HomeMy WebLinkAbout14 - Hoag Hospital Revenue Bonds0 0
CITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Cy0 /kDJ-- a-L),-,)S)
Agenda Item No. 14
July 26, 2005
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Dennis Danner, Administrative Services Director (949) 644 -3123
ddanner@city.newport-beach.ca.us
SUBJECT: Resolution 2005 - Hoag Memorial Hospital Presbyterian Series 2005
Health Care Facility Revenue Bonds
Issue:
Should the City assist Hoag Memorial Hospital Presbyterian in issuing Health Care
Facility Revenue Bonds?
Recommendation:
Hold the public hearing and adopt the resolution authorizing:
• the sale of not to exceed $200 million of City of Newport Beach Insured Demand
Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005;
• the execution and delivery of the Loan Agreement in substantially the form
presented;
• the execution and delivery of the Indenture in substantially the form presented;
• the execution and delivery of the Preliminary Official Statement (including
Appendix A) in substantially the form presented;
• the execution and delivery of the Bond Purchase Contract in substantially the
form presented; and
• staff to take the necessary steps to close the bond sale.
Discussion:
In 1984, 1992, 1996, and 1999 the City issued similar bonds on behalf of Hoag Hospital
Memorial Presbyterian. The debt service for these bonds is not a City obligation. The
hospital will use the proceeds of this issue to (1) finance the acquisition and
construction of certain additions and improvements to, and equipment for, health
facilities located at the campus of Hoag Memorial Hospital Presbyterian, and (2) provide
for the payment of bond issuance expenses, including the premium for a commercial
bond insurance policy. In each of the previous issues Hoag Hospital paid an issuance
fee to the City that was used for a General Fund paramedic reserve or for infrastructure
Hoag Memorial Aital Presbyterian Series 2005 Heath Me Facility Revenue Bonds
July 26, 2005
Page 2
improvements. Hoag is proposing paying a similar fee for this bond issuance in the
amount of $200,000.
The proposed issue provides a number of benefits to the City. First, Hoag will be able to
save money using the proceeds of tax exempt bonds to finance the construction and
improvements, and purchase equipment; a cost savings is expected to be passed along
to Newport Beach residents and other patients in the form of reduced health care costs.
Second, Hoag will be able to improve the quality of health care and do so quickly
because it will have funds necessary to acquire state -of- the -art equipment and construct
improvements to the campus. Finally, Hoag has agreed to once again contribute
$200,000 to the City to be used towards a public improvement or other expenditure of
benefit to the City as approved by the City Council.
Commonly referred to as "Conduit Debt," it is not unusual for municipalities in California
to assist public service entities such as Hoag hospital with tax exempt financing
agreements of this nature. A significant provision of the agreement between the City
and Hoag is that the City incurs no independent financial responsibility for the
indebtedness. Existing agreements of this type are disclosed in the City's
Comprehensive Annual Financial Report, which is approved by the City's auditors each
year. We are unaware of any negative comments by the auditors, creditors or Bond
rating agencies concerning the agreements.
The limited nature of the City's participation in the financing is also clearly disclosed to
investors who purchase the Bonds. The bond offering documents state that neither the
full faith nor credit of the City nor the general taxing power of City and State of California
are pledged in connection with the bond offering.
A City is a successful combination of many factors, including the mix of land uses, the
quality of public services, the availability of housing, open space opportunities, and
various other amenities. Certainly one of the key factors in achieving a successful
community is having a quality health care facility and health care providers. The City is
fortunate to have a very high quality hospital in Hoag and its success has attracted a
very high quality physician base to our immediate region The perpetuation of this asset
is in the City's long term interest. Since there is no cost or risk to the City in approving
the issue, it is in the community's interest to do so.
The Resolution authorizing the issue is attached to this staff report. All other documents
are available in the City Clerk's office for examination.
Public Notice
Public Notice of this hearing was provided as prescribed by law.
Funding Availability:
No City funding is required by this action.
Hoag MemoriallOspital Presbyterian Series 2005 HeathOare Facility Revenue Bonds
July 26, 2005
Page 3
Alternatives:
The alternative is to not assist Hoag Memorial Hospital Presbyterian in the issuance of
Health Care Facility Revenue Bonds.
Prepared and Submitted by:
/1-0 &L, o C 1e�-- e�
%..n Dennis Danner
Administrative Services Director
Attachment: Resolution
0
RESOLUTION NO.
OH &S
6/20/05
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH AUTHORIZING THE ISSUANCE OF NOT TO EXCEED
$200,000,000 AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF
NEWPORT BEACH INSURED REVENUE BONDS (HOAG MEMORIAL
HOSPITAL PRESBYTERIAL, SERIES 2005
WHEREAS, the City of Newport Beach (the "City ") is a municipal corporation and
charter city duly organized and existing under a freeholders' charter pursuant to which the City has
the right and power to make and enforce all laws and regulations in respect of municipal affairs and
certain other matters in accordance with and as more particularly provided in Sections 3, 5 and 7 of
Article XI of the Constitution of the State of California and Section 200 of Article II of the Charter
of the City (the "Charter "); and
WHEREAS, the City Council of the City, acting under and pursuant to the powers
reserved to the City under Sections, 3, 5, and 7 of Article XI of the Constitution of the State of
California and Section 200 of Article II of the Charter, has found that the public interest and
necessity require the establishment of a program for the authorization, issuance and sale of revenue
bonds or notes by the City for the purposes of making loans such as those described herein; and
WHEREAS, the City pursuant to Ordinance No. 85 -23 and 84 -4, has adopted the
Health Care and Recreation Facilities Revenue Bond Ordinance of the City of Newport Beach (the
"Law") to establish procedures for the authorization, issuance and sale of such revenue bonds or
notes; and
WHEREAS, Hoag Memorial Hospital Presbyterian, a California nonprofit public
benefit corporation (the "Corporation ") has requested that the City issue its Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian), Series 2005, in one or more series (the "Bonds ") for the
purpose of. (1) financing the acquisition and construction of certain additions and improvements
to, and equipment for, health facilities (collectively, the "Health Facilities ") located at the campus
of Hoag Memorial Hospital Presbyterian, One Hoag Drive, Newport Beach, California; and (2)
providing for the payment of bond issuance expenses; and
WHEREAS, the Corporation is a "participating health institution" and operates a
"health facility" as those terms are defined in the Law; and
WHEREAS, the loan to be made with the proceeds of said bonds will promote the
purposes of the Law by providing funds to pay the cost of acquiring, constructing, rehabilitating or
improving health facilities and reimbursing the Corporation for certain expenses incurred for the
purposes of acquiring, constructing, rehabilitating or improving the health facilities; and
DOCSSCI:356606.1
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WHEREAS, pursuant to Section 147(0 of the Internal Revenue Code of 1986
(the "Code "), the Bonds are required to be approved, following a public hearing, by an elected
representative of the City, as the governmental party issuing the Bonds, and an elected
representative of the governmental unit or units having jurisdiction over the area in which the
Health Facilities are located; and
WHEREAS, the Health Facilities are located wholly within the City; and
WHEREAS, the City Council of the City is the elected legislative body of the City
and is the applicable elected representative required to approve the issuance of the Bonds within the
meaning of Section 147(0 of the Code; and
WHEREAS, pursuant to Section 147(0 of the Code, the City Council of the City
has, following notice duly given, held a public hearing regarding the issuance, execution and
delivery of the Bonds, and now desires to approve the issuance of the Bonds; and
WHEREAS, there have been presented to this meeting the following:
(1) Proposed form of Loan Agreement (the "Loan Agreement ") between the
City and the Corporation;
(2) Proposed form of Bond Indenture (the `Bond Indenture ") between the City
and Wells Fargo Bank, National Association (or such other financial institution acceptable
to the City and the Corporation), as bond trustee (the "Bond Trustee "), providing for the
authorization and issuance of the Bonds;
(3) Proposed form of the Official Statement to be used in connection with the
sale of the Bonds (the "Official Statement "); and
(4) Proposed form of Bond Purchase Contract (the "Bond Purchase Contract ")
between the City and Citigroup Global Markets Inc. (the "Underwriter").
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Newport Beach, California, as follows:
Section 1. The form, terms and provisions of the Loan Agreement be and they
hereby are approved and the Mayor or the Mayor's designee is hereby authorized and empowered
to execute, and the City Clerk or the City Clerk's designee is hereby authorized and empowered to
attest and deliver, the Loan Agreement, in substantially the form presented to and considered at this
meeting with such changes as the official executing the same shall deem appropriate and in the best
interests of the City, as conclusively evidenced by execution thereof.
2
DOCSSC1:356606.1
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Section 2. The form, terms and provisions of the Bond Indenture be and they hereby
are approved, and the Mayor or the Mayor's designee is hereby authorized and empowered to
execute and the City Clerk or the City Clerk's designee is hereby authorized and empowered to
attest and deliver to the Bond Trustee, the Bond Indenture, in substantially the form presented to
and considered at this meeting with such changes as may be approved by the official executing the
same, such approval to be conclusively evidenced by execution thereof.
Section 3. Pursuant to Section 147(f) of the Internal Revenue Code of 1986, this
City Council approves the issuance of the Bonds in an aggregate principal amount not to exceed
$200,000,000. It is the purpose and intent of the Council that this Resolution constitute approval of
the issuance of the Bonds by the applicable elected representative of the issuer and the applicable
elected representative of the governmental unit having jurisdiction over the area in which the Health
Facilities are located, in accordance with said Section 147(f). Payment of the principal of and the
redemption premium and the interest on the Bonds shall be made solely from the revenues to be
received by the City pursuant to the Loan Agreement, and said Bonds shall not be deemed to
constitute a debt or liability of the City.
Section 4. The issuance, sale and delivery of the Bonds in one or more series
pursuant to the Bond Indenture in an aggregate principal amount of not to exceed $200,000,000 is
hereby authorized and approved.
Section 5. The Official Statement in the form presented to this meeting be and the
same hereby is approved for use by the Underwriter in connection with the public offering of the
Bonds with such changes as may be approved by one or more officers of the City, and the Mayor or
the Mayor's designee is authorized to execute the final Official Statement relating to the Bonds.
The Underwriter is hereby authorized to distribute the Official Statement in preliminary form to
potential purchasers of the Bonds, and the Official Statement in final form to actual purchasers of
the Bonds.
Section 6. The Mayor and the City Clerk (each of whom may sign by facsimile
signature) are hereby authorized and directed to execute, in the name and on behalf of the City, the
Bonds and to cause the Bonds to be delivered to the Bond Trustee for authentication and delivery to
the Underwriter.
Section 7. The Bond Purchase Contract is hereby approved, and the Mayor or the
Mayor's designee and the City Clerk or the City Clerk's designee be and hereby are authorized and
empowered to execute and deliver the Bond Purchase Contract, in substantially the form presented
to and considered at this meeting, with such changes as the officials executing the same shall deem
appropriate and in the best interests of the City as conclusively evidenced by their execution
thereof.
Section 8. The Mayor or the Mayor's designee and the City Clerk or the City
Clerk's designee are hereby authorized and directed, jointly and severally, to do any and all things,
and to execute and deliver any and all documents which they may deem necessary or advisable, in
3
DOCSSC L:356606.1
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order to consummate the issuance of the Bonds, including to modify the provisions of the Loan
Agreement, the Bond Indenture, the Official Statement and the Bond Purchase Contract to conform
to any requirements of a bond insurer selected by the Corporation and otherwise to carry out, give
effect to and comply with the terms and intent of this Resolution and the documents referred to
herein.
Section 9. The Bonds authorized to be issued pursuant to this Resolution shall be
issued in strict compliance with the provisions of the Law. The City Clerk shall certify to the
passage of this resolution by the City Council of the City of Newport Beach, and it shall thereupon
take effect.
I hereby certify that the foregoing resolution was adopted by the City Council of the
City of Newport Beach at its meeting of July 26, 2005, by the following vote:
ATTEST:
AYES: Councilmembers:
NOES: Councilmembers:
ABSTAIN: Councilmembers:
ABSENT: Councilmembers:
City Clerk
DOCSSCL356606.1
0
Mayor
Authorized to Publish Advertisements of all kinds iucluding public notices by
Decree of the Superior Court of Orange County, California Number A -6214,
September 29, 1961, and A -24831 June 11, 1963-
PROOF OF PUBLICATION
STATE OF CALIFORNIA)
) ss.
COUNTY OF ORANGE )
I am a Citizen of the United States and a
resident of the County aforesaid; I am
over the age of eighteen years, and not a
party to or interested in the below entitled
matter. I am a principal clerk of the
NEWPORT BEACH - COSTA MESA
DAILY PILOT, a newspaper of general
circulation, printed and published in the
City of Costa Mesa, County of Orange,
State of California, and that attached
Notice is a true and complete copy as
was printed and published on the
following dates:
JULY 11,2005
I declare, under penalty of perjury, that
the foregoing is true and correct.
Executed on JULY 11.2005
at Costa Mesa, California.
Signature
•
of the Internal Re,
Code (the "Code ")
be held with rasps
the proposed issf
by the City of Nei
Batch,. California
"City) of its rem
bonds in one or
series in an amour
to exceed 5200.06
(the Bonds').
proceeds of the'4
will be used by
Memorial Hosl
Presbyterian
"Corporation ") to
beat e.'. Abm not
fcquisition, cons)
'.ion, fmprovem
rpin% ort
ehaquipbili[atbn, rep rson
ng and other ca
nolects located. at
soon
". proposed to be financed
wilt
may attend the public
to hearing or, prior lo.lhe
noa.� tines. rof the hearing,
'port submit .written cam.
meets..
no"A The Bonds wilfi be
pro issued by the City ujger
nob the powers reservagg }o
the City under SeclAuns
i S, 5 and 7 of Article N
u2of the Constitutiot -ot
the State of Califihtii
uc- 'described above and will
nt• be limited obligations of
on, the City to be repaid
solely from revenues
3nereceived by the City
Jn from the Corporation.
oft Additional information.
he bdnurning.. the above
pea 'inatber,mey be obtained
the
cm-
1.. or
*tN
CITY OF NEWPORT BEACH
INSURED REVENUE BONDS
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005A, 2005B AND 2005C
CLOSING MEMORANDUM/TRANSCRIPT INDEX
Place
Offices of Orrick, Herrington & Sutcliffe LLP
777 South Figueroa Street, Suite 3200
Los Angeles, CA 90017
Conference Room A31
Conference Room Phone (213) 612 -2306
Main Phone (213) 629 -2020
Main Fax (213) 612 -2499
Date and Time
Preclosing: Tuesday, August 23, 2005 at 1:00 p.m.
Closing: Wednesday, August 24, 2005 at 8:00 a.m.
Parties
City of Newport Beach (the "City")
City Attorney's Office of the City of Newport Beach ( "City Attorney ")
Hoag Memorial Hospital Presbyterian (the "Corporation ")
Citigroup Global Markets Inc., as Broker - Dealer (the "Broker- Dealer ") and as underwriter
(the "Underwriter")
Wells Fargo Bank, National Association (the "Master Trustee ", the "Bond Trustee" and
the "Auction Agent ")
Financial Guaranty Insurance Company (the `Bond Insurer ")
Orrick, Herrington & Sutcliffe LLP ( "Bond Counsel" or "BC" and "Disclosure Counsel ")
Wells Fargo & Company ( "Bond Trustee Counsel ")
Foley & Lardner LLP ( "Underwriter's Counsel" or "UC ")
DOCSSCI:358317.5
Stradling Yocca Carlson & Rauth ( "Corporation's Counsel" or "CC ")
Ernst & Young LLP (Auditor to Hoag Memorial Hospital Presbyterian) ( "Auditor ")
Preclosins
The parties listed below will.deliver one complete original document along with
seven (7) fully executed signature pages of the respective documents indicated. The
documents will be executed in advance of the Closing by the respective parties thereto and
delivered no later than the Preclosing. At that time a Preclosing conference will be held to
confirm that all documents and papers are on hand, in proper form and properly executed. All of
such deliveries will be deemed to have been made in escrow until the final delivery at the
Closing has been made.
Responsibility for preparing or assembling the documents is indicated in
parentheticals.
Maior Documents
1. Master Trust Indenture (conformed copy only, certified as true copy by the Corporation)
(executed by the Corporation and the Master Trustee). (BC).
2. Supplemental Master Indenture for Obligation No. 14 (executed by the Corporation and
the Master Trustee). (BC)
3. Specimen Obligation No. 14 (executed by the Corporation and authenticated by the
Master Trustee). (BC)
4. Bond Indenture (executed by the City and the Bond Trustee). (BC)
5. Loan Agreement (executed by the City and the Corporation). (BC)
6. Broker - Dealer Agreement (executed by the Corporation, the Auction Agent and the
Broker - Dealer. (BC)
7. Auction Agent Agreement (executed by the Bond Trustee and the Auction Agent) (BC)
8. Tax Certificate and Agreement (executed by the City and the Corporation), together with
the following exhibits (BC):
(a) the Certificate of the Underwriter;
(b) the Certificate of the Issuer and the Borrower Concerning Rebate;
(c) the Weighted Average Expected Life of the Project;
(d) the Certificate of the Bond Insurer;
9. Continuing Disclosure Certificate (executed by the Corporation). (Corporation's Counsel)
10. Bond Insurance Policy (original to Bond Trustee; specimens for others). (Bond Insurer)
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DOCSSC 1:358317.5
Documents Relating to the Sale of the Bonds
11. Bond Purchase Contract (executed by the Underwriter and accepted and agreed to by the
City and approved by the Corporation, with the Letter of Representation (executed by the
Corporation and accepted and agreed to by the Underwriter and the City). (UC)
12. Blue Sky Memorandum. (UC)
13. Official Statement. (Disclosure Counsel)
14. _ Rating Letters from Moody's Investors Service and Standard & Poor's. (UC)
15. Agreed Upon Procedures Letter for the Official Statement. (Auditor; UC)
16. Consent Letter for the Official Statement. (Auditor; Disclosure Counsel)
Closing Documents
A. Documents Relating to the City
17. Certified Copy of the City Charter. (BC and City)
18. Certified Copy of Ordinance 85 -23and 84 -4. (BC and City)
19. Certificate of the City pursuant to Section 3(e)(7) of the Bond Purchase Contract,
together with a certified copy of the Resolution of the City relating to the issuance and
sale of the Bonds. (BC)
20. Affidavit of Publication of Notice of Public Hearing. (BC)
21. Request of the City pursuant to Section 3.01 of the Indenture (executed by Executive
Director.) (BC)
22. Internal Revenue Service Form 8038 (executed by the City). (BC)
23. DTC Blanket City Letter of Representations (copy) (executed by the City and DTC).
(BC)
24. Preliminary and Final CDIAC Reports. (BC)
25. Certificate and Agreement Regarding Community Service Obligation (executed by the
City and the Corporation). (BC)
B. Documents Relates to Corporation
26. Signature and Incumbency Certificate of Corporation. (CC)
27. Officer's Certificate (BC) with the following exhibits:
-3-
DOCSSCI:358317.5
a. Articles of Incorporation (certified by the Secretary of State within 15 days of the
closing date). (CC)
b. Bylaws. (CC)
c. Authorizing Resolution relating to the financing. (CC)
d. Evidence of 501(c)(3) status for the Corporation. (CC)
e. Certificate of Good Standing (issued by the Secretary of State). (CC)
d. Certificate of Good Standing (issued by the Franchise Tax Board). (CC)
28. Officer's Certificate pursuant to Section 2.05 of the Master Indenture for Obligation
No. 14. (BC)
29. Requisition No. 1— Costs of Issuance Fund (executed by the Corporation). (BC)
30. Requisition No. 1— Project Fund (executed by the Corporation). (BC)
C. Documents Relating to the Bond Trustee
31. Certificate of the Bond Trustee, together with authorizing resolution or bylaws (executed
by the Bond Trustee). (BC; Trustee)
D. Documents Relating to the Master Trustee
32. Certificate of the Master Trustee, together with certified authorizing bylaws (executed by
the Master Trustee). (BC; Master Trustee)
E. Documents relating to the Auction Agent
33. Certificate of the Auction Agent, together with authorizing resolution or bylaws
(executed by the Auction Agent). (BC; Auction Agent)
F. Miscellaneous Documents
34. Receipt for Purchase Price (executed by the Bond Trustee). (BC)
35. Receipt for the Bonds (executed by the Underwriter). (BC)
36. Specimen Bonds (BC)
37. Receipt for Obligation No. 14 (executed by the Bond Trustee). (BC)
G. Legal Opinions and Letters
38. Opinion of Counsel to the City. (City Attorney)
39. Opinion of Underwriter's Counsel. (Underwriter's Counsel)
40. Opinion of Counsel to the Corporation. (CC)
41. Opinion of Counsel to the Bond Insurer. (Bond Insurer)
-4-
DOCSSCI:358317.5
42. Final Opinion of Bond Counsel. (BC)
43. Supplemental Opinion of Bond Counsel. (BC)
44. Reliance Letters. (BC)
45. Opinion of Counsel to the Bond Trustee. (Bond Trustee Counsel)
H. Miscellaneous
46. Distribution List. (BC)
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DOCSSC1:358317.5
Closing
At the time. of the Closing or as soon thereafter as is practicable, the Bond
Trustee, the City, the Corporation, the Bond Insurer and the Master Trustee will receive one
signed copy (or executed counterpart) of each of the documents listed above (other than the
Bonds, Obligation No. 14 and the Bond Insurance Policy) and each of the other parties will
receive one copy of each of such documents, subsequent to the following events (not necessarily
in the following order):
(a) the Underwriter will transfer to the Bond Trustee in immediately available funds,
$196,879,904.85, (being comprised of $200,000,000.00 aggregate principal amount of the
Bonds, less an underwriters' discount of $610,000.00, less the bond insurance premium paid
by the Underwriter to the Bond Insurer in the amount of $2,510,095.15);
(b) the Bond Trustee will deliver to the Underwriter through DTC the Series 2005A Bonds in the
principal amount of $65,000,000, the Series 2005B .Bonds in the principal amount of
$65,000,000, and the Series 2005C Bonds in the principal amount of $70,000,000;
(c) the Corporation will deliver Obligation No. 14 in the principal amount of $200,000,000 to
the Bond Trustee;
(d) the Bond Trustee shall transfer funds as set forth in Section 3.02 of the Indenture; and
(e) the Bond Trustee shall pay those items specified in Requisition No. 1— Costs of Issuance
Fund.
6-
aocssCi:358317.5
EXHIBIT NO. 1
Master Trust Indenture
(conformed copy only,
certified as true copy by
the Corporation)
(executed by the Corporation and
the Master Trustee)
(BC)
0 OFFICER'S CERTIFICATE REGARDING MASTER INDENTURE
n
u
I hereby certify that the attached is a true, correct and complete copy of the Master
Indenture, originally dated as of October 1, 1984, between Hoag Memorial Hospital Presbyterian
and Wells Fargo Bank, National Association (formerly known as Chemical Bank).
DOCSSC1:358317.3
Dated: August 24, 2005.
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
U
0
MASTER TRUST INDENTURE
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
AND
CHEMICAL BANK,
As Master Trustee
Dated as of October 1, 1964
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Section
TABLE OF CONTENTS
Page
RECITALS........... ............................... ..... 1
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
CONCERNING INTERPRETATION
1.01 Definitions.. ..................... 2
... ...............
1.02 Content of Officer's Certificates .................... 13
1.03 Interpretation ........ ............................... 14
ARTICLE II
AUTHORIZATION, ISSUANCE AND TERMS
'OF INDENTURE INDEBTEDNESS
2.01 Amount of Indenture Indebtedness ..................... 15
2.02 Designation of Indenture Indebtedness ................ 16
• 2.03 Execution and Authentication of ......................
Obligations.. 16
2.04 Supplement Creating Indenture
Indebtedness.. .... . .. ...................... 17
2.05 Conditions to Issue of Indenture
Indebtedness Hereunder ............................... 17
ARTICLE III
MEMBERSHIP IN THE OBLIGATED GROUP
3.01 Conditions for Membership .............................. 18
3.02 Effects of Membership . ............................... 20
ARTICLE IV
GOVERNANCE OF THE OBLIGATED GROUP;
GENERAL REQUIREMENTS OF MEMBERSHIP;
WITHDRAWAL FROM THE OBLIGATED GROUP
4.01 Establishment of Governance of the _
Obligated Group........... 20
4.02 Restriction on Incurrence of�
Long -Term Indebtedness........ . 20
4.03 Power to Incur Indebtedness on Behalf
of Other Members of the. Obligated. Group .............. 20
4.04 Cross - Guaranties.. 20
4.05 Withdrawal From the Obligated Group.. 21
i
•
•
ARTICLE V
PARTICULAR COVENANTS OF EACH
MEMBER OF THE OBLIGATED GROUP
5.01 Payment of Principal and Interest ...................... 23
5.02 Covenants as to Corporate Existence,
Maintenance of Properties, Etc ....................... 23
5.03 Insurance.. ..... ............................ 25
5.04 Governing Agreement.. .. . ....................... 26
5.05 Limitations on Creation ofLiens..................... 26
5.06 Liens on Property, Plant and Equipment ............... 29.
5.07 Limitations on Incurrence of Additional
Indebtedness... . ... ............ .............. 29
5.08 Restrictions on Guaranties ........................... 33
5.09 Debt Service Coverage Ratios.. .. ...... o o .... 34
5.10 Sale, Lease or Other Disposition of Property,
Plant and Equipment. ..... 35
5.11 Disposition of Cash... .............. ......... 36
5..12 Consolidation; Merger, Sale or
Conveyance..... .. 37
5.13 Restrictions on� Encumbering .Revenues ................. 39
5.14 Filing of Financial Statements,
Certificate of No Default, Other
Information.................... . .......... ..... 39
5.15 Insurance and Condemnation Proceeds ...........:...... 41
ARTICLE VI
DEFAULT AND REMEDIES
6.01 Events of Default.. . .. ............... 42
6.02 Acceleration; Annulment of Acceleration .............. 44
6.03 Additional Remedies and Enforcement
of Remedies.. . ........ . .. ................ 45
6.04 Application of Revenues and Other
Moneys After Default .. ............................... 46
6.05 Remedies Not Exclusive........... ................. 48
6.06 Remedies Vested in the Master Trustee ................ 48
6.07 Obligation Holders Control of
Proceedings.. . .... ............................. 48'
6.08 Termination of Proceedings ........................... 49
6.09 Waiver of Event of Default ........................... 49'
... ... ......... ... ... .
6.10 Appointment of Receiver:. ...... 50
6.11 Remedies Subject to Provisions of Law ..:.....:........ 50
6.12 Notice of Default ..... ............................... 51
ii
ARTICLE VIII
SUPPLEMENTS AND AMENDMENTS
8.01 Related Supplements Not Requiring Consent of-
Obligation Holders „ 59
8.02 Related Supplements Requiring •Consent �of�������������
Obligation Holders.. .. .... ......... 60
8.03 Execution and Effect ofRelated Supplements .......... 62
ARTICLE IX
• SATISFACTION AND DISCHARGE OF MASTER INDENTURE
9.01 Satisfaction and Discharge of Master Indenture....... 63
9.02 Payment of Obligations after Discharge
ofLien ............... ............................... 64
ARTICLE X
CONCERNING THE OBLIGATION HOLDERS
10,01 Evidence of Acts of Obligation Holders ............. 64
10.02 Obligations or Related Bonds Owned
by Members of Obligated Group...... ................ 65
10,03 Instruments Executed by Holders Bind
Future Holders ...... ........................:...... 66
ARTICLE XI
f
MISCELLANEOUS PROVISIONS.
•
11,01
ARTICLE VII
67
11.02
THE MASTER TRUSTEE
7.01
Certain Duties and Responsibilities ..................
51
7.02
Certain Rights of Master Trustee .....................
53
7.03
Right to Deal in Obligations and
68
•
Related Bonds.. .. . .......................
54
7.04
Removal and Resignation of the
Master Trustee.. . ...... .......................
54
7.05
Compensation and Reimbursement .......................
56
7.06
Recitals and Representations .:.......................
56
7.07
Separate or Co- Trustee
57.
...............................
ARTICLE VIII
SUPPLEMENTS AND AMENDMENTS
8.01 Related Supplements Not Requiring Consent of-
Obligation Holders „ 59
8.02 Related Supplements Requiring •Consent �of�������������
Obligation Holders.. .. .... ......... 60
8.03 Execution and Effect ofRelated Supplements .......... 62
ARTICLE IX
• SATISFACTION AND DISCHARGE OF MASTER INDENTURE
9.01 Satisfaction and Discharge of Master Indenture....... 63
9.02 Payment of Obligations after Discharge
ofLien ............... ............................... 64
ARTICLE X
CONCERNING THE OBLIGATION HOLDERS
10,01 Evidence of Acts of Obligation Holders ............. 64
10.02 Obligations or Related Bonds Owned
by Members of Obligated Group...... ................ 65
10,03 Instruments Executed by Holders Bind
Future Holders ...... ........................:...... 66
ARTICLE XI
f
MISCELLANEOUS PROVISIONS.
11,01
Limitation of Rights
67
11.02
......................
Severability........ �.��.....
Holidays.. ...............................
67
111.04
1,......
...............................
Governing
67
gLaw ....... ...............................
68
•
iii
•
iv
• 11.05
Counterparts.... ..............................
68
11.06
_Immunity of individuals ............................ _
68
11.07
Binding Effect ........................................
68
11.08
Notices ............... ...............................
68
SIGNATURES.. ................ ......................:........
70
ACKNOWLEDGMENTS
•
iv
•.
- = TBIS MASTER TRUST INDENTURE, is made and entered
into a, of and betweena8lag Memorial lHospitaltPresbyterian,
nden-
a Calif by public benefit corporation (the 'Cor-
a California nonprofit
ration'), and Chemical Bank, a New York banking corporation
souly qualified to accept and administer the trusts created
hereby (the 'Master Trustee').
W ITN E S S E T H:
WHEREAS, the Corporation is authorized and deems
it necessary and desirable to enter into this Master Indenture
for the purpose of providing for the issuance from time to
time by the Corporation or other Members of the Obligated
Group of Indenture Indebtedness in order to obtain financing
or refinancing for the acquisition or betterment of health
care facilities or other facilities, or for other lawful and
proper corporate purposes; and
WHEREAS, all acts and things necessary to constitute
this Master Indentuee a valid indenture and agreement according
to its terms have been done and performed, the Corporation
has duly authorized the execution and delivery of this Master
•Indenture, and the Corporation, in the exercise of the legal
right and power vested in it, executes this Master Indenture
and proposes to make, execute, issue and deliver Indenture
Indebtedness hereunder; and
•
WHEREAS, the Master Trustee agrees to accept and
administer the trusts created hereby,
NOW, THEREFORE, in consideration of the premises,
Of the acceptance by the Master Trustee of•the trusts hereby
created, and'of the giving of consideration for and acceptance
of Indenture Indebtedness issued hereunder by the Holders
thereof, and for the purpose of fixing and declaring the
terms and conditions upon which Indenture Indebtedness will
be issued, authenticated, delivered and accepte4 by all Persons
who shall from time to time be or become Holders, thereof,
the Corporation covenants and agrees with the Mast z.Trustee,
and each other Member of the Obligated' Group. upon..Fecoming
such shall be deemed to covenant and agree with the Master
Trustee, for the equal and proportionate benefit of the respec-
tive Holders from time to time of Indenture - Indebtedness
Issued hereunder, as follows:
1
li
• ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
CONCERNING INTERPRETATION
Section 1.01. Definitions. For the purposes hereof
unless the context otherwise indicates, the following'words
and phrases shall have the following meanings:
"Additional Indebtedness" shall mean any Indebtedness
(including all Indenture Indebtedness) incurred, as to the
Corporation, subsequent to the issuance of Obligations No. 1
through No. 6 under Supplemental Indentures for Obligations
No. 1 through No. 6 to this Indenture each dated as of October 1,
1984 and, as to any other Member of the Obligated Group,
subsequent to its becoming a Member of the Obligated Group.
"Aggregate Income Available for Debt Service" shall
mean, as to any period of time, the aggregate of Income Available
for Debt Service of the Members of the Obligated Group or,
in the case of a calculation to be made pursuant to Section 5.08
hereof, a Beneficiary (as such term is defined in Section 5.08
hereof) for such period, determined in a manner such that no
• portion of Income Available for Debt Service of any such
Member is included more than once.
"Balloon Long -Term Indebtedness" means Long -Term
Indebtedness 258 or more of the principal of which (i) is
due in a single year or (ii) may, at the option of the holder
thereof, be requited to be redeemed or otherwise paid in a
single year (which portion of the principal is not required
to be amortized by redemption prior to such date) unless
such. Long -Term Indebtedness is secured by a commitment' from
a financial institution having a combined capital and surplus
of at least $250,000,000 providing for the refinancing of
such Long -Term Indebtedness.
•
"Bona Fide Loan" shall mean a loan made with a
reasonable expectation of timely repayment, and at a rea-
sonable rate of interest given the terms and nature of the
loan and the conditions under which such loan was made.
"Book Value" when used in connection with Property,.
Plant and Equipment or other Property, means the value of
such property as carried on the books of the Member owning
such property, net of accumulated depreciation.
7
• _ "Code" shall mean the internal Revenue Code of 1954,
as amended.
"Completion indebtedness" shall mean any indebted-
ness incurred by any Member of the Obligated Group for the
purpose of financing the completion of the construction or
equipping of facilities for the construction or equipping of
which indebtedness has theretofore been incurred in
accordance with the provisions hereof, to the extent
necessary to provide a completed and equipped facility of
the type and scope contemplated at the time, and in
accordance with the general plans and specifications for
such facility as in existence at the time of issuance of
such prior indebtedness with only such changes as were made
in conformance with the documents pursuant to which such
prior indebtedness was originally incurred.
"Consultant" shall mean a Person or firm who or
which is not, and no member, stockholder, director, officer
or employee of whom or of which is, a director, trustee,
officer or employee of the Corporation, a Subsidiary, or any
other Member of the Obligated Group, and who or which is a
certified public accounting. firm, banker or nationally recog-
nized professional management consultant selected by the
Corporation or other Member of the Obligated Group, as the
case may be, satisfactory to the Master Trustee and having
the skill and experience necessary to render the particular
report required by the provision hereof in which such require-
ment appears.
"Corporate Trust Office" shall mean the office of
the Master Trustee at which its principal corporate trust
business is conducted, which at the date hereof is located
at 55 Water Street, New York, New York 10041.
"Corporation" shall mean Hoag Memorial Hospital
Presbyterian, a California nonprofit public benefit corpora -
tion, and its successors.
"Current Value" as of any date of determination
shall mean, with respect to the Property, Plant and Equipment,
1258 of the Book Value thereof as of such date of determina-
tion. Notwithstanding the foregoing, any Member of the
Obligated Group may elect to have Property,,, Plant and Equip-
ment appraised; in which case 'Current Value" as of any date
of determination shall mean the aggregate of (i) the fair
market 'value of all Property, Plant and.Equipment as evidenced
by a written report delivered to the Master Trustee, dated
3
0
not more than 6 months p
determination of Current
factory to the Master Tr
Appraisal Institute (MAI
all Property, Plant and
such report, both adjust
such report or from the
Plant and Equipment acqu
as the'case may be, for
deflator for the gross n
United States Department
agency, or if such index
index_ certified to be co
Officer's Certificate de
such a written report is
term "Current Value" sha
rior to the date as of which such
Value is made, of an appraiser satis-
istee and who is a Member of the
I and (ii) the historical cost of
'equipment acquired since the date of
?d for the period from the date of
gate of acquisition of Property,
[red since the date of such report,
:hanges in the implicit price
ational product as reported by the
of Commerce or its successor
is no lonqer published, such other
nparable and appropriate in an
Livered to the Master Trustee. Once
filed with the Master Trustee, the
ll thereafter be determined in the '
manner provided in the second sentence of this definition
without regard to the first sentence of this definition.
Notwithstanding the foregoing,. the Corporation may elect to
have the site of its existing (on the date of this Master
Indenture) hospital located at 301 Newport Boulevard in New -
port.Beach, California, appraised by an appraiser satisfac-
tory to the Master Trustee and who is a Member of the
Appraisal Institute (MAI) for purposes of determining the
"Current Value" of said site without making such election
with respect to any other Property, Plant and Equipment, and
such appraised value shall be treated as the "Current Value"
of such site and no subsequent appraisals shall be required
for such site.
"Encumbered" shall mean subject to a Lien mentioned
in subsection (v) , (vi,), (vii) or (viii) of Section 5.05(b)
hereof.
"Event of Default" shall mean any one or more of
those events set forth in Section 6.01 hereof.
"Fiscal Year" shall mean the fiscal year of the
Corporation, which at the date of execution hereof beqins on
October 1 and runs for thirteen four -week periods.
"Governing Agreement" shall mean an agreement exe-
cuted by each Member of the Obligated Group (which agreement
may be pursuant to bylaw provisions adopted by each Member
Of the Obliqated Group) establishing for all Members a system.
for governance of all actions with respect to this Master
Indenture and the matters covered hereby. Any term or provi-
sion of this Master Indenture shall preempt any conflicting
term or provision of the Governing Agreement. A certified
• copy of the Governing Agreement and all amendments thereto
shall -be filed with the Master Trustee. The Governing Agree=
ment shall in all cases set forth procedures for the issuance
by any Member of any Indebtedness and for the admission of
new Members and shall provide for another Member of the Obli-
gated Group to furnish Officer's Certificates hereunder in
the event that the Corporation is no longer a Member of the
Obligated Group.
"Governing Body" shall mean,
to the Corporation or any other Member
its members, board of directors, board
board or group of individuals in which
the Corporation or such Member of the
vested.
when used with respect
of the Obligated Group,
of trustees, or other
all of the powers of
) bligated Group are
"Government Obligations" shall mean: (1)- direct
obligations of the United States of America (including obli-
gations issued or held in book -entry form on the books of
the Department of the Treasury of the United States of America)
or obligations the timely payment of the principal of and
interest on which are fully guaranteed by the United States
of America; and (2) obligations, debentures, notes or other
evidence of indebtedness issued or guaranteed by any of the
• following: Banks for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Bank System, Export - Import
Bank of the United States, Federal Financing Bank, Federal
Land Banks, Federal National Mortgage Association, Government
National Mortgage Association, Farmer's Nome Administration,
Federal Home Loan Mortgage Corporation or Federal Housing
Administration; and (3) obligations, debentures, notes or
other evidence of indebtedness that are backed by direct
obligations of the United States of America (including obli-
gations issued or held in book -entry form on the books of
the Department of the Treasury of the United States of America)
as collateral under an arrangement by which the interest and
principal payments on the collateral generally flow immedi-
ately through to the owner of such evidence of indebtedness.
"Guaranty" shall mean any obligation of any Member
of the Obligated Group guaranteeing in any manner; whether
directly or indirectly, any obligation of any other Person,
which obligation of such other Person would constitute
"Indebtedness" hereunder were such Person a Member of the
Obligated Group.
"Holder" or "Holders" means the registered owner
or holder of any Indenture Indebtedness.
•
• "Income Available for Debt Service" shall mean,
with- respect to each Member of the Obligated Group, as to
any period of time, the sum of: (1) all operating revenues
of such Member less all operating expenses and provisions
for reserves and other proper charges, but excluding any net
profits or losses on the sale or other disposition of busi-
nesses, investments or fixed assets not in the ordiriary,course
of business, plus (2) the amount of interest on Indebtedness
payable in such period from the proceeds of such Indebtedness
deposited with a trustee for such purpose, plus (3) interest
paid on Indebtedness (other than as referred to in clause (2)
of this definition), plus (4) charges for depreciation and
amortization of fixed assets, plus (5) all non - operating
income excluding any net profits or losses on the sale or
disposition of businesses, investments or fixed assets not
in the ordinary course of business, plus (6) net proceeds
from business interruption insurance. For purposes-of this
definition the term non - operating income as used in clause (5)
hereof shall exclude all restricted and unrestricted gifts
to such Member, provided that there may be included an amount
equal to the annual "average of all unrestricted gifts and
all restricted gifts, the use of which is not restricted to
any purpose inconsistent with its use in paying debt service
on Indebtedness of such Member, received by such Member for
• the previous five Fiscal Years (or if the computation is
made prior to January 1, 1987, the annual average of the
unrestricted gifts received for the previous three Fiscal
Years).
"Indebtedness" shall mean all obligations (including
Guaranties) for payment of principal and interest incurred
or assumed by one or more Members of the Obligated Group
except obligations of a Member of the Obligated Group to
another Member.
"Indenture Indebtedness" shall mean any Obligation
or other evidence of Indebtedness, including a Guaranty,
issued and delivered under this Master Indenture which has
been authenticated by the Master Trustee pursuant to Sec-
tion 2.03 hereof.
"Insurance Consultant" shall mean a Person or firm
who or which is not, and no member, director, officer or
employee of whom or of which is, a director, trustee, officer
or employee of the Corporation, any Subsidiary, or any other
Member of the Obligated Group, and who or which is selected
by the Corporation or .other Member of the-Obligated Group,
as the case may be, and satisfactory to the Master Trustee
•
•
and qualified to survey risks and to recommend insurance
coverage for hospitals, health - related facilities and services
and organizations engaged in such operations and who or which
may be an insurance agent or broker with whom or which the
Corporation, any other Member of the Obligated Group or any
Subsidiary transacts insurance business.
"Irrevocable Deposit" shall mean the irrevocable
deposit in trust of cash in an amount (or Government Obliga-
tions the principal of and interest on which will be in an
amount) and under terms sufficient to pay all of the principal
of, premium if any, and interest on, as the same shall become
due, any Indebtedness which would otherwise.be considered
Outstanding. The trustee of such deposit may be the Master
Trustee or a Related Bond Trustee..
"Irvine Indebtedness" shall mean Indebtedness
incurred prior to December 31, 1986, to finance or refinance
the initial construction, acquisition and equipping of a
hospital facility, 'including reserves, funded interest,
financing costs and all costs related, in the opinion of the
Corporation, to such project and the financing or refinancing
thereof in the City of Irvine, California.
• "Lien" shall mean any mortgage or pledge of, security
interest in, or lien or.encumbrance on, any Property of any
Member of the Obligated Group which secures any Indebtedness
or any other obligation of any Member of the Obligated Group,
or which secures any obligation of any Person other than an
obligation to any Member of the Obliqated Group, excluding
liens applicable to Property in which the Member of the Obli-
gated Group has only a leasehold interest unless the lien
secures Indebtedness of any Member of the Obligated Group.
"Long -Term Debt Service Coverage Ratio" shall mean
the ratio for the period in question of Aggregate Income
Available for Debt Service to Maximum Annual Debt Service.
"Long -Term Debt Service Requirement" shall mean as
of the date of calculation, for any period of .time, the aggre-
gate of the payments to be made in respect of principal and
interest on all Outstanding Long -Term Indebtedness of the
Members of the Obligated Group during such period (provided,
however, that with respect to Indebtedness represented by a
Guaranty of obligations of a Person which is not a Member of
the Obl,igated Group, the amount of the principal and interest
Payments to be taken into account shall be determined pursuant
to Section 5.08(b) hereof) but excluding Indebtedness to the
• extenk that Irrevocable Deposits sufficient to pay principal,
premicim, if any, and interest thereon have been made.
"Long -Term Indebtedness" shall mean all Indebtedness,
including Indenture Indebtedness, incurred or assumed by one
or more Members of the Obligated Group (other than any Guaranty
of (i) Long -Term Indebtedness of another Member of the Obli-
gated Group or (ii) Short -Term Indebtedness) or, in the case
of a calculation to be made pursuant to Section 5.08 hereof,
a Beneficiary (as such term is defined in Section 5.08 hereof)
for any of the following: .
(i) Payments of principal and interest with respect
to money borrowed for an original term, or renewable at
the option of the borrower for a period from the date
originally incurred, longer than one year, or for a
term treated as being longer than one year pursuant to
the definition of "Maximum Annual Debt Service" set
forth below; and
(ii) Payments under leases, installment sale agree-
ments or other contracts which are capitalized having
an original term, or renewable at the option of the
• lessee for a period from the date originally incurred,
longer than one year, or for a term treated as being
longer than one year pursuant to the definition of "Maxi-
mum Annual Debt Service" set forth below.
•
"Master indenture" shall mean this Master Indenture,
as from time to time amended or supplemented in accordance
with the terms hereof.
"Master Trustee" shall mean Chemical Bank and its
successors in the trust created hereunder.
"Maximum Annual Debt Service" means the highest
Long -Term Debt Service Requirement for any succeeding Fiscal
Year. For the purpose of determining Maximum Annual Debt
Service (a) in the event that any Indebtedness is secured by
a commitment from a financial institution havinq a combined
capital and surplus of at least $250,000,000 providing for
the refinancing of such Indebtedness for a term of at least
five years, then it shall be treated as Long -Term Indebtedness
with a 30 -year maturity with level debt service which would
be required to amortize a 25 =year, level debt service hospital
obligation of comparable quality (which debt service schedule,
including an assumed interest rate, for such comparable obliga-
tion shall be set forth in a certificate delivered to the
10
Master Trustee and dated not more than 30 days prior to the be
date of, issuance of the indeeinveatmentobankingofirm
issued of a nationally recognized to the Master
with expertise (b) municipal satisfact an obligation
Truetee)t
'giving rise to LongTerm Indebtedness prov de for a variable
rate of interest or.some.other method of calculation of interest
not then MaximumfAnnualsDebttServiceirequirementssand
of determining ining
there is not in p lace with re and to such Long -Term Indebted -
Hess a commitment of the nature described in clause (a) above,
the annual interest rate for such Long -Term indebtedness
shall be deemed to be equal to the average annual rate of
interest which was payable for such Long -Term Indebtedness
for the 12 month period ended on the last day of the month
ended immediately prior to the date of determination -of Maximum
Annual Debt Service, or which would have been payable if
such Long Term Indebtedness had been Outstanding throughout
such period and (c) in the event that Indebtedness is Balloon
Long Term Indebtedness and is not%described in clause (a)
above, then it shall be treated as Long -Term Indebtedness
with substantially level debt service over a term of 20 years
• from the date of determination of Maximum Annual Debt Service
(provided that if such Indebtedness matures more than 20 years
from the date of computation, the actual number of years to
maturity shall be used) at an interest rate certified to the
Master Trustee in an Officer's Certificate to be the interest
rate at which the obligor could reasonably expect to borrow
the same amount for such term by issuance of an Obligation
under this Master Indenture. Such Officer's Certificate
shall be delivered to the Master Trustee and dated not more
than 30 days prior to the date of issuance of the Indebtedness
then proposed to be issued. Debt service requirements with
respect to Guaranties constituting Long -Term Indebtedness
shall be recalculated in accordance with Section 5.08(b)
hereof at each time that Maximum Annual Debt Service is cal -
culated based upon then current financial statements and
then current debt of the Beneficiary.
"Member of the Obligated Group' or "Member- shall
mean the Corporation and any subsidiary or other Person which
has become a Member of the Obligated Group in accordance
with the provisions of Article III hereof, as the case may
-be, unless such Person has withdrawn from the Obligated Group
as permyitted by this Master indenture.
'Non-Recourse Indebtedness' shall mean any Indebt-
edness secured by a Lien, liability for which is effectively
• limited to the Property subject to such Lien with no recourse,
directly or indirectly, to any other Property of any Member
of the Obligated Group.
"Obligated Group" shall mean all Members of the
Obligated Group. All computations hereunder with respect to
the Obligated Group shall exclude all Subsidiaries that`are
not members of the Obligated Group.
"Obligation" shall mean the evidence of particular
Indenture Indebtedness issued hereunder, including a Guaranty,
provided it has been authenticated by the Master Trustee as
provided herein.
"Obligation Holder" or "Holder" shall mean the
registered owner or holder of any Obligation.
"Officer's Certificate" shall mean, with respect
to the Corporation, a. certificate, a certified copy of which
shall be delivered to the Master Trustee, signed by the chair-
man or president of the Corporation, or such other person
designated in writing by the chairman or president or by
resolution of the board of directors of the Corporation;
provided, however, that the Corporation's chief financial
• officer shall sign any certificates pursuant to Section 5.14(c)
hereof, and, with respect to any other Member of the Obligated
.Group, a certificate, a certified copy of which shall be
delivered to the Master Trustee, signed by the chairman of
the Governing Body, or the president or chief executive officer
or the chief financial officer, or the chairman of the finance
committee of the Governing Body of such Member. Unless other-
wise expressly provided herein, each Officer's Certificate
shall be dated the date of delivery thereof to the Master
Trustee. In the event that the Corporation shall not at any
time be a Member-of the Obligated Group,,the term "Officer's
Certificate of the Corporation ", as used herein, shall mean
an Officer's Certificate of the Member of the Obligated Group
designated to furnish such certificate on behalf of the
Obligated Group pursuant to the Governing Agreement.
