provide its consent, acceptance or approval with respect to matters as to which that right is given in the Loan Agreement or the Bond Indenture and (c) to receive indemnification and payment of expenses under the Bond Purchase Agreement.

“U.S. Government Obligations” means obligations that are direct, full faith and credit obligations of the United States of America or are obligations with respect to which the United States of America has unconditionally guaranteed the timely payment of all principal or interest or both, but only to the extent of the principal or interest so guaranteed.

“Valuation Date” means each September 1.

“Written Request” means with reference to the Authority, a request in writing signed by the Chairperson, Vice Chairperson or Executive Director of the Authority, and with reference to the Borrower means a request in writing signed by an Authorized Borrower Representative, or any other officers designated in writing by the Authority or the Borrower, as the case may be.

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SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE

Granting Clauses

In consideration of the acceptance by the Bond Trustee of the trusts created by the Bond Indenture, the purchase and acceptance of the Series 2018A Bonds by the Purchaser and other good and valuable consideration, and to secure the payment of the principal of, premium, if any, and interest on the Series 2018A Bonds and the performance and observance by the Authority of its obligations under the Bond Indenture and the Series 2018A Bonds, pursuant to the Bond Indenture the Authority pledges and assigns to the Bond Trustee and grants the Bond Trustee a security interest in, with power of sale, the following property: (a) except for the Unassigned Rights, the Authority’s entire right, title and interest in and to each of the Borrower’s Documents and the Master Indenture, specifically including the Authority’s right to receive payments from the Borrower under the Series 2018A Master Note or the Loan Agreement or the payments received under the Master Indenture that are available pursuant to the Master Indenture to pay amounts due on the Series 2018A Master Note and the other Borrower’s Documents; (b) the Authority’s entire right, title and interest in and to all Revenues and all cash, securities or other investments held by the Bond Trustee in any of the Bond Indenture Funds (which does not include the Rebate Fund) or otherwise under the terms of the Bond Indenture; and (c) all money and securities from time to time held by the Bond Trustee under the terms of the Bond Indenture (which does not include the Rebate Fund) and all other real or personal property from time to time conveyed, pledged, assigned or transferred to the Bond Trustee as additional security under the Bond Indenture.

Authorization and Issuance of the Series 2018A Bonds

The Bond Indenture authorizes the issuance of the Series 2018A Bonds and limits their aggregate principal amount to the amount stated on the cover page of this Official Statement.

Use of Proceeds from the Sale of the Series 2018A Bonds

The Authority agrees in the Bond Indenture to deposit the purchase price with the Bond Trustee and, upon receipt, the Bond Trustee agrees in the Bond Indenture to apply the purchase price in the manner described in the forepart of this Official Statement. See “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF FUNDS” in the forepart of this Official Statement.

Bond Fund

The Bond Indenture creates a trust fund designated the “Saint John’s Communities, Inc. Bond Fund.” Within the Bond Fund are created the following accounts:

Principal Account. Except as provided in the Bond Indenture, money in the Principal Account will be used solely (i) for the payment or scheduled mandatory redemption of the principal of the Series 2018A Bonds as it becomes due, whether at maturity, redemption, acceleration or otherwise and (ii) for the redemption of the Series 2018A Bonds from amounts transferred to the Principal Account from the Prepayment Account.

Interest Account. Except as provided in the Bond Indenture, money in the Interest Account will be used solely for the payment of the interest on the Series 2018A Bonds as it becomes due.

Excess Funds Account. Money in the Excess Funds Account will be (i) transferred to the Interest Account to the extent necessary to make the next interest payments on the Series 2018A Bonds required to be made within thirteen months from the date of the transfer, then to the Principal Account to the extent necessary to make the next payment of principal on the Series 2018A Bonds so long as the next principal payment is required to be made within thirteen months from the date of the transfer and then to the Prepayment Account or (ii) applied in any other manner directed by the Borrower in writing and accompanied by an Opinion of Bond Counsel to the effect that the alternate application will not adversely affect the validity of the Series 2018A Bonds or any exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled.

Prepayment Account. Money in the Prepayment Account will be used first to make up any deficiencies existing in the Interest Account, the Principal Account and the Debt Service Reserve Fund (in that order) and second for the payment of the principal of and premium, if any, on Bonds called for optional or extraordinary

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optional redemption as provided in the Bond Indenture. Money remaining in the Prepayment Account may be used by the Bond Trustee to purchase Bonds in the open market for immediate cancellation if the Bond Trustee is requested to do so by the Borrower.

Whenever the amount in the Bond Fund from any source is sufficient to pay the principal of the Series 2018A Bonds, unpaid interest that has accrued on the Series 2018A Bonds and will accrue to the date the Series 2018A Bonds are redeemed and any redemption premiums on all the Series 2018A Bonds then Outstanding and is available for that purpose the Bond Trustee, upon the Written Request of the Borrower, is instructed and agrees in the Bond Indenture to take or cause to be taken the necessary steps to pay or redeem all of the Series 2018A Bonds then Outstanding on the next date on which all of the Series 2018A Bonds may be redeemed and for which the required redemption notice may be given.

If (i) on any date on which a payment from the Principal Account or the Interest Account is due there is not enough money in the Principal Account or the Interest Account to make all of the payments then required to be made from the Principal Account or the Interest Account or (ii) an Event of Default has occurred and the Outstanding Bonds have been accelerated, then money in any account of the Bond Fund may be immediately or from time to time thereafter transferred to any other account in the Bond Fund for application as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Application of Proceeds.”

The Bond Trustee agrees to keep accurate records pertaining to each transaction within each of the accounts in the Bond Fund.

Project Fund

The Bond Indenture creates a trust fund designated “Saint John’s Communities, Inc. Project Fund” (the “Project Fund”). Within the Project Fund are created the following Accounts:

Issuing Expenses Account. Money in the Issuing Expenses Account will be used to pay Issuing Expenses or to reimburse the Borrower for Issuing Expenses actually paid by it. No money on deposit in any fund or account created by the Bond Indenture will be used to pay Issuing Expenses other than money on deposit in the Issuing Expenses Account. Upon the earlier of the receipt by the Bond Trustee of a Written Request of the Borrower to the effect that all Issuing Expenses to be paid with proceeds of the Series 2018A Bonds have been paid and that the Borrower has been reimbursed for all such Issuing Expenses paid by it or the first anniversary of the original issuance and delivery of the Series 2018A Bonds, amounts then on deposit in the Issuing Expenses Account will be transferred to the Construction Account and applied as other amounts on deposit in the Construction Account would be applied, unless the Bond Trustee is provided with an Opinion of Bond Counsel to the effect that some other disposition of those amounts will not adversely affect the validity of the Series 2018A Bonds or any exclusion from gross income for federal income tax purposes to which interest on the Series 2018A Bonds would otherwise be entitled.

Construction Account. Money in the Construction Account will be used to pay Project Costs or to reimburse the Borrower for Project Costs actually paid by it. Upon the earlier of the receipt by the Bond Trustee of a Completion Certificate or the third anniversary of the original issuance and delivery of the Series 2018A Bonds, amounts on deposit in the Construction Account or deposited in the Construction Account on any date thereafter will be transferred by the Bond Trustee to the Excess Funds Account, unless the Bond Trustee is provided by the Borrower with an Opinion of Bond Counsel to the effect that some other disposition of those amounts will not adversely affect the validity of the Series 2018A Bonds or any exclusion from gross income for federal income tax purposes to which interest on the Series 2018A Bonds would otherwise be entitled.

Capitalized Interest Account. Money in the Series 2018A Capitalized Interest Account will be used to pay interest on the Series 2018A Bonds as it becomes due from the date of issuance of the Series 2018A Bonds through September 15, 2020. On each Interest Payment Date, the Bond Trustee shall deposit in the Interest Account from the Series 2018A Capitalized Interest Account an amount equal to 100% of the Series 2018A Bonds due on such Interest Payment Date until no funds remain on deposit in the Series 2018A Capitalized Interest Account. Notwithstanding the foregoing, upon the earlier of the Completion Date or October 15, 2020, any amounts on deposit in the Series 2018A Capitalized Interest Account in excess of amounts necessary to pay interest on the Series 2018A Bonds through the earlier of the Completion Date or September 15, 2020 will be transferred by the Bond Trustee to the Excess Funds Account, unless the Bond Trustee receives an Opinion of Bond Counsel to the effect that such transfer will not adversely affect the validity of the Series 2018A Bonds or any exclusion from gross income for F-8

federal income tax purposes to which interest on the Series 2018A Bonds would otherwise be entitled. Investment earnings on money deposited into the Series 2018A Capitalized Interest Account will be transferred to the Construction Account pursuant to the terms of the Bond Indenture.

Upon the occurrence of an Event of Default and an acceleration of Outstanding Bonds, money in any account of the Project Fund may be immediately or from time to time thereafter transferred to the Bond Fund for application as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – Application of Proceeds.”

The Bond Trustee agrees in the Bond Indenture to keep accurate records pertaining to each transaction within each of the accounts in the Project Fund. After the Completion Certificate has been received, the Bond Trustee agrees in the Bond Indenture to file a statement of transactions for the Project Fund with the Borrower and, upon the Authority’s request, with the Authority.

Completion of the Project

The completion of the Project is to be evidenced by the filing with the Bond Trustee of the Completion Certificate. Upon receipt of the Completion Certificate, the Bond Trustee is authorized and directed to promptly transfer to the Excess Funds Account any Excess Funds then on deposit in the Construction Account, the Issuing Expenses Account and the Series 2018A Capitalized Interest Account.

Non-presentment of Bonds

Subject to the provisions of the Bond Indenture when the Bonds are in book-entry form, if funds sufficient to pay the principal of any Bond when due (whether at maturity, redemption, acceleration or otherwise) are on deposit with the Bond Trustee but the Bond is not presented to the Bond Trustee for payment, then all liability of the Authority to the Registered Owner for the payment of the Bond is completely discharged. The Bond Trustee agrees in the Bond Indenture to hold the funds on deposit for any Bonds that have not been presented when due, but without liability for interest, solely for the benefit of the Registered Owners of those Bonds. Thereafter and prior to the transfer summarized in the succeeding paragraph, the sole claim that any Registered Owner who did not present its Bonds for payment when due has for the payment of its Bonds is to receive the funds held for its Bonds by the Bond Trustee.

Any money held by the Bond Trustee pursuant to the provisions summarized under this heading that remains unclaimed by the Registered Owners entitled to it for a period of five years after the date on which those Bonds became due will, except as may otherwise be provided by applicable laws relating to escheatment, be paid to the Borrower upon its Written Request or, if required by applicable laws relating to escheatment, to the officer, board or body as may then be entitled by law to receive it. Thereafter, the Registered Owners of the Series 2018A Bonds not presented for payment may look only to the holder of those funds for the payment of its Bonds and may not look to the Bond Trustee for payment of its Bonds and the Bond Trustee has no responsibility with respect to the money transferred or the unpresented Bonds.