"Opinion of Bond Counsel" shall mean an opinion in
writing signed by an attorney or firm of attorneys satisfactory
to the Master Trustee and experienced in the field of municipal
bonds whose opinions are generally accepted by purchasers of
municipal bonds.
\J
"Opinion of Counsel" shall mean an opinion in writing
Signed by an attorney or firm.of attorneys, satisfactory to
10
L_J
•
the Master Trustee, who may be counsel for any Member of the
Obligated Group. Unless otherwise expressly provided herein,
each Opinion of Counsel delivered to the Master Trustee shall
be dated the date of delivery thereof to the Master Trustee.
"Outstanding" when used with reference to Indgbt-
edness, shall mean, as of any date of determination, all
Indebtedness theretofore issued or incurred and not paid and
discharged other than (i) Obligations theretofore cancelled
by the Master Trustee or delivered to the Master Trustee for
cancellation, (ii) Obligations deemed paid and no longer
Outstanding as provided in Article IX hereof or for which
the requirements of Section 5.07(c)(ii) hereof have been
satisfied, (iii) Obligations in lieu of which other Obliga-
tions have been authenticated and delivered or have been
paid pursuant to the provisions of the Related Supplement
regarding mutilated, destroyed, lost or stolen Obligations
unless proof satisfactory to the Master Trustee has been
received that any such Obligation is held by a bona fide
purchaser and (iv) Indebtedness (other than Indenture Indebt-
edness) to the extent that Irrevocable Deposits sufficient
to pay principal, premium, if any, and interest thereon have
been made; provided that unless an Irrevocable Deposit has
been made with the Master Trustee, such Indebtedness shall
continue to be deemed. Outstanding until there shall, have
been delivered to the Master Trustee a certificate of the
trustee with which such Irrevocable Deposit was made certify-
ing that such Irrevocable Deposit has been made as provided
in this Master Indenture.
"Permitted Liens" shall have the meaning given in
Section 5.05 hereof.
"Person" shall include an individual, association,
unincorporated organization,'a
Joint venture, or a government
subdivision thereof.
corporation, partnership,
or an agency or a political
"Prime Interest Rate" and "Prime Rate" shall mean
the fluctuating per annum interest rate equal at all times
to the rate of interest announced publicly by the Master
Trustee from time to time at its principal office in New
York, New York as its prime rate.
"Property" shall mean any and all rights, titles
and interests in and to any and all property whether real or
personal, tangible or intangible, and wherever situated.
Ii
0
"Property, Plant and Equipment" shall. mean all
Property of the Members of the Obligated Group which is prop-
erty, plant or equipment under generally accepted accounting
principles.
"Reimbursement Agreement" shall mean the Reimburse-
ment Agreement dated as of October 1, 1984, between the
Corporation and First Interstate Bank of California, as supple -
mented and amended.
"Reimbursement Agreement Indebtedness" shall mean
Indebtedness of the Corporation now or hereafter incurred
pursuant to the Reimbursement Agreement.
"Related Bonds" shall mean the revenue bonds, notes,
other evidences of indebtedness or any other obligations
issued by any state, territory or possession of the United
States or any municipal corporation or political subdivision
formed under the laws thereof or any constituted authority
or agency or instrumentality of any of the foregoing empowered
to issue obligations on behalf thereof ( "governmental issuer "),
pursuant to a single Related Bond Indenture, the proceeds of
which are loaned or otherwise made available to (i) a Member
of the Obligated Group in consideration of the execution,
authentication and delivery of an Obliqation to or for the
order of such governmental issuer, or (ii) any Person other
than a Member of the Obligated Group in consideration of the
issuance to such governmental issuer by a Member of the Obli-
gated Group of an Obligation issued under this Master Indenture
in respect of such evidence of indebtedness or other obliga-
tion.
"Related Bond Indenture" shall mean any indenture,
bond resolution or other comparable instrument pursuant to
which a series of Related Bonds are issued.
"Related Bond Issuer" shall mean the governmental
issuer of any issue of Related Bonds.
"Related Bond Trustee" shall mean the trustee and
its successors in the trust created under any Related Bond
Indenture, and if there is no such trustee, shall mean. the
Related Bond Issuer.
"Related Supplement" shall mean an indenture supple-
mental to, and authorized and executed pursuant to the terms
of, this Master Indenture for the purpose of creating Indenture
Indebtedness issued hereunder.
• "Secured Indebtedness" shall mean Indebtedness,
other than Non - Recourse Indebtedness, secured by a Lien.
"Short -Term Indebtedness" shall mean all Indebtedness
that is not Long -Term Indebtedness.
"Subordinated Indebtedness" shall mean Indebtedness
which is subordinate as to payment and security to all other
.Outstanding Indebtedness.
"Subsidiary" shall mean a corporation, partnership,
joint venture, association, business trust or similar entity
organized under the laws of the United States of America or
a state thereof which is directly or indirectly controlled
by, or under common control with the same Person as, any
Member of the Obligated Group or any other Subsidiary_. For
purposes of this definition, control means the power to direct
the management and policies of a Person through the ownership
of a majority of its voting securities or the right to desig-
nate or elect a majority of the members of its board of direc-
tors or other governing board or body by contract or otherwise.
"Tax- Exempt Organization" shall mean a Person orga-
nized under the laws of the United States of America or any
• state thereof which is an organization described in Sec-
tion 501(c) (3) and exempt from federal income taxes under
Section 501(a) of the Code or corresponding provisions of
federal income tax laws from time to time in effect:
"Total Operating Revenues" shall mean net patient
revenue and other operating revenue.
"Unencumbered" shall mean not subject to a Lien
mentioned in subsection (v), (vi), (vii), (viii) or (ix) of
Section 5.05 (b) hereof.
•
"Unsecured Indebtedness" shall mean any Indebtedness
not secured by any Lien.
Section 1.02. Content of Officer's Certificates.
Every Officer's Certificate provided for in this Master Inden-
ture with respect to compliance with any provision hereof
shall include ('1) a Statement that the person making or giving
such certificate has read such provision and the definitions
herein related thereto; (2) a brief statement-as to the nature
and scope of the examination or investigation upon which the
certificate is based; (3) a statement that, in the opinion
Of such person, he has made or caused to be made such examination
13
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t
or investigation as is necessary to enable him to express an
Informed opinion with respect to the subject matter referred
to in such certificate to which his signature is affixed;
is)based, and nthat such aassumptions uare reasonable; cand l(5)aae
,statement as to whether, in the opinion of such person, such
provision has been .complied with.
Any such Officer's Certificate may be based, insofar
as it relates to legal, accounting or hospital matters, upon
a certificate or opinion of or representation by counsel, an
accountant or a hospital management consultant, respectively,
unless such officer knows, or in the exercise of reasonable
care should have known, that the certificate, opinion or
representation with respect to the matters upon which such
certificate or statement may be based, as aforesaid, - is
erroneous in any material respect. Any such certificate,
opinion or representation made or given by counsel, an accoun-
tant or a hospital management consultant may be based, insofar
as it relates to factual matters (with respect to which infor-
mation is in the possession of the Corporation or other Member
of the Obligated Group, as the case may be) upon a certificate
• or opinion of or representation by an officer of the Corpora-
tion or other Member of the Obligated Group, unless such
counsel, accountant or hospital management consultant knows,
or in the exercise of reasonable care should have known,
that the certificate or opinion or representation with respect
to the matters upon which such person's certificate or opinion
or representation may be based, as aforesaid, is erroneous
in any material respect. The same officer of the Corporation
or other Member of the Obligated Group, or the same counsel
or accountant or hospital management consultant, as the case
may be, need not certify to all of the matters required to
be certified under any provision of.this Master Indenture,
but different officers, counsel, accountants or hospital
management consultants may certify to different matters,
respectively.
Section 1.03. Interpretation.
(a) Any reference herein to any officer of. a Member
of the Obligated Group shall include those succeeding to
their functions, duties or responsibilities pursuant to or
by operation of law or who are lawfully performing their
functions, which, upon request of the Master Trustee, shall
be evidenced by a certificate executed by the secretary or
assistant secretary of such Member and delivered to the Master
Trustee or, if such Member has no secretary or assistant
•
secretary, by its comparable officer..
• (b) Unless the context otherwise indicates, words
importing the singular shall include the plural and vice
versa and the use of the neuter, masculine, or feminine gender
is for convenience only and shall be deemed to mean and include
the neuter, masculine and feminine gender.
(c) Where the character or amount of any asset,
liability or item of income or expense is required to be
determined or any consolidation, combination or other account-
ing computation is required to be made for the purposes hereof
or of any agreement, document or. certificate executed and
delivered in connection with or pursuant to this Master Inden-
ture, the same shall be done in accordance with generally
accepted accounting principles at the time in effect consis-
tently applied, to the extent applicable, except where such
principles are inconsistent with the requirements hereof or
of such agreement, document or certificate.
(d) Headings of articles and sections herein and
the table of contents hereof are solely for convenience of
reference, do not constitute a part hereof and shall not
affect the meaning, construction or effect hereof.
• (e) The terms "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar terms, used in this Master Inden-
ture refer to this Master Indenture as a whole and not merely
the section or 'subsection in which such terms are used.
•
(f) Provisions calling for the redemption of Inden-
ture Indebtedness or the calling of Indenture Indebtedness
for redemption do not mean or include the payment of Indenture
Indebtedness at its stated maturity.
ARTICLE II
AUTHORIZATION, ISSUANCE AND TERMS OF
INDENTURE INDEBTEDNESS
Section 2.01. .Amount of Indenture Indebtedness.
The number of Obligations evidencing Indenture Indebtedness
that may be created hereunder is not limited. The aggregate
principal amount of Indenture Indebtedness of each Obligation
that may be issued, authenticated and delivered hereunder is
not limited except as limited by the provisions hereof or'of
a Related Supplement.
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Section 2.02. Designation of Indenture Indebtedness.
Indenture Indebtedness shall be issued in such forms of Obliga
tions as may from time to time be created by Related SuM e-
ments permitted hereunder provided that the administrative
provisions of such Related Supplements shall be reasonably
satisfactory to the Master Trustee. Each Obligation or series
of Obligations shall be created by a different Related'Supple-
sient and shall be designated in such a manner as will differ-
entiate such Obligation from any other Obligation.
Section 2.03. Execution and Authentication of Obliga-
tions. All Obligations shall be .executed for and on behalf
of the Member issuing said Obligations by such persons desig-
nated by its Governing Body as evidenced to the Master Trustee
in a certificate signed by the secretary or an assistant
secretary of such Member, or if such Member has no secretary
or assistant secretary, by its comparable officer. -The signa-
tures, or facsimiles thereof, of any officer executing or
attesting an Obligation may be mechanically or photographically
reproduced on the Obligations. If any officer whose signature
appears on any Obligation ceases to be such officer before
delivery thereof, such signature shall remain valid and suffi-
cient for all purposes as if such officer had remained in
office until such delivery. Unless issued under a book entry
system, each Obligation shall be manually authenticated by
an authorized officer of the Master Trustee, and without
which authentication no Obligation (other than those issued
under a book entry system) shall be entitled to the benefits
hereof.
The Master Trustee's authentication shall be sub-
stantially in the following form:
MASTER TRUSTEE'S AUTHENTICATION CERTIFICATE
The undersigned Master Trustee hereby certifies
that this Obligation No. is one of the Obligations described
in the within- mentioned Master Trust Indenture.
11 c
CHEMICAL BANK,-
as Master Trustee
By
Authorized Off cer
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Section 2.04. Supplement Creati� Indenture
Indebtedness. Any Member of the Obligated Group and the
Masterustee may from time to time enter into a Related
Supplement in order to create Indenture Indebtedness issued
hereunder. Such Related Supplement shall, (i) with respect
to Indenture Indebtedness created thereby, set forth the
date thereof, (ii) with respect to an Obligation created
...thereby, provide for the form of such Obligation and
(iii) contain such.other terms and provisions as shall not
be inconsistent with the provisions hereof.,
Section 2.05. Conditions to Issue of Indenture
Indebtedness Hereunder. With respect to Indenture Indebted-
ness issued.hereunder, simultaneously with or prior to the
execution, authentication and delivery of such Indenture
Indebtedness:
'(a) All requirements and conditions to the issuance
of such Indenture Indebtedness, if any, set forth in the
Governing Agreement, this Master Trust Indenture and the
Related Supplement shall have been complied with and satis-
fied, as.provided in an Officer's Certificate from the Member
issuing such Indenture Indebtedness, a certified copy of
which shall be delivered to the Master Trustee;
• (b) There shall have been delivered to the Master
Trustee an Officer's Certificate of the Corporation to the
effect that no Event of Default has occurred and is continuing
hereunder and that no event has occurred which with the lapse
of time.or the giving of notice, or both, shall constitute
an Event of Default hereunder;
0
(c) The Master Trustee shall have received an
Opinion of Counsel acceptable to it to the effect that, upon
issuance of such Indenture Indebtedness, the obligation of
the Corporation and each other Member of the Obligated Group
set forth in Sections 3.01(a), 4.04 and 5.01 hereof with
respect to such Indenture Indebtedness to be issued is a
valid, binding and enforceable obligation of the Corporation
and each other Member of the Obligated Group, subject however
to the usual exceptions with respect to bankruptcy, Insolvency
(including laws relating to fraudulent conveyances or trans-
fers) and the availability.of equitable remedies; and
(d) The Member issuing such Indenture Indebtedness
shall have delivered to the Master Trustee such opinions,
certificates, proceedings, instruments and other documents
as the Master Trustee may reasonably request.
'" 17
•
ARTICLE III
MEMBERSHIP IN THE OBLIGATED GROUP
Section 3.01. Conditions for Membership. -A Person
may become a Member of the Obligated Group entitled to issue
Indenture Indebtedness hereunder only upon the following
conditions:
(a) Such Person shall execute and deliver to the
Master Trustee an instrument containing the agreement of
such Person (i) to become a Member of the Obligated Group
under this Master Indenture and thereby to become subject to
compliance with all provisions of this Master Indenture per-
taining to a Member of the Obligated Group, including the
performance and observance of all covenants and obligations
of a Member of the Obligated Group hereunder, and (ii) subject
to Section 4.04('a) hereof, unconditionally and irrevocably
guaranteeing to the Master Trustee and each other Member of
the Obligated Group that all Indenture Indebtedness issued
and at any time Outstanding hereunder and all Reimbursement
Agreement Indebtedness will be paid in accordance with the
terms thereof and of this Master Indenture when due subject,
• however, to (x) the usual exceptions relating to the rights
of guarantors and equitable remedies, and (y) qualifications
dealing with the rights of 'guarantors under California law.
•
(b) The'Master Trustee shall also have received
(i) an Officer's Certificate of the Corporation certifying
that, immediately upon, such Person becoming a Member of the
Obligated Group (A) no Event of Default would exist with
respect to any existing Member of the Obligated Group solely
as a result of such Person becoming a Member of the Obligated
Group; (B) no event would exist which with the passage of
time or the giving of notice or both would constitute an
Event of Default as a result of such Person becoming a
Member of the Obligated Group, and (C) the Members of the
Obligated Group would meet the conditions described in
Section 5.06 for the creation of a Lien on Property, Plant
and Equipment; (ii) an Officer's Certificate of the Corpora-
tion and /or a written report of a Consultant (in compliance
with Section 5.07(a) hereof) certifying that, immediately
upon such Person becoming a Member of the.:Obligated Group
the Members of the Obliqated Group would meet the conditions
described in subsection (a) of Section 5.07 for the incurrence
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of one dollar of additional Long -Term Indebtedness and the
conditions described in the first sentence of. Section 5.09(a)
hereof-7 (iii) if all amounts due or to become due on any
Related Bond which bears interest that is not includable in
gross income of the registered owner or holder thereof under
the Code have not been paid to such registered owner or holder,
an Opinion of Bond Counsel, in form and substance satisfactory
to the Master Trustee, to the effect that, under then existing
law, such Person's becoming a Member of the Obligated Group,
whether or not contemplated on any date of the delivery of
any such Related Bond, would not cause the interest payable
on such Related Bond to become includable in gross income of
the registered owner or holder thereof under the Code; (iv) an
Officer's Certificate of the Corporation certifying compliance
with all applicable conditions to such Person's becoming a
Member of the-Obligated Group hereunder and under the Governing
Agreement;.and..(v) an Opinion of Counsel acceptable -to it to
the effect that upon becoming a Member of the Obligated Group
the obligation of such Person set forth in Sections 3.01(a),
4.04 and 5.01 hereof is a valid, binding and enforceable
.obligation of such Person, subject however to the usual excep-
tions with respect to bankruptcy, insolvency (including laws
relating to fraudulent conveyances or transfers) and equitable
• remedies and that all conditions precedent to such Person's
becoming a Member of the Obligated Group contained herein or
in the Governing Agreement have been satisfied.
•
(c) The execution and delivery by such Person of
the Governing Agreement.
(d) The conditions specified in Subsection (b)(i)(C)
Of this Section 3.01 need not be complied with if there is
delivered to the Master-Trustee an Officer's Certificate of
the Person proposed to become a Member certifying that such
erson, if taken by itself, would meet the conditions speci-
ied in Section 5.06 for the creation of a Lien on such
Person's Property, Plant and Equipment.
(e) The conditions specified in Subsection (b)(ii)
Of this Section 3.01 need not be complied with if there is
delivered to the Master Trustee a report of ,a Consultant
certifying that the Person proposed to become a Member#
taken by itself, would meet the conditions specified in
Section 5.07(a) for the incurrence of one dollar of addi-
`tional Long -Term Indebtedness and the condition - specified in
the first sentence of Section 5.09 hereof, as the case may
be.
19
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•
Section 3.02. Effects of Membership. Upon any
Person becoming a Member of the Obligated Group pursuant to
Section 3.01, it may create Indenture Indebtedness and enter
into and deliver a Related Supplement pursuant to the provi-
sions of this Master Indenture.
ARTICLE IV
GOVERNANCE OF.'THE OBLIGATED GROUP; GENERAL
REQUIREMENTS OF MEMBERSHIP;.WITHDRAWAL
FROM THE OBLIGATED GROUP
Section 4.01. Establishment of Governance of the
Obligated Group.. The Corporation covenants to establish
with the other Members of the Obligated Group the Governing
Agreement.
Section 4.02. Restriction on Incurrence of Long -
Term Indebtedness. No Member of the Obligated Group may
incur any Long -Term Indebtedness other than as set forth
herein and in the Governing Agreement.
Section 4.03. Power to Incur Indebtedness
of Other Members of the Obligated Gro
of the Obligated Group, respectively, by becoming a Member
acknowledges that each Member. has the power to issue Inden-
ture Indebtedness hereunder, subject to the requirements
hereof and of any Related Supplement, on which all Members
of the Obligated Group will be jointly and severally obli-
gated.
Section 4.04. Cross - Guaranties.
(a) The Corporation and each other Member of the
Obligated Group hereby unconditionally and irrevocably,
jointly and severally guaranty and promise to pay any and
all payments on any Indenture Indebtedness and Reimbursement
Agreement Indebtedness (other than Indenture Indebtedness.or
Reimbursement Agreement Indebtedness issued subsequent to
any Member's withdrawal from the Obligated Group in compli-
ance with Section 4.05 hereof), according to the terms
thereof, when due.
(b) If for any reason any payment required pursuant
to the terms of any Indenture Indebtedness issued hereunder
has not been timely paid by the Member which issued such
99
9enture Indebtedness, the Corporation and all other Members
all be obligated under subsection (a) of this Section to
ke such_payment.
Section 4.05. Withdrawal From the Obligated Group.
(a) No Member of the Obligated Group may withdraw
om.the Obligated Group unless:
(i) all Indenture Indebtedness issued by such
Member shall no longer be Outstanding;
(ii) not less than five days prior to the effective
date of such withdrawal the Master Trustee Shall have
received (A) an Officer's Certificate of the Corporation
which states that, immediately after the withdrawal of
such Member from the Obligated Group, (1) no remaining
Member of the Obligated Group would be in. default in
the performance or observance of any covenant or-condi-
tion to be performed or observed by it hereunder and
(2) the remaining Members of the Obligated Group would
meet the conditions described -in Section 5.06 for the
creation of a Lien on Property, Plant and Equipment
(B) a report of a Consultant which certifies that, imme-
diately after such withdrawal, the remaining Members of
the Obligated Group would meet the conditions described .
in subsection (a) of Section 5.07 for the incurrence of
one dollar of additional Long -Term Indebtedness and in
the first sentence of Section 5.i
due on any Related Bond which be
not includable in gross income u
been paid to the Holders thereof
Counsel, in form and substance s
Master Trustee, stating that and
such Member's withdrawal from th
whether or not contemplated on a
any Related Bond, would not caus
on such Related Bond to become i
income of the registered owner t
and (D) an Officer's Certificate
certifying compliance with all a;
and requirements hereof and unde
(iii) not less than five d
date of such withdrawal there
Trustee an Opinion of'Counsel
ments and conditions precedent
21
19(a); (C) it all amounts
irs interest that is
)der the Code have not
, an Opinion of Bond
itisfactory to the
ar then existing law
a Obligated Group,
iy date of delivery of
e the interest payable
icludable in gross
hereof under the Code;
of the Corporation
)plicable conditions
the Governing Agreement;
ays prior to the effective
is delivered to the Master
stating that all require -
to such withdrawal under
• this Master indenture and under the Governing Agreement
have been complied with and satisfied; and
(iv) Unless the tests of Section 4.05(c) are met,
the withdrawing Member delivers to the Master Trustee
not less than five days prior to the effective date of
such withdrawal a Guaranty executed by such Member con-
firming that its obligations set forth in Section 4.04
hereof shall survive such Member's withdrawal from the
Obligated Group, which Guaranty shall be accompanied by
an Opinion of Counsel to the effect that such Guaranty
is a valid, binding and enforceable obligation of such
withdrawing Member, subject to the usual exceptions
with respect to bankruptcy, insolvency (including laws
relating to fraudulent conveyances or transfers) and
the availability of equitable remedies.
(b) Notwithstanding the foregoing, any Member may
withdraw from the Obligated Group if within five days prior
to such withdrawal there is delivered to the Master Trustee
an Officer's Certificate of the Corporation certifying that
(A) such Member's Long -Term Debt Service Coverage Ratio is
less than 1.10, (B) after giving effect to such withdrawal,
the Long -Term Debt Service Coverage Ratio of the Obligated
• Group has not decreased as a result of such withdrawal and
(C) after giving effect to such withdrawal, the percentage
of the Current Value of Encumbered Property, Plant and Equip-
ment with respect to the Current Value of all Property, Plant
and Equipment has not decreased from such percentage prior
to such withdrawal.
n
(c) Notwithstanding the withdrawal of any Member
from the Obligated Group pursuant to subsection (a) or (b)
Of this Section, any Guaranty of such Member (except any
Member whose Total Operating Revenues in the previous Fiscal
Year did not exceed 10% of the Total Operating Revenues of
the Obligated Group for such Fiscal Year and the Current
Value of whose Property, Plant and Equipment does not exceed
10% of the Current Value of the Property, Plant and Equipment
Of the Obligated Group) pursuant to subsection (a) of sec-
tion 4.04 shall remain in full force and effect until the
Indenture Indebtedness to which such Guaranty relates shall
no longer be Outstanding, and such Member shall continue to
be bound by the provisions of Article V hereof- (except Sec-
tions 5.01 (to the extent that such Section relates to Inden-
ture Indebtedness incurred subsequent to such Member's with-
drawal from the Obligated Group) and 5.15 hereof), unless
there is delivered to the Master Trustee (i) an Officer's
22
• Certificate certifying that for the two Fiscal Years immedi-
ately preceding such withdrawal and also immediately after
giving effect to such withdrawal, the Long -Term Debt Service
Coverage Ratio was and will be at least 2.0 as determined
from independently audited financial statements closest.in
time to the withdrawal, adjusted to reflect the withdrawal
...of such Member and (ii) a Consultant's opinion certifying
that, in its opinion, the Long -Term Debt Service Coverage
Ratio will remain at or above 2.0 for the three Fiscal Years
following such Member's withdrawal from the Obligated Group.
Upon the delivery to the Master Trustee of such Officer's
Certificate and such Consultant's opinion, the withdrawing Member
shall thereupon be released from any Guaranty arising
with respect to such Member pursuant to subsection (a) of
Section 4.04.
(d) No.Member of the Obligated Group may withdraw
from the Obligated Group during the continuance of an Event
of Default.
ARTICLE V
PARTICULAR COVENANTS OF EACH MEMBER
• OF THE OBLIGATED GROUP
Section 5.01. Payment of Principal and Interest.
Each Member of the Obligated Group jointly and severally
covenants promptly to pay or cause to be paid the principal
of, premium, if any, and interest on Indenture Indebtedness
issued hereunder and all Reimbursement Agreement Indebtedness
at the place, on the dates and in the manner provided herein,
in the Related Supplement and in said Indenture Indebtedness
or in the Reimbursement Agreement, as the case may be, accord -
ing to the terms thereof whether at maturity, upon proceedings
for redemption, by acceleration or otherwise.
�J
Section 5.02. Covenants as to Corporate Existence,
Maintenance of Properties, Etc. Each Member of the Obligated
3r0up, respectively, hereby covenants:
(a) Except as otherwise expressly provided herein,
to preserve its corporate or other separate legal existence
ind all its rights and licenses to the extent necessary or
iesirable in the operation of its business and affairs and
:o 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
- 914
•
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•
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herein contained shall be'construed to obligate it to retain
or preserve any of its rights or licenses. no longer used oi,
in the judgment of its Governing Body, useful in the conduct
of its business.
(b) At all times to cause its Properties 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, or, if such properties
shall be damaged by reason of a force majeure, including, by
way of example only, but not limited to, storm, flood, earth-
quake, lightning, windstorm or hail, to make reasonable pro-
gress in returning such properties to good repair, working'
order and condition; provided, however, that nothing contained
in this subsection (b) shall be construed (i) to prevent it
from ceasing to operate any portion of its Properties or
entering into -a •sale and lease back" transaction that-would
constitute and be treated as a true sale and lease -under the
Code with respect to any portion of its Properties, if in
its judgment (evidenced, in the -case of such a cessation
other than in the ordinary course of business, by a determi-
nation by its Governing Body evidenced by a resolution of
such Governing Body certified by the secretary or an assistant
secretary of such Member, or if it has no secretary or assistant
secretary, by its comparable officer) it is advisable not to
Operate the same or to enter into such •sale and lease back'
arrangement, 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, useful in the conduct of
its business.
. (c) To do all things reasonably necessary to con-
duct 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
and duly observe and conform states thereof ers, regulations
to all valid ord
or requirements of any to
authority relative to
the conduct of its business and the ownership of its Properties;
provided, nevertheless, that nothing herein contained s hall
1equire it to comply with, observe and conform to any such
authorrde1' regulation or requirement of any governmental
thereof y so long as the validity thereof or -the applicability
to it shall be contested in good faith.
charges and assessments at any lawful uponal
24
• or against it or its Properties; provided, however, that it
shall have the right to contest in good faith any such taxes,
charges -or assessments or the collection of any such sums
and pending such contest may delay or defer payment thereof
unless as a result of such action such Property will be sub-
ject to imminent loss or forfeiture, in which case such taxes,
charges or assessments shall be paid promptly.
(e) Promptly to pay or otherwise to satisfy and
discharge all of its obligations and Indebtedness and all
demands and claims against it as and when the same become
due and payable, other than any thereof (exclusive of the
Indenture Indebtedness issued and Outstanding hereunder)
being contested as provided in Section 6.01(c) hereof.
(f) At all times to comply with all terms, cove-
nants and provisions of any Liens at such time existing upon
its Properties or any part thereof or securing any of its
Indebtedness.
(g) To procure and maintain all necessary licenses
and permits, to maintain accreditation of any health care
institution operated by it (other than those of a type for
which accreditation is not available) by the applicable recog-
nized accrediting body, when and as available, and to maintain
• the status of its health care facilities (other than those
not having such status as of the date hereof or, if such
Member becomes a Member of the Obligated Group after the
date hereof, as of the date such Member becomes a Member of
the Obligated Group) as a provider of health care services
eligible for reimbursement or other payments under Medi-
care, and comparable programs, including future governmental
programs; provided, however, that it need not comply with
this Section 5.02(8) if and to the extent that its Governing
Body shall have determined in good faith, evidenced by a
resolution of the 'Governing Body certified by the secretary
or an assistant secretary of such Member, or if it has no
secretary or assistant secretary, by its comparable officer,
that such compliance is not in its best interests and that
lack of such compliance would not impair its ability to pay
its Indebtedness when due.
•
Section 5.03. Insurance. Each Member of the Obli-
gated Group, respectively, agrees that it will maintain, or
cause to be maintained, insurance (including one or more
self- insurance programs considered to be adequate by an Insur-
ance Consultant) covering such risks and in such amounts as,
in its reasonable judgment, is adequate to protect it and
25
•
•
1
its Properties and operations, including (to the extent that
such Member is a health care institution) professional lia-
bility or medical malpractice insurance. The insurance re-
quired to be maintained pursuant hereto shall be subject to
the review of an Insurance Consultant who shall prepare and
file with the Master Trustee a report on the adequacy of ,
such insurance annually not later than five months after the
end of each fiscal year of such Member. Each Member of the
Obligated Group, respectively, agrees that it will follow
any recommendations of the Insurance Consultant to the
extent reasonable.
Section 5.04. Governing Agreement. Each Member
of the Obligated Group, respectively, covenants with the
Master Trustee and each other Member of the Obligated Group
to abide by the terms of the Governing Agreement. -
Section 5.05. Limitations on Creation of Liens.
(a) Each Member of the Obligated Group, respec-
tively, agrees it will not create or suffer to be created or
exist any Lien upon Property now owned or hereafter acquired
by it other than Permitted Liens.
(b) Permitted Liens shall consist of the following:
(i) Liens arising by reason of good faith depos-
its.by any Member of the Obligated Group in connection
with leases of real estate, bids or contracts (other
than contracts for the payment of money), deposits by
any Member of the Obligated Group 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 simi-
lar charges;.
(ii) Any Lien arising by reason of deposits with,
or the giving of any form of security to, any govern-
mental agency or any body created or approved by law or
governmental regulation for any purpose at.any time as
required by law or governmental regulation as a condi-
tion to the transaction of any business or the exercise
of any privilege or. license, or to enable the Corpora -
tion, any other Member of the Obligated ,Group,-or a
Subsidiary to maintain self- insurance or to participate
in any funds established to cover any insurance risks
or in connection with professional liability or medical
malpractice insurance, workers' compensation insurance,
unemployment insurance, social security insurance br
other pension or profit sharing plans, or to share in
26
0
the privilegges or benefits required for companies par-
ticipating in such arrangementsi
(iii) Any judgment Lien or notice of pending action
against any Member of the Obligated Group so long as
such judgment or pending action is being contested and
execution thereon is stayed or while the period for
responsive pleading has not lapsed;
(iv) (A) Rights reserved to or vested in any
municipality or public authority by the terms of any
right, power, franchise, grant,.licedse, permit or pro-
vision 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 and adversely affect the value thereof, or
(2) purchase, condemn, appropriate or recapture, or
designate a purchaser of, such Property; (8) any Liens
on any Property for taxes, assessments, levies, fees,
water and sewer rents, and other governmental and simi-
lar charges and any Liens of mechanics, materialmen,
• laborers, suppliers or vendors for work or services
performed or materials furnished in connection with
such Property, in each case, which are not due and pay-
able or which are not delinquent or which, or the
amount or validity of which, are being contested and
execution thereon is stayed or which, with respect to
Liens of mechanics, materialmen and laborers, have been
due for less than 60 days; (C) easements, rights -of-
way, servitudes, restrictions and other minor defects,
encumbrances, and irregularities in the title to any
Property which do not materially impair the use of such
Property or materially and adversely affect the value
thereofr (D) rights reserved to or vested in any munici-
pality 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 (E) to the extent that it affects title to
any Property, this Master Indenture;
•
(v) Any Lien (other than a Lien on Property which
is part of the Property, Plant and Equipment) securing
gon- Recourse Indebtedness;
(vi) Any Lien on Property (other than a Lien on
Property which is part of the Property, Plant and Equip-
ment) acquired by.a Member of the Obligated Group if
the Indebtedness secured by the Lien is not assumed by
a Member of the Obligated Group or, if assumed, the
assumption of-such indebtedness is Additional Indebted-
ness permitted under the provisions of Section 5.07
hereof, and if an Officer's Certificate is delivered to
the Master Trustee certifying that (A) the Lien and the
Indebtedness secured thereby were created and incurred
by a Person other than the Member of the Obliqated Group
acquiring such Property prior to acquisition of such
Property by the Member of the Obligated Group, and (B) the
Lien was.not created for the purpose of enablinq the
Member of the Obligated Group to avoid the limitations
hereof on creation of Liens on Property of the Obligated
Group;
• (vii) Any Lien on Property which is part of the
Property, Plant and Equipment permitted under the provi-
sions of Section 5.06 hereof;
is
(viii) Any Lien on inventory, securities or obligations
(other than securities or obligations issued by any
Member of the Obligated Group or Related Bonds), of
pledges of gifts or grants to be received in the future,
which Lien secures Short -Term Indebtedness incurred in
compliance with the provisions of Section 5.07(d) or
Non - Recourse Indebtedness incurred in compliance with
the provisions of Section 5.07(e);
(ix) Any Lien arising by reason of an Irrevocable
Deposit;
(x) Any Lien in favor of the Master Trustee on
the proceeds of Indebtedness prior to the applications
of such proceeds;
(xi) Any Lien in favor of the Master Trustee secur-
ing all Indenture Indebtedness on a paiity basis;
(xii) Any Lien subordinate to the Liens described
in clause (xi) of this subsection required by a statute
under which a Related Bond is issued; and
no
r
• (xiii) Any Lien in favor of a bank or other institu-
tion issuing a letter of credit or other commitment to
make a loan to a Member of the Obligated Group which
Lien secures Indebtedness permitted hereunder.
Section 5.06. Liens on Property, Plant and Equip-
ment. A Lien on Property which is part of the Property,
Plant and Equipment,shall be a Permitted Lien if, prior to
creation of such Lien, an Officer's Certificate of the Corpo-
ration is delivered to the Master Trustee stating that, imme-
diately after giving effect to the Lien, (A) the Current
Value of Property which is part of the Property, Plant and
Equipment, and is Encumbered is not more than 251 of the Cur -
rent Value of all Property, Plant and Equipment and (B) the
Obligated Group and each Member thereof will not be in default,
and no eveht shall exist which with the passage of. time or
giving of notice or both would constitute an Event of Default,
under this Master Indenture.
Section 5.01. Limitations on Incurrence of Addi-
tional Indebtedness. Each Member of the Obligated Group may
incur Ad3itionaT Indebtedness which is not Indenture Indebt-
edness. Each Member of the Obligated Group, respectively,
agrees that it will not Incur any Additional Indebtedness
• other than Additional Indebtedness consisting of one or more
of the following:
•
(a) Long -Term Indebtedness, if prior to incurrence
of the Long -Term Indebtedness, there is delivered to the
Master Trustee:
(i) An Officer's Certificate of the Corporation
certifying that the Long -Term Debt Service Coverage
Ratio for the Obligated Group is not less than 1.25
(computed on the basis of Aggregate Income Available
for Debt Service for the full Fiscal Year immediately
preceding the date of delivery of such Officer's Certifi-
cate and Maximum Annual Debt Service immediately after
giving effect to the Indebtedness proposed to be.issued);
or
(ii) Either (A) (x) an Officer's Certificate of
the Corporation addressed to the Master Trustee stating
that the Aggregate Income Available for Debt Service
for each of the preceding two Fiscal Years was not less
than 125% of Maximum Annual Debt Service (other than
the Indebtedness proposed to be issued), provided that
if Aggregate Income Available For Debt Service for the
29
•
later of such two Fiscal Years is higher than the earlier
Fiscal Year, the average Aggregate Income Available, for
Debt Service for such Fiscal Years may be used in such
computation and (y) a written report addressed to the
Master Trustee of a Consultant stating that the estimated
or forecasted Long Term Debt Service Coverage Ratio for
each of the two Fiscal Years immediately following the
issuance of said Indebtedness (or immediately following
the anticipated acquisition or completion date of the
facilities to be acquired or constructed with the proceeds
of such Indebtedness if such Indebtedness is being issued
to finance the acquisition: or construction of new income .
producing hospital facilities less than 30%. of the total
cost of which to be financed is to be for equipment),
is not less than 125% of Maximum Annual Debt Service
after giving effect to the Indebtedness proposed.to be
issued= or (e) a written Consultant's - report containing
an opinion of such Consultant that: (a) applicable laws
or regulations have prevented or will prevent the Obli-
gated Group from generating the amount of Aggregate
Income Available for Debt Service required to-be generated
by (A) above as a prerequisite to the issuance of Addi-
tional Indebtedness and, if requested by the Master
Trustee, such report is accompanied by a concurring
Opinion of Counsel acceptable to the Master Trustee as
•
to any conclusions of law supporting the opinion of
such Consultant; (b) the Obligated Group has generated
and the forecasts or 'estimates contained in such Consul-
tant's report are that it will generate the maximum
amount of Aggregate Income Available for Debt Service
which in the opinion of such Consultant can reasonably
be generated given such laws and regulations during the
period affected - thereby; and (c) the Aggregate Income.
Available for Debt Service so generated is at least
100% of Maximum Annual Debt Service of Outstanding Indebt-
edness of the Obligated Group and the Aggregate Income
Available for Debt Service estimated or forecasted to
be. so generated is at least 100% of such estimated Maxi-
mum Annual Debt Service on the Outstanding Indebtedness
of the Obligated Group and the Indebtedness proposed to
be issued.
(b) Completion Indebtedness, without limitation.
Lon Term Indebtedness) ss) (other than Balloon
9- ) purpose of refunding
any Long -Term Indebtedness if prior to incurrence thereof:
(i) Either (A) an Officer's Certificate is delivere
to the Master Trustee stating that, taking the proposed
30
• Long -Term Indebtedness and the refunding of the existing
Lorrg -Term Indebtedness into account, Aggregate Maximum
Annual Debt Service of the Obligated Group will not be
increased by more than 51 as a result of the incurrence
of such Long -Term Indebtedness, or (B) the conditions
described in subsection (a) of this Section are met
with respect to the incurrence of such proposed Long-
Term Indebtedness, and
(ii) Either (A) there is delivered to the Master
Trustee an Opinion of Counsel stating that upon the
incurrence of such proposed Long -Term Indebtedness and
application of the proceeds thereof, the Outstanding
Long -Term Indebtedness to be refunded thereby will no
longer be Outstanding; or (B) (1) the proceeds of such
proposed Long -Term Indebtedness, together with any other
funds, are to be irrevocably deposited in an escrow
account with the Master Trustee or other depository, in
the form of cash. and /or Government Obligations, in an
amount the principal of and interest on which when due
will provide money sufficient, as verified in a written
report to the Master Trustee by an independent certified
public accountant or a Consultant satisfactory to the
Master Trustee, to pay the principal or redemption price
• of and all unpaid interest to maturity, or to the redemp-
tion date, as the case may be, on the Outstanding Long -
Term Indebtedness to be refunded, as such principal or
redemption price and interest become due, provided that
the Master Trustee or other depository shall be irre-
vocably instructed to apply such money to the payment
of such principal or redemption price and interest with
respect to such Outstanding Long -Term Indebtedness; and
(2) there is delivered to the Master Trustee either (I)
a written release and discharge of such Outstanding
Long -Term Indebtedness by the Holders, or the trustee
on behalf of the Holders, of such Outstanding Long -Term
Indebtedness, or (II) an Opinion of Counsel stating
that the Holders, or the trustee on behalf of the Holders,
Of such Outstanding Long -Term Indebtedness would not be
empowered to accelerate such Outstanding Long -Term Indebt-
edness following the issuance of such proposed Long -
Term Indebtedness.
(d) Short -Term Indebtedness, provided. that:
( Such
or is secured only bIndebtedness i Unsecured Indebtedness
aLienonProperty whichisinven-
tory, securities or by (other than securities
or obligations issued by any Member of the Obligated
. Group or Related Bonds), pledges of gifts or grants to
be received in the future; and
31
(ii) Immediately after the incurrence of such Indebt-
edness the aggregate Outstanding principal amount of
such Indebtedness does not exceed 201 of the aggregate
of Total Operating Revenue of the Members of the Obli-
gated Group for the most recent period of 12 full consecu-
tive.calendar months for which the financial statements .
of each Member of the Obligated Group have been reported
upon by independent certified public accountants, pro-
vided that during any one period of 20 consecutive days
during each Fiscal Year, the amount of Short -Term Indebt-
edness does not exceed 31 of the aggregate Total Operating
Revenue of the Members of the Obligated Group for the
then most recent period of.12 full consecutive calendar
months for which the financial statements of each Member
of the Obligated Group have been reported on by independent
certified public accountants.
(e) Non=Recourse Indebtedness, without limitation.
(f) Subordinated Indebtedness, provided that such
Subordinated Indebtedness does not exceed 101 of the Current
Value of the Property, Plant and Equipment.
(g) Any Indebtedness not mentioned in any other
• subsection of this Section, incurred in the ordinary course
of business.
(h) Irvine Indebtedness.
(i) Balloon Long -Term Indebtedness, provided that,
prior to the time such Indebtedness is incurred an Officer's
Certificate is delivered to the Master Trustee certifying
that the conditions described in the proviso ending this
sentence, in Section 5.07(j) hereof and in subsection (a)(i)
or (a) (ii) above are met with respect to such Indebtedness;
Provided, however, that immediately after the incurrence of
such Indebtedness the aggregate Outstanding principal amount
of Indebtedness incurred under the provisions of this subsec-
tion (i) will not exceed 151 of the Total Operating. Revenues
Of the Members of the Obligated Group for the most recent
period of 12 full consecutive calendar months for which finan-
cial statements of each Member of the Obligated Group have
been reported upon by independent certified public accountants:
(j) At no time shall the aggregate Outstanding
amounts of Indebtedness of the Corporation and other Members
Of the Obligated Group incurred pursuant to subsections (d),
(e) . (f) and (i) above exceed 251 of the aggregate of Total
Operating Revenues of the Members.of "the Obligated Group for
• the most recent period of 12 full consecutive calendar months
32
for which the financial statements of each Member of the
Obligated Group have been reported upon by independent certi-
fied public accountants.
(k) Reimbursement Agreement Indebtedness, without
limitation.
.Section 5.08. Restrictions on Guaranties.
(a) Each Member of the Obligated Group, respec-
tively, agrees that it will not enter into, or become liable,
with respect to the Corporation, after the date of this Master
Indenture, and with respect to any other Member, after the
date it becomes a Member, in respect of any Guaranty unless
such Guaranty (i) is an Obligation and could then be incurred
as Additional Indebtedness under Section•5.07, taking subsec-
tion (b) of this Section into account or (ii) is a Guaranty
of Indebtedness of another Member of the Obligated Group
which Indebtedness is issued in compliance with Section 5.07
hereof.
(b) With respect to Guaranties of obligations of
a Person which is not a Member of the Obligated Group (for
purposes of this Section 5.08 only "Beneficiary ") the follow-
ing criteria shall be used for calculating amounts to be
included as Long -Term Indebtedness or Short -Term Indebtedness:
• (i) if a Beneficiary's obligation to repay the
Member for advances made under such Guaranty is secured
directly or by subrogation by a security interest in
real or personal property with a current value (using
the definition of Current Value herein with respect to
such property and to the extent such definition refers
to other definitions herein, using such other defini-
tions as if the Beneficiary were the only Member of the
Obligated Group) at least equal to the principal amount
of the underlying obligation subject to.the Guaranty
(subject only to security interests directly securing
such underlying obligation), 258 of the debt service on
the underlying obligation shall be included in determin-
ing Long -Term Indebtedness;. or
l.J
(ii) if'the Guaranty is not so secured but the
Beneficiary has a Long -Term Debt Service. Coverage Ratio
(determined as if the Beneficiary alone constitutes the
Obligated Group) for the immediately preceding fiscal
year of such Beneficiary of at least 1.50 when such
guaranteed debt and all debt, incurred by such Beneficiary
since the most recent independently audited financial_
33
• statements of such Beneficiary is added to the debt
shown on such financial statements, then 509 of the
debt service on the underlying obligation of such Bene-
ficiary shall be included in determining Long -Term Indebt-
edness; or
(iii) if the Guaranty is not so secured but the
Beneficiary.has a Long -Term Debt Service Coverage Ratio
(determined as if the Beneficiary .alone constitutes the
Obligated Group) for the immediately preceding fiscal
year of such Beneficiary of at least 1.20 when such
guaranteed debt and all debt incurred by such Beneficiary
since the most recent independently audited financial
statements of such Beneficiary is added to the debt
shown on such financial statements, then 759 of the
debt service on the underlying obligation of such Bene-
ficiary shall be included in determining Long -Term indebt-
edness; or
(iv) otherwise,_1009 of the underlying obligation
shall be included in determining Long -Term indebtedness
and, in all cases, 1009 of such underlying obligation
shall.be included in determining Short -Term indebtedness.
• (c) For purposes of subsection (a) of this Section,
and generally for any covenants and computations provided
for herein, the aggregate annual principal and interest pay-
ments on any indebtedness represented by a Guaranty of obli-
gations of a Member of the Obligated Group shall not be in-
cluded in such covenants and computations.
0
Section 5.09. Debt Service Coverage Ratios.
(a) Each Member of the Obligated Group, respectively, -
agrees that it will take actions which may be necessary to
maintain the Long -Term Debt Service Coverage Ratio above
1.25 as calculated at the end of each Fiscal Year; provided,
however, that the failure to maintain such ratio shall not
constitute an Event of Default. if the Long -Term Debt Service
Coverage Ratio, as calculated at the end of any Fiscal Year,
is below 1.10, the Obligated Group covenants to retain promptly
a Consultant to make recommendations to increase such Ratio
for subsequent Fiscal Years to 1.25 or, if in the opinion of
the Consultant the attainment of such level is impracticable,
to the highest practicable level. Each Member of the Obli-
gated Group, respectively, agrees that it will, to the extent
feasible and to the extent permitted by law, follow the recom-
mendations of the Consultant. So long as the Obligated Group
34
• shall retain a Consultant and each Member of the Obligated
Group shall follow such Consultant's recommendations to the
extent feasible, and to the extent permitted by law, this
Section shall be deemed to have been complied with even if
the ratio attained for any subsequent Fiscal Year is below
1.25.
(b) Notwithstanding subsection (a) of this Section,
it shall be an Event of Default if the Long -Term Debt Service
Coverage Ratio as calculated at the end of a Fiscal Year is
below 1.0.
Section 5.10. Sale, Lease or Other Disposition of
Property, Plant and Equipment. Each Member of the Obligated
Group, respectively, agrees that it will not in any calendar
year sell, lease or otherwise dispose of Property, Plant and
Equipment the Current Value of which would .cause the aggregate
Current Value of Property,.Plant and Equipment so- disposed
of by Members of the Obligated Group in such year to exceed
two percent of the Current Value of the Property, Plant and
Equipment, except fdr transfers in connection with a 'sale
and leaseback" transaction that would constitute and be treated
as a sale.and "true lease" under the Code, and except for
transfers of Property, Plant and Equipment:
• (a) To any Person if prior to the sale, lease or
other disposition there is delivered to the Master Trustee
an Officer's Certificate stating that in the judgment of the
signer such Property, Plant and Equipment have become, or
within the next succeeding 24 calendar months are reasonably
expected to become, inadequate, obsolete, worn out, unsuitable,
unprofitable, undesirable or unnecessary and the sale, lease,
removal or other disposition thereof will not impair the
structural soundness, efficiency or economic value of the
7emaining Property, Plant.and Equipment; or
•
(b) To another Member Of the Obligated Group; or
(c) To a Per.son which is not a Member of the Obli-
3ated Group and is not a Subsidiary, provided that prior to
:he sale, lease or Other disposition there is delivered to
:he Master Trustee an Officer's Certificate stating that
.mmediately after such transaction, the conditions described
.n Section 5.06 would be met for the creation of.a Lien On
'roperty, Plant and Equipment and that either:'
(i) The Long -Term Debt Service Coverage Ratio for
the most recent period of 12 full consecutive calendar
35
•
months preceding the proposed date of such transaction
for which the financial statements of each Member of
the Obligated Group have been reported upon by independent
certified public accountants, assuming such transaction
actually occurred at the beginning of such period, would
not have been reduced or, if reduced, would not have
been reduced by more than 158 and in no event to less
than 1.25; or
(ii) As shown in a Consultant's report, the Long -
Term Debt Service Coverage Ratios for each of the two
periods of 12 full consecutive calendar months immediately
succeeding the proposed date of such transaction is
expected to be either (A)(x) no less than 1.25 and (A)(y)
no less than 858 of the Long -Term Debt Service Coverage
Ratio for the period described in subsection (c)(i) of
this Section, or (B) higher than it would have been had
such transaction not been effected.