Debt Service Reserve Fund

The Bond Indenture creates a trust fund designated “Saint John’s Communities, Inc. Debt Service Reserve Fund”. The Debt Service Reserve Fund shall be initially funded on the date of issuance of the Series 2018A Bonds in the amount of the Debt Service Reserve Fund Requirement with proceeds of the 2018A Bonds.

Amounts on deposit in the Debt Service Reserve Fund shall be administered by the Bond Trustee as described under this heading. Except as provided herein, moneys on deposit in the Debt Service Reserve Fund shall be used only to make up any deficiencies in the Interest Account and the Principal Account (in that order) with respect to payments on the Series 2018A Bonds.

Qualified Investments in the Debt Service Reserve Fund shall be valued by the Bond Trustee on each Valuation Date on the basis of fair market value (which valuation shall take into account any accrued and unpaid interest). If on any Valuation Date the amount on deposit in the Debt Service Reserve Fund is less than 90% of the Debt Service Reserve Fund Requirement as a result of a decline in the market value of investments on deposit in the Debt Service Reserve Fund, the Loan Agreement requires the Borrower to deposit in the Debt Service Reserve Fund the amount necessary to restore the amount on deposit in the Debt Service Reserve Fund to an amount equal to the F-9

Debt Service Reserve Fund Requirement within 120 days following the date on which the Borrower receives written notice of such deficiency. If at any time the amount on deposit in the Debt Service Reserve Fund is less than 100% of the Debt Service Reserve Fund Requirement as a result of a transfer from the Debt Service Reserve Fund to the Principal Account or the Interest Account to fund a deficiency in one or both of those accounts, the Loan Agreement requires the Borrower to restore the amount on deposit in the Debt Service Reserve Fund to an amount equal to the Debt Service Reserve Fund Requirement by the deposit with the Bond Trustee of an amount equal to such deficiency in not more than 12 substantially equal monthly installments beginning with the first day of the sixth month after the month in which such deficiency occurred.

In connection with any partial redemption or defeasance prior to maturity of the Series 2018A Bonds, the Bond Trustee may, at the request of the Borrower, use any amounts on deposit in the Debt Service Reserve Fund in excess of the Debt Service Reserve Fund Requirement after such redemption to pay the principal of or the principal portion of the redemption price of said Bonds to be redeemed or defeased.

If on any Valuation Date the amount on deposit in the Debt Service Reserve Fund is in excess of the Debt Service Reserve Fund Requirement, such excess shall be transferred to the Construction Account until the earlier of three years from the date of the issuance and sale of the Series 2018A Bonds or the date on which the Bond Trustee receives the Completion Certificate, and thereafter to the Principal Account, to the extent of the amount required to be on deposit on the date of the next scheduled payment therefrom on the Series 2018A Bonds if such next date is scheduled to occur within the 13-month period next succeeding the date of such transfer, then to the Interest Account to the extent necessary to make interest payments due on such Bonds within the 13-month period next succeeding the date of such transfer, and then to the Prepayment Account.

Funds on deposit in the Debt Service Reserve Fund may also be used to make the final payment of principal and interest on the Series 2018A Bonds.

Investments Generally

The Bond Trustee agrees in the Bond Indenture to continuously invest and reinvest money on deposit in the Bond Indenture Funds and the Rebate Fund in Qualified Investments as directed in writing by the Borrower according to the Loan Agreement. The Bond Trustee may conclusively rely upon the Borrower’s written instructions as to both the suitability and legality of the directed investments. Ratings of Qualified Investments shall be determined at the time of purchase of such Qualified Investments and without regard to ratings subcategories and the Bond Trustee shall not be required to monitor the ratings of Qualified Investments on an ongoing basis. In the absence of investment instructions from the Borrower, the Bond Trustee is directed by the Authority pursuant to the Bond Indenture to invest any moneys held by it under the Bond Indenture in U.S. Government Obligations. Investments made with money on deposit in the Bond Indenture Funds and the Rebate Fund may be made by the Bond Trustee through its own bank investment department or that of its affiliates or subsidiaries, and the Bond Trustee may charge its ordinary and customary fees for such trades, including investment maintenance fees, and such investments (a) will have maturities or be readily marketable prior to maturity in the amounts and not later than the dates as may be necessary to provide funds for the purpose for which the money in any account is to be used, (b) will be held by or under the control of the Bond Trustee, (c) will at all times be considered a part of the account for whose benefit the investment was made, (d) will have any loss attributable to them charged to the account for whose benefit the investment was made, (e) in the case of the Interest Account and the Principal Account, will have any interest or profit derived from them applied as provided in the Loan Agreement, (f) in the case of the Excess Funds Account and the Prepayment Account, will have any interest or profit derived from them retained in the Account in which the investment was made until applied as other amounts on deposit in the Account will be applied, (g) in the case of the Series 2018A Capitalized Interest Account and the Issuing Expenses Account, will have any interest or profit derived from them credited to the Construction Account until the earlier of three years from the date of the issuance and sale of the Series 2018A Bonds or the date on which the Bond Trustee receives the Completion Certificate, and thereafter credited to the Principal Account, to the extent of the amount required to be on deposit on the date of the next scheduled payment therefrom on the Series 2018A Bonds if such next date is scheduled to occur within the 13-month period next succeeding the date of such deposit, then credited to the Interest Account to the extent necessary to make interest payments due on such Bonds within the 13-month period next succeeding the date of such deposit, and then credited to the Prepayment Account, (h) in the case of the Construction Account, will have any interest or profit derived from them retained in the Construction Account until the earlier of three years from the date of the issuance and sale of the Series 2018A Bonds or the date on which the Bond Trustee receives the Completion Certificate, and thereafter credited to the Principal Account, to the extent of the amount required to be on deposit on the date of the next scheduled payment F-10

therefrom on the Series 2018A Bonds if such next date is scheduled to occur within the 13-month period next succeeding the date of such deposit, then credited to the Interest Account to the extent necessary to make interest payments due on such Bonds within the 13-month period next succeeding the date of such deposit, and then credited to the Prepayment Account, (i) in the case of the Debt Service Reserve Fund, subject to the provisions of the Indenture, will have any interest or profit derived from them credited to the Construction Account until the earlier of three years from the date of the issuance and sale of the Series 2018A Bonds or the date on which the Bond Trustee receives the Completion Certificate, and thereafter credited to the Principal Account, to the extent of the amount required to be on deposit on the date of the next scheduled payment therefrom on the Series 2018A Bonds if such next date is scheduled to occur within the 13-month period next succeeding the date of such deposit, then credited to the Interest Account to the extent necessary to make interest payments due on such Bonds within the 13-month period next succeeding the date of such deposit, and then credited to the Prepayment Account, and (j) in all other cases will have any interest or profit derived from them retained in the fund or account from which the investment was made.

Although the Authority and the Borrower each recognize that it may obtain a broker confirmation or written statement containing comparable information at no additional cost, the Authority and the Borrower agree that confirmations of permitted investments are not required to be issued by the Bond Trustee for each month in which a monthly statement is rendered. No statement need be rendered for any fund or account if no activity occurred in such fund or account during such month.

Investments are also subject to the provisions of the Tax Exemption Agreement.

Discharge

Total Discharge. The Bond Indenture, the Series 2018A Master Note, and the Loan Agreement and the estate and rights granted by them cease, determine and are void if

(a) the Borrower has performed all of its obligations under the Master Indenture to the extent they relate to the Series 2018A Master Note and under the other Borrower’s Documents, and the Authority has performed its obligations under the Authority Documents,

(b) all expenses of the Bond Trustee that have accrued and will accrue through the final payment of the Series 2018A Bonds have been paid or arrangements satisfactory to the Bond Trustee for their payment have been made,

(c) all expenses of the Authority that have accrued and will accrue through the final payment of the Series 2018A Bonds have been paid or arrangements satisfactory to the Authority for their payment have been made,

(d) provision for the payment of all Outstanding Bonds has been made to the satisfaction of the Bond Trustee in one or more of the following ways: (i) by paying or causing to be paid, when due, the principal of, premium, if any, and interest on all Outstanding Bonds; (ii) by depositing with the Bond Trustee, in trust, at or before maturity, cash in an amount sufficient to pay or redeem (when redeemable) all Outstanding Bonds including unpaid interest that has accrued on the Series 2018A Bonds and will accrue to the final payment or redemption of the Series 2018A Bonds and any redemption premium; (iii) by delivering to the Bond Trustee, for cancellation, all Outstanding Bonds; or (iv) by depositing with the Bond Trustee, in trust, Defeasance Obligations that mature in an amount that will, together with the income or increment to accrue on them but without reinvestment, be sufficient to pay or redeem (when redeemable) all Bonds at or before their respective maturity dates, including interest that has accrued on the Series 2018A Bonds and will accrue to the final payment or redemption of the Series 2018A Bonds and any redemption premium,

(e) a notice of redemption has been given as required by the Bond Indenture if any of the Series 2018A Bonds are to be redeemed before their maturity or if a notice of redemption cannot then be given as provided in the Bond Indenture, then the Borrower has given the Bond Trustee, in a form satisfactory to the Bond Trustee, irrevocable instructions to provide a notice of redemption to the Registered Owners of any Bonds to be redeemed in accordance with the Bond Indenture when a notice of redemption can be timely given under the Bond Indenture,

(f) if the payment of the Series 2018A Bonds has been provided for as summarized in clause (d)(ii) or (d)(iv) under this heading, the Bond Trustee (i) has been furnished with an Opinion of Bond Counsel to the F-11

effect that the actions taken as summarized under this heading will not adversely affect the validity of any Bond or any exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled and (ii) has given notice to the Registered Owners of the Series 2018A Bonds at the Registered Owner’s Address of the actions taken pursuant to the provisions summarized in clause (d) under this heading, and

(g) if the payment of the Series 2018A Bonds has been provided for as summarized in clause (d)(iv) under this heading, the Bond Trustee has been provided an opinion or report from a firm of certified public accountants of the size and type commonly referred to as nationally known certified public accountants or a firm of independent public accountants or other verification experts selected by the Borrower and not objected to by the Authority to the effect that the funds available or to be available in the escrow for the payment of the Series 2018A Bonds will be sufficient to pay the principal of, premium, if any, and interest on the Series 2018A Bonds.

On the occurrence of the events summarized in clauses (a) through (g) under this heading, the Bond Trustee is authorized and directed to

(1) cancel the Series 2018A Master Note and deliver it to the Borrower;

(2) execute and deliver all appropriate instruments evidencing and acknowledging the satisfaction of the Bond Indenture and the Loan Agreement; and

(3) assign and deliver to the Borrower any money and investments in any Bond Indenture Fund (except money or investments held by the Bond Trustee for the payment of the principal of, premium, if any, and interest on any Bond).

Notwithstanding any other provision of the Bond Indenture that may be contrary to the provisions summarized under this heading, all money and Defeasance Obligations that are set aside and held in trust pursuant to the provisions summarized under this heading for the payment of the principal of, premium, if any, and interest on the Series 2018A Bonds will be applied to and used solely for the payment of the principal of, premium, if any, and interest on the particular Bonds with respect to which it was so set aside in trust. The income derived from Defeasance Obligations held by the Bond Trustee pursuant to the provisions summarized under this heading that are not needed for the payment of the principal of, premium, if any, or interest on the Series 2018A Bonds is to be disposed of in a manner that, in the Opinion of Bond Counsel, will not adversely affect the validity of any Bond or any exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled.

Notwithstanding a discharge of the Bond Indenture as summarized in clause (d)(ii) or (d)(iv) under this heading, resulting in the Registered Owners of the Series 2018A Bonds having a claim for the payment of their Bonds solely from the cash and Defeasance Obligations so set aside, the Bond Indenture will continue to govern the method of making payments of principal and interest on the Series 2018A Bonds, the registration, transfer and exchange of the Series 2018A Bonds and similar matters.

Partial Discharge. The Bond Indenture, the Series 2018A Master Note, and the Loan Agreement and the estate and rights granted by them cease, determine and are void with respect to some, but not all of the Bonds, if

(a) the Borrower has performed all of its obligations under the Master Indenture to the extent they relate to the Series 2018A Master Note and under the other Borrower’s Documents, and the Authority has performed its obligations under the Authority Documents, in each case relating to such Bonds,

(b) all expenses of the Bond Trustee that have accrued and will accrue through the final payment of such Series 2018A Bonds have been paid or arrangements satisfactory to the Bond Trustee for their payment have been made,

(c) all expenses of the Authority that have accrued and will accrue through the final payment of such Series 2018A Bonds have been paid or arrangements satisfactory to the Authority for their payment have been made,

(d) provision for the payment of all such Outstanding Bonds has been made to the satisfaction of the Bond Trustee in one or more of the following ways: (i) by paying or causing to be paid, when due, the principal

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of, premium, if any, and interest on all such Outstanding Bonds; (ii) by depositing with the Bond Trustee, in trust, at or before maturity, cash in an amount sufficient to pay or redeem (when redeemable) all such Outstanding Bonds including unpaid interest that has accrued on such Series 2018A Bonds and will accrue to the final payment or redemption of such Series 2018A Bonds and any redemption premium; (iii) by delivering to the Bond Trustee, for cancellation, all such Outstanding Bonds; or (iv) by depositing with the Bond Trustee, in trust, Defeasance Obligations that mature in an amount that will, together with the income or increment to accrue on them but without reinvestment, be sufficient to pay or redeem (when redeemable) all such Bonds at or before their respective maturity dates, including interest that has accrued on such Series 2018A Bonds and will accrue to the final payment or redemption of such Series 2018A Bonds and any redemption premium,

(e) a notice of redemption has been given as required by the Bond Indenture if any of such Series 2018A Bonds are to be redeemed before their maturity or if a notice of redemption cannot then be given as provided in the Bond Indenture, then the Borrower has given the Bond Trustee, in a form satisfactory to the Bond Trustee, irrevocable instructions to provide a notice of redemption to the Registered Owners of any Bonds to be redeemed in accordance with the Bond Indenture when a notice of redemption can be timely given under the Bond Indenture,

(f) if the payment of such Series 2018A Bonds has been provided for as summarized in clause (d)(ii) or (d)(iv) under this heading, the Bond Trustee (i) has been furnished with an Opinion of Bond Counsel to the effect that the actions taken as summarized under this heading will not adversely affect the validity of any Bond or any exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled and (ii) has given notice to the Registered Owners of such Series 2018A Bonds at the Registered Owner’s Address of the actions taken pursuant to the provisions summarized in clause (d) under this heading, and

(g) if the payment of such Series 2018A Bonds has been provided for as summarized in clause (d)(iv) under this heading, the Bond Trustee has been provided an opinion or report from a firm of certified public accountants of the size and type commonly referred to as nationally known certified public accountants or a firm of independent public accountants or other verification experts selected by the Borrower and not objected to by the Authority to the effect that the funds available or to be available in the escrow for the payment of such Series 2018A Bonds will be sufficient to pay the principal of, premium, if any, and interest on such Series 2018A Bonds.

Notwithstanding any other provision of the Bond Indenture that may be contrary to the provisions summarized under this heading, all money and Defeasance Obligations that are set aside and held in trust pursuant to the provisions summarized under this heading for the payment of the principal of, premium, if any, and interest on a portion of the Series 2018A Bonds will be applied to and used solely for the payment of the principal of, premium, if any, and interest on the particular Bonds with respect to which it was so set aside in trust. The income derived from Defeasance Obligations held by the Bond Trustee pursuant to the provisions summarized under this heading that are not needed for the payment of the principal of, premium, if any, or interest on the Series 2018A Bonds to be partially discharged is to be disposed of in a manner that, in the Opinion of Bond Counsel, will not adversely affect the validity of any Bond or any exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled.

Notwithstanding a partial discharge of the Bond Indenture with respect to a portion of the Series 2018A Bonds as provided in (d)(ii) or (d)(iv) under this heading, resulting in the Registered Owners of such Bonds having a claim for the payment of their Bonds solely from the cash and Defeasance Obligations so set aside, the Bond Indenture will continue to govern the method of making payments of principal and interest on such Series 2018A Bonds, the registration, transfer and exchange of such Series 2018A Bonds and similar matters. Nothing contained under this heading with respect to a partial discharge of the Series 2018A Bonds shall discharge the obligations of the Authority under the Bond Indenture or the obligations of the Borrower under the Loan Agreement or the Series 2018A Master Note with respect to the Outstanding Series 2018A Bonds that have not been partially discharged in accordance with the provisions under this heading.

Redemption After Satisfaction of Bond Indenture

Notwithstanding anything to the contrary in the Bond Indenture, upon the provision for payment of the Bonds or a portion thereof through a date after any optional redemption date as summarized in clauses (d)(ii) or (iv) under the headings “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – Discharge - Total Discharge and Partial Discharge,” the optional redemption provisions of the Bond Indenture allowing such Bonds F-13

to be called prior to maturity upon proper notice (notwithstanding provision for the payment of such Bonds having been made through a date after the first optional redemption date provided for in the Bond Indenture) shall remain available to the Authority, upon direction of the Borrower, unless, in connection with making the deposits referred to in the Bond Indenture, the Authority, at the direction of the Borrower, shall have irrevocably elected to waive any future right to call the Bonds or portions thereof for redemption prior to maturity. No such redemption shall occur, however, unless the Borrower shall deliver on behalf of the Authority to the Bond Trustee (a) Defeasance Obligations or cash sufficient to discharge such Bonds (or portion thereof) on the redemption or maturity date or dates selected, (b) an opinion or report of a recognized independent certified public accountant or other verification experts selected by the Borrower and not objected to by the Authority verifying that such Defeasance Obligations, together with the expected earnings thereon, and/or cash will be sufficient to provide for the payment of such Bonds to the redemption or maturity dates, and (c) an Opinion of Bond Counsel to the effect that such earlier redemption will not, in and of itself, adversely affect any exclusion from gross income for federal income tax purposes to which interest on the Series 2018A Bonds would otherwise be entitled (subject to the inclusion of any exceptions contained in the opinion delivered upon original issuance of the Bonds). The Bond Trustee will give written notice of any such redemption to the owners of the Bonds affected thereby.

Events of Default

The occurrence and continuance of any of the following events is an Event of Default under the Bond Indenture:

(a) failure to pay when due the principal of (whether at maturity, redemption, acceleration or otherwise), premium, if any, or interest on any Bond; or

(b) the Authority shall for any reason be rendered incapable of fulfilling its obligations under the Bond Indenture; or

(c) the Authority shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Series 2018A Bonds or in the Bond Indenture or any indenture supplemental to the Bond Indenture to be performed on the part of the Authority, and such default shall continue for a period of thirty (30) days after written notice specifying such default and requiring it to be remedied shall have been given to the Authority and the Borrower by the Bond Trustee, which the Bond Trustee may give in its discretion and shall give at the written request of the owners of not less than 25% in aggregate principal amount of the Series 2018A Bonds then Outstanding; 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 Authority to remedy such default within such 30-day period shall not constitute a default under the Bond Indenture if the Authority 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 until the default is remedied and provides the Bond Trustee with a certification to that effect; or

(d) the occurrence of any event of default as summarized under the headings “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT - Events of Default” or “SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - Events of Default” in Appendix C of this Official Statement and the continuation of that event of default from and after (i) the date the Authority is entitled under the Loan Agreement to request that the Master Trustee declare the Series 2018A Master Note to be immediately due and payable, (ii) the date on which the Master Trustee is entitled under the Master Indenture to declare any Master Note (as that term is defined in Appendix C of this Official Statement) immediately due and payable or (iii) the date the Master Trustee declares any Master Note (as that term is defined in Appendix C of this Official Statement) immediately due and payable.

Acceleration and Other Remedies

Upon the occurrence of an Event of Default under the Bond Indenture the Bond Trustee may and, upon receipt of a request to do so from the Registered Owners of not less than 25% of the aggregate principal amount of the Series 2018A Bonds then Outstanding, must by written notice to the Authority and the Borrower declare the principal of and accrued interest on the Series 2018A Bonds (if not then due and payable) to be due and payable immediately.

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Upon the occurrence of any Event of Default under the Bond Indenture the Bond Trustee may take whatever action at law or in equity it deems necessary or desirable (i) to collect any amounts then due under the Bond Indenture, the Series 2018A Bonds, the Loan Agreement, the Master Indenture or the Series 2018A Master Note, (ii) to enforce performance of any obligation, agreement or covenant of the Authority under the Bond Indenture or the Series 2018A Bonds, of the Borrower under any of the Borrower’s Documents or the Master Indenture, of a guarantor under any guaranty given with respect to any Bond or the Series 2018A Master Note or of the grantor of any other collateral given to secure the payment of the Series 2018A Bonds or the Series 2018A Master Note or (iii) to otherwise enforce any of its rights.

None of the remedies under the Bond Indenture is exclusive of any other remedy or remedies. Each remedy given under the Bond Indenture is cumulative and is in addition to every other remedy that is given or that now or hereafter exists at law, in equity or by statute. No delay or omission in the exercise of any right or power accruing upon an Event of Default impairs the right or power or is a waiver of or acquiescence in any Event of Default. Every right and power given by the Bond Indenture may be exercised from time to time and as often as may be deemed expedient. No waiver of any Event of Default extends to or affects any subsequent or other Event of Default or impairs any rights or remedies consequent thereon.

In the event that the Master Trustee has accelerated the Series 2018A Master Note and is pursuing its available remedies under the Master Indenture, the Bond Trustee, without waiving any Event of Default under the Bond Indenture, agrees in the Bond Indenture not to pursue its available remedies under the Bond Indenture or the Loan Agreement in a manner that would hinder or frustrate the pursuit by the Master Trustee of its remedies under the Master Indenture provided that the Bond Trustee may take any action permitted of a noteholder under the Master Indenture.