(d) To a Subsidiary which is not a Member of the
Obligated Group:
(i) If the Property, Plant and Equipment being
• transferred do not include leasehold interests and the
aggregate Current Value of the Property, Plant and Equip-
ment sold, leased or otherwise transferred to Subsidiaries
which are not Members of the Obligated Group in the
then current Fiscal Year, including the Property, Plant
and Equipment proposed to be transferred, does not exceed
3% of the aggregate Current Value of all Property, Plant
and Equipment; or
(ii). If the Property, Plant and Equipment being
transferred are leasehold interests and the portion of
Aggregate Income Available for Debt Service, for .the.
most recent period of 12 full consecutive calendar months
for which the financial statements of each Member of
the Obligated Group have been reported upon by independent
certified public accountants, attributable to the aggre-
gate of such interests transferred to Subsidiaries which
are not Members of the Obligated Group in the then current
calendar year, including the interests proposed to be
transferred, does not exceed 58 of Aggregate Income
Available for Debt Service for such period.
Section 5.11. Disposition of Cash.
(a) Each Member of the Obligated Group, respectively,
agrees that, except in the ordinary course of business, -it
•
is
will not in any Fiscal Year cause the disposition of more
than 208, in the aggregate, of the cash or other immediately
available funds of the Obligated Group, as calculated at the
end of the immediately preceding Fiscal Year, to any Person
not a Member of the Obligated Group unless prior to such
transfer there is delivered to the Master Trustee an Officer's
Certificate stating that the Long -Term Debt Service Coverage
Ratio for the most recent.period of 12 full consecutive calendar
months preceding the proposed date of ,such transaction for
which the financial statements of each Member of the Obligated
Group have been reported upon by independent certified public
accountants, assuming such transaction actually occurred at
the beginning of such period, would not have been reduced by
more than 108 and in no event to less than 2.00 unless such
transfer is to be used to make Bona Fide Loans.
(b) Notwithstanding subsection (a) of this Section
each Member of the Obligated Group, respectively, agrees
that, except in the ordinary course of business, it will not
make dispositions of cash or other immediately available
funds to any Person 'not a Member of the Obligated Group if
the Long -Term Debt Service Coverage Ratio for the most recent
period of 12 full consecutive calendar months preceding the
proposed date of such transaction for which the financial
statements of each Member of the Obligated Group have been
reported upon by independent certified public accountants,
assuming such transaction actually occurred at the beginning
of such period, would have been less than 1.25.
Section 5.12. Consolidation, Merger, Sale or Con-
veyance.
(a) Each Member of the Obligated Group, respectively,
covenants that it will not merge or consolidate with any
other corporation not a Member of the Obligated Group or
sell or convey all or substantially all of its assets to any
Person not a Member of the Obligated Group unless:
(i) Either it will
or the successor corporation
organized and existing under
States of America or.a state
be the surviving corporation,
shall be 'a corporation
the laws of the United "
thereof and such corporation
• shall become a Member of the Obligated Group and shall
expressly assume the due and punctual payment of the
principal of and premium, if any, and interest on all
Outstanding Indenture Indebtedness issued hereunder
according to its tenor, and the due and punctual per-
formance and observance of all of the covenants and
conditions of this Master Indenture by a Related Supple-
ment satisfactory to the Master Trustee, executed and
delivered to the Master Trustee by such corporation;
(ii) No Member of the Obligated Group immediately
after such merger or consolidation, or such sale or
conveyance, would be in default in the performance or
observance of any covenant or condition of this Master
Indenture, and no event shall exist which with the giving
of notice or the passage of time or both would constitute
an Event of Default, and the conditions described in
Section 5.06 would be met for the creation of-a Lien on
Property, Plant and Equipment, the condition described
in subsection (a) of Section 5.07 would be met for the
incurrence of ohe dollar of additional Long -Term Indebted-
ness and the condition described in the first sentence .
of Section 5.09 would be met;
• (iiij Prior to such merger, consolidation, sale
or conveyance the surviving corporation delivers to the
Master Trustee a report of a Consultant certifying that
such surviving corporation's long -term debt service
coverage ratios, computed as though such surviving corpora-
tion had been a Member of the Obligated Group for the
periods in question as though each such ratio were
its Long -Term Debt.Service Coverage Ratio, in each of
the two periods of 12 full consecutive calendar months
immediately succeeding the proposed date of such merger,
consolidation, sale or conveyance is expected to be at-
least 1.35 (or, if such ratio of the Member of the Obli-
gated Group was less than 1.35 for the twelve full
consecutive calendar'month period immediately preceding
the merger, consolidation, sale or conveyance, then
such long -term debt service coverage ratios are expected
to be higher than such ratio for such period); and.
(iv). If all amounts due or to become due on any
Related Bond which bears interest that.is not includable
in gross income of the registered owner or holder thereof
under the Code have not been fully paid to such registered
owner or holder, there shall have been delivered to the
Master Trustee an Opinion of Bond Counsel, in form and
38
• substance satisfactory to the Master Trustee, to the
effect that under then existing law the consummation of
such merger, consolidation, sale or conveyance, whether
or not contemplated on any date of the delivery of such
Related Bond, would not cause the interest payable on
such Related Bond to become includable in gross income
of the registered owner or holder thereof under the
Code.
(b) In case of any such consolidation, merger,
sale or conveyance and upon any such assumption by the successor
corporation, such successor corporation shall succeed to and
be substituted for its predecessor, with the same effect as
if it had been named herein as the Corporation or other Member
of the Obligated Group, as the case may be. -
(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 Indenture Indebtedness there-
after to be issued as may be appropriate.
(d) The Master Trustee shall.receive an.Opinion
of Counsel as conclusive evidence that any such consolidation,
merger, sale or conveyance, and any Isuch assumption, complies
• with the provisions of this Section and that it is proper
for'the Master Trustee under the provisions of Article VIII
and of this Section to join in the execution of the Related
Supplement provided for in this Section.
Section 5.13. Restrictions on Encumbering Revenues.
Each Member of the Obligated Group, respectively, covenants
that, except as provided in Sections 5.05, 5.06 and 5.07 it _
will not cause or permit any of its revenues, receipts or
other moneys, or right to.receive any of the same, including,
without limitation, accounts, accounts receivable, contract
rights and general intangibles, and all proceeds of all of
the foregoing, whether of cash or non -cash, to become Encum-
bered or sold except (i) with respect to amounts which may
be realized by a Person for whose benefit a Permitted Lien
has been created upon enforcement of such Permitted Lien, or
(ii) as permitted by Section 5.15 hereof with respect to
insurance or condemnation proceeds or.awards.
Section 5.14.
e of No Defau
gated Group, respec
Financ
is
mation. Each Member
covenants that it will:
(a) As soon as practicable but in no' event later
than five months after the end of its fiscal year, file with
•
• the Master Trustee, with aach Obligation Holder who may have.
so requested and if any Indenture Indebtedness is then rated
by Moody's Investors Service, Inc, or Standard & Poor.'s Cor-
poration, with such rating agency, as the case may be (i)
its revenue and expense statement (or a revenue and expense
statement of any consolidated group of companies of which it
is a member) for such fiscal year and (ii) its balance sheet
(or a balance sheet of any consolidated group of companies
of which it is a member) as of the end of such fiscal year,
each accompanied by the certificate or opinion of independent
certified public accountants.
•
(b) As soon as practicable but in no event later
than five months after the end of each Fiscal Year, file, or
cause to be filed, with the Master Trustee and if-any Indenture
Indebtedness is then rated by.Moody's Investors Service,
Inc., and Standard & Poor's Corporation, with such rating
agency, as the case may be (i) a consolidating revenue and
expense statement of the Corporation (or of any consolidated
group of companies of which the Corporation is a member) and
each other Member of the Obligated Group (or of any consoli-
dated group of companies of which such Member of the Obligated
Group is a member) presenting each separately and consolidated,
along with consolidating entries eliminating material inter-
company balances and transactions, for such Fiscal Year and
(ii) a consolidating balance sheet presented on the basis
described in (i) above as of the end of such Fiscal Year,
each accompanied by the certificate or opinion of independent
certified public accountants.
(c) As soon as practicable but in no event later
than five months after the end of each Fiscal Year, file
with the Master Trustee, and with each Obligation Holder who
may have so requested or in whose behalf the Master Trustee
may have so requested, an Officer's Certificate stating the
Long -Term Debt Service Coverage Ratio for such Fiscal Year
and stating whether or not to the best knowledge of the signer
such Member of the Obligated Group is in default in the per-
formance of any covenant contained in this Master Indenture,
and, if so, specifying each such default of.which the signer
may have knowledge.
(d) If an Event of Default shall have occurred
and be continuing (i) file with the Mastet Trustee such other
financial statements and information concgrning its operations
and financial affairs (or of any consolidated group of companies
Of which it "is a member) as the Master Trustee may from time
40
• to time reasonably request, excluding specifically privileged
information, donor records, patient records and personnel
records and (ii) provide access to its facilities for the
purpose of inspection by the Master Trustee or its agent
during regular business hours or at such other times .as the
Master Trustee may reasonably request.
.(e) Within 10 days after its receipt thereof,
file with the Master Trustee a copy of each report which
any provision of this Master Indenture requires to be prepared
by a Consultant or an ..Insurance Consultant.
Section 5.15. Insurance and Condemnation Proceeds.
(a) Any Member of the Obligated Group -may make
agreements and covenants with the holder of Secured Indebt-
edness which is incurred in compliance with the provisions
hereof and which is secured by a Permitted Lien with respect
to the application or use to be made of insurance proceeds
or condemnation awards which may be received in connection
with Property which is subject to such Permitted Lien.
(b) Amounts received by any Member of the Obligated
• Group as insurance proceeds with respect to any casualty
loss or as condemnation awards may be used in such manner as
the recipient may determine, including, without limitation,
the application of such moneys to the payment or.prepayment
of any Indenture Indebtedness in accordance with the terms
thereof and of the Related Supplement, subject to compliance
with the provisions hereof; provided that if the amount of
such proceeds or awards received with respect to any casualty
loss or condemnation exceeds 5% of the Current Value of the
Property, Plant.and Equipment, the Member of the Obligated
Group receiving such proceeds agrees that it will immediately
notify the Master Trustee and that it will, within 12 months
after--the casualty loss or taking, deliver to the Master
Trustee.
(i) (A) An Officer's Certificate of the Corporation
certifying that the expected Long -Term Debt Service
Coverage Ratio for each of the two periods of 12 full". .
consecutive calendar months following-the date on which
such proceeds or awards are expected. -.to have been "fully
applied is not less than 1.50 ", as shown by pro forma
balance sheets, statements of revenue and expenses and
statements of changes in financial position for each
such period, accompanied by a statement of the-relevant
assumptions, including assumptions as to the use of
•
v
• such proceeds or awards, upon which such pro forma state-
ments are based, delivered to the Master Trustee along
with the Officer's Certificate of the Corporation, and
(B) a written report of a Consultant confirming such
certification; or
(ii) A written report of a Consultant stating the
Consultant's recommendations, including recommendations
as to the use of such proceeds or awards, to cause the
Long -Term Debt Service Coverage Ratio for each of the
periods described in subsection (i)(A) of this subsection
(b) to be not less than 1.25; or, if in the opinion of
the Consultant the attainment of such level is impracti-
cable, to the highest practicable level.
Each Member of the .Obligated Group, respectively,
agrees that it will, to the extent permitted by law;_ use
such proceeds or awards only in accordance with the assumptions
described in subsection (i), or the recommendations described
in subsection (ii), of this subsection (b).
ARTICLE VI
DEFAULT AND REMEDIES
• Section 6.01. Events of Default. Event of Default,
as used herein, shall mean any of the following events:
•
(a) The Members of the Obligated Group shall fail
to make any payment of the principal of, the premium, if
any, or interest on any Indenture Indebtedness issued and
Outstanding hereunder when and as the same shall become due
and payable, whether at maturity, by proceedings for redemp-
tion, by acceleration or otherwise, in accordance with the
terms thereof, of this Master Indenture and the Related Supple-
ment and the continuation of such failure for a period of
five days;
(b) Any Member of the Obligated Group shall fail
duly to observe or perform any covenant or agreement required
on its part to be observed or performed under this Master
Indenture 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 by registered mail to the
Members of the Obligated Group by the Master Trustee, or to
the Members of the Obligated Group and the Master Trustee by
the Holders of at least SOt in aggregate principal amount of
Indenture Indebtedness then Outstanding;
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(c) Any Member of the Obligated Group shall default
in the payment of any Indebtedness (other than Indenture
Indebtedness issued and Outstanding hereunder and any other
Indebtedness which is Non - Recourse Indebtedness), 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; provided, however, that such default shall not
constitute an Event of Default within the meaning of this
Section if within 30 days after such default or within the
time allowed for service of a responsive pleading in any
proceeding.to enforce payment of the Indebtedness..(i) any
Member of the Obligated Group in good faith commences proceed-
ings to contest.the obligation to pay or 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;
(d) The dissolution or liquidation of any Member
of the Obligated Group; of the filing by any Member of the
Obligated Group of a voluntary petition in bankruptcy; or
•
the entry of an order for relief under Title 11 of the United
States Code, as the same may from time to time be hereafter
amended, against any Member of the Obligated Group; or the
filing of a petition or answer proposing the entry of an
order for relief against any Member of the Obligated Group
under Title 11 of the United States Code, as the same may
from time to time be hereafter amended, or proposing the
reorganization, arrangement or debt readjustment of any Member
of the Obligated Group under any present or future Federal
bankruptcy act or any similar federal or state law in any
court and the failure of said petition or answer to be dis-
charged or denied within ninety (90) days after the filing
thereof; or the appointment of a custodian (including without
limitation a receiver, trustee or liquidator of any Member
Of the Obligated Group) of all or a substantial part of the
Property of any Member of the Obligated Group, and the failure
Of such a custodian to be discharged within ninety (90) days
after such appointment; or the taking by such a custodian of.
Possession of any Member of the Obligated Group or a.substan-
tial
part of its property, and the failuie'of such taking to
be discharged
within ninety (90) days after such taking; or
any Member
of the Obligated Group's consent.to or acquiescence
In such
appointment or taking; or assignment by any Member
Of the
Obligated Group for the benefit of its creditors; or
the..entry by any Member of the Obligated Group into an agree-
ment of composition with its creditors.' The term 'dissolution
or liquidation of any Member of the Obligated Group,' as
used in this subsection, shall not be construed to ipclude
the cessation of the corporate existence of any Member of
the Obligated.Group resulting from a merger or consolidation
of any Member of the Obligated Group into or with another
corporation or a dissolution or liquidation. of any Member of
the Obligated Group following a transfer of all or substan-
tially all of its assets, under the conditions permitting
such actions contained in Section 5.12 hereof.
(e) The Long -Term Debt Service Coverage Ratio
calculated at the end of any Fiscal Year is below 1.0.
Provided, however, that an event described in Para-
graphs (b) through (d) above shall not be an Event of Default
if, without taking into account the Member of the Obligated
Group involved in such event, there should be compliance
with the provisions'of Article V and an Officer's Certificate
of the Corporation as to such compliance is delivered to the
Master Trustee within 15 days of receipt of notice by the
• Master Trustee of the existence of an event which would other-
wise be an Event of Default.
Section 6.02. Acceleration; Annulment of Accelera-
tion.
(a) Upon the occurrence and during the continuation
of an Event of Default hereunder, the Master Trustee may
and, upon the written request of the Holders of not less
than 508 in aggregate principal amount of Indenture Indebt-
edness Outstanding (other than Indenture Indebtedness which
represents Non - Recourse Indebtedness), shall, by notice to
the Members of the Obligated Group, declare all Indenture
Indebtedness Outstanding immediately due and payable, where-
upon such Indenture.Indebtedness shall become and be immedi-
ately due and payable, anything in the Indenture Indebtedness -
or herein to the contrary notwithstanding. Notwithstanding
the foregoing, if the Related Supplement creating a particular
series of Indenture Indebtedness so provides, the Holders of
not'less than 508 in aggregate principal - amount -.of Indenture
Indebtedness of such series may request the Trustee to declare
all the Indenture Indebtedness of that series immediately
due and payable, and the Trustee shall, by notice to the
Members of the Obligated Group, declare such Indenture
Indebtedness immediately due and payable. In such event,
there shall be due and payable on the Indenture Indebtedness
C1
J
so declared due and payable an amount equal to the total
principal amount of all such Indenture Indebtedness, plus
all interest accrued thereon and, to the extent permitted by
applicable law, which accrues to the date of payment.
(b) At any time after the principal of the Inden-
ture Indebtedness shall have been so declared to be due and
payable and before the entry of final judgment or decree in
any suit, action or proceeding instituted on account of such
default, if (i) the Obliqated Group has paid or caused to be
paid or deposited with the Master Trustee moneys sufficient
to pay all matured installments of interest and interest on
installments of principal and interest and principal or
redemption prices then due (other than the principal then
due only because of such declaration) of all Indenture
Indebtedness Outstandinq; (ii) the Obligated Group has paid
or caused to be paid or deposited with the Master Trustee
moneys sufficient to pay the charqes, compensation,
expenses, disbursements, advances and liabilities of the
Master Trustee and any paying agents; (iii) all other
amounts then payable by the Obligated Group hereunder shall
• have been paid or a sum sufficient to pay the same shall
have been deposited with the Master Trustee; and (iv) every
Event of Default (other than a default in the payment of the
principal of such Indenture Indebtedness then due only
because of such declaration) shall. have been remedied, then
the Master Trustee may annul such declaration and its
consequences. with respect to any Indenture Indebtedness or
Portions thereof not then due by its terms. No such annul-
ment shall extend to or affect any subsequent Event of
Default or impair any right consequent thereon.
Section 6.03. Additional Remedies and Enforcement
of Remedies.
(a) Upon the occurrence and continuance of any
Event of Default, the Master Trustee may, and upon a written
request of the Holders of not less than 50t in aggregate
principal amount of the Indenture Indebtedness 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 Obligation Holders
hereunder by such suits, actions or proceedings-as the Master
- -Trustee, being advised by counsel, shall deem expedient,
including but not limited to:
•
(
Holders to Collect oand m t
enforcetherpayment ofe amounts tdue or
becoming due under the Indenture Indebtedness;
0
•
•
(ii) Suit upon all or any part of the Indenture
Indebtedness;
(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 Indenture
Indebtedness to account as if it were the trustee of an
express trust for the Obligation Holders;
(iv) Civil action to enjoin any acts or things,
which may be unlawful or in violation of the rights of
the Obligation Holders; and
(v) Enforcement of any other right of the Obliga-
tion Holders conferred by law or hereby.
(b) Regardless of the happening of an -Event of
Default, the Master Trustee, if requested in writing by the
Holders of not less than 50% in aggregate principal amount
of Indenture Indebtedness then Outstanding, shall, upon being
indemnified to its satisfaction therefor, institute and main-
tain such suits and proceedings as it may be advised shall
be necessary or expedient (1) to prevent any impairment of
the security hereunder by any acts which may be unlawful or
in violation hereof, or (ii) to preserve or protect the inter-
ests of the Holders, 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 hereof and, in the sole
judgment of the Master Trustee, is not unduly prejudicial to
the interest of the Obligation Holders not making such request.
Section 6.04. Application of Revenues and Other
_t_!e_ After Default. During the continuance of an Event of
Default all moneys received by the Master Trustee pursuant
to any right given or action taken under the provisions of
this Article, after payment of the costs and expenses of the
Proceedings resulting in tbe.collection of such moneys and
Of the expenses and advances, including expenses covered
under Section 7.05, incurred or made by the Master Trustee
with respect thereto shall be applied as follows:
(a) Unless the principal of all Outstanding Inden_..
ture Indebtedness shall have become or have -.been declared
due and payable:
First: To the payment to the Persons entitled
thereto of all'installments of interest then due on
Indenture Indebtedness in the order of the maturity of
E
i
such installments, and, if the amount available shall
not be sufficient to pay in full any installment or
installments maturing on the same date, then to the
payment thereof ratably, according to the amounts due
thereon to the Persons entitled thereto, without, any
discrimination or preference; and .°
Second: To the payment to the Persons entitled
thereto of the unpaid principal installments of any
Indenture Indebtedness which shall have become due,
whether at maturity or by call for redemption, in the
order of their due dates, and if the amounts available
shall not be sufficient to pay in full all Indenture
Indebtedness due on any date, then to the payment thereof
ratably; according to the amounts of principal-_ install-
ments due., on such date, to the Persons entitled thereto,
without any discrimination or preference..
(b) If the principal of all Outstanding Indenture
Indebtedness shall hpve become or have been declared due and
payable, to the payment of the principal and interest then
due and unpaid upon indenture indebtedness without preference
• or priority of principal over interest or of interest over
principal, or of any installment of interest, or of any Inden-
ture Indebtedness over any other Indenture Indebtedness,
ratably,. according to the amounts due respectively for prin-
cipal and interest, to the Persons entitled thereto without
any discrimination or preference.
(c) If the principal of all Outstanding Indenture
Indebtedness shall have been declared due and payable, and
if such declaration shall thereafter have been rescinded and
annulled under the provisions of this Article, then, subject
to the provisions of paragraph (b) of this Section in the
event that the principal of all Outstanding Indenture Indebt-
edness shall later become due or be declared due and payable,
the moneys shall be applied in accordance with the provisions
of paragraph (a) of this Section.
Whenever moneys are to be applied by the Master
Trustee pursuant to the provisions of this Section, such
moneys shall be applied by it at such times, and from time
to time, as the Master Trustee shall determine, having due
regard for the amount of such moneys available for such appli-
cation and the likelihood of additional moneys becoming avail-
able for such application in the future. Whenever the Master
Trustee shall apply such moneys, it shall fix the date upon
which such application is to be made and upon such date interest
• on the amounts of principal to be paid.on such dates shall
cease to accrue. The Master Trustee shall give such notice
as "it "may deem appropriate of the deposit with it of any
such moneys and of the fixing of any such date, and shall
not be required to make payment to the Holder of any.unpaid
Obligation until such Obligation shall be presented to the
Master Trustee for appropriate endorsement of any partial
payment or for cancellation if fully paid.
Whenever all Indenture Indebtedness and interest
thereon has been paid under the provisions of this Section
and all expenses and charges of the Master Trustee have been
paid, any balance remaining shall be paid to the Person en-
titled to receive the same; if no other Person shall be en-
titled thereto, then the balance shall be paid, in accordance
with the Governing Agreement, to the Members of the Obligated
Group, their successors, or as a court of competent jurisdic-
tion may direct. I -
Section 6.05. Remedies Not Exclusive. No remedy
by the terms hereof conferred upon or reserved to the Master
Trustee or the Obligation Holders 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 hereunder or existing at law or in equity or by statute
on or after the date hereof.
•
Section 6.06. Remedies Vested in the Master Trustee.
All rights of action (including the right to file proof of
claims) hereunder or under any of the Obligations may be
enforced by the Master Trustee without the possession of any
Of the Obligations or the production thereof in any trial or
other proceedings relating thereto. Any such suit or proceed-
ing instituted by the Master Trustee may be. brought in its
name as the Master Trustee without the necessity of joining
as plaintiffs or defendants any Holders of the Obligations.
Subject to the provisions of Section 6.04 hereof, any recovery
or judgment shall be for the equal benefit of the Holders of
the Outstanding Obligations.
Section 6.07. Obli ation Holders Control of Proceed -
MIR. If an Event of Default shall have occurred and be
continuing, notwithstanding anythingg herein to the contrary;"
the Holders of at least a majority in aggregate principal
_ amount of Indenture Indebtedness then Outstanding shall have
the right, at any time, by any instrument in writing executed
and delivered to the Master Trustee, to direct the method
and place of conducting any proceeding to be taken in connection
48
0
,ith the enforcement of the terms and conditions hereof or
'or She appointment of a receiver or any other proceedings
iereunder, provided that such direction is not in conflict
+ith any applicable law or the provisions hereof (including
indemnity to the Master Trustee as provided herein) and, in
:he sole judgment of the Master Trustee, is not unduly pr.eju-
iicial to the interest of Obligation Holders not joining in
such direction and provided further that nothing in this
Section shall impair the right of the Master Trustee in its
9iscretion to take any other action hereunder which it may
teem proper and which is not inconsistent with such direction
oy Obligation Holders.
.Section 6.08. Termination of Proceedings. In
zase any proceeding taken by the Master Trustee on account
of an Event of Default shall have been discontinued-or aban-
doned for any reason or shall have been determined adversely
to the Master Trustee or to the Obligation Holders, then the
Members of the Obligated Group, the Master Trustee and the
Obligation Holders Oall be restored to their former position
and rights hereunder, and all rights, remedies and powers of
the Master Trustee and the Obligation Holders. shall continue
as if no such proceeding had been taken.
• Section 6.09. Waiver of Event of Default.
(a) No delay or omission of the Master Trustee or
of any Obligation Holder to exercise any right or power
accruing upon any Event of Default shall impair any such
right or power or shall be construed to be a. waiver of any
such Event of Default or an acquiescence therein: Every
power and remedy given by this Article to the Master Trustee
and the Obligation Holders, respectively, may be exercised
from time to time and as often as may be deemed expedient by
them.
(b) The Master Trustee may waive any_Event of
Default which in its opinion shall have been remedied before
the entry of final judgment or decree in any suit, action or
Proceeding instituted by it under the provisions hereof, or
before the completion of the enforcement of any other remedy
hereunder.
(c) Notwithstanding anything contained herein to
the contrary, the Master Trustee, upon the written request
Of the Holders of at least 66 -2/3t of the aggregate principal
amount of Indenture Indebtedness then Outstanding, shall
waive any Event of Default hereunder and its consequences;
• provided, however, that, except under the circumstances set
orth in subsection (b) of Section 6.02 hereof, a default in
:he payment of the principal of, premium, if any, or interest
)n any Indenture Indebtedness, when the same shall become
iue and payable by the terms thereof or upon call for redemp-
_ion, may not be waived without the written consent.of the
solders of all the Indenture Indebtedness at the time-out-
standing.-
(d) In case of any waiver by the Master Trustee
of an Event of Default hereunder, the Members of the Obligated
Group, the Master Trustee and the Obligation Holders shall
be restored to their former positions and rights hereunder,
respectively,.but no such waiver shall extend to any subse-
quent or other Event of Default or impair. any right consequent
thereon.
Section 6.10. Appointment of Receiver.. Upon the
occurrence of any Event of Default unless the same shall
have been waived as perein provided, the Master Trustee shall
be entitled as a matter of right if it shall so elect, (i)
forthwith and without declaring the Indenture Indebtedness
to be due and payable, (3i) after declaring the same to be
• due and payable, or (iii) upon the commencement of an action
to enforce the specific performance hereof or in aid thereof
or upon the commencement of any other judicial proceeding to
enforce any right of the Laster Trustee or the Obligation
Holders, to the appointment of a receiver or receivers of
any or all of the Property of the Obligated Group with such
powers as the court making such appointment shall confer.
Each Member of the Obligated Group, respectively, hereby
consents and agrees, and will if requested by the Master
Trustee consent and agree at the time of application by the
Master Trustee for appointment of a receiver, to the appoint-
ment of such receiver and that such receiver may be given
the right, power and authority, to the extent the same may
lawfully be given, to take possession of and operate and
deal with such Property and.the revenues, profits and proceeds
therefrom, with like effect as the Member of the Obligated
Group could do so, and to borrow money and issue evidences
of indebtedness as such receiver.
•
Section 6.11. Remedies Subject to Provisions of.
All rights, remedies and powers provided by this Article
may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all of
the provisions of this Article are intended to be subject to
all applicable mandatory provisions of law which may be con-
trolling and to be limited. to the extent necessary so that
they will not render this instrument or the.provisions hereof
invalid or unenforceable under the provisions of any applicable
law.
Section 6.12. Notice of Default. The Master Trustee
shall, within 10 days after an officer of the Master Trustee
in its Corporate Trustee Administration Department has knowl-
edge of the occurrence of an Event of Default, mail to all
Obligation Holders as the name and addresses of such Holders
appear upon the books of the Master Trustee, notice of such
Event of Default so 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
this Section being hereby defined to be the events specified
in subsections (a), (b), (c), (d) and (e) of Section 6.01,
not including any periods of grace provided for in subsections
(b) and (d) respectively, and irrespective of the giving of
written notice specified in subsection (b) of Section 6.01);
and provided that, except in the case of default in the pay- .
ment of the principal of or premium, if any, or interest on
• any of the Indenture Indebtedness and the Event of Default
specified in subsection (d) of Section 6.01, the Trustee
shall be protected in withholding such notice if and so long
as the board of directors, the executive committee, or a
trust committee of directors or responsible officers of the
Master Trustee in good faith determine that the withholding
Of such notice is in the interests of the Obligation Holders.
ARTICLE VII
THE MASTER TRUSTEE
Section 7.01. Certain Duties and Responsibilities.
Default; (a) Except during the continuance of an Event of
(i) The Master Trustee undertakes to perform such
duties and only such duties as are specifically set
forth in this Master Indenture, and no implied covenants
or obligations shall be read into this Master. Indenture
against the Master Trustee; and
(ii) In the absence of bad faith on its part, the
Master Trustee may conclusively rely, as to the truth
• of the statements and the correctness of the opinions
n
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expressed therein, upon certificates or opinions furnished
to the Master Trustee and conforming to the requirements
of this Master Indenture; but in the case of any such
certificates or opinions which by any provision hereof
are specifically required to be furnished to the Master
Trustee, the Master`Trustee shall be under a duty to
examine the same to determine whether or not they conform
to the requirements of this Master Indenture.
(b) In case an Event of .Default has occurred and
is continuing, the Master Trustee shall exercise such of the
rights and powers vested in it by this Master Indenture, and
use the same degree of care and skill in their exercise, as
a prudent man would exercise or_use under the circumstances
in the conduct of his own affairs.
(c) No provision of this Master Indenture shall
be construed to relieve the Master Trustee from liability
for its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that:
(i) this Subsection shall not be construed to
limit the effect of Subsection (a) of this Section;
• (ii) the Master Trustee shall not be liable for
any error of judgment made in good faith by a chairman
or vicechairman of the board of directors, the chairman
or vicechairman of the executive committee of the board
of directors, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier,
any trust officer or assistant trust officer, the con-
troller and any assistant controller or any other officer _
of the Master Trustee customarily performing functions •
similar to those performed by any of the above designated
officers or with respect'.to a particular matter, any
other officer to whom such matter is referred because
of his knowledge of and familiarity with the particular
subject, unless it shall be proved that the Master Trustee -
was negligent in ascertaining the pertinent facts.
(iii) the Master Trustee shall not be liable with '
respect to any action taken or omitted.to be -taken by
it in good faith in accordance with the direction of
the Holders of a majority in principal amount of the
Outstanding Indenture Indebtedness relating to the time,
method and place of conducting any proceeding for any
remedy available to the Master Trustee, or exercising
• any trust or power conferred upon the Master Trustee,
under this Master Indenture; and
(iv) no provision of this Master Indenture shall
require the Master Trustee to expend or risk its own
funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided,
every provision of this Master Indenture relating to the
conduct or affecting the liability of or affording protection
to the Master Trustee shall be subject to the provisions of
this Section.
Section 7.02. Certain Ri
Subject to Section 7,.01:
(a) The Master Trustee m
tected in acting or refraining from
• certificate, statement, instrument,
request, direction, consent,.order,
or other paper or document believed
to have been signed or presented by
ihts of Master Trustee.
my rely and shall be pro -
acting upon any .resolution,
opinion,'report, notice,
bond, obligation, note
by it to be genuine and
the proper party or parties.
(b) Any request or direction of any Member of the
Obligated Group mentioned herein shall be sufficiently evi-
denced by an Officer's Certificate and any action of the
Governing Body may be sufficiently evidenced by a copy of a
resolution certified by the secretary or an assistant, secre-
tary of the Member of the Obligated Group, or if it has no
secretary or assistant secretary, by its comparable officer,
to have been duly adopted by the Governing Body and to be in
full force and effect on the date of such certification and
delivered to the Master Trustee.
(c) Whenever in the administration of this Master
Indenture the Master Trustee shall deem it desirable,that a
matter be proved or established prior to taking, suffering .
or omitting any action hereunder, the Master Trustee (unless'
other evidence be herein specifically prescribed)"may,.in
the absence of bad faith on its part, rely upon an Officer's
Certificate.
(d) The Master Trustee may consult with counsel
and the written advice of such counsel or any Opinion of
S1
•
I,
•
Counsel shall be full and complete authorization and protec-
tion in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon (other
than reliance upon counsel to any Member of the Obligated
Group).
(e) The Master Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Master Indenture at the request or direction of any of the
Obligation Holders pursuant to this Master Indenture, unless
such Obligation Holders shall have offered to the Master
Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction.
(f) The Master Trustee shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Master Trustee, in
its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the
Master Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books,
records and premises of any.Member of the Obligated Group,
personally or by agent or attorney.
(g) The Master Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys, and
the Master Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
(h) The Master Trustee shall not be liable for
any action taken or omitted by it in good faith and believed
by it to be authorized or within the discretion or rights or
Powers conferred upon it by this Master Indenture.
Section 7.03. Right to Deal in Obligations and
Related Bonds. The Master Trustee may in good faith buyj
r. sell or hold and deal in any Related Bonds with like effect
as if it were not such Master Trustee and may commence or
Join in any action which a holder of a Related Bond is entitled
rt to take with like effect as if the Master Trustee were not
the Master Trustee.
Section'7.04. Removal and Resignation of the Master
Trustee. The Master Trustee may resign and may be removed
• at any time by (i) an instrument or instruments in writing
signed by the Holders of not less than 508 of the principal
amount of Indenture Indebtedness then Outstanding, or (ii) a
written request of the Corporation, provided the Corporation
is not in default of this Master Indenture, and no event
;hall exist which would with the passage of time or giving
:)f notice or both constitute an Event of Default, at the ;
time it makes such written request. No such resignation or
emoval shall become effective unless and until a successor
4aster Trustee has been appointed and has assumed.the trusts
:reated hereby._ Written notice of such resignation or removal
;hall be given to the Members of the Obligated Croup and to
!ach Holder of Indenture Indebtedness then Outstanding at
he address then reflected on the books of the Master Trustee
nd such resignation or removal shall take effect upoh.the
ppointment and qualification of a successor Master Trustee;
successor'Master Trustee may be appointed at the direction
f the Holders of not less than 508 in aggregate principal
mount of Indenture Indebtedness Outstanding or by the Corpo-
ation. In the event a successor Master Trustee has not
een appointed and qualified within 60 days of the date notice
f resignation is given, the Master Trustee, any Member of
he Obligated Group or any Obligation Holder may apply to
. iy court of competent jurisdiction for the appointment of a
iccessor Master Trustee to act until such time as a successor
a appointed as above provided.
Unless otherwise ordered by a court or regulatory
)dy having,competent jurisdiction, or unless required by
tw, any successor Master Trustee shall be a trust company
bank having the powers of a'trust company as to trusts,
ialified to do and doing trust business in one or more states
the United States of America and having an officially
ported-combined capital, surplus, undivided profits and
serves aggregating at least $100,000,000, if there is such
institution willing, qualified and able to accept the
ust upon reasonable or customary terms.
Every successor Master Trustee howsoever appointed
reunder shall execute, acknowledge and deliver to its pre -
cessor and also to each Member of the Obligated Group an
strument in writing, accepting such appointment hereunder,
I thereupon such successor Master Trustee, without further
tion, shall become fully vested with all the rights, immu-
ties, powers, trusts, duties and obligations of its prede-
asor, and such predecessor shall execute.and deliver an
atrument'transferring to such successor Master Trustee all
rights, powers and trusts of such predecessor. The pre -
:essor Master Trustee shall execute any and all documents.
LJ
0
necessary or appropriate to convey all interest it may have
to the successor Master Trustee. The predecessor Master
Trustee shall promptly deliver all records relating to the
trust or copies thereof and communicate all material informa-
tion it may have obtained concerning the trust to the successor
Master Trustee.
Each successor Master Trustee, not later than ten
days after its assumption of the duties hereunder, shall
mail a notice of such assumption to each registered Holder
of Indenture Indebtedness.
Section 7.05. Compensation and Reimbursement.
Each Member of the Obligated. Group, respectively, agrees:
• (a) To pay the Master Trustee from time to time
reasonable compensation for all services rendered by it here-
under (which compensation shall not be limited by any provi-
sion of law in regard to the compensation of a trustee of an
express trust). ,
.(b) To reimburse the Master Trustee upon its request
for all reasonable expenses, disbursements and advances in-
=urred or made by the Master Trustee in accordance with any
provision of this Master Indenture (including the reasonable
: ompensation and the expenses and disbursements of its counsel
end its agents), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith.
(c) To indemnify the Master Trustee for, and to
Gold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising
-Dut of or in connection with the acceptance or administration
3f this trust or the performance of its duties hereunder,
including the costs and expenses of defending - itself- against
any claim or liability in connection with the exercise or
xrformance of any of its.powers or duties hereunder.
Upon the occurrence of an Event of Default as_
jecurity for the performance of the Members of the Obligated
. Troup under this S
• ection, the Master Trustee shall have a _
; n
ndfu r any indenture
ndsheldor Indebtedness u
collected bytheMasterTrusted asosuchy
:xcept funds held in trust for the payment of principal of_
>r interest or premiums on Indenture Indebtedness.
ecitals, section 7.06. Recitals and ReorPgonf -f4 ^ mu_
0
in any Obligation (excluding the Master Tr
tion on the Obligations) shall be taken and
Je by and on the part of the Members of the
J not by the Master Trustee, and the Master
s.umes nor shall be under any responsibility
ss of the same.
ustee's authenti-
construed as
Obligated Group,
Trustee neither
for the correct-
. The Master Trustee.makes no representation as to,
d is not responsible for, the validity or sufficiency hereof,
the Obligations, or the validity or sufficiency of insur-
;ce to be provided. The Master Trustee shall be deemed not
> have made representations as to the security afforded
ereby or hereunder or as to the validity or sufficiency of
ich document. The Master Trustee shall not be concerned
th or accountable to anyone for the use or application of
iy moneys which shall be released or withdrawn in accordance
ith the provisions hereof. The Master Trustee shall have
� duty of inquiry with respect to any default or Events of
efault described herein unless an officer in the Corporate
rustee Administration Department of the Master Trustee has
ctual knowledge of or has received written notice of a default
r an Event of Default from a Member of the Obligated Group
r any Holder.
• Section 7.07. Separate or-Co-Trustee. At any
.ime or times, for the purpose of meeting any legal require -
ients of any jurisdiction, the Master Trustee shall have
)ower to appoint, and, upon the request of the Holders of at
east 25% in aggregate principal amount of Indenture Indebt-
edness Outstanding, shall appoint, one or more Persons approved
3y the Master Trustee either to act as co - trustee or co-
_rustees, jointly with the Master Trustee, to act as separate
trustee or separate trustees, and to vest in such Person or
?ersons, in such.capacity, such rights, powers, duties, trusts
or obligations as the Master Trustee may consider necessary
or desirable, subject to the remaining provisions of this
Section.
Every Co- trustee or separate trustee shall, to the
extent permitted by law but to such extent only, be'appointed
subject to the following terms, namely:
The
delivered solely by the Master authenticated and
Master Trustees.
~ (b) All rights, powers, trusts, duties and obliga-
tions conferred'or imposed upon the trustees shall be conferred
or imposed upon and exercised or performed by the Master
1
•
Trustee, or by the Master Trustee and such co- trustee or co-
trustees or separate trustee or separate trustees jointly,
as shall be provided in, the instrument appointing such co-
trustee or co- trustees or separate trustee or separate trustees,
except to the extent that, under the law of any jurisdiction
in which any particular act or acts are to be performed, the
Master Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such act or acts shall be
performed by such co- trustee or co- trustees or separate trustee
or separate trustees.
(c) Any request in writing by the Master Trustee
to any co- trustee or separate trustee to take or to refrain
from taking-any action hereunder shall be• sufficient warrant
for the taking, or the refraining from taking, of such action
by such co- trustee or separate trustee.
(d) Any co- trustee or separate trustee may, to
the extent permitted by law, delegate to the.Master Trustee
the exercise of any right, power, trust, duty or obligation,
discretionary or otherwise. .
• (e) The Master Trustee at any time, by any instru-
ment in writing, may accept the resignation of or remove any
co- trustee or separate trustee appointed under this Section.
Upon the request of the Master Trustee, the Members of the
Obligated Group shall join with the Master Trustee in the
execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation
or removal.
(f). No trustee or any paying agent hereunder shall
be personally liable by reason of any act or omission of any
other trustee or paying agent bereunder, nor will the act or
omission of any trustee or paying agent hereunder be imputed
to any other trustee or paying agent.
(g) Any demand, request, direction, appointment,
removal, notice, consent, waiver or other action in writing
delivered to the Master Trustee shall be deemed to have been
delivered to each such co-trustee or separate trustee.
(h) Any moneys, papers, securities or other items
of personal property received by any such co- trustee or sepa-
iate trustee hereunder shall forthwith,. so far as may be
Permitted by law, be turned over to the Master Trustee.
•
Upon the acceptance in writing of such appointment
by any such co- trustee or separate trustee, it or he shall
be vested with such rights, powers, duties or obligations,
as shall be specified in the instrument of appointment jointly
with the Master Trustee (except insofar as local lav• makes
it necessary for any such co- trustee or separate trustee to
act alone) subject to all the terms hereof. Every such accept-
ance shall be filed with the Master Trustee. To the extent
permitted by law, any co- trustee or separate trustee may, at
any time by an instrument in writing, constitute the Master
Trustee its or his attorney -in -fact and agent, with full power
and authority to do all acts and things and to exercise all
discretion on its or his behalf and in its or his name.
In case any co- trustee or separate trustee shall
die, become incapable of acting, resign or be removed, all
rights, powers, trusts, duties and obligations of said co-
trustee or separate trustee shall, so far as permitted by
law, vest in and be exercised by the Master Trustee unless
and until a successor co- trustee or separate trustee shall
be appointed in the manner herein provided.
• .ARTICLE VIII
SUPPLEMENTS AND AMENDMENTS
Section 8.01. Related Supplements Not Reauirina
Consent of Obligation Holders. Each Member of the Obligated
Group, when authorized by resolution or other action of equal
formality by its Governing Body, and the Master. Trustee may,.
without the consent of or notice to any of the Holders, enter
into one or more Related Supplements for one or more of the
following purposes:
omission (a) To cure any ambiguity or formal defect or
herein.
(b) To correct or supplement any provision herein
which may be inconsistent with any other provisions herein,
or to make any other provisions with respect to matters or
questions arising hereunder and which shall not materially..,
and .adversely affect the interests of the Holders.
Holders any To grant or confer ratably upon all of the
that y additional rights, remedies, powers or authority
to may lawfully be granted or conferred upon them subject
• the provisions of Section '8.02(a). -
9
I`�
(d) To qualify this Indenture under the Trust
Indenture Act of 1939, as anended, or corresponding provisions
if Federal laws from time to time in. effect.
(e) To create and provide for the issuance of
Indenture Indebtedness as permitted hereunder.
(f) To obligate a successor to the Corporation or
other Member of the Obligated Group as provided in Section
5.12.
(g) To make any change which in the judgment of
the Master Trustee is not to the prejudice of the Holder of
the Obligations.
(h) To make any change which is necessary in the
opinion of the Corporation as evidenced by an Officer's Cer-
tificate to obtain an investment grade or higher rating on
any Obligation then to be issued by any nationally recognized
rating agency subject to Section 8.02 hereof.
Section 8.02. Related Supplements Reguirinq Consent
of Obligation Solders. (a) Other than Related Supplements
• referred to in Section 8.01 hereof and subject to the terms
and provisions and limitations contained in this Article and
not otherwise, the Holders of greater than 50• in aggregate
principal amount of Indenture Indebtedness then Outstanding
shall have the right, from time to time, anything contained
herein to the contrary notwithstanding, to consent to and
approve the execution by each Member of the Obligated Group,
when authorized by resolution or other action of equal.for-
mality by its Governing Body, and the Master Trustee of such
Related Supplements as shall be deemed necessary and desir-
able for the purpose of modifying, altering, amending, adding
to or rescinding in any particular, any of the terms or
provisions contained herein; provided, however, nothing in
this Section shall permit or be construed as permitting a
Related Supplement Which would:
(i) Extend the stated maturity of or time for
paying interest on any Indenture Indebtedness or reduce
.the principal amount of or the redemption premium or
rate of interest payable on any Indenture Indebtedness
without the consent of the Holder of such Indenture
Indebtedness; or
(ii) Modify, alter, amend, add to or rescind any
• of the terms or provisions contained in Article N hereof
0
in any manner which would materially and adversely affect
the interests of the Obligation Holders or any of them
without the consent of the Holders of all Indenture
Indebtedness then Outstanding; or
(iii) Reduce the aggregate principal amount of Inden-
ture Indebtedness then Outstanding the consent of the
Holders of which is required to authorize such Related
Supplement without the consent of the Holders of all
Indenture Indebtedness then Outstanding.
(b) If at any time each Member of the Obligated
Troup shall request the Master Trustee to enter into a Related
Supplement pursuant to this Section, which request is accom-
panied by a copy of the resolution or other action of its
Governing Body certified by its secretary or assistant secre-
tary or if it has no secretary or assistant secretary, its
comparable officer, and the proposed Related Supplement and
if within such period, not exceeding three years, as shall.
be prescribed by each Member of the Obligated Group, following
the request, the Master Trustee shall receive an instrument
or instruments purporting to be executed by the Bolders.of
• not less than the aggregate principal amount of Indenture
Indebtedness specified in subsection (a) for the Related
Supplement, in question which instrument or instruments shall
refer to the proposed Related Supplement and shall specifically
consent to and approve the execution thereof in substantially
the form of the copy thereof as on file with the Master Trustee,
thereupon, but not otherwise, the Master Trustee may execute
such Related Supplement in substantially such form, without
liability or responsibility to any Obligation Holder, whether
or not such Bolder shall have consented thereto.
Obligation (c) Any such consent shall be binding upon the
HoldrofsuchdOblgigationsand ofnanytObligationaisauedsiinquent
exchange therefor (whether or not such
subsequent Holder
thereof has notice thereof), unless such consent is revoked
in writing by the Holder of such Obligation giving such con-
sent or by a subsequent Holder thereof by filing with the
Master Trustee (prior to the filing of the statement described
below with the Members of the Obligated Group) such .revocation
and, if such Obligation or Obligations are transferable by
delivery, proof that such Obligations are held b the .signer
of
At any time such revocation in the manner permitted by Section 10.01.
of Obligations tshalle have dfileditheirrconsentsp to n
theaRelatedt
•Supplement, -the Master Trustee shall make and file with each
0
Member of the Obligated Group a written statement to that
effect. Such written statement shall be conclusive that
such consents have been so filed.
(d) If the Holders of the required principal amount
of the Obligations Outstanding. shall have consented to and
approved the execution of such Related Supplement as herein
provided, no Holder of any Obligations shall have any right
to object to the execution thereof, or to object to any of
the terms and provisions contained therein or the operation
thereof, or in any manner to question the propriety of the
execution thereof, or to enjoin or restrain the Master Trustee
or any Member of the Obligated Group from executing the same
or from taking any action pursuant to the provisions. thereof.
Section 8.03. Execution and Effect of Related
Supplements.
(a) In executing any Related Supplement permitted
by this Article, the Master Trustee shall be entitled to
receive and to rely upon an Opinion of Counsel stating that
the execution of such Related Supplement is authorized or
permitted hereby and that the conditions precedent to such
execution have been complied with. The Master Trustee may
but shall not be obligated to enter into any such Related
Supplement which affects the Master Trustee's own rights,
duties or immunities.
(b) Upon the execution and delivery of any Related
Supplement in accordance with this Article, the provisions
hereof shall be modified in accordance therewith and such
Related Supplement shall form a part hereof for all purposes
and every Holder of an Obligation theretofore or thereafter -
authenticated and delivered hereunder shall be bound thereby.