Right To Direct Proceedings

Anything in the Bond Indenture to the contrary notwithstanding (excluding the provisions summarized in the first paragraph under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE – Acceleration and Other Remedies”), the Registered Owners of a majority of the aggregate principal amount of the Bonds Outstanding have the right to direct the exercise of any rights or remedies under the Bond Indenture or any of the Borrower’s Documents and the method and place of conducting all proceedings to be taken in connection with the enforcement of the Bond Indenture or any of the Borrower’s Documents. The directions of the Registered Owners summarized under this heading are to be (a) contained in a request that is signed by the Registered Owners of at least a majority of the aggregate principal amount of the Series 2018A Bonds then Outstanding and delivered to the Bond Trustee, (b) in accordance with law and the provisions of the Bond Indenture and (c) accompanied with indemnification of the Bond Trustee as is provided in the Bond Indenture.

Application of Proceeds

(a) Subject to the provisions summarized in paragraph (c) under this heading, if the principal of all the Series 2018A Bonds is not due, whether by declaration by the Bond Trustee pursuant to the provisions summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Acceleration and Other Remedies” or otherwise, then any money received by the Authority or the Bond Trustee as a result of the exercise of one or more of the remedies granted by the Bond Indenture or any of the Borrower’s Documents will be applied as follows:

FIRST: To the payment of (i) the costs and expenses associated with the exercise of any remedy granted by the Bond Indenture or any of the Borrower’s Documents, including reasonable compensation to the Authority, the Bond Trustee and either of their attorneys and agents, (ii) any expenses of the Authority and (iii) any expenses of the Bond Trustee.

SECOND: To fund any deficiency in the Rebate Fund if doing so will prevent the occurrence of an Event of Taxability.

THIRD: To the payment of interest then due on the Series 2018A Bonds, in the order of the maturity of the payments of interest then due, and, if the amount available is not sufficient to pay in full any particular installment of interest, then to the payment of interest ratably, according to the amounts due, to the persons entitled to it without discrimination or privilege. F-15

FOURTH: To the payment of principal and premium, if any, then due on the Series 2018A Bonds (other than Bonds called for redemption for the payment of which money is held pursuant to the provisions of the Bond Indenture), in the order of the maturity of the payments of principal and premium then due, and, if the amount available is not sufficient to pay in full the Series 2018A Bonds due on any particular date then to their payment ratably, according to the amount of principal due, to the persons entitled to it without any discrimination or privilege.

FIFTH: To the payment of any other sums required to be paid by the Borrower pursuant to any provisions of the Bond Indenture or any of the Borrower’s Documents.

SIXTH: To the payment of any other sums required to be paid by the Borrower pursuant to any provisions of the Master Indenture.

SEVENTH: Any balance is to be paid to the Borrower, its successors or assigns, upon its written request, or to whomever may be lawfully entitled to receive it, upon its written request, or as any court of competent jurisdiction may direct.

(b) Subject to the provisions summarized in paragraph (c) under this heading, if the principal of the Series 2018A Bonds is due, whether by declaration by the Bond Trustee pursuant to the provisions summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Acceleration and Other Remedies” or otherwise, then any money received by the Authority or the Bond Trustee as a result of the exercise of one or more of the remedies granted by the Bond Indenture or any of the Borrower’s Documents will be applied as follows:

FIRST: To the payment of (i) the costs and expenses associated with the exercise of any remedy granted by the Bond Indenture or any of the Borrower’s Documents, including reasonable compensation to the Authority, the Bond Trustee and either of their attorneys and agents, (ii) any expenses of the Authority and (iii) any expenses of the Bond Trustee.

SECOND: To fund any deficiency in the Rebate Fund if doing so will prevent the occurrence of an Event of Taxability.

THIRD: To the payment of the full amount of the principal of, premium, if any, and interest then due and unpaid on the Series 2018A Bonds. In the event money available for that purpose is insufficient to pay the full amount due, then the money that is available for that purpose will be applied ratably, according to the aggregate of principal, interest and premium, if any, then due without preference or priority as between principal, interest or premium.

FOURTH: To the payment of any other sums required to be paid by the Borrower pursuant to any provisions of the Bond Indenture or any of the Borrower’s Documents.

FIFTH: To the payment of any other sums required to be paid by the Borrower pursuant to any provisions of the Master Indenture or any of the Borrower’s Documents.

SIXTH: Any balance is to be paid to the Borrower, its successors or assigns, upon its written request, or to whomever may be lawfully entitled to receive it, upon its written request, or as any court of competent jurisdiction may direct.

(c) If the principal of all the Series 2018A Bonds has been declared due and payable and if the declaration is thereafter rescinded and annulled under the provisions of the Bond Indenture then, subject to the provisions summarized in paragraph (b) under this heading in the event that the principal of all the Series 2018A Bonds later becomes due or is declared due and payable, the money is to be applied in accordance with the provisions summarized in paragraph (a) under this heading and any amounts transferred to the Principal Account and Interest Account of the Bond Fund from any other Bond Indenture Fund will be returned to the fund or account from which they were taken.

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(d) Whenever money is to be applied pursuant to the provisions summarized under this heading, the money is to be applied at the times the Bond Trustee determines, having due regard for the amount of money available for application and the likelihood of additional money becoming available for application in the future. Whenever the Bond Trustee applies funds pursuant to the provisions summarized under this heading it will fix the date (which will be a Bond Interest Payment Date unless it deems another date more suitable) upon which the application is to be made and on that date interest on the amounts of principal paid ceases to accrue. The Bond Trustee agrees in the Bond Indenture to give any notice it deems appropriate of the deposit with it of any money pursuant to the provisions summarized under this heading and of the fixing of the payment date. Subject to the Bond Indenture, when the Series 2018A Bonds are in book entry form, payments of principal to the Registered Owner of any unpaid Bonds will not be made until the Bond is presented to the Bond Trustee at its Principal Trust Office for appropriate endorsement or for cancellation if fully paid.

Remedies Vested in Bond Trustee

All rights of action (including the right to file proofs of claim) under the Bond Indenture or under any Bonds may be enforced by the Bond Trustee without the possession of any of the Series 2018A Bonds or the production of them in any trial or other proceeding relating to them. Any suit or proceeding instituted by the Bond Trustee is to be brought in its name as Bond Trustee without the necessity of joining as plaintiffs or defendants the Registered Owners. Any resulting recovery or judgment is for the benefit of the Registered Owners of the Outstanding Bonds in accordance with the terms of the Bond Indenture.

Rights and Remedies of the Registered Owners

No Registered Owner of any Bond has any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Bond Indenture, for the execution of any trust created under the Bond Indenture, for the appointment of a receiver or any other remedy, unless (a) an Event of Default has occurred of which the Bond Trustee has been notified as provided in the Bond Indenture or it is deemed to have notice, (b) the Bond Trustee has received a request to do so from the Registered Owners of at least a majority of the aggregate principal amount of the Series 2018A Bonds then Outstanding and has been offered a reasonable opportunity either to proceed to exercise the powers granted in the Bond Indenture or to institute an action, suit or proceeding in its own name, (c) the Bond Trustee has been offered indemnity as provided in the Bond Indenture and (d) the Bond Trustee thereafter fails or refuses to exercise the powers granted in the Bond Indenture or to institute an action, suit or proceeding in its own name.

No Registered Owner has any right to affect, disturb or prejudice the security of the Bond Indenture by its action or to enforce any right under the Bond Indenture except in the manner provided in the Bond Indenture and all proceedings at law or in equity are to be conducted in the manner provided in the Bond Indenture for the equal and ratable benefit of all the Registered Owners. Nothing in the Bond Indenture, however, affects or impairs the right of any Registered Owner to enforce the payment of the principal of, premium, if any, and interest on any Bond owned by it at and after its maturity or the obligation of the Authority to pay the principal of, premium, if any, and interest on the Series 2018A Bonds issued under the Bond Indenture to the Registered Owners at the time, place, from the source and in the manner expressed in the Bond Indenture and the Series 2018A Bonds.

Termination of Proceedings

Subject to the provisions of the Bond Indenture described under “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Rights and Remedies of the Registered Owners”, if the Bond Trustee has proceeded to enforce any right under the Bond Indenture and the proceedings have been discontinued, abandoned for any reason or determined adversely, then any amounts transferred to the Principal Account and the Interest Account from any other Bond Indenture Fund will be returned to the fund or account from which they were taken, the Authority and the Bond Trustee are restored to their former positions and rights under the Bond Indenture and all rights, remedies and powers of the Bond Trustee continue as if no proceedings had been taken.

Waivers of Events of Default

The Bond Trustee (a) may waive any Event of Default under the Bond Indenture and its consequences and rescind any declaration of maturity of principal of and interest on the Series 2018A Bonds and (b) must do so upon receipt of a written request to do so from the Registered Owners of a majority in aggregate principal amount of all the Series 2018A Bonds then Outstanding in respect of which a default in the payment of the principal of, premium, if F-17

any, or interest on the Bonds exists or from the Registered Owners of 25% or more in principal amount of the Series 2018A Bonds then Outstanding in the case of any other default. Notwithstanding the preceding sentence, the Bond Trustee may not waive any Event of Default in the payment of the principal of, premium, if any, or interest on any Bond unless prior to the waiver all arrears of principal, premium, if any, and interest on the Series 2018A Bonds, and all expenses of the Authority and the Bond Trustee in connection with the Event of Default have been paid or provided for.

Removal of the Bond Trustee

The Bond Trustee may be removed at any time without cause upon 30 days’ prior notice (a) at the written direction of the Borrower (so long as no Default or Event of Default under the Bond Indenture, any of the Borrower’s Documents or the Master Indenture has occurred and is continuing) delivered to the Bond Trustee and the Authority or (b) by an instrument or concurrent instruments in writing signed by the Registered Owners of a majority of the aggregate principal amount of the Series 2018A Bonds then Outstanding and delivered to the Bond Trustee, the Authority, and the Borrower. A removal takes effect upon the appointment of a successor or temporary Bond Trustee pursuant to the Bond Indenture by the Registered Owners, the Authority or the Borrower and the successor or temporary Bond Trustee’s acceptance of its appointment.

Supplemental Bond Indentures Not Requiring the Consent of the Registered Owners

The Authority and the Bond Trustee may, without the consent of, or notice to the Registered Owners, 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 Trustee for the benefit of the Owners of the Bonds any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners of the Bonds or the Bond Trustee or any of them;

(c) to subject to the Bond Indenture additional revenues, properties or collateral;

(d) to add to the covenants and agreements of the Authority contained in the Bond Indenture other covenants and agreements thereafter to be observed for protection of the Bondholders, or, if such is not to the prejudice of the Bondholders, to surrender or limit any right, power or authority reserved to or conferred upon the Authority in the Bond Indenture, including, without limitation, the limitation of rights of redemption;

(e) to evidence any succession to the Authority and the assumption by such successor of the covenants and agreements of the Authority contained in the Bond Indenture, the Loan Agreement or any subsequent loan agreement or other instruments providing for the Bonds;

(f) to modify, amend or supplement the Bond Indenture or any Bond Indenture supplemental thereto in such manner as shall not be prejudicial to the interest of the owners of the Bonds, so as to permit the qualification thereof under any state blue sky law;

(g) to conform the Bond Indenture to any changes in the Loan Agreement permitted by the Bond Indenture;

(h) to permit the use of a book-entry system to identify the owner of any interest in a Bond issued by the Authority under the Bond Indenture, whether that Bond was formerly, or could be, evidenced by a physical security;

(i) to permit the Bond Trustee to comply with any duties imposed upon it by law;

(j) to specify further the duties and responsibilities of the Bond Trustee;

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(k) to provide for the issuance of Bonds in another form (whether or not involving certificates or other written evidence of ownership), provided that the Bond Trustee shall have received an Opinion of Bond Counsel to the effect that issuance of Bonds in any such form will not adversely affect the validity of the Bonds or any exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled;

(l) to modify or supplement the Bond Indenture in such manner as may be necessary or appropriate to qualify the Bond Indenture under the Trust Indenture Act of 1939 as then amended (the “1939 Act”), or under any similar federal statute hereafter enacted, or as may be necessary to comply with any applicable state securities laws which require the Bond Indenture to comport with any requirements of the 1939 Act regardless of the applicability of the 1939 Act thereto, including provisions whereby the Bond Trustee accepts such powers, duties, conditions and restrictions under the Bond Indenture and the Borrower undertakes such covenants, conditions or restrictions additional to those contained in the Bond Indenture as would be necessary or appropriate so to qualify the Bond Indenture or so to comply with such state securities laws; and

(m) to supplement the Bond Indenture in any other way that is not to the material prejudice of the Bond Trustee or the owners of the Bonds.

Supplemental Bond Indentures Requiring the Consent of the Registered Owners

Exclusive of supplemental indentures summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Supplemental Bond Indentures Not Requiring the Consent of the Registered Owners,” the Authority and the Bond Trustee, with the prior written consent of the Registered Owners of a majority of the aggregate principal amount of the Series 2018A Bonds then Outstanding, may enter into an indenture or indentures supplemental to the Bond Indenture as the Authority and the Bond Trustee deem necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular manner, any of the terms or provisions contained in the Bond Indenture or in any supplemental indenture. No supplemental indenture, however, may permit, (a) an extension of the stated maturity or reduction in the principal amount of, reduction in the interest rate or extension of the time for paying interest on, a reduction of any premium payable on the redemption of or a reduction in the amount or extension of the time for any payment required by any sinking fund or principal fund applicable to any Bonds without the consent of the Registered Owners of all Bonds at the time Outstanding that would be affected by the action to be taken, (b) the creation of any lien prior to or on a parity with the lien of the Bond Indenture, without the consent of the Registered Owners of all Bonds at the time Outstanding, (c) a reduction in the aggregate principal amount of the Registered Owners that are required to consent to any supplemental indenture without the consent of the Registered Owners of all Bonds at the time Outstanding that would be affected by the action to be taken or (d) a modification of the rights, duties or immunities of the Bond Trustee without the written consent of the Bond Trustee.

If at any time the Authority requests the Bond Trustee to enter into a supplemental indenture for any of the purposes covered under this heading, the Bond Trustee agrees in the Bond Indenture, upon being satisfactorily indemnified with respect to expenses, to send notice of the proposed execution of the supplemental indenture by first class mail to the Registered Owner of each of the Series 2018A Bonds at the Registered Owner’s Address subject, for so long as the Series 2018A Bonds are in a book entry system, to the Letter of Representations or in such other manner or at such other address as DTC may subsequently require. The notice will briefly set forth the nature of the proposed supplemental indenture and state that copies of it are on file at the Principal Trust Office of the Bond Trustee for inspection by the Registered Owner of any Bond. If, within sixty days or any longer period as is prescribed by the Authority following the mailing of the notice, consent of the Registered Owners of a majority of the aggregate principal amount of the Series 2018A Bonds then Outstanding has been obtained, no Registered Owner of any Bond has any right to object to any of the terms and provisions summarized under this heading or their operation, in any manner to question the propriety of the execution of the supplemental indenture or to enjoin or restrain the Bond Trustee or the Authority from executing the supplemental indenture or from taking any action pursuant to the provisions of the supplemental indenture.

Consent of Borrower; Opinion

Anything in the Bond Indenture to the contrary notwithstanding, so long as the Borrower is not in default of any of its obligations under any of the Borrower’s Documents or the Master Indenture, a supplemental indenture is not effective unless the Borrower has consented to its execution and delivery. Before the Authority and the Bond F-19

Trustee shall enter into any supplemental indenture as summarized above, there shall have been delivered to the Authority and the Bond Trustee an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by the terms of the Bond Indenture. Such opinion may rely upon certifications of financial advisors, investment bankers or others experienced in health care and/or senior living finance. The Bond Trustee shall not be required to execute any supplemental indenture that materially adversely affects the Bond Trustee’s rights, duties, indemnities or immunities.

Amendments to Certain of the Borrower’s Documents Not Requiring the Consent of the Registered Owners

The Authority and the Bond Trustee may, without the consent of or notice to the Registered Owners, consent to any amendment, change or modification of the Loan Agreement or the Series 2018A Master Note (a) as may be required by the provisions of the Loan Agreement and the Bond Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission in the Loan Agreement or the Series 2018A Master Note, (c) to more precisely identify, substitute or augment Project descriptions contained in the Loan Agreement or (d) in connection with any other change in the Loan Agreement or the Series 2018A Master Note that is not to the material prejudice of the Bond Trustee or the Registered Owners.

Before the Authority or the Bond Trustee shall consent to any modification, alteration, change, amendment or supplement to the Loan Agreement or the Series 2018A Master Note under the terms of the Bond Indenture described under this heading, there shall be delivered to the Authority and the Bond Trustee an Opinion of Counsel stating that such modification, alteration, change, amendment or supplement is authorized or permitted by the Bond Indenture.

Amendments to Certain of the Borrower’s Documents Requiring the Consent of the Registered Owners

Except for the amendments, changes or modifications summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Amendments to Certain of the Borrower’s Documents Not Requiring the Consent of the Registered Owners,” neither the Authority nor the Bond Trustee will consent to any other amendment, change or modification of the Loan Agreement or the Series 2018A Master Note without sending a notice to all Registered Owners and obtaining the prior written consent of the Registered Owners of a majority of the aggregate principal amount of the Series 2018A Bonds then Outstanding in the manner summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Supplemental Bond Indentures Requiring the Consent of the Registered Owners.” No amendment to the Loan Agreement or the Series 2018A Master Note, however, may permit, (a) an extension of the stated maturity or reduction in the principal amount of, reduction in the interest rate or extension of the time for paying interest on, a reduction of the amount or an extension of the time for paying any premium payable on the prepayment of, or a reduction in the amount or extension of the time for any payment of principal on any of the obligations described in the Loan Agreement or the Series 2018A Master Note without the consent of the Registered Owners of all the Series 2018A Bonds that would be affected by the action to be taken, (b) the creation of any lien prior to or on a parity with any lien created by the Bond Indenture without the consent of the Registered Owners of all Bonds at the time Outstanding, (c) a reduction in the aggregate principal amount of Bonds the Registered Owners of which are required to consent to any amendment of the Loan Agreement or the Series 2018A Master Note without the consent of the Registered Owners of all Bonds at the time Outstanding that would be affected by the action to be taken or (d) modify the rights, duties or immunities of the Bond Trustee without the written consent of the Bond Trustee. If at any time the Authority and the Borrower request the consent of the Bond Trustee to any proposed amendment, change or modification of the Loan Agreement or the Series 2018A Master Note, the Bond Trustee agrees in the Bond Indenture, upon being satisfactorily indemnified with respect to expenses, to send notice of the proposed amendment, change or modification in the same manner as summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Supplemental Bond Indentures Requiring the Consent of the Registered Owners.” The notice will briefly set forth the nature of the proposed amendment, change or modification and state that copies of the instrument embodying it are on file at the Principal Trust Office of the Bond Trustee for inspection by the Registered Owners.

Before the Authority or the Bond Trustee shall consent to any modification, alteration, change, amendment or supplement to the Loan Agreement or the Series 2018A Master Note under the Bond Indenture, there shall be delivered to the Authority and the Bond Trustee an Opinion of Counsel stating that such modification, alteration, change, amendment or supplement is authorized or permitted by the Bond Indenture. Such opinion may rely upon certifications of financial advisors, investment bankers or others experienced in health care and/or senior living finance. F-20

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT

Loan of Proceeds

The Borrower and the Authority will enter into the Loan Agreement pursuant to which the Authority will lend the proceeds of the sale of the Series 2018A Bonds to the Borrower. The Borrower will execute and deliver to the Authority the Series 2018A Master Note to evidence the loan and the obligation of the Borrower to repay it. The Series 2018A Master Note will be issued in a principal amount equal to the aggregate principal amount of the Series 2018A Bonds and will provide for payments of principal, premium, if any, and interest sufficient to permit the Authority to make the required payments of principal, premium, if any and interest on the Bonds.

Deposits in Respect of the Series 2018A Master Note

The Borrower agrees in the Loan Agreement to make the following payments as evidenced by the Series 2018A Master Note, directly to the Bond Trustee for deposit into the appropriate fund established by the Bond Indenture, on the following dates:

(a) for deposit into the Interest Account on or before each March 15 and September 15 commencing on September 15, 2018, the amount necessary, together with any money then on deposit in the Interest Account and available for that purpose, to pay the next installment of interest due on the Series 2018A Master Note and

(b) for deposit into the Principal Account on or before each September 15 commencing on September 15, 2021, the amount necessary, together with any money then on deposit in the Principal Account and available for that purpose, to pay the next installment of principal due on the Series 2018A Master Note.

Obligation of the Borrower Unconditional

The Borrower agrees in the Loan Agreement that its obligation to make the payments described in the Loan Agreement and the Series 2018A Master Note and to perform its obligations under the Loan Agreement and the Series 2018A Master Note are absolute and unconditional and are not subject to diminution by any defense (other than payment), by any right of set off, counterclaim or abatement, by the happening or non-happening of any event or for any other reason whatsoever.

Pledge of the Loan Agreement and the Series 2018A Master Note

Except for Unassigned Rights, all of the Authority’s right, title and interest in the Loan Agreement and the Series 2018A Master Note (including the right to receive the payments to be made by the Borrower pursuant to the Series 2018A Master Note) have been assigned to the Bond Trustee by the Bond Indenture.

Agreement To Complete the Project; Changes to Project

The Borrower agrees in the Loan Agreement to complete or cause the completion of the Project. The Borrower also agrees in the Loan Agreement to construct, acquire and install any additional land, improvements or equipment that are necessary, in the judgment of the Borrower, for the operation of the Project. The Borrower may make changes to the Project as provided in the Loan Agreement.

Establishment of the Completion Date

Upon the completion of all of the respective components of the Project to be financed with proceeds of the Bonds, the Borrower agrees in the Loan Agreement to deliver a Completion Certificate to the Bond Trustee and the Authority.

Project Fund Insufficiency

If amounts in the Construction Account of the Project Fund available for the payment of Project Costs are insufficient to pay the costs of the Project in full, the Borrower agrees in the Loan Agreement to complete the Project

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with another source of funds other than proceeds of the Combined Bonds. If amounts in the Issuing Expenses Account of the Project Fund available for the payment of Issuing Expenses are insufficient to pay Issuing Expenses in full, the Borrower agrees in the Loan Agreement to complete the payment of the Issuing Expenses from proceeds of the Series 2018B Bonds, to the extent allowed by the Bond Trust Indenture to which the Series 2018B Bonds are issued and/or its own funds.