(c) Any Obligation authenticated and delivered
after the execution and delivery of any Related Supplement
in accordance with this Article may and, if required by the
issuer of such Obligation or the Master Trustee, shall bear
a notation in form approved by the Master Trustee as to any
matter provided for in such Related Supplement. If, the issuer
Of any Trustee eshall so determine, e Outstanding
newObligationss s r
o modified as
to conform in the opinion of the Master Trustee and the Govern
be Prepared such Reate and
delivered by the Master Trustee in exchange for -and upon
• surrender of Obligations then Outstanding.
1
1
ri
ARTICLE IX
SATISFACTION AND DISCHARGE OF MASTER INDENTURE-
Section 9.01. Satisfaction and Discharce of Master
Indenture. If (i) all Mem ers of the Obligated Group shall
deliver to the Master Trustee for cancellation all Obligations
theretofore authenticated (other than any Obliqations which
shall have been mutilated, destroyed, lost or stolen and
which shall have been replaced or paid as provided in the
Related Supplement) and not theretofore cancelled, or (ii)
all Obligations not theretofore cancelled or delivered to
the Master Trustee for cancellation shall have been-paid or
deemed paid pursuant to the Related Supplement under which
such Obligation was issued, or (iii) the Members of the Obli-
gated Group or any Member thereof shall deposit with the
Master Trustee (or with respect to each series of Indenture
Indebtedness make an Irrevocable Deposit with the Related
Bond Trustee for the Related Bonds'relatinq to such series
• of Indenture Indebtedness pursuant to an agreement between
the Member of the Obligated Group in respect of which series
Of Indenture Indebtedness was incurred and such Related Bond
Tr- ustee) as trust funds the entire amount of moneys or Govern-
mental Obligations, sufficient to pay it maturity or upon
redemption all Obligations not theretofore cancelled.or
delivered to the Master Trustee for cancellation, including
principal and interest due or to become due to such date of
maturity or redemption date, as the case may be, and if in
either case the Members of the Obligated Group or any Member
thereof shall also pay or cause to be paid all other sums
Payable hereunder by the Members of the Obligated Group or
any Member thereof, then this Master Indenture shall cease
to be of further effect, and the Master Trustee, On written
request of the Members of the Obligated Group or any Member
thereof, and at the cost and expense of the Members of the
Obligated Group or any Member thereof, shall execute such
instruments acknowledging satisfaction of and discharging
this Master Indenture as shall be reasonably requested pro-
vided, however, that this Indenture shall not cease to be of.
effect and the Master Trustee shall not execute such instru-
eents acknowledging satisfaction of and discharging this
Master Indenture until it shall have received a certification
'Of such deposit from each Related Bond Trustee with which an
Irrevocable Deposit was made. Each 'Member of the Obligated
Group# respectively, hereby agrees to reimburse the Master
• Trustee for any costs or expenses theretofore and thereafter
reasonably and properly incurred by the Master Trustee in
connection with this Master Indenture or such Obligations.
0
Section 9.02. Payment of Obligations After Discharge
f Lien. Notwithstanding the discharge of the lien hereof
s in this Article provided, the Master Trustee shall never -
heless retain such rights, powers and duties hereunder as
ay be necessary and convenient for the payment of amounts
ue or to become due on the Obligations and the registration,
.ransfer, exchange and replacement of Obligations as provided
erein or in any Related Supplement. Nevertheless, any moneys
field by the Master Trustee or any paying agent for the payment
)f the principal of, premium, if any, or interest on any
) bligation remaining unclaimed for six years after the prin-
;ipal of all Obligations has become due and payable, whether
3t maturity or upon proceedings for redemption or by declaration
as provided herein, shall then be paid to the Members of the
obligated Group and the Holders of any Obligations or- coupons
not theretofore presented for payment shall thereafter be
entitled to look only to the Members of the Obligated Group
for payment thereof as unsecured creditors and all liability
of the Master Trustee or any paying agent with respect to
such moneys shall thereupon cease.
ARTICLE X
• CONCERNING THE OBLIGATION HOLDERS
Section 10.01. Evidence of Acts. of Obligation Holders.
(a) As to any request, direction, consent or other
instrument provided hereby to be signed and executed by the
Obligation Holders such action may be in any number of con-
current writings of similar tenor and may be signed or executed
by such Obligation Holders in person or by agent appointed
in writing.
(b) Proof of the execution of any such request,
direction or other instrument or of the writing appointing
any such agent and of the ownership of Obligations, if made
in the following manner, shall be sufficient for any of the
Purposes hereof and shall be conclusive in favor of the Master
Trustee and the Members of the Obligated Group, with regard
to any action taken by them, or either of them, under such
request or other instrument, namely:
(i) The fact and date of the execution by any
Person of any such writing may be proved by the certifi-
cate of any officer in.any jurisdiction who by law has
Power to take acknowledgments in such jurisdiction,
that the Person signing such writing acknowledged before
him the execution thereof, or by the affidavit of a
witness of such execution;
(ii) The fact of the holding by any Holder of coupon
Obligations and coupons or the holding by any Person of
coupon Related.Bonds and coupons, not registrable as to
principal or interest or registered to bearer, and the
amounts of such Obligations or Related Bonds and the
date of his holding the same, may be proved by production
of such Obligations or Related Bonds or by a certificate
or signature guaranty executed by any trust company,
bank, investment banker, broker or other depositary
(wherever situated), if such certificate or signature
guaranty shall be deemed by the Master Trustee to be
satisfactory, showing that at the date therein mentioned
such Person owned or had on deposit with such trust
company, investment banker, broker, or other. depositary
the Obligations or Related Bonds and coupons described
in such certificate;
(iii) The ownership of Obligations registered in
the name of a Holder as to principal or as to principal
• and interest may be proved by the register of such Obli-
gations; and
(iv) The ownership of Related Bonds registered in
the name of a Holder as to principal or as to principal.
and interest may be proved by the register of such Related
bonds maintained pursuant to the Related Bond Indenture.
(c) Nothing in this Section shall be construed as
limiting the Master Trustee to the proof herein specified,
it being intended that the Master Trustee may accept (but
shall not be obligated to accept) any other evidence of the
matters herein stated which it may deem sufficient.
(d) Any action taken or suffered by the Master
Trustee pursuant to any provision hereof, upon the request
or with the assent of any Person who at the time is the Holder
Of any Obligation or Obligations or coupons, shall be conclu-
sive and binding upon all future Holders of the same obliga-
tion or Obligations or coupons.
Section 10.02. Obligations or Related Bonds Owned
-b Members of Obligated �Group In determining whether the
$o'ders of the requisite aggregate principal amount of Obli-
gations have concurred in any demand, direction, request,
notice, consent, waiver or other action under this Master
65
by
• ure, Obligations'or Related Bonds that are owned ct
mbes of the Obligated Group or by any Person directly
: irectly controlling or controlled by or under direct
lirect common control with such Member shall be disre-
i and deemed not to be Outstanding or outstanding
t for elated Bond Indenture, as the case
provided that be
for the purposes
Df any such determination,
termining whether the Master Trustee shall be protected
lying on any such demand, direction, request, notice,
nit, waiver or other action, only such Obligations or
ed Bonds which the Master Trustee has actual notice or
edge are so owned shall be so disregarded. Obligations
lated Bonds so owned that have been pledged
telatedeBondaIndentureutas ant
hencase maysbe=,dfor purposes
,is Section, if the pledgee shall establish to the satis-
ion of the Master Trustee the pledgee's right to vote
Obligations or Related Bonds and that the pledgee is
a Person directly or indirectly controlling or controlled
r under direct or indirect common control with any Member
he Obligated Group. In case of a dispute as to such
t, any decision by the Master rToecteonttoethepMaster
• ce of counsel shall be full.p
tee.
Section 10.03. Instruments Executed by Solders
i Future Holders. At any time prior to (but not after)
Master rustee taking action in reliance upon evidence,
provided in Section 10.01 hereof, of the taking ofpanncipal
ion by the Holders of the percentage in aggregate
unt of Obligations specified herein in connection with
h action, any Holder of such an Obligation or Related
d that is shown by such evidence to be included in Obliga-
,ns the Holders of which have consented to such action
by filing written rovidedhinhSectionrl0 Trustee and ke
)n proof of holding as s p p
:h action so far as concerns such Obligation or Related by
nd. Except upon such revocation any such
e Holder of an Obligation or Related Bond in any direction,
wand, request, waiver, consent, vote or other action of
e Holder of such Obligation or Related Bond which by any
ovision hereof is required or permitted to be given shall
conclusive and binding upon such Holder and upon all future
alders and owners of such Obligation or Related Bond, and
any Obligation or Related Bond issued in u thereof,
tether or not any notation in reg. action taken by the
.ich Obligation or Related Bond. Any e principal amount e
olders.of the percentage in aggregate of
r1
U
66
•
�ligations specified herein in connection with such action
,all be conclusively binding upon each Member of the Obli-
ited-Group, the Master Trustee and the Holders of all of
ich Obligations or Related Bonds.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Limitation of Rights. With the
cception of rights herein expressly conferred, nothing
cpressed or mentioned in or to be implied from this Master
identure or the Indenture Indebtedness issued hereunder is
itended or shall be construed to give to any Person other
ian each Member of the Obligated Group, the Master Trustee,
id the Holders of the Indenture Indebtedness and the-bearers
any coupons appertaining thereto, issued hereunder, any
egal or equitable right, remedy or claim under or in respect
:) this Master Indenture or any covenants, conditions and
rovisions herein contained; this Master Indenture and all
E the covenants, conditions and provisions hereof being
itended to be and being for the sole and exclusive benefit
` the parties mentioned in this Section.
• Section 11.02. SeverabilitY. If any one or more
ection@, clauses, sentences or parts hereof shall for any
eason be questioned in any court of competent jurisdiction
id shall be adjudged invalid or unenforceable, such judgment
tall not affect, impair or invalidate the remaining provisions
ereof, or the Indenture Indebtedness issued pursuant hereto,
it shall be confined to the specific sections, clauses,
entences and parts so adjudged.
Section 11.03. Holidays. Except to the extent a
elated Supplement or an Ob ligation provides otherwise:
•
(a) Subject to subsection (b), when any action is
rovided herein to be done on a day or within a time period
arced, and the day or the last day of the period falls on a
aY on which banking institutions in the jurisdiction where
ne Corporate Trust Office is located are authorized by law
I remain closed, the action may be done on the next ensuing
aY not a day on which banking, institutions in such jurisdic-
ion are authorized by law to remain closed with effect as
sough done on the day or within the time period named.
(b) When the date on which principal of or interest
r premium on any Obligation is due and payable is a day"-on
•
which banking institutions at the place of payment are autho-
rized by law to remain closed, payment may be made on the
next ensuing day on which banking institutions at such place
are not authorized by law to remain closed with effect as
though payment were made on the due date, and, if such payment
is so made, no interest shall accrue from and after such.due
date.
Section 11.04. Governing Law. This Master Indenture
and any Indenture Indebtedness issued hereunder are contracts
made under the laws of the State of California and shall be
governed by and construed in accordance with such laws.
Section 11.05. Counterparts. This Master Indenture
may be executed in several counterparts, each of which shall
be an original and all of which shall constitute one instru-
ment.
Section 11.06. Immunitv of Individuals. No recourse
shall be had for the payment of the principal of, premium,
if any, or interest on any Indenture Indebtedness issued
hereunder or for any claim based thereon or upon any obliga-
tion, covenant or agreement herein against any past, present
or future officer, member, employee or agent of any Member
of the Obligated Group which is a corporation, whether directly
or indirectly and all such liability of any such individual
as such is hereby expressly waived and released as a condition
of and in consideration for the execution hereof.and the
issuance of Indenture Indebtedness issued hereunder.
Section 11.07. Binding Effect. This instrument
shall inure to the benefit of and shall be binding upon each
Member of the Obligated Group, the Master Trustee and their
respective successors and assigns subject to the limitations
Contained herein.
Section 11.08. Notices.
(a) Unless otherwise expressly specified or per-
mitted by the terms hereof, all notices, consents or other
communications required or permitted hereunder shall be deemed
sufficiently given or served if given in writing, mailed by
first class mail, postage prepaid and addressed as follows:
(i) If to any Member of the Obligated Group,
addressed to the Corporation at 301 Newport Boulevard,
Newport Beach, California 92663, Attention: Director of
• Finances
0
(ii) If to the Master Trustee, addressed to it at
the Corporate Trust Office, Attention: Corporate Trustee
- Administration Department; or
(iii) If to the registered Holder of Indenture Indebt-
edness, addressed to such Holder at the address shown
on the books of the Master Trustee kept pursuant hereto.
(b) Any Member of the Obligated Group or the Master
Trustee may from time to time by notice in writing to the•
others and to the registered Holders of Indenture Indebtedness
designate a different address or addresses for notice hereunder.
L J
•
0
IN WITNESS WHEREOF, the Corporation has caused
ese presents to be signed in its name and on its behalf
9 attested by its duly authorized officers and to evidence
s acceptance of the trusts hereby created the Master Trustee
s caused these presents to be signed in its name and on
s behalf by its duly authorized officers, all as of the
y and year first above written.
TEST:
- n� '✓ 4%�.
Secretary
J
'TEST:
Q1..rti�
Assistant Secretary
L J
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
By /�, a
President'�-'—
CHEMICAL BANK,
as Master Trustee
By
Vice P esident
CP
n
U
•
SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION No. 7.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Master Trustee
Dated as of October 1, 1992
Supplementing the
Master Trust Indenture.
Dated as of October 1, 1984
ui- 2708+.8
• Section 20. Counterparts . . . . . . . . . . . . . . . ".Q 18
Section 21. Governing Law . . . . . . . . . . . . .. . . . . 18
sai.naeo.a i
r
SUPPLEMENTAL
MASTER INDENTURE FOR OBLIGATION NO.
7
•
TABLE OF CONTENTS
Pave
Section
1.
Definitions . . . . . . . . . . . . . ... .
. . 1
Section
1.1.
Interpretation . . . . . . . . . . . . . .
2
Section
1.2.
Content of Certificates and Opinion . .
2
Section
2.
Issuance of Obligation No. 7 . . . . . . . .
. . 3
Section
3.
Payments on Obligation No. 7; Credits . . .
. . 4
Section
4.
Prepayment of Obligation No. 7 . . . . . . .
. . 5
Section
5.
Registration, Number, Negotiability and
Transfer of Obligation No. 7 . . . . . .
. . 5
Section
6.
Mutilation, Destruction, Loss and Theft
of Obligation No. 7 . . . . . . . . .
. . 5
Section
7.
Execution and Authentication of
Obligation No.. 7 . . . . . . . . . . . .
. 6
•
Section
8.
Right to Redeem . . . . . . . . . . . . . .
. . 6
Section
9.
Partial Redemption of Obligation No. 7 . . .
. . 6
Section
10.
Effect of Call for Redemption . . . . . . .
. . 7
Section
11.
Form of Obligation No. 7 . . . . . . . .
. . 7
Section
12.
Delivery of Obligation No. 7 . . . . . . .
. . 14
Section
13.
Notification to Master Trustee of
Certain Matters . . . . . . . . . . . .
. . 14
Section
14.
Specification of Use of Proceeds . . . . .
. . 14
Section
15.
Tax Exempt Status . . . . . . . . . .. . . .
. . 14
Section
16.
Amendments to Master Indenture . . . . . .
. . 14
Section
17.
Acceleration . . . . . . . . . . .. . . . .
. . 17
Section
18.
Ratification of Master Indenture . . . . .
. . 17
Section
19.
Severability . . . . . . . . . . . . .
. . 17
• Section 20. Counterparts . . . . . . . . . . . . . . . ".Q 18
Section 21. Governing Law . . . . . . . . . . . . .. . . . . 18
sai.naeo.a i
r
• THIS SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION No. 7
made and entered into as of October 1, 1992 ( "Supplement No. 711),
among HOAG MEMORIAL HOSPITAL PRESBYTERIAN, a California nonprofit
public benefit corporation (the "Corporation "), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national
banking association, as trustee (the "Master Trustee ") under the
Master Trust Indenture, dated as of October 1, 1984 (the "Master
Indenture "),
W I T N E S S E T H;
WHEREAS, the parties have entered into the Master
Indenture which provides for the issuance by the Corporation of
its Obligations thereunder upon the Corporation and the Master
Trustee entering into an indenture supplemental to the Master
Indenture;
WHEREAS, the Corporation desires to issue its
Obligation hereunder to evidence its obligation arising from the
loan to the Corporation by the City of Newport Beach (the "City ")
of the proceeds of the City of Newport Beach-Variable Rate Demand
Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 1992;
and
WHEREAS, all acts and things necessary to constitute
• this Supplement No. 7 a valid supplemental indenture and
agreement according to its terms have been done and performed,
and the Corporation has duly authorized the execution and
delivery hereof and of the Obligation issued hereby;
NOW, THEREFORE, in consideration of the premises, of
the acceptance by the Master Trustee of the trusts hereby
created,.and of the giving of consideration for and acceptance of
the Obligation issued hereunder by the Holder thereof, the
Corporation covenants and agrees with the Master Trustee for the
benefit of the Holder from time to time of the Obligation issued
hereby, as follows:
Section 1. Definitions. Unless otherwise required by
the context, all terms used herein which are defined in the
Master Indenture shall have the meanings assigned to them
therein, except as set forth below:
Agreement
"Agreement" shall mean the Loan Agreement, dated as of
October 1, 1992, by and between the City and the Corporation and
relating to the issuance of the Bonds, and when amended or
supplemented, such Agreement as amended or supplemented.
Bond Indenture
• "Bond Indenture" shall mean the Indenture, dated s"of
October 1; 1992, by and between the City and the Bond Trustee and
ui -27MA
•
relating to the Bonds, and when amended -or supplemented, such
Indenture as amended or supplemented.
Bonds
"Bond" or "Bonds" shall mean the City of Newport Beach
Variable Rate Demand Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 1992, issued under the Bond Indenture.
Bond Trustee
"Bond Trustee" shall mean U.S. Tru st Company of
California, N.A., Los Angeles, California, as trustee, a banking
corporation organized and existing under the laws of the State of
California, and any successor to its duties under the Bond
Indenture.
City
"City" shall mean the City of Newport Beach,
California.
Obligation No. 7
"Obligation No
pursuant hereto.
Supplement No. 7
7" shall mean the Obligation issued
"Supplement No. 7" shall mean this Supplemental Master
Indenture for Obligation No. 7.
Section 1.1. Interpretation.
(a) Unless the context otherwise indicates, words
expressed in the singular shall include the plural and vice versa
and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the
neuter, masculine or feminine gender, as appropriate.
(b) Headings of sections herein and the table of
contents hereof are solely for convenience of reference, do not
constitute_a part hereof and shall not affect the meaning,
construction or effect hereof.
Section 1.2. Content of Certificates..and Opinions.
Every certificate or opinion provided for herein with respect to
compliance with any provision hereof shall include (1) a
statement that the person making or giving such certificate or
opinion has read such provision and the definitions herein
relating thereto; (2) a brief statement as to the nature and
•scope of the examination or investigation upon which the
certificate or opinion is based; (3) a statement that, in -tiig.-
opinion of such person, he-has made or caused to be made such
2
• examination of investigation as is necessary to enable him to
express an informed opinion with respect to the subject matter
referred to in the instrument to which his signature is affixed;
and (4) a statement as to whether, in the opinion of_such person,
such provision has been complied with.
Any such certificate or opinion made or given by any
officer of the Corporation may be based, insofar as it relates to
legal, accounting or hospital matters, upon a certificate or
opinion of or representation by counsel, an accountant or a
management consultant, unless such officer knows, or in the
exercise of reasonable care should have known, that the
certificate, opinion or representation with respect to the
matters upon which such certificate or statement may be based, as
aforesaid, is erroneous. Any such certificate or opinion made or
given by counsel, an accountant or a management consultant may be
based, insofar as it relates to factual matters (with respect to
which information is in the possession of the Corporation) upon a
certificate or opinion of or representation by an of of the
Corporation, unless such counsel, accountant or management
consultant knows, or in the exercise of reasonable care should
have known, that the certificate or opinion or representation
with respect to the matters upon which such person's certificate
or opinion or representation may be based, as aforesaid, is
erroneous. The same officer of the Corporation, or the same
counsel or accountant or management consultant, as the case may
• be, need not certify to all of the matters required to be
certified under any provision of this Supplement No. 7, but
different officers, counsel, accountants or management
consultants may certify to different matters, respectively.
•
Section 2. Issuance of Obligation No. 7. There is
hereby created and authorized to be issued an Obligation of the
Corporation in an aggregate principal amount of ninety -one
million dollars ($91;000,000). This Obligation shall be dated as
of October 1, 1992, shall be designated "Hoag Memorial Hospital
Presbyterian.Obligation No. 7" and shall be payable in such
amounts, at such times and in such manner and shall have such
other terms and provisions as are set forth in the form of
Obligation No. 7 as provided in Section 11 hereof.
The aggregate principal amount of Obligation No. 7 is
limited to-ninety -one million dollars ($91,000,000), except for
any Obligation No. 7 authenticated and delivered in lieu of
another Obligation No. 7 as provided in Section 6 hereof, with
respect to any Obligation No. 7 mutilated, destroyed,.lost or
stolen or, subject to the provisions of Section 5 of this
Supplement No. 7, upon transfer of registration of Obligation
No. 7.
uI -270"l 3
Section 3. Payments on Obligation No. 7; Credits.
• (a) Principal of and interest and any applicable
redemption premium on Obligation No. 7 are payable in-any coin or
currency of the United States of America which on the payment
date is legal tender for the payment of public and private debts.
Except as provided in subsection (b) of.this Section with respect
to credits, and Section 4 hereof regarding.prepayment, payments
on the principal of and premium, if any, and interest on
Obligation No. 7 shall be made at the times and in the amounts
specified in Obligation No. 7 by the Corporation depositing the
same with or to the account of the Bond Trustee at or prior.to
the opening of business on the day such.payments shall become due
or payable (or the next succeeding business day if such date is a
Saturday, Sunday or bank holiday in the city in which the
principal corporate trust office of the Bond Trustee is located),
and giving notice to the Master Trustee and the Bond Trustee of
each payment of principal, interest or premium on Obligation
No. 7, specifying the amount paid and identifying such payment as
a payment on Obligation No. 7.
(b) The Corporation shall receive credit for payment
on Obligation No. 7, in addition to any credits resulting from
payment or prepayment from other sources, as follows:
(i) On installments of interest on Obligation
• No. 7 in an amount equal to moneys deposited in the Interest
Account created under the Bond Indenture to the extent such
amounts have not previously been credited against payments'
on Obligation No. 7;'
(ii) On installments of principal of Obligation
No. 7 in an amount equal to moneys deposited in the
Principal Account created under the Bond Indenture to the
extent such amounts have not previously been credited on
Obligation No: 7;
(iii) On installments of principal and interest,
respectively,-on Obligation No. 7 in an amount equal to the
principal amount of Bonds for the payment at maturity or
redemption of which sufficient amounts (as determined by
Section 10.03 of the Bond Indenture) in cash or Investment
Securities (as defined in the Bond Indenture) are on deposit
as provided in Section 10.03 of the Bond Indenture to the
extent such amounts have not been previously credited
against payments on Obligation No. 7, and-the interest on
such Bonds from and after the date fixed for payment at
maturity or redemption thereof. Such credits shall be made
against the installments of principal of and interest on
Obligation No. 7 which would have been used, but for such
call for redemption, to pay principal of and interest on
• such Bonds when due at maturity; and
ui- 27094.1
(iv) On installments of principal and interest,
respectively, on Obligation No. 7 in an amount equal to the
principal amount of Bonds acquired by the Corporation and
• . surrendered to the Bond Trustee for cancellation or
purchased by the Bond Trustee and canceled, and the interest
on such Bonds from and after the date interest thereon has
been paid prior to cancellation.' Such credits shall be made
against the installments of principal of and interest on
Obligation No. 7 which would have been used, but for such
cancellation, to pay principal of and interest on such Bonds
when due.
Section 4. Prepayment of Obligation No. 7.
(a) So long as all amounts which have become due under
Obligation No. 7 have been paid, the Corporation shall have the
right, at any time and from time to time, to pay in advance and
in any order of due dates all or part of the amounts to become
due under Obligation No. 7. Prepayments may be made by payments
of cash or surrender of Bonds, as contemplated by subsections
3(b) (iii) and (iv) hereof. All such prepayments (and the
additional payment of any amount necessary to pay the applicable
premium, if any, payable upon the redemption of Bonds) shall be
deposited and applied in the manner and subject to the terms and
conditions set forth in the Bond Indenture. Notwithstanding any
such prepayment or surrender of Bonds, as long as any Bonds
remain outstanding (as defined'in the Bond Indenture) or any
•additional payments required to be made hereunder remain unpaid,
.the Corporation shall not be relieved of.its obligations
hereunder.
(b) Prepayments made under subsection (a) of this
Section shall be credited against amounts to become due on
Obligation No. 7 as provided in Section 3 hereof.
Section 5. Registration, Number, Negotiability and
Transfer of Obligation No. 7.
(a) Except as provided in subsection (b) of this
Section, so long as any Bond remains outstanding, Obligation
No. 7 shall consist of a single Obligation without coupons,
registered as to principal and interest in the name of the Bond
Trustee, and no transfer of Obligation No. 7 shall be registered
under the Master Indenture except for transfers to a successor
Bond Trustee.
(b) Upon.the principal of all Obligations then
Outstanding being declared immediately due arid payable upon and
during the continuance of an Event.of Default, Obligation No. 7
may be transferred, if and to the extent the Bond Trustee
requests that the restrictions of subsection (a) of this Section
on transfers be terminated.
Section 6. Mutilation, Destruction, Loss and Theft of
• Obligation No. 7. If (i) Obligation No. 7 is surrendered tithe
Master Trustee in a mutilated condition, or'the Corporation and
ui.zrona.a 5
the Master Trustee receive evidence to their satisfaction of the
destruction, loss or theft of Obligation No. 7, and (ii) there is
• delivered to the Corporation and the Master Trustee such security
or indemnity as may be required by.them to hold them harmless,
then, in the absence of proof satisfactory to the Corporation and
the Master Trustee that Obligation No. 7 has been acquired by a
bona fide purchaser and upon the Holder paying the reasonable
expenses of the Corporation and the Master Trustee, the
Corporation shall cause to be executed and the Master Trustee
shall authenticate and deliver, in exchange for'such mutilated
Obligation No. 7 or in lieu of such destroyed, lost or stolen
Obligation No. 7, a new Obligation No. 7 of like principal.
amount, date and tenor. If any such mutilated, destroyed, lost
or stolen Obligation No. 7 has become or is about to become due
and payable, Obligation No. 7 may be paid when due instead of
delivering a new Obligation No. 7.
Section 7. Execution and Authentication of Obligation
No. 7. Obligation No. 7 shall be executed and attested for and
on behalf of the Corporation by its duly authorized officers.
The signatures of .either or both of such officers may be
mechanically or photographically reproduced on Obligation No. 7.
If any officer whose signature appears on Obligation No. 7 ceases
to be such officer before delivery thereof, such signature shall
remain'valid and sufficient for all purposes as if such officer
had remained in office until such delivery. Obligation No. 7
shall be manually authenticated'by an authorized officer of the
•Master Trustee, without which authentication Obligation No. 7
shall not be entitled to the benefits hereof.
Section 8. Right to Redeem. Obligation No. 7 shall be
subject to redemption, in whole or in part, prior to maturity, at
the times and in the amounts specified in the Bonds issued under
the Bond Indenture and in the manner provided herein; provided
that in no event shall Obligation No. 7 be redeemed unless a
corresponding amount of Bonds is also redeemed.
Section 9. Partial Redemption of Obligation No. 7:
Upon the selection and call for redemption, and the surrender of,
Obligation No. 7 for redemption in part only, the Corporation
shall cause to be executed and the Master Trustee shall
authenticate and deliver to, upon the written order of, the
Holder thereof, at the expense of the Corporation, a new
Obligation No. 7 in principal amount equal to the unredeemed
portion of Obligation No. 7, which new Obligation No. 7 shall be
a fully registered Obligation without coupons.
The Corporation may agree with the Holder of Obligation
No. 7 that such Holder may, in lieu of surrendering the
Obligation for a new fully registered Obligation #ithout coupons,
endorse on the Obligation a notice of such partial redemption,
which notice shall set forth, over the signature of such Holder,
the payment date, the principal amount redeemed and the principal
amount remaining unpaid. Such partial.redemption shall be valid
•upon payment of the amount thereof to the registered owner of
Obligation No. 7 and the Obligated Group and the Master Trusgee'
.shall be fully released and discharged from all liability to the
w- 270".8
extent of such payment irrespective of whether such endorsement
shall or shall not have been made upon the reverse of Obligation
No. 7 by the Holder thereof and irrespective of any error or
• omission in such endorsement.
Section 10. Effect of Call for Redemption. On the
date designated for redemption by notice given as herein
provided, Obligation No. 7 shall become and be due and payable at
the redemption price provided for redemption of Obligation No. 7
on such date. If on the date fixed for redemption moneys for
payment of the redemption price and accrued interest are held by
the Master Trustee, interest on Obligation No. 7 shall cease to
accrue and Obligation No. 7 shall cease to be entitled to any
benefit or security under the Master Indenture except the right
to.receive payment from the moneys held by the Master Trustee or
the paying agents and the amount of Obligation No. 7 so called
for redemption shall be deemed paid and no longer outstanding.
is
Section 11. Form of Obligation No. 7. Obligation
No. 7 shall be in substantially the following form with such
necessary and appropriate omissions, insertions and variations as
are permitted or required hereby or by the Master Indenture and
are approved by those officers executing such Obligation on
behalf of the Corporation and execution thereof by such officers
shall constitute conclusive evidence of such approval.
r 1
v.i- naea.s 7
ti
[Form of Obligation No. 71
• HOAG MEMORIAL HOSPITAL PRESBYTERIAN
OBLIGATION NO. 7
$91,000,000
KNOW ALL BY THESE PRESENTS that HOAG MEMORIAL HOSPITAL
PRESBYTERIAN (the "Corporation "), a nonprofit public benefit
corporation organized and existing under the laws of the State of
California, for value received hereby acknowledges itself
obligated to, and promises- to.pay to U.S. Trust Company of
California, N.A., as trustee (the "Bond Trustee ") under the
indenture dated as of October 1, 1992 (the "Bond Indenture "),
between the Bond Trustee thereunder and the City of Newport Beach
(the "City "), relating to the City of Newport Beach Variable Rate
Demand Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 1992 (the "Bonds "), and any successor trustee under the
Bond Indenture,-or registered assigns, the principal sum of
ninety -one million dollars ($91,000,000), and to pay-interest on
the unpaid balance of said sum from the date hereof on the dates
and in the manner hereinafter described.
This Obligation No. 7 is a single Obligation of the
Corporation limited to ninety -one million dollars ($91,000,000)
in principal amount (except as- provided in the Master Indenture
hereinafter identified), designated as "Hoag Memorial Hospital
isPresbyterian, Obligation No. 7" ( "Obligation No. 7" and, together
with all other obligations issued under the Master Indenture
hereinafter identified, "Obligations "), issued under and pursuant
to the Supplemental Master Indenture for Obligation No. 7, dated
as of October 1, 1992 (the "Supplemental Indenture "),
supplementing and amending the Master Trust Indenture, dated as
of October 1, 1984, as supplemented or amended, between the
Corporation and Bank of.America National Trust and Savings
Association, as successor trustee (the "Master Trustee "). The
Master Indenture, as supplemented.and amended in accordance with
its terms, is hereinafter called the "Master.Indenture."
Principal hereof, interest hereon and any applicable
redemption premium, are payable in any coin or currency of the
United States of America which on the payment date is legal
tender for the payment of public and private debts, on the dates
specified and in an amount equal to the amount necessary for the
Bond Trustee to make the transfers and-deposits required pursuant
to Section 5.02 of the Bond Indenture.
The Corporation shall receive credit f.or payment on
Obligation No. 7, in addition to any Credits resulting from
payment.or prepayment from other sources, as follows: (i) on
installments of interest of Obligation No. 7 in an amount equal
to moneys deposited in the Interest Account created under the
Bond Indenture to the extent such amounts have not previously
been credited against payments.on Obligation.No. 7; (ii) on
.nstallments of principal of Obligation No. 7 in an amount eg al
o moneys deposited in the Principal Account created under tht
Bond Indenture to the extent such amounts have not previously
ui- 270U.1
been credited against payments on Obligation No. 7; (iii) on
• installments of principal and interest, respectively, on
Obligation No. 7 in an amount equal to principal amount of Bonds
for which sufficient amounts (as determined by Section 10.03 of
the Bond Indenture) are on deposit as provided in Section 10.03
of the Bond Indenture to the extent such amounts have previously
not been credited against payments on Obligation No. 7 and the
interest on such Bonds from and after the date fixed for payment
at maturity or redemption; and (iv) on installments of principal
and.interest, respectively, on Obligation No. 7 in an amount
equal to the principal.amount of Bonds acquired by the
Corporation and surrendered to the Bond Trustee for cancellation
or purchased by the Bond Trustee and canceled and the interest on
such Bonds from and after the date interest thereon has been paid
prior to cancellation; provided, however, that cancellation of a
Bond maturing.or required to be redeemed on one date may not be
credited against a principal installment due on Obligation No. 7
which would be used, but for the Cancellation of such Bond, to
retire a Bond having a different maturity or mandatory_redemption
date.
Upon payment by the Corporation of a sum, in cash or
Investment Securities (as defined in the Bond Indenture), or
both, sufficient, together with any other cash and Investment
Securities (as defined in the Bond Indenture) held by the Bond
Trustee and available for such purpose, to cause all outstanding
Bonds to be deemed to have been paid within the meaning of
Article X of the Bond Indenture and to pay all other amounts
•referred to in Article X of the Bond Indenture, accrued and to be
accrued to the date of discharge of the Bond Indenture,
Obligation No. 7 shall be deemed to have been paid and to be no
longer outstanding under the Bond Indenture.
If a Liquidity Facility (as defined in the Bond
Indenture) is not in effect or, if in effect, the Bank is not
performing thereunder, the Corporation shall pay all amounts
necessary to purchase Bonds in accordance with Sections 4.06,
4.07 and 4.08 of the Bond Indenture, at the times and in the
amounts specified in said sections.
Copies of the Master Indenture and the Supplemental
Indenture are on file at the corporate trust office of the Master
Trustee, in Los Angeles, California, and reference is hereby made
to the Master Indenture for the provisions, among others, with
respect to the nature and extent of the rights of the holders of
Obligations, issued under the Master Indenture, the terms and
conditions -on which, and the purposes for which Obligations are
to be issued and the rights, duties and obligations of the
Corporation and the Master Trustee under the Master Indenture, to
all of which the holder hereof, by acceptance of this Obligation
No. 7, assents.
The Master Indenture permits the issuance of additional
Obligations under the Master Indenture to be secured by the
provisions of the Master Indenture, all of which, regardless of
•the times of issue or maturity, are to be of equal rank without_
preference,. priority or distinction of any Obligations issuer
cwt- no84.8 9
under the Master Indenture over any other such Obligations except
as expressly provided or permitted in the Master Indenture.
• To the extent permitted by and as provided in the
Master Indenture, modifications or changes of the Master
Indenture, of any indenture supplemental thereto, and of the
rights and obligations of the Corporation and of the holders of
Obligations in any particular may be made by the execution and
delivery of an indenture or indentures supplemental to the Master
Indenture or any supplemental indenture. Certain modifications
or changes which would affect the rights of the holder of this
Obligation No. 7 may be made only,with. the consent of the holders
of not less than a majority in aggregate principal amount of
Obligations then outstanding under the Master Indenture. No
modification or change shall be made which will (i) extend the
stated maturity of or time for paying interest on any Obligation
or reduce the principal amount of or the redemption premium or
rate of interest payable on any.Obligation without the consent of
the holder of such Obligation; (ii) modify, alter, amend, add to
or rescind any of the terms or provisions contained in Article VI
of the Master Indenture (relating to the acceleration of the
Obligations) in any manner which would materially and adversely
affect the interests of holders of Obligations or any of them
without the consent of the holders of all Obligations then
outstanding; or (iii) reduce the aggregate principal amount of
Obligations then outstanding the consent of the holders of which
is required to authorize such modifications.or changes without
the consent of the holders of all Obligations then outstanding.
•Any.such consent by the holder of this Obligation No. 7 shall be
conclusive and binding upon such holder and all future holders
and owners hereof irrespective of whether or not any notation of"
such consent is made upon this Obligation No. 7, unless such
consent is rendered as provided in the Master Indenture.
In the manner and with the effect provided in the
Supplemental Indenture, Obligation No. 7 will be subject to
redemption prior to maturity at the times and in the amounts
specified in the Bonds issued under the Bond Indenture.
Any redemption, either in whole or.'in part, shall be
made upon notice thereof in the manner and upon the terms and
conditions provided in the Supplemental Indenture. If this
Obligation No. 7 shall have been duly called for redemption and
payment of the redemption price, together with interest.accrued
thereon to the date fixed for redemption, shall have been made or
provided for; as more fully set forth in the Supplemental
Indenture, 'interest on this Obligation No. 7 shall cease to
accrue from the date fixed for redemption, and from and after
such date, this Obligation No. 7 shall be deemed.not to be
outstanding, as defined in the Master Indenture, and shall no
longer be entitled to the benefits of the Master Indenture, and
the holder hereof shall have no rights in respect of this
Obligation No. 7 other than payment of the redemption price,
together with accrued interest, to the date fixed for redemption.
Upon the occurrence of certain "Events of Default ".(as
Defined in the Master Indenture.), the principal of all
uiamoea.e 10
Obligations then outstanding may be declared, and thereupon shall
• become, due and payable as provided in the Master Indenture.
The holder.of this Obligation No. 7 shall have no right
to enforce the provisions of the Master Indenture, or to
institute any action to enforce the covenants therein, or to take
any action with respect to any default under the Master
Indenture, or to institute, appear in or defend any suit or other
proceeding with respect to any default under the Master
Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Master
Indenture.
Obligation No. 7 is issuable only as a registered
Obligation without coupons.
Unless the principal of all Obligations then
outstanding has been declared immediately due and payable, no
transfer of this Obligation No. 7 shall be permitted except for
transfers to a successor trustee under the Bond Indenture. This
Obligation No. 7.shall be registered on the register -to be
maintained by the Master Trustee as registrar for the Corporation
for that purpose at the principal corporate trust office of,the
Master Trustee and this Obligation No. 7 shall be transferable
only upon presentation of this Obligation No. 7 at said office by
the holder or by his duly authorized attorney and subject to the
limitations, if any, set forth,in the Supplemental Indenture.
Such transfer shall be without charge to the holder hereof, but
•any taxes or other governmental charges required to be .paid with
respect to the same shall be paid by the holder requesting such
transfer as a condition precedent to the exercise of such
privilege. Upon any such transfer, the Corporation shall execute
and the Master Trustee shall authenticate and deliver in exchange
for this Obligation No. 7 a new registered Obligation without
coupons, registered in the name of the transferee.
Prior to due presentment hereof for registration of
transfer, the Corporation, the Master Trustee, any paying agent
and any registrar with respect to this Obligation No. 7 may -deem
and treat the person in whose name this Obligation No. 7 is
registered as the absolute owner hereof for all purposes; and
neither the Corporation, any paying agent, the Master Trustee nor
any Obligation registrar shall be affected by any notice to the
contrary. All payments made to the registered owner hereof shall
be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys
payable on this Obligation No. 7.
No covenant or agreement contained in this Obligation
No. 7 or the Master Indenture shall be deemed to be a covenant or
agreement of any officer, agent or employee of the Corporation or
of the Master Trustee in his individual capacity, and no
incorporator', member, officer or member of the governing board of
the Corporation shall be liable personally on this Obligation
No. 7 or be subject to any personal liability or accountability
by reason of the issuance of this Obligation No. 7.
uI -27M.e 11
This Obligation No. 7 shall not be entitled to any
• benefit under the Master Indenture, or be valid or become
obligatory for any purpose, until this Obligation No. 7 shall
have been manually authenticated by the execution by an
authorized officer of the Master Trustee, or its successor as
Master Trustee, of the Certificate of Authentication inscribed
hereon.
IN WITNESS WHEREOF, the Corporation has caused'this
Obligation No. .7 to be executed in its name and on its behalf and
attested by the manual signature of its duly authorized officers
all as of October 1, 1992.
(SEAL]
ATTEST: By •
•
w -27M.8
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
By
President
12
_ e _
MASTER TRUSTEE'S AUTHENTICATION CERTIFICATE
•
The undersigned Master Trustee hereby certifies that
this Obligation No. 7 is one of the Obligations described in the
within - mentioned Master Indenture.
BANK OF AMERICA NATIONAL, TRUST AND
SAVINGS ASSOCIATION, as Master
Trustee
By
Its Authorized Signatory
•
u7- 77094.3 13
Section 12. Delivery of Obligation No. 7. (a) Upon the
*xecution and delivery of this Supplement No. 7, the Corporation
shall execute and deliver to the Master Trustee, and the Master
Trustee shall authenticate and deliver to the Bond Trustee,
Obligation No. 7; (b) Prior to the delivery by the Master Trustee
of Obligation No. 7, there shall be filed with or delivered to
the Master Trustee:
(1) a request and authorization to the Master'Trustee
on behalf of the'Corporation and signed by an
Authorized Representative to authenticate and
deliver Obligation No. 7 to the Bond Trustee;
(2) an executed or certified copy of the Agreement;
and
(3) an executed or certified copy of the Bond
Indenture.
Section 13. Notification to Master Trustee of Certain
Matters. The Corporation covenants to furnish or cause'to be
furnished to the Master Trustee:
(1) Notice of any redemption of all or a portion of
the Bonds;
(2) Notice of any event of default.under the Bond
• Indenture;
3) Notice of any payment or deposit made with respect
to the Bonds pursuant to Article X of the Bond
Indenture;
(4) Notice of any amendments to the Agreement or the
Bond Indenture.
Section 14. Specification of Use of Proceeds. The
proceeds from the issuance of the Bonds under the Bond Indenture
shall be used for the purposes described in the Bond Indenture.
Section 15. Tax Exempt Status. The Corporation agrees
on behalf of itself and each other Member of the Obligated Group
that is an organization exempt from federal income taxation under
Section 501(c)(3) of the Code at the time it-becomes a Member of
the.Obligated Group, respectively, that so long as all amounts
due or to become due on any Bond have not been fully paid to the
Holder thereof, it will not take any action or suffer any action
to be taken by others, including any action that would-result in
the alteration or loss of its status as such a tax - exempt
organization, which would cause interest payable on any Bond to
become includable in gross income under the Code. -
Section 16. Amendments to Master Indenture. The
Holder or subsequent Holders of Obligation No. 7, by acceptance
•thereof, shall have been deemed as of the date of Obligation
No. 7, to have consented in accordance with Section 6.02 of .the
Master Indenture, to amendments in the form set forth in this
Section to the terms of the Master Indenture.
uI- 27084.8 - 14
K
a. The definition of the term "Code" set forth in
•Section 1.01 of the Master Indenture is amended to read, in its
entirety, as follows:
"Code" shall mean the Internal Revenue Code of
1986 and any regulations promulgated thereunder.
b. The definition of the term "Fiscal Year" set forth
in Section 1.01 of the Master Indenture is amended to read, in
its entirety, as follows:
"Fiscal Year" shall mean the fiscal year of the
Corporation, which at the date of execution of Supplement
No. 7, provides for thirteen (13) accounting periods, each
of four (4) weeks' duration, and commences on the fifteenth
day of September in each year, plus or minus two weeks,
allowing for the inherent variation of a 364 -day accounting
cycle.
c. The definition of the term "Government
Obligations" set forth in Section 1.01 of the Master Indenture is
amended by (i) deleting the word "fully" in clause (1) of said
definition and (ii) adding the words "Resolution Funding Corp.,"
after the ":" in clause (2) of said definition.
d. The definition of the term "Income Available for
Debt Service" set forth in Section 1.01 of the Master Indenture
is amended to read, in its entirety, as follows:
• "Income Available for Debt Service" shall mean,
with respect.to each Member of the Obligated Group, as to
any period of'time, the excess of revenues over expenses of
such Member for such period, determined in accordance with
generally accepted accounting principles, to which shall be
added interest, amortization and depreciation expense and
extraordinary or unusual non -cash items, each item
determined in accordance with generally accepted accounting
principles, and transfer to such Member from Hoag Hospital
Foundation, and excluding (a) any profits or losses on the
sale or other disposition, not in ordinary course of
business, of investments or fixed capital assets or
resulting from the early extinguishment of debt, (b) gifts,
grants, bequests, donations and contributions,,to the extent
specifically restricted by the donor to a particular purpose
inconsistent with their use for the payment of Debt Service
and otherwise included in income in accordance with
generally accepted accounting principles, and (c) the net
proceeds of insurance (other than business interruption
insurance) and condemnation awards.
e. The definition of the term "Irvine Indebtedness"
set forth in Section 1.01 of the Master Indenture is hereby
deleted in its entirety.
f. With respect to the definition of "Maximum Annual
#
bt Service" set forth in Section 1.01 of the Master Indenture,
e term "25 -year" is hereby deleted and the.term "30 -year" i
ubstituted in its place.
ui- 270U.3 is
1
g. Section 2.05 of the Master Indenture is amended
• and supplemented by adding the following sentence thereto:
Notwithstanding anything to the contrary herein,
if a Member other than the Corporation seeks to incur
Indenture Indebtedness, the prior written approval of
the Corporation shall be obtained.
h. (1) Subsection 5.05(b) of the Master Indenture is
hereby
amended to read in its entirety as follows:
(xiii) Any Lien on'any Related Bond or other
Indebtedness in favor of a bank or other institution
issuing a letter of credit or other commitment to make
a loan to a Member of the Obligated Group to secure or
provide liquidity in connection with Indebtedness
permitted hereunder.
(2) Subsection 5.05(b) of the Master Indenture is
hereby
amended by adding the following:
(xiv) Liens set forth on Exhibit A attached to
the Supplemental Master Indenture for Obligation No. 7
and in existence as of the date of execution of said
Supplemental Master Indenture.
i. Subsection 5.07.(g) of the Master Indenture is
amended
to read in its entirety as follows:
•
(g) Any Indebtedness not mentioned in
paragraphs (a) through (f) above or (h) and (i) below,
incurred in the ordinary course of business.
j. Subsections 5.07(h) and (i) of the Master
Indenture
are hereby deleted in their entireties and Subsection
5.07(j)
of the Master Indenture is hereby renumbered and amended
to read
in its entirety as follows:
(h) At no time shall the aggregate
Outstanding amounts of Indebtedness of the
Corporation and other Members of the Obligated
Group incurred pursuant to subsections (d), (e)
and (f) above.exceed 25%- of the aggregate of Total
Operating Revenues of the Members of the Obligated
Group for the most recent Fiscal Year for which
the financial statement of each Member Of the
Obligated Group have been reported upon by
independent certified public accountants.
k. Subsection 5.07(k) of the Master Indenture is
hereby renumbered as Subsection 5.07(i) and amended to read in
full as follows:
(i) Reimbursement and other obligations arising
under reimbursement agreements relating to letter of
• credit or similar credit facilities used to secure.Qr-
provide liquidity in connection with Indebtedness,
without limitation.
ut- 270".8 16
1. The words "Fiscal Year" are hereby substituted for
• the words "period of 12 full consecutive calendar months" in each
place they appear in Subsections 5.07(d)(ii), 5.10(c)(i),
5.10(d)(ii), 5.11(a) and 5.11(b) of the Master Indenture.
M. The words "Fiscal Years" are hereby substituted
for the words "periods of 12 full consecutive calendar months" in
each place they appear in Subsections 5.10(c)(ii), 5.12(a)(iii)
and 5.15(b)(i)(A) of the Master Indenture.
n. The words "in a principal amount in excess of
$500,000" shall be inserted after the word "Indebtedness" when it
first appears in the second .line of Subsection 6.01(c) of the
Master Indenture.
o. The words "and any other Indebtedness which is
Non - Recourse Indebtedness" are hereby deleted from Section
6.01(c) of the Master Indenture.
p. The second paragraph of Section 7.04 of-the Master
Indenture is amended and supplemented to read, in its entirety,
as follows:
Unless otherwise ordered by a court or regulatory
body having competent jurisdiction, or unless required
by law, any successor Master Trustee shall be a trust
company or bank having the powers of a trust company as.
to trusts, qualified to do and doing trust business in
• one or more states of the United States of America and
having a combined capital and surplus (or the parent
holding company of which has a combined capital and
surplus), of at least $50,000,000, if there is such an
institution willing, qualified and able to accept the
trust upon reasonable or customary terms.