Inspection of the Bond Financed Property

The Borrower agrees in the Loan Agreement that each of the Authority, the Bond Trustee and the authorized agents of either of them, on reasonable prior written notice and as often as the Authority and the Bond Trustee reasonably determine to be desirable, (a) have the right at reasonable times to enter upon the Facilities in order to examine and inspect the Bond Financed Property, (b) have the right to any access to the Facilities that is reasonably necessary to complete the Project or to repair and maintain the Bond Financed Property in the event the Borrower fails to do so, (c) will be permitted to discuss the affairs and finances of the Borrower with its officers and independent accountants and (d) will be permitted at all reasonable times to examine and copy the books and records of the Borrower; provided, however, the Borrower shall not be required to disclose or discuss information that it is required to hold confidential either by law or contract.

Sufficient Revenues

Notwithstanding any other provision of the Loan Agreement or any other of the Borrower’s Documents or the Master Indenture, the Borrower unconditionally agrees in the Loan Agreement that it will pay pursuant to the Loan Agreement and the Series 2018A Master Note the full amount needed and at the times needed to enable the Authority to make timely payment of the principal of (whether due upon maturity, redemption, acceleration or otherwise), premium, if any, and interest on the Bonds.

Financial Information and Reports

The Borrower agrees in the Loan Agreement to (a) keep proper books of record and account in which full, true and correct entries will be made of all the Borrower’s business and affairs in accordance with generally accepted accounting principles consistently applied and (b) furnish to the Financial Statement Recipients, at the same time it is provided to the Master Trustee, the materials and notices required to be delivered to the Master Trustee under the Master Indenture. The Bond Trustee shall have no duty to review or analyze any financial statements provided to the Bond Trustee pursuant to the provisions summarized under this heading and shall hold such financial statements solely as a repository for the benefit of the Bondholders. The Bond Trustee shall not be deemed to have notice of any information contained therein or Event of Default that may be disclosed therein in any manner.

Maintenance of Tax Status

The Borrower agrees in the Loan Agreement that it will at all times maintain its existence as a nonprofit corporation and its status as an organization described in Section 501(c)(3) of the Code and exempt from federal income taxation under Section 501(a) of the Code. The Borrower agrees in the Loan Agreement that it will not take any action or permit any action to be taken by others that will adversely affect its agreement summarized in this paragraph.

Maintenance of Existence

Except as otherwise provided in the Master Indenture, the Borrower agrees in the Loan Agreement that during the term of the Loan Agreement it will maintain its corporate existence and will be duly qualified to transact business in the State, will not dissolve, will not sell, lease, transfer or otherwise dispose of all or substantially all of its assets, will not receive from any other corporation by sale, lease, transfer or otherwise all or substantially all of its assets, will not consolidate with or merge into another corporation and will not permit one or more other corporations to consolidate with or merge into it.

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Tax Exempt Bonds

The Borrower and Authority intend that the interest paid on the Series 2018A Bonds will be excluded from the gross income of the owners of the Series 2018A Bonds for federal income tax purposes pursuant to Section 103 of the Code. The Borrower agrees in the Loan Agreement that it will not take any action that would, or fail to take any action the omission of that would, cause an Event of Taxability to occur. The obligations of the Borrower summarized under this heading survive a defeasance of the Series 2018A Bonds pursuant to the provisions summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Discharge” and continue until all the Series 2018A Bonds have been paid in full.

Maintenance of Status as a Member of the Obligated Group

Subject to the provisions of the Bond Indenture summarized under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURE - Replacement of Series 2018A Master Note with Note Issued Under a Separate Master Indenture,” the Borrower agrees in the Loan Agreement that as long as any Bonds remain outstanding it will remain a Member of the Obligated Group; provided, however, the foregoing shall not preclude a merger among Members of the Obligated Group.

Debt Service Reserve Fund

The Borrower agrees to fund the Debt Service Reserve Fund in accordance with the Bond Indenture. If at any time the amount on deposit in the Debt Service Reserve Fund is less than 100% of the Debt Service Reserve Fund Requirement as a result of a transfer from the Debt Service Reserve Fund to the Principal Account or the Interest Account to fund a deficiency in one or both of those accounts, the Bond Trustee shall notify the Authority and the Borrower of such transfer and the Borrower agrees to restore the amount on deposit in the Debt Service Reserve Fund to an amount equal to the Debt Service Reserve Fund Requirement by the deposit with the Bond Trustee of an amount equal to such deficiency in not more than 12 substantially equal monthly installments beginning with the first day of the sixth month after the month in which such deficiency occurred. If on any Valuation Date the amount on deposit in the Debt Service Reserve Fund is less than 90% of the Debt Service Reserve Fund Requirement as a result of a decline in the market value of investments on deposit in the Debt Service Reserve Fund, the Borrower agrees to pay an amount equal to the amount of such deficiency in order to restore the amount on deposit in the Debt Service Reserve Fund to an amount equal to the Debt Service Reserve Fund Requirement within not more than 120 days following the date the Borrower receives written notice of such deficiency.

Events of Default

The occurrence and continuance of any of the following events is an Event of Default under the Loan Agreement:

(a) Failure by the Borrower to pay when due the principal of (whether at maturity, redemption, acceleration or otherwise), premium, if any, or interest on the Series 2018A Master Note.

(b) Failure by the Borrower to observe and perform any covenant, condition or agreement in the Borrower’s Documents to be observed or performed by it, other than those summarized in paragraph (a) under this heading, for a period of thirty (30) days after written notice specifying the failure and requesting that it be remedied is given to the Borrower by the Bond Trustee provided that if the failure is one that can be remedied but cannot be remedied within that thirty-day period, the Bond Trustee may grant an extension of the thirty-day period if the Borrower institutes corrective action within that thirty day period and diligently pursues that action until the default is remedied.

(c) Any representation or warranty made by the Borrower in the Borrower’s Closing Certificate, any of the Borrower’s Documents, the Master Indenture, or any financial statement or other document delivered in connection with the issuance of the Bonds proving to be false or misleading in any material respect as of the date given or made.

(d) The occurrence of an event of default under the Master Indenture that would permit the acceleration of any note or other obligation issued pursuant to the Master Indenture.

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Remedies

Upon the occurrence of an Event of Default, the Bond Trustee, as assignee of the Authority, may, and, upon receipt from the Registered Owners of more than 50% of the principal amount of the Bonds then Outstanding of a request to do so, shall by written notice to the Master Trustee, request that the Master Trustee declare the principal of the Series 2018A Master Note (if not then due and payable) to be due and payable immediately subject to the provisions of the Master Indenture regarding waiver of events of default, anything in the Series 2018A Master Note or in the Loan Agreement contained to the contrary notwithstanding.

Upon the occurrence of any Event of Default the Bond Trustee, as assignee of the Authority, may take whatever action at law or in equity the Authority or the Bond Trustee deem necessary or desirable (i) to collect any amounts then due under the Loan Agreement, the Series 2018A Master Note or the Master Indenture, (ii) to enforce performance of any obligation, agreement or covenant of the Borrower under any of the Borrower’s Documents, the Series 2018A Master Note or the Master Indenture or (iii) to otherwise enforce any of its rights.

None of the remedies of the Authority and the Bond Trustee as its assignee under the Loan Agreement is exclusive of any other remedy or remedies, and each remedy given is cumulative and is in addition to every other remedy that is given or that now or hereafter exists at law, in equity or by statute. No delay or omission by the Authority of the Bond Trustee in the exercise of any right or power accruing upon an Event of Default impairs the right or power or is a waiver of or acquiescence in any Event of Default. Every right and power given by the Loan Agreement to the Authority and assigned to the Bond Trustee may be exercised from time to time and as often as may be deemed expedient by the Authority or the Bond Trustee. No waiver of any Event of Default extends to or affects any subsequent Event of Default or impairs any rights or remedies consequent thereon.

Waivers of Events of Default

The Authority, or the Bond Trustee, as its assignee, may waive any Event of Default under the Loan Agreement and its consequences and rescind any action previously taken and must do so upon receipt of a request from the Registered Owners of more than 50% of the principal amount of the Series 2018A Bonds then Outstanding. There may not be waived, however, any Event of Default summarized in paragraph (a) under the heading “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT - Events of Default” unless, prior to the waiver, all arrears of principal, premium, if any, and interest on the Series 2018A Bonds and all expenses of the Authority and the Bond Trustee in connection with the Event of Default have been paid or provided for. If any waiver of any Event of Default occurs under the provisions summarized under this heading or any proceeding taken by the Bond Trustee on account of any Event of Default is discontinued, abandoned or determined adversely, then the Authority, the Borrower, the Bond Trustee and the Registered Owners will be restored to their former positions and rights under the Loan Agreement. No waiver summarized under this heading, whether by the Bond Trustee or the Registered Owners, extends to or affects any subsequent or other Event of Default or impairs any rights or remedies consequent thereon.

Remedies Subject to Law

All rights, remedies and powers given by the Loan Agreement to the Authority and to the Bond Trustee, as its assignee, may be exercised only to the extent that the exercise does not violate any applicable provision of law. All the provisions of the Loan Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they will not render the Loan Agreement invalid or unenforceable under the provisions of any applicable law.

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APPENDIX G

Form of Opinion of Bond Counsel

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We have acted as bond counsel in connection with the issuance by the Wisconsin Health and Educational Facilities Authority (the “Authority”) of $83,725,000 of its Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project) (the “Bonds”). The Series 2018A Bonds are being issued pursuant to Chapter 231 of the Wisconsin Statutes (the “Act”) and a resolution adopted by the Authority on March 13, 2018 (the “Resolution”) and under a Bond Trust Indenture dated as of April 1, 2018 (the “Bond Indenture”) between the Authority and U.S. Bank National Association, as bond trustee (the “Bond Trustee”).

Under a Loan Agreement dated as of April 1, 2018 (the “Loan Agreement”) between the Authority and Saint John’s Communities, Inc. (the “Borrower”), the Authority is loaning to the Borrower the proceeds from the sale of the Series 2018A Bonds to (a) finance or reimburse the Borrower for a portion of the costs associated with the acquisition, construction, renovation and equipping of the project described in the Loan Agreement (collectively, the “Project”), (b) establish a debt service reserve fund for the Series 2018A Bonds, (c) finance certain interest on the Series 2018A Bonds during the construction of the Project and (d) pay certain costs associated with the issuance of the Series 2018A Bonds.

The Borrower’s obligation to repay the loan is evidenced by its Promissory Note, Series 2018A dated April 11, 2018 (the “Note”). The Note is being issued pursuant to an Amended and Restated Master Trust Indenture dated as of December 1, 2015, as heretofore supplemented and as currently being supplemented and amended by a Third Supplemental Master Trust Indenture dated as of April 1, 2018 between the Obligated Group created by such Master Trust Indenture (of which the Borrower is the sole member) and U.S. Bank National Association, as the current trustee thereunder.

The Series 2018A Bonds are issuable as fully registered bonds in the denominations, bear interest at the rates and mature on the dates and in the amounts as provided in the Bond Indenture. The Series 2018A Bonds are subject to redemption prior to maturity at the times, in the manner and upon the terms set forth in the Series 2018A Bonds and the Bond Indenture.

We have examined (a) copies of Bonds numbered R-1 through R-17, (b) the Loan Agreement, (c) the Note, (d) the Bond Indenture, (e) a Tax Exemption Certificate and Agreement dated April 11, 2018 (the “Tax Exemption Agreement”) among the Authority, the Borrower and the Bond Trustee, (f) a Bond Purchase Agreement dated March 14, 2018 (the “Bond Purchase Agreement”) among the Authority, Piper Jaffray & Co. and the Borrower, and (g) the Resolution.

As to questions of fact material to our opinion, we have also examined and relied upon representations and certifications of officials of the Authority, the Borrower and others delivered in connection with the issuance of the Series 2018A Bonds (including without limitation, certifications as to the use of proceeds of the Series 2018A Bonds and the operation and use of the property financed therewith) without undertaking to verify the same by independent investigation. We have also examined the other documents we deemed relevant and necessary in rendering this opinion.

G-1 April 11, 2018 Page 2

Based upon the examination described above, it is our opinion under existing law that:

1. The Authority is a public body corporate and politic created and existing under the laws of the State of Wisconsin and has authority under the Act to issue the Series 2018A Bonds and to enter into and perform its obligations under the Loan Agreement, the Tax Exemption Agreement, the Bond Purchase Agreement and the Bond Indenture.

2. The Series 2018A Bonds are in the form required by law and have been authorized, executed, issued and delivered by the Authority in accordance with law, the Resolution and the Bond Indenture. The Series 2018A Bonds are valid and binding limited obligations of the Authority and are entitled to the protection given by the Bond Indenture except that enforceability may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent transfer or other laws affecting creditors’ rights generally. Enforceability of the Authority’s obligations is also subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). The principal of, premium, if any, and interest on the Series 2018A Bonds are payable solely out of the revenues derived from the Loan Agreement and the Note or, in the event of default under the Loan Agreement, as otherwise permitted by the Bond Indenture or the Resolution and by law. The Series 2018A Bonds do not constitute or give rise to a pecuniary liability of the Authority or a charge against its general credit. The Authority has no taxing power.

3. The Loan Agreement, the Note and the amounts payable under the Loan Agreement and the Note by the Borrower (excluding the Unassigned Rights, as defined in the Loan Agreement) have been pledged and assigned under the Bond Indenture as security for payment of the principal of, premium, if any, and interest on the Series 2018A Bonds.

4. The interest on the Series 2018A Bonds is excludable for federal income tax purposes from the gross income of the owners of the Series 2018A Bonds. The interest on the Series 2018A Bonds is not a specific preference item for purposes of the federal alternative minimum tax imposed by Section 55 of the Internal Revenue Code of 1986, as amended (the “Code”), although Bond Counsel observes that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income for taxable years that began prior to January 1, 2018. The Code contains requirements that must be satisfied subsequent to the issuance of the Series 2018A Bonds in order for interest on the Series 2018A Bonds to be or continue to be excludable from the gross income of the owners of the Series 2018A Bonds for federal income tax purposes. Failure to comply with certain of those requirements could cause the interest on the Series 2018A Bonds to be included in gross income retroactively to the date of issuance of the Series 2018A Bonds. The Authority, the Bond Trustee, and the Borrower have agreed to comply with all of those requirements and the opinion set forth in the first sentence of this paragraph is subject to the condition that the Authority, the Bond Trustee, and the Borrower comply with those requirements. We express no opinion regarding other federal tax consequences arising with respect to the Series 2018A Bonds.

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This opinion letter deals only with the specific legal issues that it explicitly addresses and no opinions may be inferred or implied beyond the matters expressly contained herein. The opinions expressed herein are specifically limited to the laws of the United States and the present internal laws of the State of Wisconsin. The opinions expressed herein are based upon those facts and circumstances in existence and laws in effect on the date hereof, and we assume no obligation or responsibility to update or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in laws that may hereafter occur, or to inform any person of any change in circumstances occurring after the date hereof that would alter the opinions rendered herein.

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APPENDIX H

Form of Continuing Disclosure Agreement

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CONTINUING DISCLOSURE UNDERTAKING AGREEMENT

This CONTINUING DISCLOSURE UNDERTAKING AGREEMENT (this “Agreement”) is entered into as of April 1, 2018, by Saint John’s Communities, Inc., a Wisconsin nonstock nonprofit corporation (the “Corporation”), to each registered owner or holder of any Bond (as hereinafter defined), for the purpose of permitting Piper Jaffray & Co. (the “Underwriter”), to purchase the Bonds in compliance with the Securities and Exchange Commission (“SEC’) Rule 15c2-12 (the “SEC Rule”), as amended.

The Bonds are being issued pursuant to the Indenture (defined below). The proceeds of the Bonds are being made available by the Issuer (defined below) to the Corporation, an Obligated Person (defined below), pursuant to the Loan Agreement between the Corporation and the Issuer dated as of April 1, 2018 (the “Loan Agreement”). The Bonds are secured under the provisions of the Indenture and the Loan Agreement and will be payable from (i) payments to be made by the Corporation under the Loan Agreement and (ii) payments made by the members of the Obligated Group (defined below) on the Corporation’s Promissory Note, Series 2018A (the “Note”) issued by the Corporation pursuant to the Master Indenture (defined below). Payment of the principal of and interest on the Bonds shall be made from moneys derived from the Note. Under the Master Indenture, the members of the Obligated Group are jointly and severally liable to make payments on the Note according to the terms thereof when due. At present, the Corporation is the only member of the Obligated Group under the Master Indenture. The Corporation is also the Obligated Group Representative under the Master Indenture. Any registered owner or holder of any Bond shall, by its payment for and acceptance of such Bond, accept and assent to this Agreement and the exchange of (a) such payment and acceptance for (b) the promises of the Corporation contained herein.

1. Definitions. The words and terms defined in this Agreement shall have the meanings herein specified unless the context or use clearly indicates another or different meaning or intent. Those words and terms not expressly defined herein and used herein with initial capitalization, where rules of grammar do not otherwise require capitalization, shall have the meanings assigned to them in the SEC Rule.

“Administrative Offices Portion” shall mean the portion of the Project related to the conversion of the offices in the Corporation’s Central Tower building.

“Annual Information” shall mean the information specified in Section 5(a)(i).

“Construction Monitor” shall mean zumBrunnen, Inc.

“EMMA” means the Electronic Municipal Market Access system operated by the MSRB, accessible at http://emma.msrb.org.

“Fiscal Year” shall have the meaning set forth in the Master Indenture.

“Final Official Statement” means the Official Statement dated March 14, 2018, relating to the Bonds, including any document or set of documents included by specific reference to such document or documents, previously provided to the Repository or filed with the SEC.

H-1 “Indenture” means the Bond Trust Indenture between the Issuer and U.S. Bank National Association as Bond Trustee, dated as of April 1, 2018, and all amendments and supplements thereto.

“Issuer” shall mean the Wisconsin Health and Educational Facilities Authority, as issuer of the Bonds.

“Loan Agreement” shall mean the Loan Agreement between the Issuer and the Corporation, dated as of April 1, 2018, and all amendments and supplements thereto.

“Master Indenture” shall mean the Amended and Restated Master Trust Indenture dated as of December 1, 2015 between the Corporation and U.S. Bank National Association as master trustee, as amended and supplemented to date, and as may be amended and supplemented hereafter.

“Monthly Report” shall mean the information specified in Section 5(a)(iii).

“MSRB” shall mean the Municipal Securities Rulemaking Board.

“Obligated Group” shall have the meaning set forth in the Master Indenture.

“Obligated Group Representative” shall have the meaning set forth in the Master Indenture.

“Obligated Issuer” shall have the meaning set forth in the Master Indenture.

“Obligated Person” means any person, including the Corporation, who is either generally or through an enterprise, fund or account of such person committed by contract or other arrangement to support payment of all or part of the obligations on the Bonds (other than providers of municipal bond insurance, letters of credit or other liquidity facilities). All Obligated Persons with respect to the Bonds currently are identified in Section 4 below.

“Officer’s Certificate” shall have the meaning set forth in the Master Indenture.

“Qualified Accountants” shall have the meaning set forth in the Master Indenture.

“Project” shall have the meaning set forth in the Loan Agreement.

“Quarterly Report” shall mean the information specified in Section 5(a)(ii).

“Tower Portion” shall mean the Project excluding the Administrative Offices Portion.

“Repository” shall mean, at any point in time, any nationally recognized municipal securities information repository which is then recognized as such by the SEC, presently the MSRB through EMMA.

2. Bonds. This Agreement applies to the Wisconsin Health and Educational Facilities Authority Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project) issued in the original aggregate principal amount of $83,725,000 (the “Bonds”).

H-2 3. Term. The term of this Agreement is from the date of delivery of the Bonds by the Issuer to the earlier of (i) the date of the last payment of principal or redemption premium, if any, of, and interest accrued on, all of the Bonds or (ii) the date the Bonds are defeased under Article 7 of the Indenture.

4. Obligated Persons. The Corporation hereby warrants and represents as of the date hereof that the Corporation is the only Obligated Person with respect to the Bonds. If any Obligated Person is no longer committed by contract or other arrangement to support payment of any portion of the obligations on the Bonds, such person shall no longer be considered an Obligated Person within the meaning of the SEC Rule and the obligations of such person under this Agreement to provide annual information and notices of events shall terminate.