. Section 17. Acceleration. Pursuant to Section 6.02(a)
of the Master Indenture, upon the occurrence and during the
continuation of an Event of Default under the Master Indenture,
the Holders of not less than 50% in aggregate principal amount of
Obligation No. 7 may request the Master Trustee to declare
Obligation No. 7 immediately due and payable, and the Master
Trustee shall, by notice to the Members of the Obligated Group,
declare Obligation No. 7 immediately due and payable.
Section 18. Ratification of Master Indenture. As
supplemented hereby, the Master Indenture is in all respects
ratified and confirmed and the Master Indenture as so
supplemented hereby shall be read, taken and construed as one and
the same instrument.
Section 19. Severability. If any provision of this
Supplement No. 7 shall be held or deemed to be or shall, in fact,
be inoperative or unenforceable as applied in any particular case
and any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases, because it conflicts with any other provision or
provisions hereof or any constitution, statute, rule or public
policy, or for any other reason, such circumstances shall no*
have the effect of rendering the provision in question
uI -trou.c 17
• inoperative or unenforceable in any other case or circumstance,
or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to any extent
whatever.
•
•
The invalidity of any one or more phrases,.sentences,
clauses, sections or subsections contained in this Supplement
No. 7 shall not affect the remaining portions of this Supplement
No. 7 or any part thereof.
Section 20. Counterparts. This Supplement No. 7 may
be executed in several counterparts, each of which shall be an
original and all of which shall constitute one instrument.
Section 21. Governing Law. This Supplement No. 7
shall be governed by and construed in accordance with the laws of
the State of California.
LA 1-27084.8 18
• IN WITNESS WHEREOF, the Corporation has caused these
presents to be signed in its name and on.its behalf and attested
by its duly authorized officers and to evidence its acceptance of
the trusts hereby created the Master Trustee has caused these
presents to be signed in its name and on its behalf by one of its
duly authorized officers, all as of the day and year first above
written.
11
ATTEST:
Y
Assistant Secretary
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Master__
Trustee
ay. = _
Authorized Signato
LA147 K.s 19
i
SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION NO.'8
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
and
• BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Master Trustee
Dated as of October 1, 1992
1�
•
Supplementing the
.Master Trust Indenture
Dated as of October 1, 1984
S=1WP51WAr%W%j=u.003 1
-- ti:
• THIS SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION NO
( "Supplement No. 8 0).is made and entered into as of October 1,
1992 by.and between HOAG MEMORIAL HOSPITAL PRESBYTERIAN, a
California nonprofit public benefit corporation (the
"Corporation "), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association, as trustee (the
"Master Trustee ") under the Master Trust Indenture dated as of
October 1, 1984 (the "Master Indenture ").
WI THE jag ET -i:
WHEREAS,.the parties have entered into the Master
Indenture which provides for the issuance by the Corporation of
its Obligations thereunder upon the Corporation and the Master
Trustee entering into an indenture supplemental to the Master
Indenture;
WHEREAS, the Corporation has undertaken certain
obligations pursuant to that certain Standby Bond Purchase
Agreement dated as of October 1, 1992 (the "Agreement ") by and
between the Corporation and Credit Suisse, a Swiss banking
corporation, acting by and through its New York branch (the
"Bank ") with respect to the City of Newport Beach Variable Rate
Demand Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series
1992 (the "Bonds ") and wishes to designate such obligations as
its Obligation No. 8 under the Master Indenture; and-
WHEREAS, all acts and things necessary to constitute
this Supplement No. 8, providing for the issuance of the .
Corporation's Obligation No. 8, a valid indenture and agreement
according to its terms have been done and performed, and the
Corporation has duly authorized the execution and delivery hereof
and of the Obligation issued hereby;
NOW, THEREFORE, in consideration of the premises, of
the acceptance by the Master Trustee of the trusts hereby '
created, and of the giving of consideration for and acceptance of
the Obligation issued hereunder by the Holder thereof, the
Corporation covenants and agrees with the Master Trustee for the
benefit of the Aolder from time to time of the Obligation issued
hereby, as follows:
SECTION 1. - DEFINITIONS AND INTERPRETATION
.(a) 'Unless otherwise required by the context, all
terns used herein which are defined in the Master Indenture shall
have the meanings assigned to them therein, except as set forth
below:
Agreement
• "Agreement" shall mean the Standby Bond Purchase
Agreement, dated as of October 1, 1992, by and bet'Ween
the Bank and the Corporation and.relating to the
sDorwni%wdebon%=di.ow 2
• issuance of the Bonds, and when amended or
supplemented, such Agreement as amended or
supplemented.
Bond Indenture
"Bond Indenture" shall mean the indenture, dated as of
October 1, 1992, by and between the City of Newport
Beach (the "Issuer ") and the Bond Trustee and relating
to the Bonds, and when amended or supplemented, such
Bond Indenture as amended or supplemented.
Bonds
"Bond" or "Bonds" shall mean the City.of Newport Beach
Variable Rate Demand Revenue Bonds (Hoag Memorial
Hospital Presbyterian) Series 1992, issued under the
Bond Indenture.
Bond Trustee
".Bond Trustee" shall mean U.S. Trust Company of
California, N.A., Los Angeles, California, as trustee,
a banking-corporation organized and existing under the
laws of the State of California,.and any successor to
its duties under the Bond Indenture.
• Issuer
"Issuer" shall mean the City of Newport Beach,
California.
Oblicaatton No. 8
"Obligation No. 8" shall mean the Obligation issued
pursuant hereto.
S=_Dlement No. 8
!'Supplement No. 8" shall mean this Supplemental Master
Indenture for Obligation No. S.
(b) Unless the context otherwise indicates, words
expressed in the singular shall include the plural and vice versa
and the ube of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the
neuter, masculine or feminine gender, as appropriate.
(c) Headings of sections herein and the table of
contents hereof are solely for convenience of reference, do not
constitute a part hereof and shall not affect the meaning,
• construction or effect hereof.
snoawrs n ndr\hmg\wnh.om 3
SECTION 2. ISSUANCE OF OBLIGATION NO. 8.
• The Agreement is hereby created and authorized to be
issued as an Obligation of the Corporation in an aggregate
principal indebtedness not to exceed ninety -two thousand one
hundred sixty dollars ($92,160,000). This Obligation shall be
dated as of October 1, 1992, shall be designated "Hoag Memorial
Hospital Presbyterian Obligation No. 8" and shall be payable in
such amounts, at such times and in such manner and shall have
such other terms and provisions as are set forth in the form of
the Agreement attached hereto as Exhibit "A ".
SECTION 3. PAYMENTS ON OBLIGATION N0, B-t--CREDITS.
Principal of and interest and any applicable redemption
premium on Obligation No. 8 are payable in any coin or currency
of the United States of America which on the payment date is
legal tender for the payment of public and private debts.
SECTION 4. MUTILATION, DESTRUCTION, LOSS AND
THEFT OF OBLIGATION NO. 8.
If (i) Obligation No. 8 is surrendered to the Master
Trustee in a mutilated condition, or the Corporation and the Master
Trustee receive evidence to their satisfaction of the destruction,
loss or theft of Obligation No. 8, and (ii) there is delivered to
the Corporation and the Master Trustee such security or indemnity
as may be required by them to hold them harmless, then, in the
absence of proof satisfactory to the Corporation and the Master
Trustee that Obligation No. 8 has been acquired by a bona fide
purchaser and upon the Holder paying the reasonable expenses of the
Corporation and the Master Trustee, the Corporation shall cause to
be executed and the Master Trustee shall authenticate and deliver,
in exchange for such mutilated Obligation No. 8 or in lieu of such
destroyed, lost or stolen Obligation No. 8, a new Obligation No. 8
of like principal amount, date and tenor. If any such mutilated,
destroyed, lost or stolen Obligation No. 8 has become or is about
to become due and payable, Obligation No. 8 may be paid when due
instead of delivering a new Obligation No. 8.
SECTION S. EXECUTION AND AUTHENTICATION OF -OBLIGATION- N0. _a.
Obligation No. 8 shall be executed and attested for and
on behalf of the Corporation by its duly authorized officers. The
signatures of either or both of such officers may lie mechanically
or photographically reproduced on Obligation No. 8. If any officer
whose, signature appears on Obligation No. 8 ceases to be such
officer before delivery thereof, such signature shall remain valid
and sufficient for all purposes as if such officer had remained in
office until such delivery. Obligation No. 8 shall be. manually
•authenticated by an authorized officer or signatory of the Master
Trustee, without which authentication Obligation No. 8 shalt jWt be
entitled to the benefits hereof.
SWAWP51VD&\how\=U.0W 4 .
• SECTION 6. FORM OF OBLIGATION NO 8.
Obligation No. 8 shall be in substantially the form of
Exhibit "A" attached hereto, with such necessary and appropriate
omissions, insertions and variations as are permitted or required
hereby or by the Master Indenture and are approved by those
officers executing such Obligation on behalf of the Corporation and
execution thereof by such officers shall constitute conclusive
evidence of such approval.
SECTION 7. DELIVERY OF OBLIGATION NO 8.
Upon the execution and delivery of this Supplement No. 8,
the Corporation shall execute and deliver to the Master Trustee,
and the Master Trustee shall authenticate and deliver to the Bank,
Obligation No. 8; (b) Prior to the delivery by the Master Trustee.
of Obligation No. 8, there shall be filed with or delivered to the
Master Trustee:
(1) a request and authorization to the Master Trustee
on behalf of the Corporation and signed by an
Authorized Representative to authenticate and
deliver Obligation No. 8 to the Bank; and
(2) an executed or certified copy of the Agreement.
• SECTION 8: NOTIFICATION TO MASTER TRUSTEE OF CERTAIN ]MATTERS.
. The Corporation covenants to furnish or cause to be
furnished to the Master Trustee:
(1) Notice of any event of default .under the Agreement;
and
(2) Notice of any amendments to the Agreement.
SECTION 9. TAX EXEMPT STATUS.
The Corporation agrees on behalf of itself and each other
Member of the Obligated Group that is an organization exempt from
federal income taxation under Section 501(c)(3) of the Code at the
time it becpmes a Member of the Obligated Group, respectively, that
so long as-all amounts due or to become due.on any Bond have not
been fully paid to the Holder thereof, it will not take any action
or suffer any action to be taken by others.,.in_cluding any action
that would result in the alteration or loss of its status as such
a tax- exempt organization, which would cause interest payable on
any Bond to become includable in gross income under the Code.
SECTION 10. RATIFICATION OF MASTER INDENTURE.
As supplemented hereby, the Master Indenture is i -&.-all
respects ratified and confirmed and the Master Indenture as so
snonwesnma��a.am 5
• supplemented hereby shall be read, taken and construed as one and
the same instrument.
SECTION 11. SEVERABILIT -Y.
If any provision of this Supplement No. 8 shall be held
or deemed to be or shall, in fact, be inoperative or unenforceable
as applied in, any particular case and any jurisdiction or
jurisdictions or in all jurisdictions, or in all cases, because it
conflicts with any .other provision or provisions hereof or any
constitution, statute, rule or public policy, or for any other
reason, such circumstances shall not have.th'e effect of rendering
the .provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable
to any extent whatever.
The invalidity of any one or more phrases, - sentences,
clauses, sections or subsections contained in this Supplement No.
8 shall not affect the remaining portions of this Supplement No. 8
or any part thereof.
SECTION 12. COUNTERPARTS.
This Supplement No.. 8 may be executed in several
•counterparts, each of which shall be an original and all of which
shall constitute one instrument.
SECTION 13. GOVERNING LAW.
•
This Supplement No. 8 shall be governed by and construed
in accordance with the laws of the State of California.
SECTION 14. AZCELERATION.
Pursuant to Section 6.02(a) of the Master. Indenture; upon
the occurrence and during the continuation of an Event of Default
under the Master Indenture, Bank, On behalf Of the Holders of
Obligation No. 8, may request the Master Trustee to declare
Obligation No. 8 immediately due and payable, and the Master
Trustee shall, by notice to the Members of the Obligated Group,
declare Obligation No. 8 immediately due and payable. 'Nothing.in
the Master ; ndenture or this Supplement No. 8 shall be construed as
limiting the Banks ability to exercise any rights or remedies
provided Under Obligation No. 8 or otherwise afforded by applicable
law in accordance with the terms of Obligation No. -8 and such
applicable law.
SDM%Wrsi %2nw.om 6
-- I�
• IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf and attested by its duly authorized officers
and to evidence its acceptance of the trusts hereby created the Master Trustee
has caused these presents to be signed in its name and on its behalf by one of
its duly authorized officers, all as of the day and year first above written.
HOAG MEM0R1hI4HOSPITJ PRES RIAN
By:
Name: Albert J.
Title: Chairman
ATTEST:
BANK OF AMERICA NATIONAL TRUST AND -
SAVINGS ASSQC N, as Master Trus ee
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Name: Sravy_ c
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EXECUTION COPY
SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION NO. 13
DOCMSC1:254590.5
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Master Trustee
Dated as of December 1, 1999
Supplementing the
Master Trust Indenture
Dated as of October 1, 1984
TABLE OF CONTENTS
n
U
Page
Section1. Definitions ........:............................................................................ ............................... l
Section I.I. Interpretation .................................................................. ............7..................
2
Section 11. Content of Certificates and Opinions ............................. .............4.................
2
Section 2. Issuance of Obligation No. 13 ...................................................... ...............................
3
Section 3. Payments on Obligation No. 13; Credits ...................................... ...............................
3
Section 4. Prepayment of Obligation No. 13 .............:.................................... ...............................
4
Section 5. Registration, Number, Negotiability and Transfer of Obligation No. 13 ....................
5
Section 6. Mutilation, Destruction, Loss and Theft of Obligation No. 13 ..... ...............................
5
Section 7. Execution and Authentication of Obligation No. ,13 ......... . ................. ::......................
5
Section8. Right to Redeem ........................................................................... ...............................
5
Section 9. Partial Redemption of Obligation No. 13 ..................................... ...............................
5
Section 10. Effect of Call for Redemption ..................................................... ...............................
6
Section 11. Form of Obligation No. 13 .......................................................... ...............................
6
Section 12. Delivery of Obligation No 13 ................................................... ...............................
11
Section 13. Notification to Master Trustee of Certain Events ..................... ...............................
12
Section 14. Specification of Use of Proceeds .............................................. ...............................
12
Section 15. Tax-Exempt Status .................................................................... ...............................
12
Section 16. Acceleration .............................................................................. ...............................
12;
Section 17. Ratification of Master Indenture ................................................. .............................12
i
Section18. Severability ...........................................................................:..: ...............................
12
Section19. Counterparts .............................................................................. ...............................
13
Section 20. Governing Law ...................... : ..................................... ...........................................
13
•
DOCSSCi:254590.5 -i-
THIS SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION
• NO. 13 made and entered into as of December 1, 1999 ("Supplement No. 13'), among HOAG
MEMORIAL. HOSPITAL PRESBYTERIAN, a California nonprofit public benefit corporation (the
"Corporation "), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association, as successor trustee (the "Master Trustee) under the Master Trust Indenture,
dated as of October 1, 1984 (the "Master Indenture'),
WITNESSETH:
WHEREAS, the parties have entered into the Master Indenture which provides for
the issuance by the Corporation of its Obligations thereunder upon the Corporation and the Master
Trustee entering into an indenture supplemental to the Master Indenture;
WHEREAS, the Corporation desires to issue its Obligation hereunder to evidence its
obligation arising from the loan to the Corporation by the City of Newport Beach (the "City') of the
proceeds of the City of Newport Beach Variable Rate Demand Revenue Bonds (Hoag Memorial
Hospital Presbyterian), 1999 Series A, B and C; and
WHEREAS, all acts and things necessary to constitute this Supplement No. 13 a
valid supplemental indenture and agreement according to its terms have been done and performed,
and the Corporation has duly authorized the execution and delivery hereof and of the Obligation
issued hereby;
• NOW, THEREFORE, in consideration of the premises, of the acceptance by the
Master Trustee of the trusts hereby created, and of the giving of consideration for and acceptance of
the Obligation issued hereunder by the Holder thereof, the Corporation covenants and agrees with
the Master Trustee for the benefit of the Holder from time to time of the Obligation issued hereby,
as follows:
•
Section 1. Definitions. Unless otherwise required by the context, all terms used
herein which are defined in the Master Indenture shall have the meanings assigned to them therein,
except as set forth below:
"Agreement' shall mean the Loan Agreement, dated as of December 1, 1999, by and
between the City and the Corporation and relating to the issuance of the Bonds, and when amended
or supplemented, such Agreement as amended or supplemented.
`Bond Indenture" shall mean the Indenture, dated as of December 1, 1999, by and
between the City and the Bond Trustee and relating to the Bonds, and when amended or
supplemented, such Indenture as amended or supplemented.
cassCi:254590s
Bonds
i`Bond" or "Bonds" shall mean the City of Newport Beach Variable Rate Demand
Revenue Bonds (Hoag Memorial Hospital Presbyterian), 1999 Series A, B and C, issued under the
Bond Indenture.
"Bond Trustee" shall mean Norwest Bank Minnesota, National Association, as
trustee, a banking corporation organized and existing under the laws of the State of California, and
any successor to its duties under the Bond Indenture.
"City shall mean the City of Newport Beach, California.
"Obligation No. 13" shall mean the Obligation issued pursuant hereto.
• No. 13. "Supplement No. 13" shall mean this Supplemental Master Indenture for Obligation
Section L 1 Inert 7,pretation
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the neuter, masculine or feminine
gender, as appropriate.
(b) Headings of sections herein and the table of contents hereof are solely for
convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
Section 12 -Content of Certi&-ales and Opinions. Every certificate or opinion
provided for herein with respect to compliance with any provision hereof shall include (1) a
statement that the person making or giving such certificate or opinion has read such provision and
the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the certificate or opinion is based; (3) a statement that, in
the opinion of such person, he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion with respect to the subject matter referred
to in the instrument to which his signature is affixed; and (4) a statement as to whether, in the
opinion of such person, such provision has been complied with.
• Any such certificate or opinion made or given by an officer of the Corporation may
be based, insofar as it relates to legal, accounting or hospital matters, upon a certificate or opinion of
nOCSSC1:254590.5 _ ..
or representation by counsel, an accountant or a management consultant, unless such officer knows,
• or m the exercise of reasonable care should have known, that the certificate, opinion or
representation with respect to the matters upon which such certificate or statement may be based, as
aforesaid, is erroneous. Any such certificate or opinion made or given by counsel, an accountant or
a management consultant may be based, insofar as it relates to factual matters (with respect to which
information is in the possession of the Corporation) upon a certificate or opinion of or
representation by an officer of the Corporation, unless such counsel, accountant or management
consultant knows, or in the exercise of reasonable care should have known, that the• certificate or
opinion or representation with respect to the matters upon which such person's certificate or opinion
or representation may be based, as aforesaid, is erroneous. The same officer of the Corporation, or
the same counsel or accountant or management consultant, as the case may be, need not certify to
all of the matters required to be certified under any provision of this Supplement No. 13, but
different officers, counsel, accountants or management consultants may certify to different matters,
respectively.
Section 2. Issuance of Obligation No. 13. There is hereby created and authorized to
be issued an Obligation of the Corporation in an aggregate principal amount one "hundred twenty-
five million dollars ($125,000,000). This Obligation shall be dated as of December 1, 1999, shall be
designated "Hoag Memorial Hospital Presbyterian Obligation No. 13" and shall be payable in such
amounts, at such times and in such manner and shall have such other terms and provisions as are set
forth in the form of Obligation No. 13 as provided in Section 11 hereof.
The aggregate principal amount of Obligation No. 13 is limited to one hundred
•twenty-five million dollars ($125,000,000), except for any Obligation No. 13 authenticated and
delivered in lieu of another Obligation No. 13 as provided in Section 6 hereof, with respect to any
Obligation No. 13 mutilated, destroyed, lost or stolen or, subject to the provisions of Section 5 of
this Supplement No. 13, upon transfer of registration of Obligation No. 13.
•
(a) Principal of and interest and any applicable redemption premium on
Obligation No. 13 are payable in any coin or currency of the United States of America which on the
payment date is legal tender for the payment of public and private debts. Except as provided in
subsection (b) of this Section with respect to credits, and Section 4 hereof regarding prepayment,
payments on the principal of and premium, if any, and interest on Obligation No. 13 shall be made
at the times and in the amounts specified in Obligation No. 13 by the Corporation depositing the
same with or to the account of the Bond Trustee at or prior to the opening of business on the day
such payments shall become due or payable (or the next succeeding business day if such date is a
Saturday, Sunday or bank holiday in the city in which the principal corporate trust office of the
Bond_ Trustee is located), and giving notice to the Master Trustee and the Bond Trustee of each
payment of principal, interest or premium on Obligation No. 13, specifying the amount paid and
identifying such payment as a payment on Obligation No. 13.
(b) The Corporation shall receive credit for payment on Obligation No. 13, in
addition to any credits resulting from payment or prepayment from other sources, as follows:
DOCSSCi254590.5
(i) On installments of interest on Obligation No. 13 in an amount equal
• to moneys deposited in the Interest Account created under the Bond Indenture to the extent
such amounts have not previously been credited against payments on Obligation No. 13;
(ii) On installments of principal of Obligation No. 13 in an amount equal
to moneys deposited in the Principal Account created under the Bond Indenture to the extent
such amounts have not previously been credited on Obligation.No. 13;
(iii) On installments of principal and interest, respectively, on Obligation
No. 13 in an amount equal to the principal amount of Bonds for the payment at maturity or
redemption of which sufficient amounts (as determined by Section 10.03 of the Bond
Indenture) in cash or Investment Securities (as defined in the Bond Indenture) are on deposit
as provided in Section 10.03 of the Bond Indenture to the extent such amounts have not
been previously credited against payments on Obligation No. 13, and the interest on such
Bonds from and after the date fixed for payment at maturity or redemption thereof. Such
credits shall be made against the installments of principal of and interest on Obligation No.
13 which would have been used, but for such call for redemption, to pay-principal of and
interest on such Bonds when due at maturity; and
(iv) On installments of principal and interest, respectively, on Obligation
No. 13 in an amount equal to the principal amount of Bonds acquired by the Corporation
and surrendered to the Bond Trustee for cancellation or purchased by the Bond Trustee and
canceled, and the interest on such Bonds from and after the date interest thereon has been
• paid prior to cancellation. Such credits shall be made against the installments of principal of
and interest on Obligation No. 13 which would have been used, but for such cancellation, to
pay principal of and interest on such Bonds when due.
(c) If a Liquidity Facility (as defined. in the Bond Indenture) is not in effect or, if
in effect, the Liquidity Facility Provider (as defined in the Bond Indenture) is not performing
thereunder, the Corporation shall pay all amounts necessary to purchase Bonds in accordance with
Sections 4.06, 4.07 and 4.08 of the Bond Indenture, at the times and in the amounts specified in said
sections.
(a) So long as all amounts which have become due under Obligation No. 13
have been paid, the Corporation shall have the right, at any time and from time to time, to pay in
advance and in any order of due dates all or part of the amounts to become due under Obligation '
No. 13. Prepayments may be made by payments of cash or surrender of Bonds, as contemplated by
subsections 3(b) (iii) and (iv) hereof. All such prepayments (and the additional payment of any
amount necessary to pay the applicable premium, if any, payable upon the redemption of Bonds)
shall be deposited and applied in the manner and subject to the terms and conditions set forth in the
Bond Indenture. Notwithstanding any such prepayment or surrender of Bonds, as long as any
Bonds remain outstanding (as defined in the Bond Indenture) or any additional payments required to
be made hereunder remain unpaid, the Corporation shall not be relieved of its obligations hereunder.
• (b) Prepayments made under subsection (a) of this Section shall be credited
against amounts to become due on Obligation No. 13 as provided in Section 3 hereof.
DOCSSCI :254590.5
L
a Except as provided in subsection (b) of this Section, so long as any Bond
remains outstanding, Obligation No. 13 shall consist of a single Obligation without coupons,
registered as to principal and interest in the name of the Bond Trustee, and no transfer of Obligation
No. 13 shall be registered under the Master Indenture except for transfers to a successor Bond
Trustee.
(b) Upon the principal of all Obligations then Outstanding being declared
immediately due and payable upon and during the continuance of an Event of Default, Obligation
No. '13 may be transferred, if and to the extent the Bond Trustee requests that the restrictions of
subsection (a) of this Section on transfers be terminated.
S-ection_ 6. M 'la ' . Dcstruc io . Loss and Theft of ILO. 13. If
(i) Obligation No. 13 is surrendered to the Master Trustee in a mutilated condition, or the
Corporation and the Master Trustee receive evidence to their satisfaction of the destruction, loss or
theft of Obligation No. 13, and (ii) there is delivered to the Corporation and the Master Trustee such
security or indemnity as may be required by them to hold them harmless, then, in the absence of
proof satisfactory to the Corporation and the Master Trustee that Obligation No. 13 has been
acquired by a bona fide purchaser and upon the Holder paying the reasonable expenses of the
Corporation and the Master Trustee, the Corporation shall cause to be executed and the Master
Trustee shall authenticate and deliver, in exchange for such mutilated Obligation No. 13 or in lieu of
• such destroyed, lost or stolen Obligation No. 13, a new Obligation No. 13 of like principal amount,
date and tenor. If any such mutilated, destroyed, lost or stolen Obligation No. I3 has become or is
about to become due and payable, Obligation No. 13 may be paid when due instead of delivering a
new Obligation No. 13.
Section 7. Execution and uffiadcation of Oblieation No 13. Obligation No. 13
shall be executed and attested for and on behalf of the Corporation by its duly authorized officers.
The signatures of either or both of such officers may be mechanically or photographically
reproduced on Obligation No. 13. If any officer whose signature appears on Obligation No. 13
ceases to be such officer before delivery thereof, such signature shall remain valid and sufficient for
all purposes as if such officer had remained in office until such delivery. Obligation No_ 13 shall be
manually authenticated by an authorized officer of the Master Trustee, without which authentication
Obligation No. 13 shall not be entitled to the benefits hereof.
Section g. Right to Redeem. Obligation No. 13 shall be subjectto redemption, in -
whole or in part, prior to maturity, at the times and in the amounts specified in the Bonds issued
under the Bond Indenture and in the manner provided herein; provided that in no event shall
Obligation No. 13 be redeemed unless a corresponding amount of Bonds is also redeemed.
Section 9. Partial Redm lion of Obligation No. 13. Upon the selection and call for
redemption, and the surrender of, Obligation No. 13 for redemption in part only, the Corporation
shall cause to be executed and the Master Trustee shall authenticate and deliver to, upon the written
• order of, the Holder thereof, at the expense of the Corporation, a new Obligation No. 13 in principal
amount equal to the unredeemed portion of Obligation No. 13, which new Obligation No. 13 shall
be a fully registered Obligation without coupons:
DOCSSCi:254590.5
The Corporation may agree with the Holder of Obligation No. 13 that such Holder
may, in lieu of surrendering the Obligation for a new fully registered Obligation without coupons,
endorse on the Obligation a notice of such partial redemption, which notice shall set forth, over the
signature of such Holder, the payment date, the principal amount redeemed and the principal
amount remaining unpaid. Such partial redemption shall be valid upon payment of the amount
thereof to the registered owner of Obligation No. 13" and the Obligated Group and the Master
Trustee shall be fully released and discharged from all liability to the extent of such payment
irrespective of whether such endorsement shall or shall not have been made upon the reverse of
Obligation No. 13 by the Holder thereof and irrespective of any error or omission in such
endorsement.
Section 10. Affect of Call for Redemption. On the date designated for redemption
by notice given as herein provided, Obligation No. 13 shall become and be due and payable at the
redemption price provided for redemption of Obligation No. 13 on such date: If on the date fixed
for redemption moneys for payment of the redemption price and accrued interest are held by the
Master Trustee, interest on Obligation No. 13 shall cease to accrue and Obligation No. 13 shall
cease to be entitled to any benefit or security under the Master Indenture except the right to receive
payment from the moneys held by the Master Trustee or the paying agents and the amount of
Obligation No. 13 so called forredemption shall be deemed paid and no longer outstanding.
Section 11. Form of Obligation No. 13. Obligation No. 13 shall be in substantially
the following form with such necessary and appropriate omissions, insertions and variations as are
permitted or required hereby or by the Master Indenture and are approved by those officers
• executing such Obligation on behalf of the Corporation and execution thereof by such officers shall
constitute conclusive evidence of such approval.
U
DOCSSC1:254590.5
[Form of Obligation No. 13]
• HOAG MEMORIAL HOSPITAL PRESBYTERIAN
OBLIGATION NO. 13
$125,000,000
KNOW ALL BY THESE PRESENTS that HOAG MEMORIAL HOSPITAL
PRESBYTERIAN (the "Corporation'), a nonprofit public benefit corporation organized and
existing under the laws of the State of California, for value received hereby acknowledges itself
obligated to, and promises to pay to NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as trustee (the `Bond Trustee) under the indenture dated as of December 1, 1999
(the `Bond Indenture'), between the Bond Trustee thereunder and the City of Newport Beach (the
"City ), relating to the City of Newport Beach Variable Rate Demand Revenue Bonds (Hoag
Memorial Hospital Presbyterian), 1999 Series A, B and C (the `Bonds'), and any successor trustee
under the Bond Indenture, or registered assigns, the principal sum of ONE HUNDRED TWENTY -
FIVE MILTON DOLLARS AND NO CENTS ($125,000,000.00), and to pay interest on the unpaid
balance of said sum from the date hereof on the dates and in the manner hereinafter described.
This Obligation No. 13 is a single Obligation of the Corporation limited to one
hundred twenty-five million dollars ($125,000,000) in principal amount (except as provided in the
Master Indenture hereinafter identified), designated as "Hoag Memorial Hospital Presbyterian,
Obligation No. 13" ( "Obligation No. 13" and, together with all other obligations issued under the
• Master Indenture hereinafter identified, "Obligations'), issued under and pursuant to the
Supplemental Master Indenture for Obligation No. 13, dated as of December 1, 1999 (the
"Supplemental Indenture'), supplementing and amending the Master Trust Indenture, dated as of
October 1, 1984, as supplemented or amended, between the Corporation and Norwest Bank
Minnesota, National Association, as successor trustee (the "Master Trustee'). The Master
Indenture, as supplemented and amended in accordance with its terms, is hereinafter called the
"Master Indenture."
Principal hereof, interest hereon and any applicable redemption premium, are
payable in any coin or currency of the United States of America which on the payment date is legal
tender for the payment of public and private debts, on the dates specified and in an amount equal to
the amount necessary for the Bond Trustee to make the transfers and deposits required pursuant to
Section 5.02 of the Bond Indenture.
The Corporation shall receive credit for payment on Obligation No. 13, in addition_ .
to any credits resulting from payment or prepayment from other sources, as follows: (i) on
installments of interest of Obligation No. 13 in an amount equal to moneys deposited in the Interest
' Account created under the. Bond Indenture to the extent such amounts have not previously been
credited against payments on Obligation No. 13; (ii) on installments of principal of Obligation
No. 13 in an amount equal to moneys deposited in the Principal Account created under the Bond
Indenture to the extent such amounts have not previously been credited against payments on
Obligation No. 13; (iii) on installments of principal and interest, respectively, on Obligation No. 13
• in an amount equal to principal amount of Bonds for which sufficient amounts (as determined by
Section 10.03 of the Bond Indenture) are on deposit as provided in Section 10.03 of the Bond
DOCSSC1:454590.5 7
Indenture to the extent such amounts have previously not been credited against payments on
•Obligation No. 13 and the interest on such Bonds from and after the date fixed for payment at
maturity or redemption; and (iv) on installments of principal and interest, respectively, on
Obligation No. 13 in an amount equal to the principal amount of Bonds acquired by the Corporation
and surrendered to the Bond Trustee for cancellation or purchased by the Bond Trustee and
canceled and the interest on such Bonds from and after the date interest thereon has been paid prior
to cancellation; provided, however, that cancellation of a Bond maturing or required to be redeemed
on one date may not be credited against a principal installment due on Obligation No. 13 which
would be used, but for the cancellation of such Bond, to retire a Bond having a different maturity or
mandatory redemption date.
Upon payment by the Corporation of a sum, in cash or Investment Securities (as
defined in the Bond Indenture), or both, sufficient, together with any other cash and Investment
Securities (as defined in the Bond Indenture) held by the Bond Trustee and available for such
purpose, to cause all outstanding Bonds to be deemed to have been paid within the meaning of
Article X of the Bond Indenture and to pay all other amounts referred to in Article X of the Bond
Indenture, accrued and to be accrued to the date of discharge of the Bond Indenture, Obligation
No. 13 shall be deemed. to have been paid and to be no longer outstanding under the Bond
Indenture.
If a Liquidity Facility (as defined in the Bond Indenture) is not in effect or, if in
effect, the Bank is not performing thereunder, the Corporation shall pay all amounts necessary to
purchase Bonds in accordance with Sections 4.06, 4.07 and 4.08 of the Bond Indenture, at the times
• and in the amounts specified in said sections.
Copies of the Master Indenture and the Supplemental Indenture are on file at the
corporate trust office of the Master Trustee, in Los Angeles, California, and reference is hereby
made to the Master Indenture for the provisions, among others, with respect to the nature and extent
of the rights of the holders of Obligations issued under the Master Indenture, the terms and
conditions on which, and the purposes for which Obligations are to be issued and the rights, duties
and obligations of the Corporation and the Master Trustee under the Master Indenture, to all of
which the holder hereof, by acceptance of this Obligation No. 13, assents.
The Master Indenture permits the issuance of additional Obligations under the
Master Indenture to be secured by the provisions of the Master Indenture, all of which, regardless of
the times of issue or maturity, are to be of equal rank without preference, priority or distinction of
any Obligations issued under the Master Indenture over any other such Obligations except as
expressly provided or permitted in the Master Indenture.
To the extent permitted by and as provided in the Master Indenture, modifications or
changes of the Master Indenture, of any indenture supplemental thereto, and. of the rights and
obligations of the Corporation and of the holders of Obligations in any particular maybe made by
the execution and delivery of an indenture or indentures supplemental to the Master Indenture or
any supplemental indenture. Certain modifications or changes which would affect the rights of the
holder of this Obligation No. 13 may be made only with the consent of the holders of not less than a
• majority in aggregate principal amount of Obligations then outstanding under the Master Indenture.
No modification or change shall be made which will (i) extend the stated maturity of or time for
paying interest on any Obligation or reduce the principal amount of or the redemption premium or
DOCSSC1:754590.5 _ 8
rate of interest payable on any Obligation without the consent of the holder of such Obligation; (ii)
• modify, alter, amend, add to or rescind any of the terms or provisions contained in Article VI of the
Master Indenture (relating to the acceleration of the Obligations) in any manner which would
materially and adversely affect the interests of holders of Obligations or any of them without the
consent of the holders of all Obligations then outstanding; or (iii) reduce the aggregate principal
amount of Obligations then outstanding the consent of the holders of which is required to authorize
such modifications or changes without the consent of the holders of all Obligations then
outstanding. Any such consent by the holder of this Obligation No. 13 shall be conclusive and
binding upon such holder and all future holders and owners hereof irrespective of whether or not
any notation of such consent is made upon this Obligation No. 13, unless such consent is rendered
as provided in the Master Indenture.
In the manner and, with the effect provided in the Supplemental Indenture,
Obligation No. 13 will be subject to redemption prior to maturity at the times and in the amounts
specified in the Bonds issued under the Bond Indenture.
Any redemption, either in whole or in part, shall be made upon notice thereof in the
manner and upon the terms and conditions provided in the Supplemental. Indenture. If this
Obligation No. 13 shall have been duly called for redemption and payment of the redemption price,
together with interest accrued thereon to the date fixed for redemption, shall have been made or
provided for, as more fully set forth in the Supplemental Indenture, interest on this Obligation
No. 13 shall cease to accrue from the date fixed for redemption, and from and after such date, this
Obligation No. 13 shall be deemed not to be outstanding, as defined in the Master Indenture, and
• shall no longer be entitled to the benefits of the Master Indenture, and the holder hereof shall have
no rights in respect of this Obligation No. 13 other than payment of the redemption price, together
with accrued interest to the date fixed for redemption.
Upon the occurrence of certain "Events of Default" (as defined in the Master
Indenture), the principal of all Obligations then outstanding maybe declared, and thereupon shall
become, due and payable as provided in the Master Indenture.
The holder of this Obligation No. 13 shall have no right to enforce the provisions of
the Master Indenture, or to institute any action to enforce the covenants therein, or to take any action
with respect to any default under the Master Indenture, or to institute, appear in or defend any suit or
other proceeding with respect to any default under the Master Indenture, or to institute, appear in or
defend any suit or other proceeding with respect thereto, except as provided in the Master Indenture.
Obligation No. 13 is issuable only as a registered Obligation without coupons.
Unless the principal of all Obligations then outstanding has been declared
immediately due and payable, no transfer of this Obligation No. 13 shall be permitted except for
transfers to a successor trustee under the Bond Indenture. This Obligation No. 13 shall be registered
on the register to be maintained by the Master Trustee as registrar for the Corporation for that
purpose at the principal corporate trust office of the Master Trustee and this Obligation No. 13 shall
be transferable only upon presentation of this Obligation No. 13 at said office by the holder or by
• his duly authorized attorney and subject to the limitations, if any, set forth in the Supplemental
Indenture. Such transfer shall be without charge to the holder hereof, but any taxes or other
governmental charges required to be paid with respect to the same shall be paid by the holder
DMSCI254590.5 .. 9
requesting such transfer as a condition precedent to the exercise of such privilege. Upon any such
• transfer, the Corporation shall execute and the Master Trustee shall authenticate and deliver in
exchange for this Obligation No. 13 a new registered Obligation without coupons, registered in the
name of the transferee.
Prior to due presentment hereof for registration of transfer, the Corporation, the
Master Trustee, any paying agent and any registrar with respect to this Obligation No. 13 may deem
and treat the person in whose name this Obligation No. 13 is registered as the absolute owner hereof
for all purposes; and neither the Corporation, any paying agent, the Master Trustee` nor any
Obligation registrar shall be affected by any notice to the contrary. All payments made to the
registered owner hereof shall be valid, and, to the extent of the sum or sums so paid, effectual to
satisfy and discharge the liability for moneys payable on this Obligation No. 13.
No covenant or agreement contained in this Obligation No. 13 or the Master
Indenture shall be deemed to be a covenant or agreement of any officer, agent or employee of the
Corporation or of the Master Trustee in his individual capacity, and no incorporator, member,
officer or member of the governing board of the Corporation shall be liable personally on this
Obligation No. 13 or be subject to any personal liability or accountability by reason of the issuance
of this Obligation No. 13.
This Obligation No. 13 shall not be entitled to any benefit under the Master
Indenture, or be valid or become obligatory for any purpose, until this Obligation No. 13 shall have
been manually authenticated by the execution by an authorized officer of the Master Trustee, or its
• successor as Master Trustee, of the Certificate of Authentication inscribed hereon.
•
DOCSSC1:754590S 10
•
C�
•
IN WITNESS WHEREOF, the Corporation has caused this Obligation No. 13 to be
executed in its name and on its behalf and attested by the manual signature of its duly authorized
officers all as of December 1, 1999.
[SEAL]
ATTEST:
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
0
Assistant Secretary
Executive Vice President
MASTER TRUSTEES AUTHENTICATION CERTIFICATE
The undersigned Master Trustee hereby certifies that this Obligation No. 13 is one
of the Obligations described in the within - meritioned Master Indenture.
Dated:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Master Trustee
Its Authorized Signatory
Section 12. IDg]ivery of Obligation No 13. (a) Upon the execution and delivery of
this Supplement No. 13, the Corporation shall execute and deliver to the Master Trustee, and the
Master Trustee shall authenticate and deliver to the Bond Trustee, Obligation No. 13.
(b) Prior to the delivery by the Master Trustee of Obligation No. 13, there shall
be filed with or delivered to the Master Trustee:
DMSSC1:2545%!5
(1) a request and authorization to the Master Trustee on behalf of the
Corporation and signed by an Authorized Representative to authenticate and
deliver Obligation No. 13 to the Bond Trustee;
(2) an executed or certified copy of the Agreement; and
(3) an executed or certified copy of the Bond Indenture.
Section 13. Notification to Master Trustee of Certain Events. The Corporation
covenants to famish or cause to be furnished to the Master Trustee:
(1) Notice of any redemption of all or a portion of the Bonds;
(2) Notice of any event of default under the Bond Indenture;
(3) Notice of any payment or deposit made with respect to the Bonds pursuant to
Article X of the Bond Indenture;
(4) Notice of any amendments to the Agreement or the Bond Indenture.
Section 14. ,Snwiflcation of [Ise d . The proceeds from the issuance of
the Bonds under the Bond Indenture shall be used for the purposes described in the Bond Indenture.
Section 15. Tax - Exempt Status. The Corporation agrees on behalf of itself and each
other Member of the Obligated Group that is an organization exempt from federal-income taxation
under Section 501(c)(3) of the Code at the time it becomes a Member of the Obligated Group,
respectively, that so long as all amounts due or to become due on any Bond have not been fully paid
to the Holder thereof, it will not take any action or suffer any action to be taken by others, including
any action that would result in the alteration or loss of its status as such a tax - exempt organization,
which would cause interest payable on any Bond to become includable in gross income under the
Code.
• Section 16. Accelerati on. Pursuant to Section 6.02(a) of the Master Indenture, upon
the occurrence and during the continuation of an Event of Default under the Master Indenture, the
Holders of not less than 50% in aggregate principal amount of Obligation No. 13 may request the
Master Trustee to declare Obligation No. 13 immediately due and payable, and the Master Trustee
shall, by notice to the Members of the Obligated Group, declare Obligation No. 13 immediately due
and payable.
Section 17• Ratification of Master Indenture. As supplemented hereby, the Master
Indenture is in all respects ratified and confirmed and the Master Indenture as so supplemented
hereby shall be read, taken and construed as one and the same instrument.
Section 18• Severbilitv. If any provision of this Supplement No. 13 shall be held
or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case
and any jurisdiction or jurisdictions or in all jurisdictions, or in all cases, because it conflicts with
any other provision or provisions hereof or any constitution, statute, rule or public policy, or for any
other reason, such circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering any other provision
or provisions herein contained invalid, inoperative or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses, sections or
subsections contained in this Supplement No. 13 shall not affect the remaining portions of this
• Supplement No. 13 or any part thereof.
DOCSSC7254590.5 12
. This Supplement No. 13 may be executed in counterparts, each off which h shall be Iann oonginal and all of which shall constitute one instrument. y
•
lion 20. Governing Law. This Supplement No. 13 shall be governed by and
construed in accordance with the laws of the State of California.
•
DOCSSC];254590.5 - 13
•IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf and attested by its duly authorized officers and to evidence its
acceptance of the trusts hereby created the Master Trustee has caused these presents to be signed in
its name and on its behalf by one of its duly authorized officers, all as of the day and year first
above written.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
By 'D l —I Im- 70'-&
Executive Vice President
ATTEST:
By a ?w i 04-0 r .
Assistant Secretary
is NORWEST BANK
ASSOCIATION,
as Master Trustee
•
DOCSSC1:254590.4
MINNESOTA, NATIONAL
�Q"� � /r /
Authorized Representative
EXHIBIT NO.2
Supplemental Master
Indenture for
Obligation No. 14
(executed by the Corporation and
the Master Trustee)
(BC)
U
n
U
•
EXECUTION COPY
SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION NO. 14
DOCSSC13564613
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Master Trustee
Dated as of August 1, 2005
Supplementing the
Master Trust Indenture
Dated as of October 1, 1984
Securing the City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
TABLE OF CONTENTS
• Page
Section1. Definitions ..................................................................................... ............................... 1
Section1.1. Interpretation .............................................................................. ... ............................. 2
Section 1.2. Content Of Certificates And Opinions ....................................... ............................... 3
0
Section 2. Issuance Of Obligation No. 1 4 ...................................................... ............................... 3
Section 3. Payments On Obligation No. 14; Credits ..................................... ............................... 4
Section 4. Prepayment Of Obligation No. 14 ................................................ ............................... 5
Section S. Registration, Number, Negotiability And Transfer Of Obligation No. 14 .................. 5
Section 6. Mutilation, Destruction, Loss And Theft Of Obligation No. 1 4 ... ............................... 5
Section 7. Execution And Authentication Of Obligation No. 14 .................. ............................... 6
Section8. Right To Redeem .......................................................................... ............................... 6
Section 9. Partial Redemption Of Obligation No. 14 .................................... ............................... 6
Section 10. Effect Of Call For Redemption ................................................... ............................... 6
Section 11. Form Of Obligation No. 1 4 ......................................................... ............................... 6
Section 12. Delivery Of Obligation No 14 ..:............................................... ............................... 11
• Section 13. Bond Insurer Covenants..; ......................................................................................... 11
Section 14. Notification To Master Trustee Of Certain Events ................... ............................... I I
Section 15.
Specification Of Use Of Proceeds ............................................
............................... 12
Section 16.
Tax- Exempt Status ....................................................................
............................... 12
Section17.
Acceleration ..............................................................................
............................... 12
Section 18.
Ratification Of Master Indenture ................................................
........:....................12
Section19.
Severability ...............................................................................
............................... 12
Section20.
Counterparts ..............................................................................
............................... 12
Section21.
Governing Law .........................................................................
............................... 12
DOCSSCt35WI3
THIS SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION
NO. 14 made and entered into as of August 1, 2005 ("Supplement No. 14'), among HOAG
MEMORIAL HOSPITAL PRESBYTERIAN, a California nonprofit public benefit corporation (the
is "Corporation "), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banldng
association, as successor trustee (the "Master Trustee) under the Master Trust Indenture, dated as
of October 1, 1984 (the "Master Indenture "),
WITNESSETH:
WHEREAS, the parties have entered into the Master Indenture which provides for
the issuance by the Corporation of its Obligations thereunder upon the Corporation and the Master
Trustee entering into an indenture supplemental to the Master Indenture;
WHEREAS, the Corporation desires to issue its Obligation hereunder to evidence its
obligation arising from the loan to the Corporation by the City of Newport Beach (the "City) of the
proceeds of the City . of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, 2005B and 2005C;
WHEREAS, all acts and things necessary to constitute this Supplement No. 14 a
valid supplemental indenture and agreement according to its terms have been done and performed,
and the Corporation has duly authorized the execution and delivery hereof and of the Obligation
issued hereby,
•NOW, THEREFORE, in consideration of the premises, of the acceptance by the
Master Trustee of the trusts hereby created, and of the giving of consideration for and acceptance of
the Obligation issued hereunder by the Holder thereof, the Corporation covenants and agrees with
the Master Trustee for the benefit of the Holder from time to time of the Obligation issued hereby,
as follows:
U
Section 1. Definitions. Unless otherwise required by the context, all terms used
herein which are defined in the Master Indenture shall have the meanings assigned to them therein,
except as set forth below:
Aweement
"Agreement" shall mean the Loan Agreement, dated as of August 1, 2005, by and
between the City and the Corporation and relating to the issuance of the Bonds, and when amended
or supplementedi such Agreement as amended or supplemented.
Bond Indenture
"Bond Indenture" shall mean the Indenture, dated as of August 1, 2005, by and
between the City and the Bond Trustee and relating to the Bonds, and when amended or
supplemented, such Bond Indenture as amended or supplemented.
DOCSSC13564613
Bond Insurer
• `Bond Insurer" means Financial Guaranty Insurance Company, a New York stock
insurance company, or any successor thereto.
Bond Insurance Poli cy
"Bond Insurance Policy" means that certain municipal bond new issue insurance
policy issued by the Bond Insurer with respect to the Bonds, which Bond Insurance Policy
guarantees the payment when due of the principal of and interest on the Bonds, as provided therein.
Bonds
"Bond" or `Bonds" shall mean the City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian), Series 2005A, 2005B and 2005C, issued under the Bond
Indenture.
Bond Trustee
"Bond Trustee" shall mean Wells Fargo Bank, National Association, as trustee, a
national banking association organized and existing under the laws of the United States of America,
and any successor to its duties under the Bond Indenture.
City
• "City" shall mean the City of Newport Beach, California.
Insurance Default
"husurance Default" means a default by the Bond Insurer with respect to any of its
obligations under the Bond Insurance Policy.
Obligation No. 14
"Obligation No. 14" shall mean the Obligation issued pursuant hereto.
Snlement No. 14
No. 14.
"Supplement No. 14" shall mean this Supplemental Master Indenture for Obligation -
Section I.I. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the neuter, masculine or feminine
gender, as appropriate.
•
DOCSSC13564613 2
(b) Headings of sections herein and the table of contents hereof are solely for
convenience of reference, do not constitute a part hereof and shall not affect the meaning,
• construction or effect hereof.
Section 1.2. Content of Certificates and Opinions. Every certificate or opinion
provided for herein with respect to compliance with any provision hereof shall include (1) a
statement that the person making or giving such certificate or opinion has read such provision and
the definitions herein relating thereto; (2) a brief statement as to the nature and, scope of the
examination or investigation upon which the certificate or opinion is based; (3) a statement that, in
the opinion of such person, he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion with respect to the subject matter referred
to in the instrument to which his signature is affixed; and (4) a statement as to whether, in the
opinion of such person, such provision has been complied with.
Any such certificate or opinion made or given by an officer of the Corporation may
be based, insofar as it relates to legal, accounting or hospital matters, upon a Certificate or opinion of
or representation by counsel, an accountant or a management consultant, unless such officer knows,
or in the exercise of reasonable care should have known, that the certificate, opinion or
representation with respect to the matters upon which such certificate or statement may be based, as
aforesaid, is erroneous. Any such certificate or opinion made or given by counsel, an accountant or
a management consultant may be based, insofar as it relates to factual matters (with respect to which
information is in the possession of the Corporation) upon a certificate or opinion of or
representation by an officer of the Corporation, unless such counsel, accountant or management
consultant knows, or in the exercise of reasonable care should have known, that the certificate or
• opinion or representation with respect to the matters upon which such person's certificate or opinion
or representation maybe based, as aforesaid, is erroneous. The same officer of the Corporation, or
the same counsel or accountant or management consultant, as the case may be, need not certify to
all of the matters required to be certified under any provision of this Supplement No. 14, but
different officers, counsel, accountants or management consultants _may certify to different matters,
respectively.
•
Section 2. Issuance of Obligation No. 14. There is hereby created and authorized to
be issued an Obligation of the Corporation in an aggregate principal amount two hundred million
dollars ($200,000,000). This Obligation shall be dated as of August 1, 2005, shall be designated
"Hoag Memorial Hospital Presbyterian Obligation No. 14" and shall be payable in such amounts, at
such times and in such manner and shall have such other terms and provisions as are set forth in the
form of Obligation No. 14 as provided in Section 11 hereof.
The aggregate principal amount of Obligation No. 14 is limited to two hundred
million dollars ($200,000,000), except for any Obligation No. 14 authenticated and delivered in lieu
of another Obligation No. 14 as provided in Section 6 hereof, with respect to any Obligation No. 14
mutilated, destroyed, lost or stolen or, subject to the provisions of.Section 5 of this Supplement No.
14, upon transfer of registration of Obligation No. 14.
DOCSSCI'3564613
Section 3. Pavments on Obligation No. 14• Credits
• (a) Principal of and interest and any applicable redemption premium on
Obligation No. 14 are payable in any coin or currency of the United States of America which on the
payment date is legal tender for the payment of public and private debts. Except as provided in
subsection (b) of this Section with respect to credits, and Section 4 hereof regarding prepayment,
payments on the principal of and premium, if any, and interest on Obligation No. 14 shall be made
at the times and in the amounts specified in Obligation No. 14 by the Corporation depositing the
same with or to the account of the Bond Trustee at or prior to the opening of business on the day
such payments shall become due or payable (or the next succeeding business day if such date is a
Saturday, Sunday or bank holiday in the city in which the principal corporate trust office of the
Bond Trustee is located), and giving notice to the Master Trustee and the Bond Trustee of each
payment of principal, interest or premium on Obligation No. 14, specifying the amount paid and
identifying such payment as a payment on Obligation No. 14.
(b) The Corporation shall receive credit for payment on Obligation No. 14, in
addition to any credits resulting from payment or prepayment from other sources, as follows:
(i) On installments of interest on Obligation No. 14 in an amount equal
to moneys deposited in the Interest Account created under the Bond Indenture to the extent
such amounts have not previously been credited against payments on Obligation No. 14;
(ii) On installments of principal of Obligation No. 14 in an amount equal
• to moneys deposited in the Principal Account created under the Bond Indenture to the extent
such amounts have not previously been credited on Obligation No. 14;
(iii) On installments of principal and interest, respectively, on Obligation
No. 14 in an amount equal to the principal amount of Bonds for the payment at maturity or
redemption of which sufficient amounts (as determined by Section 10.03 of the Bond
Indenture) in cash or Investment Securities (as defined in the Bond Indenture) are on deposit
as provided in Section 10.03 of the Bond Indenture to the extent such amounts have not
been previously credited against payments on Obligation No. 14, and the interest on such
Bonds from and after the date fixed for payment at maturity or redemption thereof. Such
credits shall be made against the installments of principal of and interest on Obligation No.
14 which would have been used, but for such call for redemption, to pay principal of and
interest on such Bonds when due at maturity; and
(iv) On installments of principal and interest, respectively, on Obligation
No. 14 in an amount equal to the principal amount of Bonds acquired by the Corporation
and surrendered to the Bond Trustee for cancellation or purchased by the Bond Trustee and
canceled, and the interest on such Bonds from and after the date interest thereon has been
paid prior to cancellation. Such credits shall be made against the installments of principal of
and interest on Obligation No. 14 which would have been used, but for such cancellation, to
pay principal of and interest on such Bonds when due.
•(c) If a Liquidity Facility (as defined in the Bond Indenture) is not in effect or, if
in effect, the Liquidity Facility Provider (as defined in the Bond Indenture) is not performing
DOCSSCl:3564613
thereunder, the Corporation shall pay all amounts necessary to purchase Bonds in accordance with
Sections 4.06, 4.07, 4.08 and 4.09 of the Bond Indenture, at the times and in the amounts specified
• in said Sections.
Section 4. PrMayment of Obligation No. 14.
(a) . So long as all amounts which have become due under Obligation No. 14
have been paid, the Corporation shall have the right, at any time and from time to time, to pay in
advance and in any order of due dates all or part of the amounts to become due under Obligation
No. 14. Prepayments may be made by payments of cash or surrender of Bonds, as contemplated by
subsections 3(b) (iii) and (iv) hereof All such prepayments (and the additional payment of any
amount necessary to pay the applicable premium, if any, payable upon the redemption of Bonds)
shall be deposited and applied in the manner and subject to the terms and conditions set forth in the
Bond Indenture. Notwithstanding any such prepayment or surrender of Bonds, as long as any
Bonds remain outstanding (as defined in the Bond Indenture) or any additional payments required to
be made hereunder remain unpaid, the Corporation shall not be relieved of its obligations hereunder.
(b) Prepayments made under subsection (a) of this Section -shall be credited
against amounts to become due on Obligation No. 14 as provided in Section 3 hereof.
Section 5. Registration, Number. Negotiability and Transfer of Obligation No. 14.
(a) Except as provided in subsection (b) of this Section, so long as any Bond
remains outstanding, Obligation No. 14 shall consist of a single Obligation without coupons,
• registered as to principal and interest in the name of the Bond Trustee, and no transfer of Obligation
No. 14 shall be registered under the Master Indenture except for transfers to a successor Bond
Trustee.
•
(b) Upon the principal of all Obligations then Outstanding being declared
immediately due and payable upon and during the continuance of an Event of Default, Obligation
No. 14 may be transferred, if and to the extent the Bond Trustee requests that the restrictions of
subsection (a) of this Section on transfers be terminated.
Section 6. Mutilation. Destruction, Loss and Theft of Obligation No. 14. If
(i) Obligation No. 14 is surrendered to the Master Trustee in a mutilated condition, or the
Corporation and the Master Trustee receive evidence to their satisfaction of the destruction, loss or
theft of Obligation No. 14, and (ii) there is delivered to the Corporation and the Master Trustee such
security or indemnity as may be required by them to hold them harmless, then, in the absence of
proof satisfactory to the Corporation and the Master Trustee that Obligation No. 14 has been
acquired by a bona fide purchaser and upon the Holder paying the reasonable expenses of the
Corporation and the Master Trustee, the Corporation shall cause to be executed and the Master
Trustee shall authenticate and deliver, in exchange for such mutilated Obligation No. 14 or in lieu of
such destroyed, lost or stolen Obligation No. 14, a new Obligation No. 14 of like principal amount,
date and tenor.. If any such mutilated, destroyed, lost or stolen Obligation No. 14 has become or is
about to become due and payable, Obligation No. 14 may be paid when due instead of delivering a
new Obligation No. 14.
DOCSSC135WI3 5
Section 7. Execution and Authentication of Obligation No. 14. Obligation No. 14
shall be executed and attested for and on behalf of the Corporation by its duly authorized officer.
• The signature of such officer may be mechanically or photographically reproduced on Obligation
No. 14. If any officer whose signature appears on Obligation No. 14 ceases to be such officer
before delivery thereof, such signature shall remain valid and sufficient for all purposes as if such
officer had remained in office until such delivery. Obligation No. 14 shall be manually
authenticated by an authorized officer of the Master Trustee, without which authentication
Obligation No. 14 shall not be entitled to the benefits hereof.
Section 8. Right to Redeem. Obligation No. 14 shall be subject to redemption, in
whole or in part, prior to maturity, at the times and in the amounts specified in the Bonds issued
under the Bond Indenture and in the manner provided herein; provided that in no event shall
Obligation No. 14 be redeemed unless a corresponding amount of Bonds is also redeemed.
Section 9. Partial Redemption of Obligation No. 14. Upon the selection and call for
redemption, and the surrender of, Obligation No. 14 for redemption in part only, the Corporation
shall cause to be executed and the Master Trustee shall authenticate and deliver to, upon the written
order of, the Holder thereof, at the expense of the Corporation, a new Obligation No. 14 in principal
amount equal to the unredeemed portion of Obligation No. 14, which new Obligation No. 14 shall
be a fully registered Obligation without coupons.
The Corporation may agree with the Holder of Obligation No. 14 that such Holder
may, in lieu of surrendering the Obligation for a new fully registered Obligation without coupons,
endorse on the Obligation a notice of such partial redemption, which notice shall set forth, over the
• signature of such Holder, the payment date, the principal amount redeemed and the principal
amount remaining unpaid. Such partial redemption shall be valid upon payment of the amount
thereof to the registered owner of Obligation No. 14 and the Obligated Group and the Master
Trustee shall be fully released and discharged from all liability to the extent of such payment
irrespective of whether such endorsement shall or shall not have been made upon the reverse of
Obligation No. 14 by the Holder thereof and irrespective of any error or omission in such
endorsement.
U
Section 10. Effect of Call for Redemption. On the date designated for redemption
by notice given as herein provided, Obligation No. 14 shall become and be due and payable at the
redemption price provided for redemption of Obligation No. 14 on such date. If on the date fixed
for redemption moneys for payment of the redemption price and accrued interest are held by the
Master Trustee, interest on Obligation No. 14 shall cease to accrue and Obligation No. 14 shall
cease to be entitled to any benefit or security under the Master Indenture except the right to receive
payment from the moneys held by the Master Trustee or the paying agents and the amount of -
Obligation No. 14 so called for redemption shall be deemed paid and no longer outstanding.
Section 11. Form of Obligation No. 14. Obligation No. 14 shall be in substantially
the following form with such necessary and appropriate omissions, iiisertions and variations as are
permitted or required hereby or by the Master Indenture and are approved by the officer executing
such Obligation on behalf of the Corporation and execution thereof by such officer shall constitute
conclusive evidence of such approval.
DOCSSCI35WI.3 ,_ 6
[Form of Obligation No. 14]
• HOAG MEMORIAL HOSPITAL PRESBYTERIAN
OBLIGATION NO. 14
i 0II17</IIIIT</II111
KNOW ALL BY THESE PRESENTS that HOAG MEMORIAL HOSPITAL
PRESBYTERIAN (the "Corporation" ), a nonprofit public benefit corporation organized and
existing under the laws of the State of California, for value received hereby acknowledges itself
obligated to, and promises to pay to WELLS FARGO BANK, NATIONAL ASSOCIATION, as
trustee (the "Bond Trustee') under the indenture dated as of August 1, 2005 (the `Bond Indenture'),
between the Bond Trustee thereunder and the City of Newport Beach (the "City "), relating to the
City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005A, 2005B and 2005C (the "Bonds"), and any successor trustee under the Bond
Indenture, or registered assigns, the principal sum of TWO HUNDRED MILLION DOLLARS
($200,000,000.00), and to pay interest on the unpaid balance of said sum from the date hereof on the
dates and in the manner hereinafter described.
This Obligation No. 14 is a single, Obligation of the Corporation limited to two
hundred million dollars ($200,000,000) in principal amount (except as provided in the. Master
Indenture hereinafter identified),. designated as "Hoag Memorial Hospital Presbyterian, Obligation
No. 14" ("Obligation No. 14" and, together with all other obligations issued under the Master
•Indenture hereinafter identified, "Obligations'), issued under and pursuant to the Supplemental
Master Indenture for Obligation No. 14, dated as of August 1, 2005 (the "Supplemental Indenture"),
supplementing and amending the Master Trust Indenture, dated as of October 1, 1984, as
supplemented or amended, between the Corporation and Wells Fargo Bank, National Association, .
as successor trustee (the "Master Trustee "). The Master Indenture, as supplemented and amended
in accordance with its terms, is hereinafter called the "Master Indenture."
Principal hereof, interest hereon and any, applicable redemption premium, are
payable in any coin or currency of the United States of America which on the payment date is legal
tender for the payment of public and private debts, on the dates specified and in an amount equal to
the amount necessary for the Bond Trustee to make the transfers and deposits required pursuant to
Section 5.02 of the Bond Indenture.
The Corporation shall receive credit for payment on Obligation No. 14, in addition
to any credits resulting from payment or prepayment from other sources, as follows: (i) on
installments of interest of Obligation No. 14 in an amount equal to moneys deposited in the Interest
Account created under the Bond Indenture to the extent such amounts have not previously been
credited against payments on Obligation No. 14; (ii) on installments of principal of Obligation No.
14 in an amount equal to moneys deposited in the Principal Account created under the Bond
Indenture to the extent such amounts have not previously been credited against payments on
Obligation No. 14; (iii) on installments of principal and interest, respectively, on Obligation No. 14
in an amount equal to principal amount of Bonds for which sufficient amounts (as determined by
•Section 10.03 of the Bond Indenture) are on deposit as provided in Section 10.03 of the Bond
Indenture to the extent such amounts have previously not been credited against payments on
DOCSSCl3564613 _ 7
Obligation No. 14 and the interest on such Bonds from and after the date fixed for payment at
maturity or redemption; and (iv) on instalhnents of principal and interest, respectively, on
• Obligation No. 14 in an amount equal to the principal amount of Bonds acquired by the Corporation
and surrendered to the Bond Trustee for cancellation or purchased by the Bond Trustee and
canceled and the interest on such Bonds from and after the date interest thereon has been paid prior
to cancellation; provided, however, that cancellation of a Bond maturing or required to be redeemed
on one date may not be credited against a principal installment due on Obligation No. 14 which
would be used, but for the cancellation of such Bond, to retire a Bond having a different maturity or
mandatory redemption date.
Upon payment by the Corporation of a sum, in cash or United States Government
Obligations (as defined in the Bond Indenture), or both, sufficient, together with any other cash and
United States Government Obligations (as defined in the Bond Indenture) held by the Bond Trustee
and available for such purpose, to cause all outstanding Bonds to be deemed to have been paid
within the meaning of Article X of the Bond Indenture and to pay all other amounts referred to in
Article X of the Bond Indenture, accrued and to be accrued to the date of discharge of the Bond
Indenture, Obligation No. 14 shall be deemed to have been paid and to be no longer outstanding
under the Bond Indenture.
If a Liquidity Facility (as defined in the Bond Indenture) is not in effect or, if in
effect, the Bank is not performing thereunder, the Corporation shall pay all amounts necessary to
purchase Bonds in accordance with Sections 4.06, 4.07, 4.08 and 4.09 of the Bond Indenture, at the
times and in the amounts specified in said sections.
• Copies of the Master Indenture and the Supplemental Indenture are on file at the
corporate trust office of the Master Trustee, in Los Angeles, California, and reference is hereby
made to the Master Indenture for the provisions, among others, with respect to the nature and extent
of the rights of the holders of Obligations issued under the Master Indenture, the terms and
conditions on which, and the purposes for which Obligations are to be issued and the rights, duties
and obligations of the Corporation and the Master Trustee under the Master Indenture, to all of
which the holder hereof, by acceptance of this Obligation No. 14, assents.
The Master Indenture permits the issuance of additional Obligations under the
Master Indenture to be secured by the provisions of the Master Indenture, all of which, regardless of
the times of issue or maturity, are to be of equal rank without preference, priority or distinction of
any Obligations issued under the Master Indenture over any other such Obligations except as .
expressly provided or permitted in the Master Indenture.
To the extent permitted by and as provided in the Master Indenture, modifications or -
changes of the Master Indenture, of any indenture supplemental thereto, and of the rights and
obligations of the Corporation and of the holders of Obligations in any particular may be made by
the. execution and delivery of an indenture or indentures supplemental to the Master Indenture or
any supplemental indenture. Certain modifications or changes which would affect the rights of the
holder of this Obligation No. 14 may be made only with the consent of the holders of not less than a
majority in aggregate principal amount of Obligations then outstanding under the Master Indenture.
No modification or change shall be made which will (i) extend the stated maturity of or time for
• paying interest on any Obligation or reduce the principal amount of or the redemption premium or
rate of interest payable on any Obligation without the consent of the holder of such Obligation; (ii)
DOCSSC13564613 $
modify, alter, amend, add to or rescind any of the terms or provisions contained in Article VI of the
Master Indenture (relating to the acceleration of the Obligations) in any manner which would
• materially and adversely affect the interests of holders of Obligations or any of them without the
consent of the holders of all Obligations then outstanding; or (iii) reduce the aggregate principal
amount of Obligations then outstanding the consent of the holders of which is required to authorize
such modifications or changes without the consent of the holders of all Obligations then
outstanding. Any such consent by the holder of this Obligation No. 14 shall be conclusive and
binding upon such holder and all future holders and owners hereof irrespective of whether or not
any notation of such consent is made upon this Obligation No. 14, unless such consent is rendered
as provided in the Master Indenture.
In the manner and with the effect provided in the Supplemental Indenture,
Obligation No. 14 will be subject to redemption prior to maturity at the times and in the amounts
specified in the Bonds issued under the Bond Indenture.
Any redemption, either in whole or in part, shall be made upon notice thereof in the
manner and upon the. terms and conditions provided in the Supplemental Indenture. If this
Obligation No. 14 shall have been duly called for redemption and payment of the "'redemption price,
together with interest accrued thereon to the date fixed for redemption, shall have been made or
provided for, as more fully set forth in the Supplemental Indenture, interest on this Obligation No.
14 shall cease to accrue from the date . fixed for redemption, and from and after such date, this
Obligation No. 14 shall be deemed not to be outstanding, as defined in the Master Indenture, and
shall no longer be entitled to the benefits of the Master Indenture, and the holder hereof shall have
no rights in respect of this Obligation No. 14 other than payment of the redemption price, together
• with accrued interest to the date fixed for redemption.
Upon the occurrence of certain "Events of Default" (as. defined in the Master
Indenture), the principal of all Obligations then outstanding may be declared, and thereupon shall
become, due and payable as provided in the Master Indenture.
The holder of this Obligation No. 14 shall have no right to enforce the provisions of
the Master Indenture, or to institute any action to enforce the covenants therein; or to take any action
with respect to any default under the Master Indenture, or to institute, appear in or defend any suit or
other proceeding with respect to any default under the Master Indenture, or to institute, appear in or
defend any suit or other proceeding with respect thereto, except as provided in the Master Indenture.
Obligation No. 14 is issuable only as a registered Obligation without coupons.
Unless the principal of all Obligations then outstanding has been declared -
immediately due and payable, no transfer of this Obligation No. 14 shall be permitted except for
transfers to a successor trustee under the Bond Indenture. This Obligation No. 14 shall be registered
on the register to be maintained by the Master Trustee as registrar for the Corporation for that
purpose at the principal corporate trust office of the Master Trustee and this Obligation No. 14 shall
be transferable only upon presentation of this Obligation No. 14 at said office by the holder or by
his duly authorized attorney and subject to the limitations, if any, set forth in the Supplemental
Indenture. Such transfer shall be without charge to the holder hereof, but any taxes or other
• governmental charges required to be paid with respect to the same shall be paid by the holder
requesting such transfer as a condition precedent to the exercise of such privilege. Upon any such
DocssCr:ssca L3 9
transfer, the Corporation shall execute and the Master Trustee shall authenticate and deliver in
exchange for this Obligation No. 14 a new registered Obligation without coupons, registered in the
• name of the transferee.
Prior to due presentment hereof for registration of transfer, the Corporation, the
Master Trustee, any paying agent and any registrar with respect to this Obligation No. 14 may deem
and treat the person in whose name this Obligation No. 14 is registered as the absolute owner hereof
for all purposes; and neither the Corporation, any paying agent, the Master Trustee nor any
Obligation registrar shall be affected by any notice to the contrary. All payments made to the
registered owner hereof shall be valid, and, to the extent of the sum or sums so paid, effectual to
satisfy and discharge the liability for moneys payable on this Obligation No. 14.
•
•
No covenant or agreement contained in this Obligation No. 14 or the Master
Indenture shall be deemed to be a covenant or agreement of any officer, agent or employee of the
Corporation or of the Master Trustee in his individual capacity, and no incorporator, member,
officer or member of the governing board of the Corporation shall be liable personally on this
Obligation No. 14 or be subject to any personal liability or accountability by reason of the issuance
of this Obligation No. 14.
This Obligation No. 14 shall not be entitled to any. benefit under the Master
Indenture, or be valid or become obligatory for any purpose, until this Obligation No. 14 shall have
been manually authenticated by the execution by an authorized officer of the Master Trustee, or its
successor as Master Trustee, of the Certificate of Authentication inscribed hereon.
DOCSSC1:356461.3 10
IN WITNESS WHEREOF, the Corporation has caused this Obligation No. 14 to be
executed in its name and on its behalf and attested by the signature of its duly authorized officer all
as of August 1, 2005.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
Authorized Officer
MASTER TRUSTEE'S AUTHENTICATION CERTIFICATE
The undersigned Master Trustee hereby certifies that this Obligation No. 14. is one
of the Obligations described in the within- mentioned Master Indenture.
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Master Trustee
Dated: By
• Authorized Signatory
Section 12. Delivery of Obligation No 14. Upon the execution and delivery of this
Supplement No. 14, the Corporation's execution and delivery of Obligation No. 14, the Loan
Agreement and the Bond Indenture, the Corporation hereby requests and authorizes the Master
Trustee to authenticate and deliver Obligation No. 14 to the Bond Trustee.
Section 13. Bond Insurer Covenants. The Members covenant and agree, for the
benefit of the Bond Insurer only, to keep and perform the additional covenants set forth in Exhibit A
hereto, which is incorporated herein by this reference: Notwithstanding any other provision in this
Supplement No. 14 or the Master Indenture, such covenants may be (a) waived by the Bond Insurer
in its sole discretion and without the approval of the Master Trustee or any Holder of any
Obligations, by written notice of waiver delivered to the Master Trustee and the Corporation, or (b)
modified or amended by the Bond Insurer and the Corporation, for itself and on behalf of the other
Members, without the approval of the Master Trustee or any Holder of any Obligations, by written
amendment to Exhibit A delivered to the Master Trustee. The Master Trustee shall have no duty to
monitor compliance by the Corporation or any other Member with the covenants set forth in Exhibit
A.
Section 14. Notification to Master Trustee of Certain Events. The Corporation
covenants to furnish or cause to be furnished to the Master Trustee:
• (1) Notice of any redemption of all or a portion of the Bonds;
oocsscI:35e461.3
(2) Notice of any event of default under the Bond Indenture;
• (3) Notice of any payment or deposit made with respect to the Bonds pursuant to
Article X of the Bond Indenture;
(4) Notice of any amendments to the Agreement or the Bond Indenture.
Section 15. Specification of Use of Proceeds. The proceeds from the issuance of
the Bonds under the Bond Indenture shall be used for the purposes described in the Bond Indenture.
Section 16. Tax - Exempt Status. The Corporation agrees on behalf of itself and each
other Member of the Obligated Group. that is an organization exempt from federal income taxation
under Section 501(c)(3) of the Code at the time it becomes a Member of the Obligated Group,
respectively, that so long as all amounts due or to become due on any Bond have not been fully paid
to the Holder thereof, it will not take any action or suffer any action to be taken by others, including
any action that would result in the alteration or loss of its status as such a tax- exempt organization,
which would cause interest payable on any Bond to become includable in gross income under the
Code.
Section 17. Acceleration. Pursuant to Section 6.02(a) of the Master Indenture, upon
the occurrence and during the continuation of an Event of Default under the Master Indenture, the
Holders of not less than 50% in aggregate principal amount of Obligation No. 14 may request the
Master Trustee to declare Obligation No. 14 immediately due and payable, and the Master Trustee
shall, by notice to the Members of the Obligated Group, declare Obligation No. 14 immediately due
and payable.
Section 18. Ratification of Master Indenture. As supplemented hereby, the Master
Indenture is in all respects ratified and confirmed and the Master Indenture as so supplemented
hereby shall be read, taken and construed as one and the same instrument.
Section 19. Severability. If any provision of this Supplement No. 14 shall be held
or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case
and any jurisdiction or jurisdictions or in all jurisdictions, or in all cases, because it conflicts with
any other provision or provisions hereof or any constitution, statute, rule or public policy, or for any
other reason, such circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering any other provision
or provisions herein contained invalid, inoperative or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses, sections or
subsections contained in this Supplement No. 14 shall not affect the remaining portions of this
Supplement No. 14 or any part thereof.
Section 20. Counterparts. This Supplement No. 14 may be executed in several
counterparts, each of which shall be an original and all of which shall constitute one instrument.
Section 21. Governing Law. This Supplement No. 14 shall be governed by and
construed in accordance with the laws of the State of California.
Docsscr:35WI 3 12
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
It in its name and on its behalf and attested by its duly authorized officer and to evidence its
acceptance of the trusts hereby created the Master Trustee has caused these presents to be signed in
its name and on its behalf by one of its duly authorized officers, all as of the day and year first above
written.
9
0
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
i
By
Au&orized •
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Master Trustee
a
DOCSSCl:356461.3 13
Authorized Signatory
r�
U
I
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf and attested by its duly authorized officer and to evidence its
acceptance of the trusts hereby created the Master Trustee has caused these presents to be signed in
its name and on its behalf by one of its duly authorized officers, all as of the day and year first above
written.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
m
Authorized Officer
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Master Trustee
By O&, 4
Authorized Signatory
DOCSSCl:356461.3 13
APPENDIX A
• BOND INSURER COVENANTS
The covenants contained in this Exhibit A are made solely for the benefit of the
Bond Insurer and may be enforced solely by or at the sole direction of the Bond Insurer; the
Obligation Holders shall have no rights herein. Additionally, the provisions of this Exhibit A
shall be in effect only for so long as Obligation No. 14 or any of the Bonds are Outstanding and
no Insurance Default has occurred and is then continuing.
Section 1. Definitions.
(a) The capitalized terms used in this Exhibit A and not otherwise defined
herein shall, except as otherwise provided in subsection (b) of this Section, have the meanings
assigned to them in the Master Indenture or the Bond Indenture, as the case may be. In addition,
the following terms shall have the following meanings:
Days Cash on Hand means, with respect to any Fiscal Year, -the ratio of (a)
Unrestricted Cash and Investments to (b) the quotient of total Operating Expenses divided by
365 days (except that for any calculation for a six-month interim period, divided by 182 days).
Operating Expenses means operating expenses as determined in accordance with
generally accepted accounting principles and shall be those expenses classified as operating
expenses in the audited financial statements of the Obligated Group; provided, however, that
Operating Expenses shall not include: depreciation and amortization but shall include interest
• expense on any outstanding bonds and allowance for bad or uncollectible debt; and provided
further that with respect to the audited financial statements of the Corporation as a Member of
the Obligated Group, its statements may be consolidated with its affiliates in accordance with
generally accepted accounting principles and the Operating Expenses may be derived from such
consolidated statements.
Swap Contract means (a) any and all swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or bond price or
bond index swaps or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, cap transactions, floor transactions, collar transactions, or any
other similar transactions or any combination of any of the foregoing (including any options to
enter into any of the forgoing), whether or not any such transaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by, any form of
master agreement published by the International Swaps and Derivatives Association, Inc.
Unrestricted Cash and Investments shall mean:
(i) Cash and cash equivalents of the Obligated Group.
(ii) Liquid funds of the Obligated Group.
• (1) Marketable securities (long term and short term investments.
DOCSSC13564613 A -1
(2) Unrestricted board designated funds.
• (iii) Unrestricted Cash and Investments shall not include: (1) trustee -held
funds, (2) debt service funds, (3) construction funds, (4) debt service
reserve funds, (5) litigation reserves, (6) self - insurance and captive insurer
reserves, (7) pension and retirement funds, (8) the amount realized from
the sale or factoring of accounts receivable, (9) proceeds of Short-Term
Indebtedness, unless there exists a firm refinancing commitment from a
qualified financial institution rated at least "A" by a nationally recognized
rating agency, (10) the principal amount of demand notes or obligations,
unless a liquidity facility from a qualified financial institution rated at least
"A +" or "AI" from a nationally recognized rating agency is provided, or
(11) collateral required to be posted by a Swap Contract.
Section 2. Liquiditv Covenant.
(a) Each Member agrees, to maintain at least 75 Days Cash on Hand for the
combined Obligated Group as of the last day of each Fiscal Year (an "Annual Calculation
Date "), and the Corporation further covenants and agrees to fiunish the Bond Insurer an
Officer's Certificate setting forth the Days Cash on Hand for such calculation no later than (i) 60
days following the end of the Obligated Group's Fiscal Year based on the unaudited financial
statements of the Obligated Group and (ii) within 15 days following receipt of the audited
financial statements for the Obligated Group for such Fiscal Year based on the audited financial
statements of the Obligated Group, but in no event more than 120 days following the end of the
Obligated Group's Fiscal Year, provided that with respect to the calculation and certification of
•Days Cash on Hand, such information relating to the Corporation as a Member of the Obligated
Group may be derived from its audited financial statements consolidated with its affiliates in
accordance with generally accepted accounting principles.
(b) If Days Cash on Hand shall be less than 75 as of an Annual Calculation
Date, the Corporation will promptly employ a Consultant to make recommendations as to
methods of operation of the Obligated Group to increase Days Cash on Hand to at least 75 for
subsequent periods. Copies of the recommendations of the Consultant shall be filed with the
Bond Insurer at the same time as delivered to the Obligated Group. Each Member covenants and
agrees to follow the recommendations of the Consultant, to the extent feasible. The Consultant
and the scope of the Consultant's review shall be acceptable to the Bond Insurer. If a Consultant
has been employed, the Corporation shall for the period of time until the Corporation has
complied with subsection (a) provide to the Bond Insurer a report, within 60 days of the end of
each fiscal quarter, detailing the actions of the Obligated Group taken to increase the Days Cash
on Hand to at least 75 for subsequent periods. The Corporation shall.also provide to the Bond
Insurer during such period, within 60 days of the end of the second fiscal quarter of the
Obligated Group, an Officer's Certificate setting forth the Days Cash on Hand as of the last day
of the second fiscal quarter of a Fiscal Year (a "Semi- Annual Calculation Date ").
(c) If the Members comply in all material respects with the provisions of
subsection (b) of this Section, the Members will be deemed to have complied with the provisions
of this Section 2 notwithstanding that Days Cash on Hand shall be less than 75 as of the Annual
•Calculation Date or Semi - Annual Calculation Date immediately preceding the delivery of the
Consultant's. report; provided, however, that failure of the Members to have at least 50 Days
DOCSSCl3564613 A -2
Cash on Hand as of the Annual Calculation Date or Semi - Annual Calculation Date shall
constitute an Event of Default under this Exhibit A. The Members shall not be excused from
• taking any action or performing any other duty required under the Master Indenture.
Section 3. Limitations on Swap Contracts.
Each Member agrees that it will not enter into any debt - related Swap Contract
unless the following conditions are met:
(i) The Swap Contract must be entered into as a hedge against swaps
outstanding (such as basis swaps or reverse swaps), against Indebtedness
then outstanding or to be issued or as a means of achieving a forward
refunding or other forward arrangement;
(ii) The Swap Contract must not contain any multiplier component greater
than 1.Ox unless a matching hedge is in place, which offsets the exposure
from such component;
(iii) The swap counterparty, or the guarantor of its obligations under the swap,
shall have unenhanced long -term debt or claims- paying ability rated at
least "A/A2" by S &P and Moody's, respectively.
(iv) The Swap Contract must provide that it will not tern-iinate for events
related to the swap provider (such as a rating downgrade).
• Section 4. Limitations on Purchases in Lieu of Redemption.
Each Member agrees that it will not utilize the optional redemption provisions of
the Bond Indenture to purchase and then remarket any of the Bonds (i.e., "purchase in lieu of
redemption'. Notwithstanding the foregoing, the Members may participate in an open market
tender offer for the Bonds or any portion thereof provided that any Bonds so purchased are
surrendered to the Bond Trustee for cancellation.
Section 5. Recognition of Other Agreements.
To the extent other agreements with bond insurers, liquidity providers, swap
providers or other credit providers contain more restrictive covenants than the covenants at the
time benefiting the Bond Insurer, if the debt securities of the Obligated Group are at any time
rated in a rating category equivalent to or less than "BBB -Baa3" by a nationally recognized
rating agency, then such more restrictive covenants shall also run to the benefit of the Bond
Insurer until such underlying rating of the Obligated Group's debt is equal to or higher than the
"BBB -Baa3" rating category. Copies of all such documents with more restrictive covenants if
ever applicable hereunder shall be provided to the Bond Insurer and to the Master Trustee.
Section 6. Amendment of Section 4.05 — Withdrawal from the Obligated
9 M n.
Section 4.05 of the Master Indenture is amended with the addition of the
• following subsection (e):
nocssC1356461.3 A -3
"Hoag Memorial Hospital Presbyterian may not withdraw
from the Obligated Group unless it has received the prior written
• consent of the Bond Insurer."
Section. 7 Amendment of Section 8.01 — Related Supplements Not Requiring
Consent of Obligation Holders.
end:
Section 8.01 is hereby amended and revised to add the following language at the
"Notwithstanding anything else in this Section 8.01, the
Members of the Obligated Group shall not enter into any Related
Supplements other than those adding new Members to the
Obligated Group or those securing Additional Indebtedness in
accordance with the terms of the Master Indenture, without the
prior written consent of the Bond Insurer. The Corporation finther
covenants and agrees not to allow the substitution of a replacement
master indenture or substitute obligations to the Holders of any
Obligations without the prior written consent of the Bond Insurer.
Each Rating Agency then rating the Bonds must receive
notice of and a copy of each amendment or supplement to the
Master Indenture at least 15 days in advance of the execution of
any such amendment or supplement. The Bond Insurer shall be
provided with a full transcript of all proceedings relating to the
• execution of any amendment or supplement."
Section 8. Financial and Overating Reaortin>e Requirements.
(a) Annual Requirements
(i) The Corporation agrees to provide to the Bond Insurer within 120
days after the end of each Fiscal Year the following information
relating to the Obligated Group for the immediately preceding
Fiscal Year:
(1) Audited financial statements containing consolidating
balance sheet and income statements for the Obligated
Group; which with respect to the Corporation may be
consolidated with its affiliates in accordance with generally
accepted accounting principles.
(2) Utilization statistics for each hospital owned and operated
by any Member of the Obligated Group,-including:
a. Beds in service;
b. Inpatient admissions;
•C. Emergency room visits and outpatient visits;
DOCSSCl:3564613 A -4
d. Average length of stay;
• e. Patient days;
f. Inpatient and outpatient surgeries.
(3) Information setting forth the Payor Mix by gross revenue
and discharges.
(4) Profit and Loss information of all affiliates and joint .
ventures which represent at least 10% of the total revenue
of the Obligated Group.
(5) A Management's Discussion of Annual Fiscal Year results
which should include, but not be limited to, the following
items:
a. Review of financial performance results compared
to prior Fiscal Year's results —
i. Revenue and expense trends;
ii. Income from operations;
iii. Change in Net Assets.
• b. Information regarding any change in investment
policy or asset allocation and the investment return
for the Fiscal Year.
r 1
U
C. Schedule of any new Indebtedness inured —
including guarantees, short-term debt, off-balance
sheet transactions, nonrecourse debt, subordinated
debt and operating leases in excess of $5,000,000.
d. Information relating to utilization trends and the
competitive environment relating to the Obligated
Group.
(6) A certification by the Corporation that there has not been
an Event of Default under the Master Indenture, or an event _
that with the passage of time would constitute an Event of
Default under the Master Indenture, and setting forth
(based on the audited financial statements of the Obligated
Group for the immediately preceding Fiscal Year); which
for the Corporation may be consolidated with its affiliates
in accordance with generally accepted accounting
principles:
D005.4C135W13 A -5
a. The Long -Term Debt Service Coverage Ratio
calculated pursuant to Section 5.09 of the Master
• Indenture;
b. A statement that there are no Liens other than
Permitted Liens. The Corporation should list any
Liens of the Obligated Group incurred with the
issuance of any Indebtedness even if they constitute
Permitted Liens.
(b) Quarterly Requirements:
(i) The Corporation agrees to provide to the Bond Insurer within 60
days after the end of each fiscal quarter, unaudited financial
statements for the immediately preceding fiscal quarter with
comparisons for the similar period of -the prior Fiscal Year, relating
to the Obligated Group. However, (1) if the Obligated Group fails
to maintain a Long -Term Debt Service Coverage Ratio in excess of
2.0:1.0 or (2) if there is a breach of a financial or payment
covenant under the Master Indenture or (3) if the Bond Insurer
reasonably requests, the Corporation agrees to provide to the Bond
Insurer within 60 days after the end of each month, unaudited
financial statements for the immediately preceding month with
comparisons for the same month of the prior Fiscal Year, relating
to the Obligated Group.
• (c) Other Requirements:
(i) The Corporation agrees to provide the Bond Insurer a copy of each
Fiscal Year budget within 60 days after the beginning of each
Fiscal Year.
•
(ii) Each Member of the Obligated Group agrees to provide to the
Bond Insurer information relating to any change in corporate
structure or membership of the Members of the Obligated Group
within 30 days of such event.
(iii) The Corporation agrees to provide to the Bond Insurer within 60
days after the end of each Fiscal Year notice of all pending
litigation and investigations relating to any Member of the
Obligated Group where the amount reserved by any Member is in
excess of $5,000,000.
(iv) Notice of the redemption, other than mandatory sinking fund
redemption, of any of the Bonds, or of any advance refunding of
the Bonds, including the principal amount, maturities and CUSIP
numbers thereof.
DoCSSCl35WI3 A -6
•
•
(v) The Corporation agrees to provide to the Bond Insurer notice of
the downgrading by any rating agency of the Obligated Group's
underlying public rating.
(vi) The Corporation agrees to provide to the Bond Insurer notice of
any events required to be provided to a nationally recognized
municipal securities information repository ( "NRMSIR") pursuant
to the Continuing Disclosure Agreement at the same time such
notice is provided to the NRMSIR.
(vii) Each Member agrees to provide to the Bond Insurer such financial
and operating information that is not otherwise confidential under
provision of law or governmental regulation regarding itself as the
Bond Insurer may reasonably request in order to perform its credit
assessment of the Obligated Group.
Section 9. Reimbursement of Bond Insurer Fees and Expenses.
Each Member jointly and severally agrees to pay or reimburse the Bond Insurer
for any and all charges, fees, costs, and expenses that the Bond Insurer may reasonably pay or
incur in connection with the following: (i) the administration, enforcement, defense, or
preservation of any rights or security under the Master Indenture, Supplement No. 14, the Bond
Indenture or the Loan Agreement; (ii) the pursuit of any remedies under the Master Indenture,
Supplement No. 14, the Bond Indenture or the Loan Agreement, or otherwise afforded by law or
equity, (iii) any amendment, waiver or other action with respect to or related to the Master
Indenture, Supplement No. 14, the Bond Indenture or the Loan Agreement whether or not
executed or completed; (iv) the violation by any Member of the Obligated Group of any law, rule
or regulation or any judgment, order or decree applicable to it; (v) any advances or payments
made by the Bond Insurer to cure defaults of the City or the Obligated Group under the Master
Indenture, Supplement No. 14, the Bond Indenture or the Loan Agreement; or (vi) any litigation
or other dispute in connection with the Master Indenture, Supplement No. 14, the Bond
Indenture or the Loan Agreement or the transactions contemplated hereby or thereby, other than
amounts resulting from the failure of the Bond Insurer to honor its payment obligations under the
Bond Insurance Policy. The Bond Insurer reserves the right to charge a reasonable fee as a
condition to executing any amendment, waiver or consent proposed in respect of the Master
Indenture, Supplement No. 14, the Bond Indenture or the Loan Agreement. The obligations of
the Obligated Group to the Bond Insurer shall survive discharge and termination of this
Supplement No. 14.
DOCSSC1356461.3
A -7
EXHIBIT NO.3
Specimen Obligation
No. 14
(executed by the Corporation and
authenticated by the
Master Trustee)
[(a]
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
OBLIGATION NO. 14
.. $`200,000,000
KNOW ALL BY THESE PRESENTS that HOAG MEMORIAL
HOSPITAL PRESBYTERIAN (the "Co "), a nonprofit public benefit corporation
organized and existing under the la s of California, for value received hereby
acknowledges itself obligat s to pay to WELLS FARGO BANK,
NATIONAL ASSOC a "Bond Trustee ") under the indenture dated as
of August 1, 2 o enture "), between the Bond Trustee thereunder and the
City of Newpo (th City"), relating to the City of Newport Beach Insured Revenue
Bonds (Hoag orial Hospital Presbyterian), Series 2005A, 2005B and 2005C
(the "Bonds "), and any successor trustee under the Bond Indenture, or registered assigns, the
principal sum of TWO HUNDRED MILLION DOLLARS ($200,000,000.00), and to pay
interest on the unpaid balance of said sum from the date hereof on the dates and in the
manner hereinafter described.
This Obligation No. 14 is a single Obligation of the Corporation limited to
two hundred million dollars ($200,000,000) in principal amount (except as provided in the
Master Indenture hereinafter identified), designated as "Hoag Memorial Hospital
Presbyterian, Obligation No. 14" ( "Obligation No. 14" and, together with all other
• obligations issued under the Master Indenture hereinafter identified, "Obligations "), issued
under and pursuant to the Supplemental Master Indenture for Obligation No. 14, dated as of
August 1, 2005 (the "Supplemental Indenture"), supplement .
upplemen' V and amending the Master
Trust Indenture, dated as of October 1, 1984, as suppl or amended, between the
Corporation and Wells Fargo Bank National Asso i lessor trustee (the "Master
Trustee "). The Master Indenture, as suppl aded in accordance with its
terms, is hereinafter called the "Master e:
u
Principal hereo t l�n and any applicable redemption premium,
are payable in any coin or curre the United States of America which on the payment
date is legal tender for the payment of public and private debts, on the dates specified and in
an amount equal to the amount necessary for the Bond Trustee to make the transfers and
deposits required pursuant to Section 5.02 of the Bond Indenture.
The Corporation shall receive credit for payment on Obligation No. 14, in
addition to any credits resulting from payment or prepayment from other sources, as
follows: (i) on installments of interest of Obligation No. 14 in an amount equal to moneys
deposited in the Interest Account created under the Bond Indenture to. the extent such
amounts have not previously been credited against payments on Obligation No. 14; (ii) on
installments of principal of Obligation No. 14 in an amount equal to moneys deposited in
the Principal Account created under the Bond Indenture to the extent such amounts have not
previously been credited against payments on Obligation No. 14; (iii) on installments of
DOCSSC1:358839.1
• principal and interest, respectively, on Obligation No. 14 in an amount equal to principal
amount of Bonds for which sufficient amounts (as determined by Section 10.03 of the Bond
Indenture) are on deposit as provided in Section 10.03 of the Bond Indenture to the extent
such amounts have previously not been credited against payments on Obligation No. 14 and
the interest on such Bonds from and after the date fixed for payment at maturity or
redemption; and (iv) on installments of d interest, respectively, on Obligation
No. 14 in an amount equal to f Bonds acquired by the Corporation
and surrendered ste n or purchased by the Bond Trustee and
canceled and th s from and after the date interest thereon has been
paid prior to c 'on; provided, however, that cancellation of a Bond maturing or
required to be redeemed on one date may not be credited against a principal installment due
on Obligation No. 14 which would be used, but for the cancellation of such Bond, to retire a
Bond having a different maturity or mandatory redemption date.
Upgn payment by the Corporation of a sum, in cash or United States
Government Obligations (as defined in the Bond Indenture), or both, sufficient, together
with any other cash and United States Government Obligations (as defined in the Bond
Indenture) held by the Bond Trustee and available for such purpose, to cause all outstanding
Bonds to be deemed to have been paid within the meaning of Article X of the Bond
Indenture and to pay all other amounts referred to in Article X of the Bond Indenture,
accrued and to be accrued to the date of discharge of the Bond Indenture, Obligation No. 14
shall be deemed to have been paid and to be no longer outstanding under the Bond
Indenture.
• If a Liquidity Facility (as defined in the Bond Indenture) is not in effect or, if
in effect, the Bank is not performing thereunder, the Corporatio shall pay all amounts
necessary to purchase Bonds in accordance with Sections 4 4.08 and 4.09 of the
Bond Indenture, at the times and in the amounts specifj 1 s.
•
Copies of the Master In supplemental Indenture are on file at
the corporate trust office of the Ma112Ve;01rs Angeles, Califomia, and reference is
hereby made to the Master Inden a provisions, among others, with respect to the
nature and extent of the rights of a holders of Obligations issued under the Master
Indenture, the terms and conditions on which, and the purposes for which Obligations are to
be issued and the rights, duties and obligations of the Corporation and the Master Trustee
under the Master Indenture, to all of which the holder hereof, by acceptance of this
Obligation No. 14, assents.
The Master Indenture permits the issuance of additional Obligations under
the Master Indenture to be secured by the provisions of the Master Indenture, all of which,
regardless of the times of issue or maturity, are to be of equal. rank without preference,
priority or distinction of any Obligations issued under the Master Indenture over any other
such Obligations except as expressly provided or permitted in the Master Indenture.
DOCSSC1:358839.1 2
To the extent permitted by and as provided in the Master Indenture,
modifications or changes of the Master Indenture, of any indenture supplemental thereto,
and of the rights and obligations of the Corporation and of the holders of Obligations in any
particular may be made by the execution and delivery of an indenture or indentures
supplemental to the Master Indenture or any supplemental indenture. Certain modifications
or changes which would affect the rights of the holder of this Obligation No. 14 may be
made only with the consent of the holders of not less tha2 adnaj onty in aggregate principal
amount of Obligations tt�hen utstWout denture. No modification or
change shall be made of or time for paying interest
on any Obligation or r demption premium or rate of
interest payable on any n the holder of such Obligation; (ii)
modify, alter, amend, add to or rescind any of the terms or provisions contained in
Article VI of the Master Indenture (relating to the acceleration of the Obligations) in any
manner which would materially and adversely affect the interests of holders of Obligations
or any of them without the consent of the holders of all Obligations then outstanding; or (iii)
reduce the aggregate.principal amount of Obligations then outstanding the consent of the
holders of which is required to authorize such modifications or changes without the consent
of the holders of all Obligations then outstanding. Any such consent by the holder of this
Obligation No. 14 shall be conclusive and binding upon such holder and all future holders
and owners hereof irrespective of whether or not any notation of such consent is made upon
this Obligation No. 14, unless such consent is rendered as provided in the Master Indenture.
In the manner and with the effect provided in the Supplemental Indenture,
Obligation No. 14 will be subject to redemption prior to maturity at the times and in the
• amounts specified in the Bonds issued under the Bond Indenture.
Any redemption, either in whole or in part, shall be made upon notice
thereof in the manner and upon the terms and conditions provided in the Supplemental
Indenture. If this Obligation No. 14 shall have been duly called for redemption and payment
of the redemption price, together with interest accrued thereon to the date fixed for
redemption, shall have been made or provided for, as more fully set forth in the
Supplemental Indenture, interest on this Obligation No. 14 shall cease to accrue from the
date fixed for redemption, and from and after such date, this, ObhRggation No. 14 shall be
deemed not to be outstanding, as defined in the Master lli�ntui�`'�d shall no longer be
entitled to the benefits of the Master Indenture, f shall have no rights in
respect of this Obligation No. 14 other than nt emption price, together with
accrued interest to the date fixed for
Upon the occurrence n "Events of Default' (as defined in the Master
Indenture), the principal of all Obligations then outstanding may be declared, and thereupon
shall become, due and payable as provided in the Master Indenture.