5. Provision of Annual, Quarterly and Monthly Information.

(a) The Corporation hereby undertakes to provide to the MSRB through EMMA the following financial and operating information:

(i) Within 150 days after the close of each fiscal year of the Obligated Group, beginning with the fiscal year ending December 31, 2017 the following financial information and operating data for the Obligated Group:

(A) (x) a combined or consolidated and consolidating statement of operations, changes in net assets and cash flows of the Corporation and each other Obligated Issuer for such Fiscal Year (all material inter-company transactions and balances shall be eliminated in the preparation of the combined statements), and (y) a combined or consolidated and consolidating balance sheet presented on the basis described in (x) above as of the end of such Fiscal Year, showing in each case in comparative from the financial figures for the preceding Fiscal Year, accompanied by an opinion of Qualified Accountants which states that such financial statements have been presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States;

(B) a certificate of Qualified Accountants stating whether or not, to the best knowledge of the signers, the Obligated Issuers are in default in the performance of the Historical Debt Service Coverage Ratio covenant summarized in the Final Official Statement under the heading “SECURITY FOR THE SERIES 2018A BONDS - Rate Covenant,” the Days Cash on Hand covenant summarized in the Final Official Statement under the heading “SECURITY FOR THE SERIES 2018A BONDS - Liquidity Covenant” or in the performance of any other financial covenant contained in the Master Indenture as amended or supplemented from time to time insofar as they relate to accounting matters, and, if so, specifying each such default of which the signers may have knowledge; and

(C) an Officer’s Certificate stating whether or not, to the best knowledge of the signer, the Obligated Group is in compliance with all of the terms, provisions and conditions of the Master Indenture or if not, specify all such defaults and the nature of the Master Indenture; calculating and certifying the

H-3 Historical Debt Service Coverage Ratio and Days Cash on Hand covenant; and providing an executive summary of any actuarial reports received by the Obligated Group during the preceding Fiscal Year, if any;

(such financial information and operating data in this Section 5(a)(i), collectively, the “Annual Information”); and

(ii) Within 45 days after the end of each of the first three fiscal quarters of the Corporation’s fiscal year, and within 60 days of the final fiscal quarter of the Corporation’s fiscal year, beginning with the fiscal quarter ending March 31, 2018:

(A) quarterly unaudited financial statements of the Obligated Group, including a consolidated or consolidating statement of operations, changes in net assets and cash flows of the Obligated Group during such period and a consolidated or consolidating balance sheet as of the end of each such fiscal quarter with a comparison to the operating budget, all prepared in reasonable detail and certified, subject to year-end adjustment, by an officer of the Obligated Group Representative;

(B) occupancy information for the facilities operated by the Obligated Issuers, as of the end of each such quarter of the type presented in Appendix A to the Final Official Statement under the heading “EXISTING CONTINUING CARE FACILITIES - Historical Occupancy;” and

(C) payor mix information for such quarter of the type presented in Appendix A to the Final Official Statement under the heading “SELECT FINANCIAL INFORMATION – Sources of Revenues;”

(such financial and operating information in this Section 5(a)(ii), collectively, the “Quarterly Report”).

(iii) Within 45 days after the end of each fiscal month, commencing with the fiscal month ending March 31, 2018 and ending with the fiscal month of the final completion date of the Project, a report on the Project that includes (A) a calculation of the marketing/reservation levels for the Project as of the end of such month, including the number of units that have been reserved or cancelled during that month and on an aggregate basis; (B) summary statements as to the status of construction, (C) unaudited financial reports on the development costs of the Project incurred during the month and on an aggregate basis; (D) the latest report from the Construction Monitor on the Tower Portion; and (E) statements of the balances in each fund and account held under the Indenture as of the end of such month (to the extent available from the bond trustee), all in reasonable detail, certified by an officer of the Corporation.

(such financial and operating information in this Section 5(a)(ii), collectively, the “Monthly Report”).

(b) If any Annual Information, Quarterly Report or Monthly Report relating to the Corporation (and, if applicable, other members of the Obligated Group) referred to in

H-4 paragraph (a)(i), (a)(ii) or (a)(iii) of this Section 5 no longer can be provided because the operations to which they related have been materially changed or discontinued, a statement to that effect, provided by the Corporation to the MSRB through EMMA, along with any other Annual Information, Quarterly Report or Monthly Report required to be provided under this Agreement, shall satisfy the undertaking to provide such Annual Information, Quarterly Report or Monthly Report. To the extent available, the Corporation shall cause to be filed, along with the other Annual Information, Quarterly Report or Monthly Report, financial information or operating data similar to that which can no longer be provided in its prior form.

(c) Annual Information, Quarterly Reports or Monthly Reports required to be provided pursuant to this Section 5 may be provided by a specific reference to such Annual Information, Quarterly Reports or Monthly Reports already prepared and previously provided to the MSRB through EMMA, or filed with the SEC; however, if such document is a final official statement, it must be available from the MSRB.

(d) The Corporation hereby agrees to conduct investor calls (i) quarterly within 45 days after the end of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2018 and ending with the fiscal quarter in which the final completion date of the Tower Portion occurs, and (ii) following the fiscal quarter in which the final completion date of the Tower Portion occurs, annually within 60 days after the close of each Fiscal Year.

6. Accounting Principles. The accounting principles pursuant to which the financial statements will be prepared shall be the generally accepted accounting principles applicable to organizations of the same character as the Corporation, as in effect from time to time, those described in the auditors’ report and the notes accompanying the consolidated audited financial statements of the Corporation included in Appendix B to the Final Official Statement or those mandated by any applicable state law from time to time, or any other accounting principles which do not, in the determination of the Corporation, materially deviate from any of such accounting principles.

7. Reportable Events. The Corporation shall disclose the following events, in a timely manner within 10 business days of the occurrence of any of the following events, to the MSRB as such relate to the Bonds:

(i) Principal and interest payment delinquencies;

(ii) Non-payment related defaults, if material;

(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;

(v) Substitution of credit or liquidity providers, or their failure to perform;

(vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form

H-5 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the Bonds, or other material events affecting the tax-exempt status of the Bonds;

(vii) Modifications to rights of Bondholders, if material;

(viii) Bond calls (other than mandatory, scheduled redemptions, not otherwise contingent upon the occurrence of an event, the terms of which redemptions are set forth in detail in the Final Official Statement), if material, and tender offers;

(ix) Defeasances;

(x) Release, substitution or sale of property securing repayment of the Bonds, if material;

(xi) Rating changes;

(xii) Bankruptcy, insolvency, receivership or similar event of the Corporation;

(xiii) The consummation of a merger, consolidation, or acquisition involving the Corporation or the sale of all or substantially all of the assets of the Corporation, other than in the course of ordinary business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(xiv) Appointment of a successor or additional trustee or the change of a name of a trustee, if material.

Any event described in subsection (xii) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Corporation in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Corporation, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Corporation.

The Corporation may from time to time choose to provide notice to the MSRB of the occurrence of any other event with respect to the Bonds, in addition to those listed above, if such other event is material with respect to the Bonds and should be disclosed. However, the Corporation does not commit to provide any such notice of the occurrence of any other event except for those events set forth in the list above.

8. Use of Agent. The Corporation may, at its sole discretion, utilize an agent (the “Dissemination Agent”) in connection with the dissemination of any information required to be provided by the Corporation pursuant to the SEC Rule and this Agreement. If a Dissemination

H-6 Agent is selected for these purposes, the Corporation shall provide prior written notice thereof (as well as notice of replacement or dismissal of such agent) to the MSRB through EMMA.

The initial Dissemination Agent is U.S. Bank National Association.

Further, the Corporation may, at its sole discretion, retain counsel or others with expertise in securities matters for the purpose of assisting the Corporation in making judgments with respect to the scope of its obligations hereunder and compliance therewith, all to further the purposes of this Agreement as set forth in the preamble and Section 10 hereof.

9. Failure to Disclose. If for any reason the Corporation fails to provide the Annual Information, a Quarterly Report or a Monthly Report as required by this Agreement, the Corporation shall provide notice of such failure in a timely manner to the MSRB through EMMA.

10. Remedy.

(a) The purpose of this Agreement is to enable the Underwriter to purchase the Bonds by providing for an undertaking by the Corporation in satisfaction of the SEC Rule. This Agreement is solely for the benefit of the owners of the Bonds and creates no new contractual or other rights for the SEC, underwriters, brokers, dealers, municipal securities dealers, potential customers, any other Obligated Persons (as defined in the SEC Rule) or any other third party. The sole remedy against the Corporation for any failure to carry out any provision of this Agreement shall be for specific performance of the Corporation’s disclosure obligations hereunder and not for money damages of any kind or in any amount or for any other remedy. The Corporation’s failure to honor its covenants hereunder shall not constitute a breach or default of the Bonds, the Indenture, the Loan Agreement, the Note, the Master Indenture or any other agreement to which the Corporation is a party.

(b) Subject to paragraph (e) of this Section 10, in the event the Corporation fails to provide any information required of it by the terms of this Agreement, any holder of Bonds may pursue the remedy set forth in the preceding paragraph in any court of competent jurisdiction in the State of Wisconsin. An affidavit to the effect that such person is a holder of Bonds, supported by reasonable documentation of such claim, shall be sufficient to evidence standing to pursue this remedy.

(c) Subject to paragraph (e) of this Section 10, any challenge to the adequacy of the information provided by the Corporation by the terms of this Agreement may be pursued only by holders of Bonds then Outstanding, in any court of competent jurisdiction in the State of Wisconsin. An affidavit to the effect that such persons are holders of Bonds, supported by reasonable documentation of such claim, shall be sufficient to evidence standing to pursue the remedy set forth in the preceding paragraph.

(d) If specific performance is granted by any such court, the party seeking such remedy shall be entitled to payment of costs by the Corporation and to reimbursement by the Corporation of reasonable fees and expenses of attorneys incurred in the pursuit of such claim.

H-7 (e) Prior to pursuing any remedy for any breach of any obligation under this Agreement, a holder of Bonds shall give notice to the Corporation, via registered or certified mail, of such breach and its intent to pursue such remedy. Fifteen (15) days after the mailing of such notice, and not before, such remedy may be pursued under this Agreement if and to the extent the Corporation has failed to cure such breach within fifteen (15) days.

11. Modification of Agreement. The Corporation may, from time to time, amend or modify this Agreement without the consent of or notice to the owners of the Bonds if either (a), as evidenced by an opinion of counsel, (i) such amendment or modification is made in connection with a change in circumstances that arises from a change in legal requirements, change in law or change in the identity, nature or status of the Corporation, or type of business conducted, (ii) this Agreement, as so amended or modified, would have complied with the requirements of the SEC Rule on the date hereof, after taking into account any amendments or interpretations of the SEC Rule, as well as any change in circumstances, and (iii) such amendment or modification does not materially impair the interests of the holders of the Bonds, as determined either by (A) any person selected by the Corporation that is unaffiliated with the Corporation (including the Trustee) or (B) an approving vote of the holders of the requisite percentage of Outstanding (as defined in the Indenture) Bonds as required under the Indenture at the time of such amendment or modification; or (b) such amendment or modification is permitted by law, as evidenced by an opinion of counsel.

12. Format of Filings. All documents and information delivered pursuant to this Agreement shall be submitted in a format which conforms to the requirements specified by the MSRB.

13. Interpretation Under Wisconsin Law. It is the intention of the parties hereto that this Agreement and the rights and obligations of the parties hereunder shall be governed by and construed and enforced in accordance with, the law of the State of Wisconsin.

14. Severability Clause. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

15. Successors and Assigns. All covenants and agreements in this Agreement made by the Corporation shall bind its successors, whether so expressed or not.

16. Notices. Notices to the Corporation under this Agreement shall be made at the following address:

Saint John’s Communities, Inc. 1840 N. Prospect Avenue Milwaukee, WI 53202 Attention: President

With a copy sent to the attention of: Director of Finance

H-8 17. Business Days. If the last day for taking any action under this Agreement is a day other than a business day, such action may be taken on the next succeeding business day and, if so taken, shall have the same effect as if taken on the day required by this Agreement.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed as of the date set forth above.

SAINT JOHN’S COMMUNITIES, INC.

By: ______Renee Anderson, President and Chief Executive Officer

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Wisconsin Health and Educational Facilities Authority • Fixed Rate Revenue Bonds, Series 2018A (Saint John’s Communities, Inc. Project)