•
The holder of this Obligation No. 14 shall have no right to enforce the
provisions of the Master Indenture, or to institute any action to enforce the covenants
therein, or to take any action with respect to any default under the Master Indenture, or to
institute, appear in or defend any suit or other proceeding with respect to any default under
DOCSSCI:358839.1
the Master Indenture, or to institute, appear in or defend any suit or other proceeding with
• respect thereto, except as provided in the Master Indenture.
Obligation No. 14 is issuable only as a registered Obligation without
coupons.
Unless the principal of all Obligations then outstanding has been declared
immediately due and payable, no transfer of this Obi lion No. 14 shall be permitted except
for transfers to a successor trustee under��lWture. This Obligation No. 14 shall
be registered on the register to b aster Trustee as registrar for the
Corporation for that p ate trust office of the - Master Trustee and
this Obligation No. a only upon presentation of this Obligation No. 14
at said office by the or W s duly authorized attorney and subject to the limitations,
if any, set forth in th pplemental Indenture. Such transfer shall be without charge to the
holder hereof, but any taxes or other governmental charges required to be paid with respect
to the same shall be paid by the holder requesting such transfer as a condition-precedent to
the exercise of such privilege. Upon any such transfer, the Corporation shall execute and
the Master Trustee shall authenticate and deliver in exchange for this Obligation No. 14 a
new registered Obligation without coupons, registered in the name of the transferee.
Prior to due presentment hereof for registration of transfer, the Corporation,
the Master Trustee, any paying agent and any registrar with respect to this Obligation No. 14
may deem and treat the person in whose name this Obligation No. 14 is registered as the
• absolute owner hereof for all purposes; and neither the Corporation, any paying agent, the
Master Trustee nor any Obligation registrar shall be affected by any notice to the contrary.
All payments made to the registered owner hereof shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable on
this Obligation No. 14.
U
No covenant or agreement contained in this n No. 14 or the Master
Indenture shall be deemed to be a covenant or agree er, agent or employee
of the Corporation or of the Master Trustee ' city, and no incorporator,
member, officer or member of the b e Corporation shall be liable
personally on this Obligation No. any personal liability or accountability
by reason of the issuance of this O n o. 14.
This Obligation No. 14 shall not be entitled to any benefit under the Master
Indenture, or be valid or become obligatory for any purpose, until this Obligation No. 14
shall have been manually authenticated by the execution by an authorized officer of the
Master Trustee, or its successor as Master Trustee, of the Certificate of Authentication
inscribed hereon.
DOCSSC1:358839.1
IN WITNESS WHEREOF, the Corporation has caused this Obligation No.
14 to be executed in its name and on its behalf and attested by the signature of its duly
• authorized officer all as of August 1, 2005.
•
E
HOAG MEMORIAL HOSPUAL
PPTnrI< TT.nrA� T �
a
DOCSSC13599393 5
MASTER TRUSTEE'S AUTHENTICATION CERTIFICATE
•
The undersigned Master Trustee hereby certifies that this Obligation No. 14
is one of the Obligations, described in the within- mentioned Master Indenture.
L7
L
•
Dated: August 24, 2005
WELLS FARGO BANK, N
ASSOCIATION, as M t
Lo
DOCSSC1:358839.1 6
Signatory _ .
EXHIBIT NO.4
Bond Indenture
(executed by the City and
the Bond Trustee)
(BC)
EXECUTION COPY
CITY OF NEWPORT BEACH
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Bond Trustee
� Ut 1►1� ► l 1:
Dated as of August 1, 2005
relating to
$200,000,000
CITY OF NEWPORT BEACH
INSURED REVENUE BONDS
(HOAG MEMORIAL HOSPITAL PRESBYTERIAL
SERIES 2005A, 2005B AND 2005C
i
• DOCSSC1:356339.9
a
TABLE OF CONTENTS
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of Bonds ........................................................... ............................... 64
Section 3.02. Application of Proceeds of Bonds .................................. ............................... 64
Section 3.03. Establishment and Application of Costs of Issuance Fund ............................ 64
Section 3.04. Establishment and Application of the Project Fund .................. :................... 65
Section 3.05. Validity of Bonds .............................................................. .............................66
ARTICLE IV
REDEMPTION AND TENDER OF BONDS
Section 4.01. Terms of Redemption ..................................................... ............................... 66
Section 4.02. Selection of Bonds for Redemption ................................ ............................... 68
Section 4.03. Notice of Redemption ..................................................... ............................... 68
• DOCSSC1:356339.8 -i-
Page
ARTICLE I
DEFINITIONS;
CONTENT OF CERTIFICATES AND OPINIONS
Section 1.01.
Definitions ....................................................................... ................1..............
18
Section 1.02.
Content of Certificates and Opinions ............................. ...............................
41
Section 1.03.
Interpretation ................................................................... ...............................
41
ARTICLE 11
THE BONDS
Section 2.01.
Authorization of Bonds ................................................... ...............................
42
Section 2.02.
Terms of the Bonds; Registration; Denominations; Payment of
Principal and Interest .................................................... ...............:...............
42
Section 2.03.
Initial Interest Rate; Subsequent Interest Rates .............. ...............................
45
Section 2.04.
Weekly Interest Rate Period ........................................... ...............................
46
Section 2.05.
Serial Bond Interest Rate Period ..................................... ...............................
47
Section 2.06.
Short-Term Interest Rate Periods .................................... ...............................
50
Section 2.07.
Notice of Conversion; Conditions .................................. ...............................
52
Section 2.08.
ARS Provisions ............................................................... ...............................
54
Section 2.09.
Execution of Bonds ...........:............................................. ...............................
60
•Section
2.10.
Section 2.11.
Transfer of Bonds ........................................................... ...............................
Exchange of Bonds ......................................................... ...............................
61
61
Section 2.12.
Bond Register .................................................................. ...............................
62
Section 2.13.
Temporary Bonds ............................................................ ...............................
62
Section 2.14.
Bonds Mutilated, Lost, Destroyed or Stolen ................... ...............................
62
Section 2.15.
Use of Securities Depository .............................................. :..........................
62
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of Bonds ........................................................... ............................... 64
Section 3.02. Application of Proceeds of Bonds .................................. ............................... 64
Section 3.03. Establishment and Application of Costs of Issuance Fund ............................ 64
Section 3.04. Establishment and Application of the Project Fund .................. :................... 65
Section 3.05. Validity of Bonds .............................................................. .............................66
ARTICLE IV
REDEMPTION AND TENDER OF BONDS
Section 4.01. Terms of Redemption ..................................................... ............................... 66
Section 4.02. Selection of Bonds for Redemption ................................ ............................... 68
Section 4.03. Notice of Redemption ..................................................... ............................... 68
• DOCSSC1:356339.8 -i-
LJ
•
Section 4.04.
Section 4.05.
Section 4.06.
Section 4.07.
Section 4.08.
Section 4.09. ._
TABLE OF CONTENTS
(continued)
Page
Partial Redemption of Bonds ................... ...............................
Effectof Redemption ...................................................... ...............................
Optional Tender During Weekly Interest Rate Period .... ...............................
Mandatory Tender for Purchase On Day Next Succeeding the
Last Day of Each Bond Interest Term .......................... ...............................
Mandatory Tender for Purchase on First Day of Each
InterestRate Period ....................................................... .......................:.......
Mandatory Tender Upon Termination or Expiration of
Liquidity Facility or Delivery of an Alternate Liquidity Facility
69
70
70
70
71
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment ............................................................ ............................... 89
Section 6.02. Extension of Payment of Bonds ...................................... ............................... 89
Section 6.03. Against Encumbrances .................................................... ............................... 90
• Section 6.04. Power to Issue Bonds and Make Pledge and Assignment .............. ............ ". 90
DOCSSC1:356339.9 _ii_
(If Liquidity Facility Provided) ..................................... ...............................
71
Section 4.10.
General Provisions Relating to Tenders ......................... ...............................
71
Section 4.11.
Notice of Mandatory Tender for Purchase on First Day of
Each Interest Rate Period .............................................. ...............................
76
Section 4.12.
Irrevocable Notice Deemed to be Tender of Bond; Undelivered Bonds.......
76
Section 4.13.
Remarketing of Bonds; Notice of Interest Rates ............ ...............................
77
Section 4.14.
The Remarketing Agent .................................................. ...............................
77
Section 4.15.
Qualifications of Remarketing Agent; Resignation; Removal ......................
78
Section 4.16.
Successor Remarketing Agents ....................................... ...............................
78
Section 4.17.
The Tender Agent ........................................................... ...............................
78
Section 4.18.
Qualifications of Tender Agent; Resignation; Removal . ...............................
79
Section 4.19.
Successor Tender Agents ................................................ ...............................
79
Section 4.20.
Termination of Liquidity Facility Prior to Expiration Date;
Purchase by Liquidity Facility Provider; Notices ......... ...............................
80
ARTICLE V
REVENUES
Section 5.01.
Pledge and Assignment; Revenue Fund ......................... ...............................
81
Section 5.02.
Allocation of Revenues ................................................... ...............................
82
Section 5.03.
Application of Interest Account ...................................... ...............................
82
Section 5.04.
Application of Principal Account ................................... ...............................
82
Section 5.05.
Application of Redemption Fund .................................... ...............................
87
Section5.06.
Rebate Fund .................................................................... ...............................
87
Section 5.07.
Investment of Moneys in Funds and Accounts ............... ...............................
88
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment ............................................................ ............................... 89
Section 6.02. Extension of Payment of Bonds ...................................... ............................... 89
Section 6.03. Against Encumbrances .................................................... ............................... 90
• Section 6.04. Power to Issue Bonds and Make Pledge and Assignment .............. ............ ". 90
DOCSSC1:356339.9 _ii_
TABLE OF CONTENTS
(continued)
• Page
Section 6.05.
Accounting Records and Financial Statements ............... ...............................
90
Section 6.06.
Tax Covenants ................................................................ ...............................
91
Section 6.07.
Enforcement of Loan Agreement and Obligation No. 14 ..............................
91
Section 6.08.
Amendment of Loan Agreement .................................... ...............................
91
Section6.09.
Waiver of Laws ............................................................... ........................ ........
92
Section 6.10.
Further Assurances :......................................................... ...............................
92
Section 6.1 L.
Continuing Disclosure ..................................:................. ...............................
93
Section 6.12.
Replacement of Obligation No. 14 ................................. ...............................
93
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
Section 7.01.
Events of Default .......................................... ..........................:I... :...............
94
Section 7.02.
Acceleration of Maturities .............................................. ...............................
95
Section 7.03.
Application of Revenues and Other Funds After Default ..............................
96
Section 7.04.
Bond Trustee to Represent Bondholders ........................ ...............................
97
Section 7.05.
Bond Insurer's and Bondholders' Direction of Proceedings .........................
98
Section 7.06.
Limitation on Bondholders' Right to Sue ...................:... ...............................
98
Section 7.07.
Absolute Obligation of City ............................................ ...............................
99
Section 7.08.
Termination of Proceedings .....................................:...... ...............................
99
Section 7.09.
•
Remedies Not Exclusive ....................:............................ ...............................
99
Section 7.10.
No Waiver of Default ...................................................... ...............................
99
Section 7.11.
Consent of Bond Insurer in the Event of Insolvency ......... .............................99
Section 7.12.
Payment Procedure Pursuant to Bond Insurance Policy ..............................
100
ARTICLE VIII
THE BOND TRUSTEE
Section 8.01.
Duties, Immunities and Liabilities of Bond Trustee ..... ...............................
101
Section 8.02.
Merger or Consolidation ................... ............................... ............................103
Section 8.03.
Liability of Bond Trustee .................. ..........:.................... ............................103
Section 8.04.
Right of Bond Trustee to Rely on Documents .............. ...............................
104
Section 8.05.
Preservation and Inspection of Documents ...................... ..........:.................105
Section 8.06.
Compensation and Indemnification .............................. :..............................
105
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE BOND INDENTURE
Section 9.01. Amendments Permitted ................................................. ............................... 106
Section 9.02. Effect of Supplemental Bond Indenture .......................... ............................108
Section 9.03. Endorsement of Bonds; Preparation of New Bonds ..... ............................... 108
• Section 9.04. Amendment of Particular Bonds ................................... ............................... 109
DOCSSC1:356339.8 -iii-
TABLE OF CONTENTS
(continued)
• Page
ARTICLE X
DEFEASA14CE
Section 10.01. Discharge of Indenture ...................... ............................... ............................109
Section 10.02. Discharge of Liability on Bonds ................................... .......................... ...... 109
Section 10.03. Deposit of Money or Securities with Bond Trustee ...... ............................... 110
Section 10.04. Payment of Bonds After Discharge of Bond Indenture ... ............................111
ARTICLE XI
MISCELLANEOUS
Section 11.01.
Limited Liability of City ................... ............................... ............................111
Section 11.02.
Successor is Deemed Included in All References to Predecessor.; .............
112
Section 11.03.
Limitation of Rights to Parties, City, Bond Trustee the Corporation,
the Liquidity Facility Provider, the Bond Insurer and Bondholders ..........
112
Section 11.04.
Waiver of Notice ............................... ............................... ............................112
Section 11.05.
Destruction of Bonds ........................ ............................... ............................112
Section 11.06.
Severability of Invalid Provisions ................................. ...............................
112
Section11.07.
Notices .......................................................................... ...............................
112
Section 11.08.
Evidence of Rights of Bondholders .. ............................... ............................114
•
Section 11.09.
Disqualified Bonds ........................................................ .........................:.....
115
Section 11.10.
Money Held for Particular Bonds ................................. ...............................
115
Section 11.11.
Funds and Accounts .......................... ............................... ............................115
Section 11.12.
Waiver of Personal Liability ......................................... ...............................
116
Section 11.13.
Business Days ............................................................... ...............................
116
Section 11.14.
Affiliates Not Liable ..................................................... ...............................
116
Section 11.15.
Governing Law; Venue ................................................. ..............7................
116
Section 11.16.
Execution in Several Counterparts .......... :....................................................
116
Section 11.17.
Consent Rights of the Bond Insurer; Bond Insurer Deemed Holder
of Bonds in Certain . Circumstances . ............................... ............................116
EXHIBIT A
AUCTION AND SETTLEMENT PROCEDURES .......... ..............................1
EXHIBIT B
FORM OF NOTICE OF CURE OF ARS PAYMENT DEFAULT ................1
EXHIBIT C
FORM OF REQUISITION — PROJECT FUND REQUISITION
NO. - PROJECT FUND ............................................. ...............................
1
EXHIBIT D
FORM OF REQUISITION - COSTS OF ISSUANCE FUND .......................
1
•
DOCSSCl:356339.8
-iv-
•This BOND INDENTURE, made and entered into as of August 1, 2005, by and
between the CITY OF NEWPORT BEACH, a municipal corporation and charter city duly
organized and existing under a freeholder's charter under the Constitution and the laws of the
State of California (the "City"), and Wells Fargo Bank, National Association, a national banking
association organized and existing under the laws of the United States of America, being
qualified to accept and administer the trusts hereby created (the "Bond Trustee ");
WITNESSETH:
WHEREAS, the City is a municipal corporation and charter city duly organized
and existing under a freeholder's charter under the Constitution and laws of the State of
California, and pursuant to the Charter of the City (as it may from time to time be amended,
hereinafter called the "Charter") has the right and power to make and enforce all laws and
regulations in respect to municipal affairs and certain other matters in accordance with and as
more particularly provided in Sections 3, 5 and 7 of Article XI of the Constitution of the State of
California and Section 200 of Article Il of the Charter, and pursuant to such right and power the
City Council of the City adopted Ordinance No. 85 -23 and 84-4 (said Ordinance, as the same
may from time to time be amended, being hereafter called the "Law"); and
WHEREAS, the City is authorized under the Law to issue its bonds for the
purpose of making secured or unsecured loans to any participating health institution (as defined
in the Law) for the cost of acquiring, constructing, rehabilitating or improving a health facility
•(as defined in the Law) or financing thereof or working capital therefor, including reimbursement
of costs already expended for such purpose and for refinancing outstanding obligations of such
participating health institution incurred to finance the cost of acquiring, constructing,
rehabilitating or improving a health facility or financing working capital for such health facility,
all for the purposes set forth in the Law; and
WHEREAS, Hoag Memorial Hospital Presbyterian, a California nonprofit public
benefit corporation (the "Corporation'), has requested the assistance of the City in the financing
of the acquisition, construction and equipping of health facilities located within the City;
WHEREAS, after due investigation and deliberation, the City has approved said .
request and authorized the issuance of its Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, 2065B and 2005C (collectively, the "Bonds') in the aggregate
principal amount of two hundred million dollars ($200,000,000) to provide such.assistance to the
Corporation in accordance with the Law;
WHEREAS, the City has duly entered into a loan agreement, dated as of
August 1, 2005, with the Corporation specifying the terms and conditions of a loan by the City to
the Corporation of the proceeds of the Bonds and of the payment by the Corporation to the City
of amounts sufficient for the payment of the principal of and interest and premium, if any, on the
Bonds, the Purchase Price, under circumstances described therein, and certain related expenses;
WHEREAS, pursuant to a master indenture, dated as of October 1, 1984 (the
. "Master Indenture "), as supplemented or amended, between the Corporation and Wells Fargo
DOCSSC1:356339.8
Bank, National Association, as successor master trustee (the "Master Trustee'), and a
•Supplemental Master Indenture for Obligation No. 14, dated as of August 1, 2005, between the
Corporation and the Master Trustee ("Supplement No. 14 "), the Corporation has issued its
Obligation No. 14 to evidence the obligation of the Members to make all payments under the
Loan Agreement, including amounts sufficient to pay the principal of and premium and interest
on the Bonds;
•
•
WHEREAS, in order to further support payments of principal of and interest on
the Bonds, the Corporation has obtained a Bond Insurance Policy from Financial Guaranty
Insurance Company, as Bond Insurer;
WHEREAS, in order to provide for the authentication and delivery of the Bonds,
to establish and declare the terms and conditions upon which the Bonds are to be issued and
secured and to secure the payment of the principal thereof and interest thereon, the City has
authorized the execution and delivery of this Bond Indenture; and
WHEREAS, the Bonds, and the Bond Trustee's certificate of authentication and
assignment to appear thereon, shall be in substantially the following forms, respectively, with
necessary or appropriate variations, omissions and insertions, as permitted or required by this
Bond Indenture:
-2-
V<)CSSCI:356339.8
E
•
is
FORM OF BOND
NUMBER PRINCIPAL AMOUNT
R- $
CITY OF NEWPORT BEACH
INSURED REVENUE BOND
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005_
MATURITY DATE
December 1, 2040
INTEREST RATE
Variable
REGISTERED HOLDER; Cede & Co.
DATED
August 24, 2005
CUSIP NUMBER
CITY OF NEWPORT BEACH, a municipal corporation and charter city duly .
organized and existing under a freeholder's charter under the Constitution and the laws of the
State of California, (the "City), for value received, hereby promises to pay (but only out of the
Revenues and other assets pledged therefor as hereinafter mentioned) to the Registered Holder
specified above or registered assigns, on the Maturity Date specified above (unless this Bond
shall have been previously called for redemption in whole or in part and payment of the
Redemption Price (as hereinafter provided) shall have been duly made), the Principal Amount
specified above, in lawful money of the United States of America; and to pay interest thereon
(but only from said Revenues and other assets pledged therefor) in like lawful money from the
date hereof until payment of such principal sum shall be discharged as provided in the Bond
Indenture hereinafter mentioned, at the rates per annum determined as set forth below, payable
on each Interest Payment Date (as defined below). The principal (or Redemption Price) hereof is
payable at the designated corporate trust office of Wells Fargo Bank, National Association
(together with any successor Bond Trustee as provided in the Bond Indenture, as defined below,
the `Bond Trustee "). Interest hereon is payable by check mailed on each Interest Payment Date
to the Holder hereof as of the close of business on the Record Date (as hereinafter defined) at the
address appearing on the bond registration books maintained by the Bond Trustee; provided,
however, that in the case of Bonds bearing interest at Bond Interest Term Rates (as hereinafter
described), or Bonds bearing interest other than at a Bond Interest Term Rate for a Holder who
owns an aggregate principal amount in excess of $1,000,000 of Bonds as shown on the
registration books maintained by the Bond Trustee and who, prior to the Record Date next
preceding any Interest Payment Date, shall have provided the Bond Trustee with written wire
transfer instructions, in accordance with such written wire transfer instructions and the Bond
Indenture, provided that while the Bonds bear interest at Bond Interest Term Rates, except for
Bonds registered in the name of the Securities Depository (as defined in the Bond Indenture),
interest payable hereon is payable only upon presentation hereof to the Bond Trustee, at its
Principal Office (hereinafter identified).
DOC33C1356339.8 3
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
•CITY OF NEWPORT BEACH, THE STATE OF CALIFORNIA OR ANY POLITICAL
SUBDIVISION THEREOF IS PLEDGE TO THE PAYMENT OF THE PRINCIPAL OF OR
PREMIUM OR INTEREST ON THIS BOND.
The Record Date means (i) with respect to any Bonds bearing interest at a Weekly
Interest Rate (as hereinafter described) or a Bond Interest Term Rate (as hereinafter described)
(each a "Record Date'), the Business Day (as hereinafter described) immediately preceding the
related Interest Payment Date, (ii) with respect to any Bonds bearing interest at a Serial Bond
Interest Rate, the 15th day of the calendar month immediately preceding the calendar month in
which such Interest Payment Date falls or, in the event that an Interest Payment Date shall occur
less than 15 days after the first day of a Serial Bond Interest Rate Period, such first day and (iii)
with respect to any Bonds which are ARS, the second Business Day next preceding each ARS
Interest Payment Date. If available funds are insufficient on any Interest Payment Date to pay
the interest then due, such interest shall continue to accrue thereon but shall cease to be payable
to the Holders shown on the registration books of the Bond Trustee as of the related Record
Date. If sufficient funds for the payment of the overdue interest thereafter become available, the
Bond Trustee shall establish a special interest payment date (any such date being herein referred
to as a "Special Interest Payment Date') on which such overdue interest shall be paid and a
special record date for determining the Bondholders entitled to such payments (any such date
shall be a Business Day and shall be referred to as a "Special Record Date'), shall mail a notice
of each such date to each Holder at least ten days prior to the Special Record Date, but not more
than thirty days prior to the Special Interest Payment Date, and shall pay the overdue interest to
• the Holders on the Special Interest Payment Date.
This Bond is issuable in denominations of $100,000 or any integral multiple of
$5,000 in excess of $100,000 for Bonds during the Short-Term Interest Rate Period or Weekly
Interest Rate Period. During the Serial Bond Interest Rate Period, this Bond shall be issuable in
denominations of $5,000 or any integral multiple thereof. During any ARS Interest Rate Period,
this Bond is issuable in denominations of $25,000 or any integral multiple thereof.
•
This Bond is one of a duly authorized issue of bonds of the City designated as
"City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series
2005_" (the "Series 2005_ Bonds "), limited in aggregate principal amount to $
and issued pursuant to the provisions of Ordinance. No. 85 -23 and 84-4 of the City (the "Law")
and a bond indenture, dated as of August 1, 2005, between the City and the Bond Trustee (the
"Bond Indenture "). The Series 2005 Bonds are issued under the Bond Indenture on a parity .
with bonds of the City designated as _ "City of Newport Beach Insured Revenue Bonds (Hoag
Memorial Hospital Presbyterian), Series 2005_" (the "Series 2005_ Bonds') and the "City of
Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005"
(the "Series 2005_ Bonds'). The Series 2005_ Bonds, Series 2005_ Bonds and the Series
2005 Bonds are collectively referred to as the "bonds." The Bonds are issued for the purpose
of making a loan to Hoag Memorial Hospital Presbyterian, a California nonprofit public benefit
corporation (the "Corporation "), pursuant to a loan agreement, dated as of August 1, 2005 (the
"Loan Agreement'), between the City and the Corporation, for the purposes and on the terms
and conditions set forth therein.
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DOCSSC1:356339.8--
Reference is hereby made to the Bond Indenture (a copy of which is on file at said
• designated corporate trust office of the Bond Trustee) and all indentures supplemental thereto, to
the Loan Agreement (a copy of which is on file at said designated corporate trust office of the
Bond Trustee) and to the Law for a description of the rights thereunder of the Holders of the
Bonds, of the nature and extent of the security, of the rights, duties and immunities of the Bond
Trustee and of the rights and obligations of the City thereunder, to all the provisions of which
Bond Indenture and Loan Agreement the Holder of this Bond, by acceptance hereof, assents and
agrees. Capitalized terms not otherwise defined herein have the meanings set forth in the Bond
Indenture.
The Bonds and the interest thereon are payable from Revenues (as that term is
defined in the Bond Indenture) and are secured by a pledge and assignment of said Revenues and
of amounts held in the funds and accounts established pursuant to the Bond Indenture (other than
the Bond Purchase Fund and the Rebate Fund), subject only to the provisions of the Bond
Indenture permitting the application thereof for the purposes and on the terms and conditions set
forth in the Bond Indenture. The Bonds are further secured by an assignment of the right, title
and interest of the City in the Loan Agreement (to the extent and as more particularly described
in the Bond Indenture) and in Obligation No. 14, dated as of the date of initial delivery of the
Bonds, and issued by the Corporation, pursuant to the terms of a master indenture, dated as of
October 1, 1984, as supplemented or amended (the "Master Indenture "), between the
Corporation and Wells Fargo Bank, National Association, as successor Master Trustee (herein
called the "Master Trustee ") and a supplemental master indenture, dated as of August 1, 20052
between the Corporation and the Master Trustee.
• The term of the Series 2005_ Bonds will be divided into consecutive Interest
Rate Periods during each of which the Series 2005_ Bonds shall bear interest at a Weekly
Interest Rate (a "Weekly Interest Rate Period'), a Serial Bond Interest Rate (a "Serial Bond
Interest Rate Period "), Bond Interest Term Rates for one or more consecutive Bond Interest
Terms (a "Short-Term Interest Rate Period ") or an ARS Interest Rate (an "ARS Interest Rate
Period "). The Interest Rate Period on the Series 2005_ Bonds thereafter may be adjusted from
time to time to a Weekly Interest Rate Period, a Short -Term Interest Rate Period, a Serial Bond
Interest Rate Period or an ARS Interest Rate Period and thereafter again adjusted as described in
the Bond Indenture. As hereinafter described, the Series 2005_ Bonds are subject to mandatory
purchase on the first day of any Interest Rate Period.
During any Weekly Interest Rate Period for the Series 2005_ Bonds, interest on
the Series 2005_ Bonds shall be payable on each Interest Payment Date for the period
commencing on the immediately preceding Interest Accrual Date (or, if any Interest Payment "
Date is not a Wednesday, commencing on the second preceding Interest Accrual Date) and
ending on the Tuesday immediately preceding the Interest Payment Date (or, if sooner, the last
day of the Weekly Interest Rate Period). During any Short -Term Interest Rate Period, Serial
I Bond Interest Rate Period or ARS Interest Rate Period, interest on this Bond shall be payable on
each Interest Payment Date for the period commencing on the immediately preceding Interest
Accrual Date and ending on the day immediately preceding such Interest Payment Date. In any
event, interest on this Bond shall be payable for the final Interest Rate Period to the date on
which this Bond shall have been paid in full. Interest shall be computed, in the case of a Serial
• Bond Interest Rate Period, on the basis of a 360 -day year consisting of twelve 30-day months, in
-5-
DOCSSCI356339.8
the case of an ARS Interest Rate Period, on the basis of a 360 -day year for actual days elapsed,
• and in the case of any other Interest Rate Period, on the basis of a 365- or 366- day year, as the
case may be, for the actual number of days elapsed.
The term "Interest Accrual Date" means (i) with respect to any Weekly Interest
Rate Period, the first day thereof and, thereafter, the first Wednesday of each calendar month
during such Weekly Interest Rate Period (whether or not a Business Day), (ii) with respect to any
Auction Period within an ARS Interest Rate Period, the first day thereof, (iii) with respect to any
Serial Bond Interest Rate Period, the first day thereof and, thereafter, each Interest Payment Date
in respect thereof, other than the last such Interest Payment Date, and (iv) with respect to each
Bond Interest Term within a Short-Term Interest Rate Period, the first day thereof. The term
"Interest Payment Date" means (i) with respect to any Weekly Interest Rate Period, the first
Wednesday of each calendar month or, if such first Wednesday shall not be a Business Day, the
next succeeding Business Day, (ii) with respect to any Serial Bond Interest Rate Period, each
June 1 and December 1, provided that if any such June 1 or December 1 is not a Business Day,
the next succeeding Business Day, (iii) with respect to any Bond Interest Term, the day next
succeeding the last day thereof (iv) with respect to each ARS Interest Rate Period, the Business
Day immediately following each Auction Period and (v) with respect to any Interest Rate Period
that is different than the immediately preceding Interest Rate Period, the first day thereof. The
term "Business Day" means any day on which banks located in New York, New York and the
city in which the Principal Office of the Bond Trustee are located are not required or authorized
to close and on which the New York Stock Exchange is open.
• The interest rate on the Series 2005_ Bonds shall be determined as follows:
(1) Weekly Interest Rate. During each Weekly Interest Rate Period, this
Bond shall bear interest at the Weekly Interest Rate, which shall be determined by the
Remarketing Agent by no later than 5:00 p.m., New York City time, on Tuesday of each week
during such Weekly Interest Rate Period or if such day shall not be a Business Day, then on the
next succeeding Business Day. The first Weekly Interest Rate for each Weekly Interest Rate
Period shall be determined on or prior to the first day of such Weekly Interest Rate Period and
' shall apply to the period commencing on the first day of such Weekly Interest Rate Period and
ending on the next succeeding Tuesday (whether or not a Business Day). Thereafter, each
Weekly Interest Rate shall apply to the period commencing on the first Wednesday on or after
the date of determination thereof (whether or not a Business Day) and ending on the next
succeeding Tuesday (whether or not a Business Day), unless such Weekly Interest Rate Period
shall end on a day other than a Tuesday, in which event the last Weekly Interest Rate for such
Weekly Interest Rate Period shall apply to the period commencing on the Wednesday (whether
or not a Business Day) preceding the last day of such Weekly Interest Rate Period and ending on
the last day of such Weekly Interest Rate Period. The Weekly Interest Rate shall be the rate of
interest per annum determined by the Remarketing Agent to be the minimum interest rate which,
if borne by the Series 2005_ Bonds, would enable the Remarketing Agent to sell the Series
2005_ Bonds on the effective date and at the time of such determination at a price (without
regard to accrued interest) equal to the principal amount thereof. In the event that the
Remarketing Agent fails to establish a Weekly Interest Rater for any week, then the Weekly
Interest Rate for such week shall be the same as the Weekly Interest Rate for the immediately
preceding week if the Weekly Interest Rate for such preceding week was determined by the
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DOCSSC1:356339.8
Remarketing Agent. In the event that the Weekly Interest Rate for the immediately preceding
• week was not determined by the Remarketing Agent, or in the event that the Weekly Interest
Rate determined by the Remarketing Agent shall be held to be invalid or unenforceable by a
court of law, then the interest rate for such week shall be equal to 110% of the BMA Index on
the day such Weekly Interest Rate would otherwise be determined as provided in the Bond
Indenture for such Weekly Interest Rate Period.
(2) Serial Bond Interest Rate. During each Serial Bond Interest'Ratq Period,
this Bond shall bear interest at the Serial Bond Interest Rate. The Serial Bond Interest Rate shall
be determined by the Remarketing Agent on a Business Day no later than the effective date of
such. Serial Bond Interest Rate Period. Subject to the detailed provisions set forth in the Bond
Indenture the Serial Bond Interest Rate shall be the rate of interest per annum determined by the
Remarketing Agent to be the minimum interest rate which, if bome by the Series 2005_ Bonds,
would enable the Remarketing Agent to sell the Series 2005_ Bonds on the date and at the time
of such determination at a price equal to the principal amount thereof (or at a discount below or
premium above par if Bond Counsel (as defined in the Bond Indenture) delivers a Favorable
Opinion of Bond Counsel (as defined in the Bond Indenture) to the Bond Trustee). If, for any
reason, the Serial Bond Interest Rate is not so determined for the Serial Bond Interest Rate
Period by the Remarketing Agent on or prior to the first day of such Serial Bond Interest Rate
Period, then the Series 2005 Bonds shall bear interest at the Weekly Interest Rate and shall
continue to bear interest at a _ Weekly Interest Rate until such time as the interest rate on such
Bonds shall have been adjusted to Bond Interest Term Rates, a Serial Bond Interest Rate or an
ARS Interest Rate, as provided herein, and the Series 2005_ Bonds shall be subject to mandatory
• purchase.
(3) Bond Interest Term Rates. During each Short-Term Interest Rate Period,
this Bond shall bear interest during each Bond Interest Term at the Bond Interest Term Rate.
The Bond Interest Term and the Bond Interest Term Rate need not be the same for any two
Bonds, even if determined on the same date. Each of such Bond Interest Terms and Bond
Interest Term Rates for each Bond shall be determined by the Remarketing Agent no later than
the first day of each Bond Interest Term. Each Bond Interest Term shall be for a period of days
within the range or ranges announced as possible Bond Interest Terms no later than 9:30 a.m.,
New York City time, on the first day of each Bond Interest Term by the Remarketing Agent.
Each Bond Interest Term for each Bond shall be a period of not more than one hundred eighty
(180) days, determined by the Remarketing Agent to, be the period which, together with all other
Bond Interest Terms for all Series 2005_ Bonds then Outstanding, will result in the lowest
overall interest expense on the Series 2005_ Bonds over the next succeeding one hundred eighty
(180) days. If, for any reason, a Bond Interest Term for any Bond cannot be so determined by
the Remarketing Agent, or if the determination of such Bond Interest Term is held by a court of
law to be invalid or unenforceable, then such Bond Interest Term shall be thirty (30) days, but if
the last day so determined shall not be a day immediately preceding. a Business Day, shall end on
the first day immediately preceding the Business Day next succeeding such last day, or if such
last day would be after the day immediately preceding the Maturity Date, shall end on the day
immediately preceding the Maturity Date. Each Bond Interest Term shall end on either a day
which immediately precedes a Business Day or on the day immediately preceding the Maturity
•Date for the Series 2005; Bonds. No Bond Interest Term shall be set to end on a day later than
the fifth day preceding the expiration of any Liquidity Facility applicable to the subject Bonds.
-7-
DOCSSC1356339.8
The Bond Interest Term Rate shall be the rate of interest per annum determined by the
• Remarketing Agent to be the minimum interest rate which, if borne by this Bond, would enable
the Remarketing Agent to sell this Bond on the date and at the time of such determination at a
price equal to the principal amount thereof. If, for any reason, a Bond Interest Term Rate for any
Bond is not so established by the Remarketing Agent for any Bond Interest Term, or such Bond
Interest Term Rate is determined by a court of law to be invalid or unenforceable, then the Bond
Interest Term Rate for such Bond Interest Term shall be the rate per annum equal to 110% of the
BMA Index on the first day of such Bond Interest Term.
(4) ARS Interest Rates. During each ARS Interest Rate Period, this Bond
shall bear interest at a rate determined by the periodic application of the Auction Procedures, as
provided in the Bond Indenture.
The Bond Trustee shall give notice by first class mail of an adjustment in the
Interest Rate Period not less than thirty (30) days prior to the proposed effective date of such
Interest Rate Period. If notice of such adjustment has been mailed to the Holders of the Series
2005 Bonds and Bond Counsel fails to deliver a Favorable Opinion of Bond Eounsel (as that
term is defined in the Bond Indenture), if required pursuant to the Bond Indenture, or if other
conditions precedent to such adjustment have not been satisfied, the Series 2005_ Bonds shall
continue to be subject to mandatory tender for purchase (as described herein) on the date that
would have been the effective date of such adjustment unless the Bonds were previously bearing
interest at an ARS Interest Rate. If this Bond was previously bearing interest at an ARS Interest
Rate, this Bond shall not be subject to mandatory tender for purchase and shall bear interest as
• provided in the Bond Indenture.
Ovtional Purchase of Bonds During_ Weekly Interest Rate Period. During any
Weekly Interest Rate Period with respect to this Bond, this Bond shall be purchased at the option
of the Holder on any Business Day at a purchase price equal to the Purchase Price (as defined in
the Bond Indenture), payable in immediately available funds, upon delivery to the Tender Agent
at its Principal Office for delivery of notices and to the Remarketing Agent of an irrevocable
written notice which states the name of this Bond, the principal amount of this Bond and the date
on which the same shall be purchased, which date shall be a Business Day not prior to the
seventh day next succeeding the date of the delivery of such notice to the Tender Agent. Any
notice delivered to the Tender Agent after 4:00 p.m., New York City time, shall be deemed to
have been received on the next succeeding Business Day. For payment of such Purchase Price
on the date specified in such notice, this Bond must be delivered, at or prior to 10:00 a.m., New
York City time, on the date specified in such notice, to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer hereof, in form satisfactory to the Tender Agent -
executed in blank by the Holder hereof or the Holder's duly authorized attorney, with such
signature guaranteed by a commercial bank, trust company or member firm of the New York
Stock Exchange. The giving of notice by a Holder of this Bond that such Holder elects to have
this Bond purchased during a Weekly Interest Rate Period as described above shall constitute the
irrevocable tender for purchase of this Bond with respect to which such notice shall have been
given irrespective of whether this Bond shall be delivered to the Tender Agent for purchase.
Mandatory Tender for Purchase on Day Next Succeeding the Last Day of Each
• Bond Interest Term. On the day next succeeding the last day of each Bond Interest Term for this
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DOCSSC1:356339.8
Bond while in a Short-Term Interest Rate Period, unless such day is the first day of a new
• Interest Rate Period, this Bond shall be purchased from its Holder at a purchase price equal to the
principal amount hereof plus accrued interest to but not including the Purchase Date (as defined
in the Bond Indenture), payable in immediately available funds, if this Bond is delivered to the
Tender Agent not later than 10:00 a.m., New York City time, on such day or, if delivered after
10:00 a.m., New York City time, payable on the next succeeding Business Day; provided,
however, that in any event this Bond will not bear interest at the Bond Interest Term Rate after
the last day of each Bond Interest Term. The Purchase Price of any Bond so purchased. shall be
payable only upon surrender of such Bond to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer thereof, in form satisfactory to the Tender Agent,
executed in blank by the Holder thereof or by the Holder's duly authorized attorney, with such
signature guaranteed by a commercial bank, trust company or member firm of the New York
Stock Exchange.
Mandatory Tender for Purchase on First Day of Each Interest Rate Period. This
Bond shall be subject to mandatory tender for purchase on the first day of each Interest Rate
Period, or on the day which would have been the first day of an Interest Rate Period in the event
that one of the conditions precedent to the adjustment to a new Interest Rate Period shall not be
met as described in the Bond Indenture (unless the Bonds were previously bearing an ARS
Interest Rate, in which case there is no mandatory tender), at the Purchase Price, payable in
immediately available funds in accordance with the Bond Indenture. The Purchase Price of any
Bond so purchased shall be payable only upon surrender of such Bond to the Tender Agent at its
Principal Office, accompanied by an instrument of transfer thereof, in form satisfactory to the
. Tender Agent, executed in blank by the Holder thereof or by the Holder's duly authorized
attorney, with such signature guaranteed by a commercial bank, trust company or member firm
of the New York Stock Exchange, at or prior to 10:00 a.m., New York City time, on the date
specified for such delivery in this paragraph or in the notice of adjustment to a new Interest Rate
Period provided to the Holders by the Bond Trustee.
Mandatory Tender UQon Termination or Expiration of Liquidity Facility or
Delivery of an Alternate Liquidity Facility (If Liquidi1y Facility Provided). If a Liquidity
Facility (as that term is defined in the Bond Indenture) securing the Series 2005_ Bonds is
delivered to the Tender Agent in the sole discretion of the Corporation in accordance with the
provisions of the Loan Agreement, this Bond shall be subject to mandatory tender for purchase
prior to the Noticed Termination Date (as that term is defined in the Bond Indenture) or the
Expiration Date (as that term is defined in the Bond Indenture) for the Liquidity Facility, and
upon delivery of an Alternate Liquidity Facility (as that term is defined in %the Bond Indenture) at
a Purchase Price, payable in immediately available funds, equal to the principal amount plus
accrued interest, if any. The Purchase Price of any Bond so purchased shall be payable only
upon surrender of such Bond to the Tender Agent at its Principal Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the
Holder thereof or by the Holder's duly authorized attorney, with such signature guaranteed by a
commercial bank, trust company or member firm of the New York Stock Exchange, at or prior to
10:00 a.m., New York City time, on the date specified for such delivery in a notice provided to
the Holders by the Bond Trustee. The Liquidity Facility is expected to provide that it may
immediately terminate upon the occurrence of certain events of default specified in the Liquidity
• Facility without notice or mandatory tender.
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DOCSSCI:356339.8
The Tender Agent may refuse to accept delivery of any Bond for which a proper
• instrument of transfer has not been provided; such refusal, however, shall not affect the validity
of the purchase of such Bond as herein described. In the event that any Holder of a Bond who
shall have given notice of such Holder's election to have this Bond purchased during a Weekly
Interest Rate Period hereof or any Holder of a Bond subject to mandatory tender shall fail to
deliver such Bond to the Tender Agent at the place and on the applicable date and time specified,
or shall fail to deliver such Bond properly endorsed, such Bond shall constitute an "Undelivered
Bond." If funds in the amount of the Purchase Price of any Undelivered Bond are available for
payment to the Holder thereof on the date and at the time specified in accordance with the Bond
Indenture, then from and after the date and time of that required delivery, (i) such Undelivered
Bond shall be deemed to be purchased and shall no longer be deemed to be Outstanding under
the Bond Indenture; (ii) interest shall no longer accrue thereon; and (iii) funds in the amount of
the Purchase Price of such Undelivered Bond shall be held by the Tender Agent for the benefit of
the Holder thereof, to be paid upon delivery (and proper endorsement) of the Undelivered Bond
to the Tender Agent at its Principal Office. Any such funds held by the Tender Agent for the
purchase of Undelivered Bonds shall be held uninvested.
BY ACCEPTANCE OF THIS BOND, EACH HOLDER- IRREVOCABLY
AGREES THAT, IF THIS BOND (OR ANY PORTION HEREOF) IS TO BE PURCHASED
ON ANY DATE AND SUFFICIENT FUNDS ARE ON DEPOSIT WITH THE BOND
TRUSTEE FOR ALL PURCHASES TO BE MADE ON SUCH DATE AS AFORESAID, THIS
BOND (OR THE PORTION TO BE PURCHASED) SHALL BE DEEMED TO HAVE BEEN
PURCHASED FOR ALL PURPOSES HEREUNDER AND UNDER THE BOND
•INDENTURE AND, THEREAFTER, THE HOLDER SHALL HAVE NO FURTHER RIGHTS
HEREUNDER OR UNDER THE BOND INDENTURE WITH RESPECT TO THIS BOND
(OR SUCH PORTION), EXCEPT TO RECEIVE THE PURCHASE PRICE FOR THIS BOND
(OR SUCH PORTION) FROM THE FUNDS SO DEPOSITED UPON SURRENDER HEREOF
AS AFORESAID.
The obligation to purchase Bonds upon optional or mandatory tender is not
initially supported by a Liquidity Facility or a covenant of the Corporation to maintain levels of
liquid assets, although the Bond Indenture provides that the Corporation may deliver a Liquidity
Facility to the Tender Agent at any time, in the sole discretion of the Corporation, to provide a
source of funds for the purchase of Bonds.
While any Weekly Interest Rate is in effect with respect to the Series 2005_
Bonds, the Series 2005_ Bonds are subject to redemption prior to their stated maturity, at the
option of the City (which option shall be exercised upon Request of the Corporation given to the
Bond Trustee (unless waived by the Bond Trustee) at least twenty-five (25) days prior to the date
fixed for redemption) in whole or in part on any date at a redemption price equal to the principal
amount of such Bonds to be redeemed, plus accrued interest thereon (if any) to the date fixed for
redemption, without premium.
While any Serial Bond Interest Rate is in effect with respect to the Series 2005_
Bonds, the Series 2005_ Bonds are subject to redemption prior to their stated maturity at the
option of the City (which option shall be exercised upon Request of the Corporation given to the
. Bond Trustee (unless waived by the. Bond Trustee) at least forty-five (45) days prior to the date
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DOCSSC1:356339.8
fixed for redemption), in whole or in part, on the fast day following such Serial Bond Interest
• Rate Period at a redemption price equal to the principal amount of such Bonds to be redeemed,
plus accrued interest thereon (if any) to the date fixed for redemption, without premium, and
thereafter, during the periods specified below (or, if approved by Bond Counsel, during the
periods and at the redemption prices specified in a notice of the Corporation to the Bond Trustee)
in whole or in part on any date, at the redemption prices (expressed as a percentage of principal
amount) hereinafter indicated or specified in the notice of the Corporation to the Bond Trustee,
plus accrued interest thereon (if any) to the date fixed for redemption:
Length of Serial Bond
Interest Rate Period
(expressed in years l Redemption Prices
greater than 20 after 10 years at 102% declining by 1 % every
year to 100%
less than or equal to 20 after 7 years at 102% declining by I % every
and greater than 15 year to 100%
less than or equal to 15 after 5 years at 102% declining by 1% every
and greater than 10 year to 100%
less than or equal to 10 not subject to optional redemption
• The foregoing notwithstanding, if the Corporation delivers to the Bond Trustee,
the Remarketing Agent and the City prior to any Conversion Date to the Serial Bond Interest
Rate a notice containing an alternative redemption schedule setting forth different dates on
which, or different redemption prices at which, the Bonds may be redeemed while the Serial
Bond Interest Rate is in effect and a Favorable Opinion of Bond Counsel, then during such Serial
Bond Interest Rate Period such alternative redemption schedule shall apply to the redemption of
the Bonds. .
While any Bond Interest Term Rate is in effect, the Series 2005_ Bonds subject to
such Bond Interest Term Rate are also subject to redemption prior to their stated maturity, at the
option of the City (which option shall be exercised upon Request of the Corporation given to the
Bond Trustee (unless waived by the Bond Trustee) at least twenty-five (25) days prior to the date
fixed for redemption) in whole or in part, on the day succeeding the last day of such Bond
Interest Term.at a Redemption Price equal to the principal amount of Series 2005_ Bonds called
for redemption, plus accrued interest th
premium. ereon (if any) to the date fixed for redemption,, without
While any ARS Interest Rate is in effect, the Series 2005_ Bonds are also subject
to redemption prior to their stated maturity, at the option of the City (which option shall be
exercised upon Request of the Corporation given to the Bond Trustee (unless waived by the
Bond Trustee) at least forty (40) days prior to the date fixed for redemption), in whole or in part,
on any ARS Interest Payment Date at a Redemption Price equal to the principal amount of Series
•
DOCSSC1:356339.8
-11-
2005_ Bonds called for redemption, plus accrued interest thereon (if any) to the date fixed for
• redemption, without premium.
The Bonds are subject to redemption prior to their stated maturity, at the option of
the City (which option shall be exercised upon Request of the Corporation in accordance with
the Bond Indenture) in whole or in part, on any date, from hazard insurance or condemnation
proceeds received with respect to the facilities of any of the Members and deposited in the
Special Redemption Account, at a redemption Price equal to the principal amount thereof, plus
accrued interest thereon (if any) to the date fixed for redemption, without premium.
In addition, the Bonds are also subject to redemption prior to maturity at the
option of the City (which option shall be exercised upon Request of the Corporation in
accordance with the Bond Indenture) as a whole (but not in part) on any date at the principal
amount thereof and interest accrued thereon (if any) to the date fixed for redemption, without
premium, if as a result of any changes in the Constitution of the United States of America or any
state or legislative or administrative action or inaction by the United States of America or any
state, or any agency or political subdivision thereof, or by reason of any judicial decisions and
there is a good faith determination by any Member that (a) the Master Indenture has become void
or unenforceable.or impossible to perform or (b) unreasonable burdens or excessive liabilities
have been imposed on such Member, including without limitation, federal, state or other ad
valorem property, income or other taxes not being imposed on the Date of Issuance.
The Series 2005_ Bonds are also subject to mandatory redemption prior to the
Maturity Date, in part, from Sinking Fund Installments payable on December 1 (subject to
•adjustment in accordance with the Bond Indenture) of each year set forth below (provided, that if
the Series 2005_ Bonds are in a Weekly Interest Rate Period, a Short -Term Interest Rate Period
or a Serial Bond Interest Rate Period, and any such December 1is not a Business Day, the
applicable Sinking Fund Installment shall be paid on the next succeeding Business Day; and
provided further, that if the Series 2005_ Bonds are in an ARS Interest Rate Period and any such
December 1 is not an ARS Interest Payment Date, the applicable Sinking Fund Installment shall
be paid on the next succeeding ARS Interest Payment Date), in the amount set forth below, at a
redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest
thereon (if any) to the date fixed for redemption, without premium:
Sinking Fund Installment Date
1December It) Sinkiniz Fund Installments
20
20
20
f Subject to adjustment as provided in the Bond Indenture.
* Final maturity.
Any redemption of this Bond shall be made as provided in the Bond Indenture
. upon not less than thirty (30) days' nor more than sixty (60) days' notice (except in the case of
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DOCSSC1356339.8
redemption of Bonds that bear interest at a Weekly Interest Rate, or at a Bond Interest Term Rate
•which shall be upon not less than ten (10) days' notice and except in the case of redemption of
Bonds that bear interest at an ARS Interest Rate which shall be upon not less than twenty-five
(25) days' notice) by mailing a copy of the redemption notice postage prepaid to the Holder
hereof at the address shown on the bond registration books of the Bond Trustee; provided,
however, that failure by the Bond Trustee to mail any notice or any defect therein or in the
mailing thereof, as it affects any particular Bond, shall not affect the validity of the proceedings
for redemption of any other Bonds.
Any notice of redemption given in accordance with the provisions of the Bond
Indenture may be rescinded by written notice given to the Bond Trustee by the Corporation no
later than five Business Days prior to the date specified for redemption. If this Bond is called for
redemption and payment is duly provided therefor as specified in the Bond Indenture, interest
shall cease to accrue hereon from and after the date fixed for redemption.
If an Event of Default (as that term is defined in the Bond Indenture) shall occur,
the principal of all Bonds may be declared due and payable upon the conditions, in the manner
and with the effect provided in the Bond Indenture. The Bond Indenture provides that in certain
events such declaration and its consequences may be rescinded.
Subject to the limitations and upon payment of the charges, if any, provided in the
Bond Indenture, Series 2005 Bonds may be exchanged, at the designated corporate trust office
of the Bond Trustee, for a like aggregate principal amount of Series 2005_ Bonds of other
authorized denominations.
• This Bond is transferable by the Holder hereof, in person or by such Person's
attorney duly authorized in writing, at the designated corporate trust office of the Bond Trustee,
but only in the manner, subject to the limitations and upon payment of the charges, if any,
provided in the Bond Indenture, and upon surrender and cancellation of this Bond. Upon such
transfer a Series 2005_ Bond or Bonds, of authorized denomination or denominations and for
the same aggregate principal amount, will be issued to the transferee in exchange herefor.
The City and the Bond Trustee shall treat the Holder hereof as the absolute owner
hereof for all purposes, and the City and the Bond Trustee shall not be affected by any notice to
the contrary.
The Bond Indenture and the rights and obligations of the City and of the Holders
of the Bonds and of the Bond Trustee may be modified or amended from time to time and at any
time in the manner, to the extent, and upon the terms provided in the Bond Indenture; provided
that no such modification or amendment shall (i) extend the stated maturity of this Bond, or
reduce the amount of principal hereof, or extend the time of payment, or change the. method of
computing the rate of interest hereon, or extend the time of payment of interest hereon, or reduce
any premium payable upon the redemption hereof or change the Purchase Price to be paid upon
tender hereof, without the consent of the Holder hereof, or (ii) reduce the percentage of Bonds
the consent of the Holders of which is required. to effect any such modification or amendment, or
permit the creation of any lien on the Revenues and other assets pledged under the Bond
• Indenture as security for the Bonds prior to or on a parity with the lien created by the Bond
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DOCSSC 1:356339.6
Indenture, or deprive the Holders of the Bonds of the lien created by the Bond Indenture on such
• Revenues and other assets (except as expressly provided in the Bond Indenture), without the
consent of the Holders of all Bonds then outstanding, all as more fully set forth in the Bond
Indenture.
�J
•
It is hereby certified and recited that any and all acts, conditions and things
required to exist, to have happened and to have been performed precedent to and in the issuance
of this Bond do exist, have happened and have been performed in due time, form and manner as
required by the provisions of the Law and by the Constitution and laws of the State of California,
and that the amount of this Bond, together with all other indebtedness of the City, does not
exceed any limit prescribed by the Law or the Constitution and laws of the State of California,
and is not in excess of the amount of Bonds permitted to be issued under the Bond Indenture.
This Bond shall not be entitled to any benefit under the Bond Indenture, or
become valid or obligatory for any purpose, until the certificate of authentication and registration
hereon endorsed shall have been signed by the Bond Trustee.
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DOCSSC1:356339.8
IN WITNESS WHEREOF, CITY OF NEWPORT BEACH has caused this Bond
• to be executed in its name and on its behalf by the facsimile signature of its Mayor and its seal to
be reproduced hereon by facsimile and attested by the facsimile signature of its City Clerk, all as
of the date set forth above.
CITY OF NEWPORT BEACH
Mayor
(Seal)
Attest:
By:
City Clerk
[FORM OF BOND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
AND REGISTRATION]
This is one of the Bonds described in the within mentioned Bond Indenture,
• which has been registered on the date set forth below.
6
•
Dated'
Wells Fargo Bank, National Association,
as Bond Trustee
LE
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DOCSSC1356339.9 -
Authorized Officer
[FORM OF ASSIGNMENT]
• For value received, the undersigned do(es) hereby sell, assign and transfer unto
the within mentioned Bond and hereby irrevocably constitute(s) and
appoint(s) ' attorney, to transfer the same on the books of the within
named Bond Trustee, with full power of substitution in the premises.
Dated:
Signature Guaranteed By:
NOTICE: Signature must be guaranteed by
•
an eligible guarantor institution.
•
By:
Notice: The signature on this Assignment must
correspond with the name as it appears on the
face of the within Bond in every particular,
without alteration or enlargement or any
change whatsoever.
Social Security Number, Taxpayer
Identification Number or other Identifying
Number of Assignee:
WHEREAS, the City has determined that all acts and proceedings required by law
necessary to make the Bonds, when executed by the City, authenticated and delivered by the
Bond Trustee and duly issued, the valid, binding and legal limited obligations of the City, and to
constitute this Bond Indenture a valid and binding agreement for the uses and purposes herein set
forth in accordance with its terms, have been done and taken, and the execution and delivery of
this Bond Indenture have been in all respects duly authorized;
NOW, THEREFORE, THIS BOND INDENTURE WITNESSETH, that in order
to secure the payment of the principal of, and the interest and premium, if any, on, all Bonds at
any time issued and outstanding under this Bond Indenture, according to their tenor, and to
secure the performance and observance of all the covenants and conditions therein and herein set
forth, and to declare the terms and conditions upon and subject to which the Bonds are to be
issued and received, and in consideration of the premises and of the mutual covenants herein
contained and of the purchase and acceptance of the Bonds by the holders thereof, and for other
valuable consideration, the receipt whereof is hereby acknowledged, the City does hereby
covenant and agree with the Bond Trustee, for the respective benefit of the holders from time to
time of the Bonds, and the Bond Insurer as follows:
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DOCSSC1:356339.8 ..
ARTICLE I
• DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions. Unless the context otherwise requires, the terms
defined in this Section shall, for all purposes of this Bond Indenture and of any indenture
supplemental hereto and of any certificate, opinion or other document herein mentioned, have
the meanings herein specified, to be equally applicable to both the singular and plural forms of
any of the terms herein defined. Unless otherwise defined in this Bond Indenture, all terms used
herein shall have the meanings assigned to such terms in the Law.
Additional Payments
"Additional Payments" means the payments so designated and required to be
made by the Corporation pursuant to Section 3.2 of the Loan Agreement.
Administrative Fees and Expenses
"Administrative Fees and Expenses" means any application, commitment,
financing or similar fee charged or reimbursement for administrative or other expenses incurred
by the City or the Bond Trustee, including Additional Payments.
All -Hold Rate
•. "All -Hold Rate" means, on any date of determination, the interest rate per annum
equal to 65% (as such percentage may be adjusted pursuant to Section 2.08(D)) of the Index.
Alternate Liquidity Facility
"Alternate Liquidity Facility" means a line of credit, letter of credit, standby
purchase agreement or similar liquidity facility issued by a commercial bank or financial
institution delivered or made available to the Tender Agent in accordance with Section 5.7 of the
Loan Agreement which replaces the Liquidity Facility then in effect.
Applicable ARS Rate
"Applicable'ARS Rate" means, with respect to any Series of Bonds which are
ARS, the rate per annum at which interest accrues on the Bonds of such Series for any ARS
Interest Period..
ARS
"ARS" means, on any date, all Bonds of any Series which on such date bear
interest as auction rate securities as provided in Section 2.08 and the Auction Procedures
applicable thereto.
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DOCSSC1:356339.8 -
ARS Beneficial Owner
• "ARS Beneficial Owner" means the Person who is the beneficial owner of ARS
according to the records of (i) the Securities Depository or its participants while such ARS are in
book -entry form or (ii) the Bond Trustee while such ARS are not in book -entry form.
ARS Defaulted Interest
"ARS Defaulted Interest" means interest on any ARS which is payable but is not
punctually paid or duly provided for on any ARS Interest Payment Date.
ARS Interest Pavment Date
"ARS Interest Payment Date" means, with respect to each Series of ARS, the
Business Day immediately following each Auction Period for such Series.
AR Interest Period
"ARS Interest Period" means, with respect to each Series of ARS, the period
commencing on and including an ARS Interest Payment Date and ending on the day immediately
preceding the next succeeding ARS Interest Payment Date; provided, that the fast ARS Interest
Period within each ARS Interest Rate Period other than the one immediately following the Date
of Issuance shall commence on and include the Conversion Date.
• ARS Interest Rate
"ARS Interest Rate" means the interest rate on ARS of any Series determined as
provided in Section 2.08 and the Auction Procedures.
ARS Interest Rate Period
Series are ARS. "ARS Interest Rate Period" means each period during which the Bonds of a
ARS Maximum Rate
"ARS Maximum Rate" means 15% per annum; provided, that in no event shall
the ARS Maximum Rate be more than the Maximum Lawful Rate.
ARS Payment Default
"ARS Payment Default" means any failure by the City and the Bond Insurer to
make the timely payment of the principal of or interest on ARS when due.
Auction
Date. "Auction" means the implementation of the Auction Procedures on an Auction
•
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DOCSSC1:356339.8
Auction Agent
• "Auction Agent" means, initially, Wells Fargo Bank, National Association and
any auction agent appointed in accordance with Section 2.08(E) that agrees with the Bond
Trustee to perform the duties of the Auction Agent herein with respect to a Series of ARS.
When used herein at a time when more than one Auction Agent is acting under this Bond
Indenture, the term "the Auction Agent" means, as the context dictates, either all such Auction
Agents, collectively, or the Auction Agent acting with respect to the applicable Series of SIRS.
Auction Agent Agreement
"Auction Agent Agreement" means that certain Auction Agent Agreement, dated
as of August 1, 2005, between Wells Fargo Bank, National Association, as Auction Agent and
the Bond Trustee, and any agreement with an Auction Agent in substantially the form of such
Auction Agent Agreement, as amended or supplemented from to time to time.
Auction Agent Fee
"Auction Agent Fee" has the meaning provided in each Auction . Agent
Agreement.
Auction Date
"Auction Date" means, with respect to each Series of ARS, the Business Day
• immediately preceding the first day of each Auction Period, other than:
(i) each Auction Period commencing after the ownership of such
Series of ARS is no longer maintained in book -entry form by a Securities Depository;
(ii) each Auction Period commencing after the occurrence and during
the continuance of an ARS Payment Default; or
(iii) any Auction Period commencing less than two Business Days after
the cure or waiver of an ARS Payment Default.
The Auction Date determined as provided in this definition may be adjusted as provided in
Section 2.08(1).
Auction Period
"Auction Period" means (i) with respect to a Series of ARS in a seven -day mode,
any of (A) a period, generally of seven days, beginning on and including a Monday (or the day
following the last day of the prior Auction Period if the prior Auction Period does. not end on a
Sunday) and ending on and including the Sunday thereafter (unless such Sunday is not followed
by a Business Day, in which case ending on and including the next succeeding day which is
followed by a Business Day), (B) a period, generally of seven days, beginning on and including a
Tuesday (or the day following the last day of the prior Auction Period if the prior Auction Period
• does not end on a Monday) and ending on and including the Monday thereafter (unless such
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DOCSSC1:356339.8 _
Monday is not followed by a Business Day, in which case ending on and including the next
• succeeding day which is followed by a Business Day), (C) a period, generally of seven days,
beginning on and including a Wednesday (or the day following the last day of the prior Auction
Period if the prior Auction Period does not end on a Tuesday) and ending on and including the
Tuesday thereafter (unless such Tuesday is not followed by a Business Day, in which case
ending on and including the next succeeding day which is followed by a Business Day), (D) a
period, generally of seven days, beginning on and including a Thursday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a' Wednesday)
and ending on and including the Wednesday thereafter (unless such Wednesday is not followed
by a Business Day, in which case ending on and including the next succeeding day which is
followed by a Business Day) or (E) a period, generally of seven days, beginning on and
including a Friday (or the day following the last day of the prior Auction Period if the prior
Auction Period does not end on a Thursday) and ending on and including the Thursday thereafter
(unless such Thursday is not followed by a Business Day, in which case ending on and including
the next succeeding day which is followed by a Business Day) and (ii) with respect to a Series of
ARS Bonds in a 35 -day mode, any of (A) a period, generally of 35 days, beginning on and
including a Monday (or the day following the last day of the prior Auction Period if the prior
Auction Period does not end on a Sunday) and ending on and including the fifth Sunday
thereafter (unless such Sunday is not followed by a Business Day, in which case ending on and
including the next succeeding day which is followed by a Business Day), (B) a period, generally
of 35 days, beginning on and including a Tuesday (or the day following the last day of the prior
Auction Period if the prior Auction Period does not end on a Monday) and ending on and
including the fifth Monday thereafter (unless such Monday is not followed by a Business Day, in
•which case ending on and including the next succeeding day followed by a Business Day), (C) a
period, generally of 35 days, beginning on and including a Wednesday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a Tuesday) and
ending on and including the fifth Tuesday thereafter (unless such Tuesday is not followed by a
Business Day, in which case ending on and including the next succeeding day followed by a
Business Day), (D) a period, generally of 35 days, beginning on and including a Thursday (or the
day following the last day of the prior Auction Period if the prior Auction Period does not end on
a Wednesday) and ending on and including the fifth Wednesday thereafter (unless such
Wednesday is not followed by a Business Day, in which case ending on and including the next
succeeding day followed by a Business Day) or (E) a period, generally of 35 days, beginning on
and including a Friday (or the day following the last day of the prior Auction Period if the prior
Auction Period does not end on a Thursday) and ending on and including the. fifth Thursday
thereafter (unless such Thursday is not followed by a Business Day, in which case ending on and
including the next succeeding day which is followed by a Business Day); provided, however,
that the initial Auction Period with respect to each Series of Bonds that are issued in an ARS
Interest Rate Period shall begin on and include the Date of Issuance, and that in the event of a
Conversion of a Series of Bonds from another Interest Rate Period to an ARS Interest Rate
Period the initial Auction Period with respect to such Series- .- of Bonds following such
Conversion shall begin on and include the Conversion Date.
•
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DOCSSCl:356339.8
Auction Procedures
• "Auction Procedures" means, with respect to each Series of ARS, the provisions
set forth in Section 2 of the Auction and Settlement Procedures set forth in Exhibit A attached
hereto.
Auction Rate
"Auction Rate" means, with respect to the interest rate on a Series of An, the
rate of interest per annum that results from implementation of the Auction Procedures with
respect to such Series, and determined as described in Section 2(c)(ii) of the Auction Procedures;
provided, however, that the Auction Rate with respect to such Series shall not exceed the ARS
Maximum Rate.
Authorized Representative
"Authorized Representative" means with respect to the Corporation in whatever
capacity it may then be acting, the chairman of its governing body, its chief executive officer, its
chief financial officer or any other person designated as an Authorized Representative of the
Corporation by a Certificate of the Corporation signed by the chairman of its governing body, its
chief executive officer, its chief financial officer, and filed with the Bond Trustee.
Beneficial Owner
•"Beneficial Owner" means any Person which has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of any of the Bonds (including
any Person holding Bonds through nominees, depositories or other intermediaries).
Bid
•
"Bid" has the meaning set forth in Section 2(a)(i) of the Auction Procedures.
BMA Index
"BMA Index" means, on any date, a rate determined on the basis of the seven -day
high grade market index of tax- exempt variable rate demand obligations, as produced by
Municipal Market Data and published or made available by the Bond Market Association
( "BMA') or any Person acting in cooperation with or under the sponsorship of BMA and.
acceptable to the Bond Trustee and effective from such date.
Bond Counsel
"Bond Counsel" means Orrick, Herrington & Sutcliffe LLP or another attorney -at-
law, or firm of such attorneys, of nationally recognized standing in matters pertaining to the tax -
exempt nature of interest on obligations issued by states and their political subdivisions and
acceptable to the City and the Bond Trustee.
DOCSSC1:356339.5 -21-
Bond Indenture
• "Bond Indenture" means this Bond Indenture, as originally executed or as it may
from time to time be supplemented, modified or amended by any Supplemental Bond Indenture.
Bond Insurance Policy
"Bond Insurance Policy" means that certain municipal bond new issue insurance
policy issued by the Bond Insurer with respect to the Bonds, which Bond Insurance Policy
guarantees the payment when due of the principal of and interest on the Bonds, as provided
therein.
Bond Insurer
`Bond Insurer" means Financial Guaranty Insurance Company, a New York stock
insurance company, or any successor thereto.
Bond Interest Term
"Bond Interest Term's means, with respect to any Bond, each period established in
accordance with Section 2.06 during which such Bond shall bear interest at a Bond Interest Term
Rate.
Bond Interest Term Rate
• "Bond Interest Term Rate" means, with respect to any Bond, an interest rate on
such Bond established periodically in accordance with Section 2.06.
Bond Purchase Fund
"Bond Purchase Fund" means the fund by that name established pursuant to
Section 4.10.
Bond Trustee
"Bond Trustee" means Wells Fargo Bank, National Association, a national
banking association organized and existing under and by virtue of the laws of the United States,
or its successor, as Bond Trustee hereunder as provided in Section 8.01.
"Bonds" means the City of Newport Beach Insured Revenue Bonds (Hoag
Memorial Hospital Presbyterian), Series 2005A, 2005B and 2005C authorized by, and at any
time Outstanding pursuant to, this Bond Indenture.
Broker - Dealer
"Broker - Dealer" means, with respect to any Series of Bonds, Citigroup Global
. Markets Inc., and any other broker or dealer (each as defined in the Securities Exchange Act of
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DOCSSC1356339.8 ...
1934), commercial bank or other entity permitted by law to perform the functions required of a
Broker - Dealer set forth in the Auction Procedures which (i) is a participant in or member of the
Securities Depository as determined by the rules or bylaws of the Securities Depository (or an
affiliate of such a participant or member), (ii) has been appointed as such by the Corporation
pursuant to Section 2.080, and (iii) has entered into a Broker - Dealer Agreement that is in effect
on the date of reference. When used herein at a time when more than one Broker - Dealer is
acting under this Bond Indenture, the term "the Broker - Dealer" means, as the context dictates,
either all such Broker - Dealers collectively, or only each Broker - Dealer acting with respect to the
applicable Series ofARS. .
Broker- Dealer Agreement
"Broker - Dealer Agreement" means that certain Broker - Dealer Agreement dated
as of August 1, 2005, among the Auction Agent, the Corporation and a Broker - Dealer pursuant
to which the Broker - Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, and any similar agreement with a successor Broker - Dealer in substantially the form
attached to the Auction Agent Agreement, each as from time to time amended or supplemented.
Business Dav
"Business Day" means any day on which banks located in the State of California,
New York, New York and the city in which the Principal Office of the Bond Trustee is located
are not required or authorized to be closed and on which The New York Stock Exchange is open.
. Certificate. Statement. Request or Requisition of the City or the Comoration
"Certificate," "Statement," "Request" and "Requisition" of the City or the
Corporation mean, respectively, a written certificate, statement, request or requisition signed in
the name of the City by its Mayor, City Clerk or such other person as may be designated and
authorized to sign for the City in writing to the Bond Trustee, or in the name of the Corporation
by an Authorized Representative of the Corporation. Any such instrument and supporting
opinions or representations, if any, may, but need not be combined in a single instrument with
any other instrument, opinion or representation, and the two or more so combined shall be read
and construed as a single instrument. If and to the extent required by Section 1.02, each such
instrument shall include the statements provided for in Section 1.02.
•
city
"City" means the City of Newport Beach, a municipal corporation and charter city
duly organized and existing under a freeholder's charter under the Constitution and the laws of
the State of California.
Code
"Code" means the Internal Revenue Code of 1986, or any successor statute
thereto and any regulations promulgated thereunder.
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DOCSSCI:356339.8
Continuing Disclosure Certificate
• "Continuing Disclosure Certificate" means the continuing disclosure certificate
executed by the Corporation with respect to the Bonds on the Date of Issuance pursuant to
Section 5.8 of the Loan Agreement.
Conversion
"Conversion" means a conversion of a Series of Bonds from one Interest Rate
Period to another Interest Rate Period
Conversion Date
"Conversion Date" means the effective date of a Conversion of a Series of Bonds.
Corooration
"Corporation" means Hoag Memorial Hospital Presbyterian, a California
nonprofit public benefit corporation duly organized and existing under the laws of the State of
California or any corporation that is the surviving, resulting or transferee corporation in any
merger, consolidation or transfer of all or substantially all assets permitted under the Master
Indenture.
Corporation Purchase Account
• "Corporation Purchase Account" means the account by that name in the Bond
Purchase Fund established pursuant to Section 4.10.
Costs of Issuance
"Costs of Issuance ". means all items of expense directly or indirectly payable by
or reimbursable to the City or the Corporation and related to the authorization,. issuance, sale and
delivery of the Bonds, including but not limited to advertising and printing costs, costs of
preparation and reproduction of documents, filing and recording fees, initial fees and charges of
the Bond Trustee and the Master Trustee, initial and ongoing fees and charges of the City, legal
fees and charges, fees and disbursements of consultants and professionals, Rating Agency fees,
fees and charges for preparation, execution, transportation and safekeeping of the Bonds, and any
other cost, charge or fee in connection with the original issuance of the Bonds.
Costs of Issuance Fund
"Costs of Issuance Fund" means the fund by that name established pursuant to
l Section 3.03.
Date of Issuance
•
"Date of Issuance" means August 24, 2005.
_24_
DOCSSCI356339.8
Eligible Bonds
• "Eligible Bonds" means any Bonds other than Liquidity Facility Bonds or Bonds
owned by, for the account of, or on behalf of, the City or any Member.
Environmental Laws
"Environmental Laws" means any federal, state or local law, statute, code,
ordinance, regulation, requirement or rule relating to Hazardous Materials to which the
Corporation or any property of the Corporation is subject.
Event of Default
"Event of Default" means any of the events specified in Section 7.01.
Existing Holder
"Existing Holder" means, with respect to any Auction, a Person who was listed as
the ARS Beneficial Owner in the applicable Existing Holder Registry at the close of business on
the Business Day immediately preceding such Auction.
Existing Holder Registry
"Existing Holder Registry" means, with respect to each Series of ARS, the
•registry of Persons who are ARS Beneficial Owners of such Series, maintained by the Auction
Agent as provided in the Auction Agent Agreement.
Expiration Date
•
"Expiration Date" means (i) the date upon which a Liquidity Facility is scheduled
to expire (taking into account any extensions of such Expiration Date by virtue of extensions of a
particular Liquidity Facility, from time to time) in accordance with its terms, including without
limitation termination upon the effective date of an Alternate Liquidity Facility delivered in
accordance with Section 5.7 of the Loan Agreement, and (ii) the date upon which a Liquidity
Facility terminates following voluntary termination by the Corporation pursuant to Section 5.7(b)
of the Loan Agreement.
Favorable Opinion of Bond Counsel
"Favorable Opinion of Bond Counsel" means an opinion of Bond Counsel,
addressed to the City, the Remarketing Agent (if any), the Broker - Dealer (if any), the Auction
Agent (if any), the Corporation and the Bond Trustee to the effect that the action proposed to be
taken is authorized or permitted by the laws of the State of California and this Bond Indenture
and will not result in the inclusion of interest on the Bonds in gross income for federal income
tax purposes.
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DOCS3CI:356339.8 -
Fixed Rate Conversion Date
• "Fixed Rate Conversion Date" means the date on which a Series of Bonds begin
to bear interest for a Serial Bond Interest Rate Period which extends to the final Maturity Date of
such Series of Bonds.
Hazardous Materials
"Hazardous Materials" means dangerous, toxic or hazardous pollutants,
contaminants, chemicals, waste, materials or substances (as defined in Environmental Laws), and
also any urea formaldehyde, polychlorinated biphenyls, asbestos, asbestos containing materials,
nuclear fuel or waste, radioactive materials, explosives, carcinogens and petroleum products, or
any other waste, material, substance, pollutant or contaminant the improper storage, disposal or
release of which would subject the person so storing, disposing or releasing (or the owner of the
property on which such action occurs) to any damages, penalties or liabilities under any
applicable law, regulation, requirement or rule.
Holder or Bondholder
"Holder" or `Bondholder," whenever used herein with respect to a Bond, means
the Person in whose name such Bond is registered.
Hold Order
•"Hold Order" has the meaning set forth in Section 2(a)(i) of the Auction
Procedures.
Immediate Termination Date
"Immediate Termination Date" means the date on which the Liquidity Facility
Provider's obligation to advance funds or purchase Bonds under a Liquidity Facility terminates
or is suspended immediately in accordance with its terms.
Index
"Index" means, on any Auction Date with respect to any Series of Bonds in any
Auction Period, the One Month LIBOR Rate on such date. If such rate is unavailable, the Index
for the Bonds or any Series of Bonds means an index or rate agreed to by all Broker - Dealers. If
for any reason on any Auction Date the Index shall not be determined as provided above, the
Index shall mean the Index for the Auction Period ending on such Auction Date.
Interest Account
"Interest Account" means the account by that name in the Revenue Fund
established pursuant to Section 5.02.
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DOCSSCL356339.9 ..
Interest Accrual Date
• "Interest Accrual Date" means
(a) for any Weekly Interest Rate Period, the first day thereof and,
thereafter, the first Wednesday of each calendar month during such Weekly Interest Rate Period
(whether or not a Business Day);
(b) for any Auction Period within an ARS Interest Rate Period, the
first day thereof;
(c) for any Serial Bond Interest Rate Period, the first day thereof and,
thereafter, each Interest Payment Date in respect thereof, other than the last such Interest
Payment Date, during that Serial Bond Interest Rate Period; and
(d) for each Bond Interest Term within a Short-Term Interest Rate
Period, the first day thereof.
Interest Payment Date
"Interest Payment Date" means:
(a) with respect to the Bonds or any Series of Bonds other than ARS,
• (i) for any Weekly Interest Rate Period, the fast Wednesday of
each calendar month, or, if the fast Wednesday is not a Business Day, the next
succeeding Business Day;
(ii) for any Serial Bond Interest Rate Period, each June 1 and
December 1, or if any June 1 or December 1 is not a Business Day, the next
succeeding Business Day;
(iii) for any Bond Interest Term, the day next succeeding the
last day of that Bond Interest Term;
(iv) for each Interest Rate Period that is different than the
immediately preceding Interest Rate Period, the first day thereof for the
immediately preceding Interest Rate Period; and
(v) for Liquidity Facility Bonds, each date specified in the
Liquidity Facility relating to such Liquidity Facility Bonds.
(b) with respect to Bonds or any Series of Bonds which are ARS, each
ARS Interest Payment Date.
Interest Rate Period
"Interest Rate Period" means a Weekly Interest Rate Period, a Short-Term Interest
• Rate Period, a Serial Bond Interest Rate Period or an ARS Interest Rate Period.
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DOCSSC1:356339.8
Investment Securities
• "Investment Securities" means any of the following that at the time are legal
investments under the laws of the State of California for moneys held hereunder and.then proposed
to be invested therein:
(a) United States Government Obligations;
(b) Obligations of any of the following federal agencies which
obligations represent the full faith and credit of the United States of America:
(PHAs);
(i) Export-Import Bank;
(ii) Rural Economic Community Development Administration;
(iii) U.S. Maritime Administration;
(iv) Small Business Administration;
(v) U.S. Department of Housing & Urban Development
(vi) Federal Housing Administration; and
• (vii) Federal Financing Bank.
(c) Direct obligations of any of the following federal agencies which
obligations are not fully guaranteed by the full faith and credit of the United States of America:
(i) Senior debt obligations issued by the Federal National
Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC);
(ii) Obligations of the Resolution Funding Corporation
(REFCORP);
(iii) Senior debt obligations of the Federal Home Loan Bank
System; and
(iv) Senior debt obligations of other. government sponsored
agencies approved by the Bond Insurer.
(d) U.S. dollar denominated deposit _..accounts, federal fund and
bankers' acceptances with domestic commercial banks which have a rating on their short term
certificates of deposit on the date of purchase of "P-l" by Moody's and "A -1" or "A -1 +" by S &P
and maturing not more than 360 calendar days after the date of purchase;
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DOCSSC1:356339.8
(e) Commercial paper which is rated at the time of purchase in the
• single highest classification, "P -1" by Moody's and "A -1 +" by S &P and which matures not more
than 270 calendar days after the date of purchase;
(f) Investments in money market funds rated "AAAm" or "AAm -G"
or better by S &P;
(g) Pre- refunded Municipal Obligations defined as follows: any bonds
or other obligations of any state of the United States of America or of any agency,
instrumentality or local governmental unit of any such state which are not callable at the option
of the obligor prior to maturity or as to which irrevocable instructions have been given by the
obligor to call on the date specified in the notice; and
(i) which are rated, based on irrevocable escrow account or
fund (the "escrow j, in the highest Rating Category of Moody's or S &P or any
successors thereto; or
(ii) (a) which are fully secured as to principal, interest and
redemption premium, if any, by an escrow consisting only of cash or United
States Government Obligation, which escrow may be applied only to the payment
of such principal of and interest and redemption premium, if any, on such bonds
or other .obligations on the maturity date or dates thereof or the specified
redemption date or dates pursuant to such irrevocable instructions, as appropriate,
and (b) which escrow is sufficient, as verified by a nationally recognized
• independent certified public accountant, to pay principal of and interest and
redemption premium, if any, on the bonds or other obligations described in this
paragraph on the maturity date or dates specified in the irrevocable instructions
referred to above, as appropriate.
(h) Municipal obligations rated "Aaa/AAA" or general obligations of
States with a rating of "AWA" or higher by both Moody's and S &P;
(i) Investment agreements approved in writing by the Bond Insurer
(supported by appropriate opinions of counsel); and
(j) Other forms of investments (including repurchase agreements)
approved in writing by the Bond Insurer.
Law
"Law" means Ordinance No. 85 -23 and 84-4 of the City, as now in effect and as it
may from time to time be amended or supplemented.
Liquidity Facility
"Liquidity Facility" means a line of credit, letter of credit, standby purchase
agreement or similar liquidity facility issued by a commercial bank or other financial institution
• and delivered or made available to the Tender Agent in accordance with Section 5.7 of the Loan
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DOCSSC1J56339.8
Agreement or, in the event of the delivery or availability of an Alternate Liquidity Facility, such
• Alternate Liquidity Facility.
Liquidity Facility Account
"Liquidity Facility Account" means the account by that name in the Bond
Purchase Fund established pursuant to Section 4.10.
Liquidity Facility Bonds
"Liquidity Facility Bonds" means Bonds purchased with moneys drawn under (or
otherwise obtained pursuant to the terms of) a Liquidity Facility, but excluding Bonds no longer
considered to be Liquidity Facility Bonds in accordance with the terms of the applicable
Liquidity Facility.
Liquidity Facility Provider
"Liquidity Facility Provider" me
institution issuing (or having primary obligation, or
obligated, under) a Liquidity Facility then in effect.
Liquidity Facility Rate
means
the commercial bank or other financial
acting as agent for the financial institutions
"Liquidity Facility Rate" means the rate per annum, if any, specified in a
•Liquidity Facility as applicable to Liquidity Facility Bonds, which rate shall not exceed the
Maximum Interest Rate, but in no event shall such Liquidity. Facility Rate exceed the Maximum
Lawful Rate.
Loan Agreement
"Loan Agreement" means that certain loan agreement by and between the City
and the Corporation, dated as of August 1, 2005, as originally executed and as it may from time
to time be supplemented, modified or amended in accordance with the terms thereof and of this
Bond Indenture.
Loan Default Event
"Loan Default Event" means any of the events specified in Section 6.1 of the
Loan Agreement.
Loan Repayments
"Loan Repayments" means the payments so designated and required to be made
by the Corporation pursuant to Section 3.1 of the Loan Agreement. .
Master Indenture
•"Master Indenture" means that certain master trust indenture, dated as of
October 1, 1984, as supplemented or amended between the Corporation and the Master Trustee
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DOCSSC1:356339.8
and as it may from time to time be supplemented, modified or amended in accordance with the
• terms thereof.
Master Trustee
"Master Trustee" means Wells Fargo Bank, National Association, a national
banking association duly organized and existing under the laws of the United States of America,
as successor master trustee or its successor as master trustee under the Master Indenture.
Maturity Date
"Maturity Date" means, with respect to each Series of the Bonds, December 1,
2040.
Maximum Interest Rate
"Maximum Interest Rate" means (a) with respect to Bonds other than ARS the
lesser of 12% per annum and the Maximum Lawful Rate and (b) with respect to ARS, the ARS
Maximum Rate, in each case calculated in the same manner as interest is calculated for the
particular interest rate on the Bonds.
Maximum Lawful Rate
"Maximum Lawful Rate" means the maximum rate of interest on the relevant
• obligation permitted by applicable law.
Member
•
"Member" means the Corporation and each other Person that is then obligated as
a Member under the Master Indenture.
Minimum Authorized Denominations
"Minimum Authorized Denominations" means with respect to any (i) Serial Bond
Interest Rate Period, $5,000 and any integral multiple thereof; (ii) Short-Term Interest Rate
Period or Weekly Interest Rate Period, $100,000 and any integral multiple of $5,000 in excess of
$100,000, and (iii) ARS Interest Rate Period, $25,000 and any integral multiple thereof.
Moody's
" Moody's" means Moody's Investors Service; a corporation organized and
existing under the laws of the State of Delaware, its successors and their assigns, or, if such
corporation shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, any other nationally recognized securities rating agency designated by
the Corporation by notice in writing to the City and the Bond Trustee.
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DOCSSC1:356339.8
Non - Payment Rate
• "Non- Payment Rate" means 15% per annum; provided, that in no event shall the
Non - Payment Rate be more than the Maximum Lawful Rate.
Notice of ARS Payment Default
"Notice of ARS Payment Default" means a notice substantially in the form of
Exhibit C to the Auction Agent Agreement.
Notice of Cure of ARS Payment Default
"Notice of Cure of ARS Payment Default" means a notice substantially in the
form of Exhibit B attached hereto. .
Noticed Termination Date
"Noticed Termination Date" means the date on which a Liquidity Facility
Provider's obligation to advance funds or purchase Bonds under a Liquidity Facility terminates
as stated in the Liquidity Facility Provider's notice of termination delivered pursuant to the
Liquidity Facility due to a default under specified sections of the Liquidity Facility, which date
of termination shall be twenty (20) days (or such longer period as is specified in the Liquidity
Facility) after the date of receipt by the Bond Trustee of such notice.
• Obligated GrouD
"Obligated Group" means the Corporation and each other Member.
•
Obligation No. 14
"Obligation No. 14" means the obligation issued under the Master Indenture and
Supplement No. 14.
One -Month LIBOR Rate
"One Month LIBOR Rate" means, as of any date of determination, the offered
rate for deposits in U.S. dollars for a one -month period which appears on the Telerate Page 3750
at approximately 11:00 a.m., London time, on such date, or if such date is not a date on which
dealings in U.S. dollars are transacted in the London interbank market, then on the next
preceding day on which such dealings were transacted in such market.
Opinion of Counsel
"Opinion of Counsel" means a written opinion of counsel (who may be counsel
for the City, the Bond Trustee or the Corporation), selected by the Bond Trustee and not objected
to by the City. If and to the extent required by the provisions of Section 1.02, each Opinion of
Counsel shall include the statements provided for in Section 1.02.
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DOCSSCI:356334.8
i
•
•
Optional Redemption Account
"Optional Redemption Account' means the account by that name in the
Redemption Fund established pursuant to Section 5.05.
Order
"Order" has the meaning set forth in Section 2(a)(i) of the Auction Procedures.
Outstandine
"Outstanding," when used as of any particular time with reference to Bonds,
means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being,
authenticated and delivered by the Bond Trustee under this Bond Indenture except (1) Bonds
theretofore canceled by the Bond Trustee or surrendered to the Bond Trustee for cancellation; (2)
Bonds with respect to which all liability of the City shall have been discharged in accordance
with Section 10.02, including Bonds (or portions of Bonds) referred to in Section 11.10; and (3)
Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall
have been authenticated and delivered by the Bond Trustee pursuant to this Bond Indenture.
Participant
"Participant' means a member of or participant in the Securities Depository.
Payment Default
"Payment Default" means any failure by the City to make timely payment of
principal or interest on the Bonds when due.
Person
"Person" means an individual, corporation, firm, association, partnership, bust or
other legal entity or group of entities, including a governmental entity or any agency or political
subdivision thereof.
Potential Holder
"Potential Holder" means, with respect to
Existing Holder, who may be interested in acquiring a
subject to such Auction in addition to the ARS of such
Person.
Principal Account .
any Auction, any Person, including any
beneficial interest in ARS of a Series
Series, if any, currently owned by such .
'Principal Account' means the account by that name in the Revenue Fund
established pursuant to Section 5.02.
DOCSSCI:356339.8
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Principal Office
• "Principal Office" means, as appropriate, the designated corporate trust office of
(1) the Bond Trustee, which as of the date hereof is located at 707 Wilshire Boulevard, 17th
Floor, Los Angeles, CA 90017, Attention: Corporate Trust Services or (2) the Tender Agent,
which as of the date hereof, shall be the same as the Bond Trustee or (3) the Bond Insurer, which
as of the date hereof is located at 125 Park Avenue, New York, NY 10017.
Program
"Program" means the City's program of making loans under the Law.
Project
"Project" means the acquisition and construction of certain additions and
improvements to, and equipment for, the acute care hospital and related facilities owned by the
Corporation and located on the campus known as One Hoag Drive, Newport Beach, California
92658. The Project may include improvements at or relating "to the South Tower following
evidence being submitted to the Bond Trustee that all approvals required from the City for such
additional project elements under the California Environmental Quality Act have been
completed.
Project Fund
• "Project Fund" means the fund by that name established pursuant to Section 3.04.
Purchase Date
•
Purchase Price
"Purchase Date" has the meaning set forth in Section 4.10(C).
"Purchase Price" has the meaning set forth in Section 4.10(C).
Purchased Bonds
"Purchased Bonds" has the meaning set forth in Section 4.10(C).
Rating Agency
"Rating Agency" means S&P and/or Moody's, as the context requires.
Rating Category
"Rating Category" means a generic securities rating category, without regard to
any refinement or gradation of such rating category by a numerical modifier or otherwise.
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DOCSSCI:356339.8
Rebate Fund
• "Rebate Fund" means the fund by that name established pursuant to Section 5.06.
Record Date
"Record Date" means (a) with respect to the Bonds other than ARS, (i) with
respect to any Interest Payment Date in respect to any Weekly Interest Rate Period or any Short-
Term Interest Rate Period, the Business Day immediately preceding such Interest Payment Date,
and (ii) with respect to any Interest Payment Date in respect to any Serial Bond Interest Rate
Period, the 15th day of the calendar month preceding the calendar month in which such Interest
Payment Date falls or, in the event that an Interest Payment Date shall occur less than 15 days
after the first day of a Serial Bond Interest Rate Period, that first day and (b) with respect to any
Bonds which are ARS, the second Business Day next preceding each ARS Interest Payment
Date.
Redemption Fund
"Redemption Fund" means the fund by that name established pursuant to
Section 5.05.
Redemption Price
"Redemption Price" means, with respect to any Bond (or portion thereof), the
principal amount of such Bond (or portion) plus the applicable premium, if any, payable upon
• redemption thereof pursuant to the provisions of such Bond and this Bond Indenture.
Remarketin¢ Agent
•
"Remarketing Agent" means, with respect to any Series of Bonds, any
Remarketing Agent or successor or additional Remarketing Agent appointed in accordance with
this Bond Indenture with respect to such Series of Bonds. "Principal Office" of the Remarketing
Agent means the address for the Remarketing Agent designated in writing to the Bond Trustee
and the Corporation.
Remarketing Agreement
"Remarketing Agreement" means each such agreement between the Corporation
and a Remarketing Agent with respect to any Series of Bonds, and any similar agreement with a
successor Remarketing Agent, in each case as from time to time in effect.
Remarketing Proceeds Account
"Remarketing Proceeds Account" means the account by that name within the
Bond Purchase Fund established pursuant to Section 4.10.
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DOCSSCI :356339.8
Required Stated Amount
• "Required Stated Amount" means with respect to a Liquidity Facility, at any time
of calculation, an amount equal to the aggregate principal amount of all Bonds then Outstanding
subject to such Liquidity Facility together with interest accruing thereon (assuming an annual
rate of interest equal to the Maximum Interest Rate) for the period specified in a Certificate of
the Corporation to be the minimum period specified by the Rating Agencies then rating such
Bonds as necessary to obtain (or maintain) a specified short-term rating of such Bonds.
•
Revenue Fund
Section 5.01. "Revenue Fund" means the fund by that name established pursuant to
Revenues
"Revenues" means all amounts received by the City or the BondTrnstee for the
account of the City pursuant or with respect to the Loan Agreement or Obligation No. 14,
including, without limiting the generality of the foregoing, Loan Repayments (including both
timely and delinquent payments and any late charges, and whether paid from any source),
prepayments, insurance proceeds, condemnation proceeds and all interest, profits or other
income derived from the investment of amounts in any fund or account established pursuant to
this Bond Indenture, but not including any Administrative Fees and Expenses, or any moneys
required to be deposited in the Rebate Fund.
WN
"S &P" means Standard & Poor's Ratings Services, 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 their assigns, or, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, any other nationally
recognized securities rating agency designated by the Corporation by notice in writing to the City
and the Bond Trustee.
Securities Depository
"Securities Depository" means The Depository Trust Company and its successors
and assigns, or any other securities depository selected as set forth in Section 2.16.
11 Order
"Sell Order" has the meaning set forth in Section 2(a)(i) of the Auction
Procedures.
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DOCSSC1:356339.8
Serial Bond Conversion Date
• "Serial Bond Conversion Date" means the date on which the Bonds begin to bear
interest at a Serial Bond Interest Rate pursuant to the provisions of Section 2.05 and such term
shall include the Fixed Rate Conversion Date for such Bonds.
Serial Bond Interest Rate
"Serial Bond Interest Rate" means, with respect to the Bonds, an interest rate on
such Bonds established in accordance with Section 2.05.
Serial Bond Interest Rate Period
"Serial Bond Interest Rate Period" means each period during which such a Serial
Bond Interest Rate is in effect for the Bonds.
ries
"Series," when used with respect to the Bonds, means all the Bonds designated as
being of the same series, authenticated and delivered in a simultaneous transaction, and any
Bonds thereafter authenticated and delivered upon a transfer or exchange or in lieu of or in
substitution for such Bonds as herein provided.
Series 2005A Bonds
• "Series 2005A Bonds" means the City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian), Series 2005A, authorized by, and at any time
Outstanding pursuant to, this Bond Indenture.
Series 2005B Bonds
"Series 2005B Bonds" means the City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian),' Series 2005B, authorized by, and at any time
Outstanding pursuant to, this Bond Indenture.
Series 2005C Bonds
"Series 2005C Bonds" means the City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian), Series 2005C, authorized by, and at any time
Outstanding pursuant to, this Bond Indenture.
Short-Term Interest Rate Period
"Short-Term Interest Rate Period" means each period with respect to a Series of
the Bonds, comprised of Bond Interest Terms, during which Bond Interest Term Rates are in
effect.
DocssC1:356339.8 -37-
Sinking Fund Installment
0 "Sinking Fund Installment' means the amount required by Section 5.04 to be paid
by the City on any single date for the retirement of Bonds.
Sinking Fund Installment Date
"Sinking Fund Installment Date" means, (i) with respect to the Series 2005A
Bonds, each December 1, commencing December 1,2016, (ii) with respect to the Series 2005B
Bonds, each December 1, commencing December 1, 2016, and (iii) with respect to the Series
2005C Bonds, each December 1, commencing December 1, 2016; provided, that if any such
Bond is in a Weekly Interest Rate Period, a Short -Term Interest Rate Period or a Serial Bond
Interest Rate Period, and any such December 1 is not a Business Day, the applicable Sinking
Fund Installment Date shall be the next succeeding Business Day, and provided further, that if
any such Bond is in an ARS Interest Rate Period and any such December 1 is not an ARS
Interest Payment Date, the applicable Sinking Fund Installment Date shall be the next succeeding
ARS Interest Payment Date.
Special Record Date
"Special Record Date" means the date established by the Bond Trustee pursuant
to Section 2.02 as the record date for the payment of defaulted interest on the Bonds that are not
ARS and pursuant to Section 2.08(A)(6)(b) as the record date for the payment of ARS Defaulted
Interest.
• Special Redemption Account
U
"Special Redemption Account" means the account by that name in the
Redemption Fund established pursuant to Section 5.05.
Submitted Hold Orders
"Submitted Hold Orders" has the meaning set forth in Section 2(c)(i) of the
Auction Procedures.
Sufficient Clearing Bids
"Sufficient Clearing Bids" has the meaning set forth in Section 2(c)(i) of the
Auction Procedures.
Supplemental Bond Indenture
"Supplemental Bond Indenture" means any indenture hereafter duly authorized
and entered into between the City and the Bond Trustee, supplementing, modifying or amending
this Bond Indenture; but only if and to the extent that such Supplemental Bond Indenture is
specifically authorized hereunder.
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D005SC1:356339.8
Supplement No. 14
• "Supplement No. 14" means that certain supplemental master trust indenture,
dated as of August 1, 2005, between the Corporation and the Master Trustee pursuant to which
Obligation No. 14 is issued, as originally executed and as amended or supplemented from time to
time in accordance with the terms of the Master Indenture.
Tax Agreement
"Tax Agreement' ' means the Tax Certificate and Agreement delivered by the City
and the Corporation at the time of issuance and delivery of the Bonds, as the same may be
amended or supplemented in accordance with its terms.
Tender Agent
"Tender Agent" means the Tender Agent appointed in accordance with Sections
4.17 through 4.19.
Tender Agent Agreement
"Tender Agent Agreement" means each such agreement between the Corporation
and a Tender Agent with respect to any Series of Bonds, and any similar agreement with a
successor Tender Agent, in each case as from time to time in effect.
• Undelivered Bonds
"Undelivered Bonds" means any Bond which constitutes an Undelivered Bond
under the provisions of Section 4.12.
•
United States Government Obligations
"United States Government Obligations" means (1) noncallable direct obligations
of the United States of America (including obligations issued or held in book -entry form on the
books of the Department of Treasury of the United States of America) and obligations of any
agency or instrumentality of the United States of America the timely payment of the principal of
and interest on which are fully guaranteed by the United States of America, and (2) any other
obligations approved in writing by the Bond Insurer.
Weekly Interest Rate
"Weekly Interest Rate" means a variable interest rate borne by a Series of Bonds
and established in accordance with Section 2.04.
Weekly Interest Rate Period
"Weekly Interest Rate Period" means each period with respect to a Series of
Bonds during which a Weekly Interest Rate is in effect.
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DOCSSCI:356339.9
SECTION 1.02. Content of Certificates and Opinions. Every certificate or
• opinion provided for herein with respect to compliance with any provision hereof shall include
(1) a statement that the Person making or giving such certificate or-opinion has read such
provision and the definitions herein relating thereto; (2) a brief statement as to the nature and
scope of the examination or investigation upon which the certificate or opinion is based; (3) a
statement that, in the opinion of such Person, he has made or caused to be made such
examination or investigation as is necessary to enable such Person to express an informed
opinion with respect to the subject matter referred to in the instrument to which such Person's
signature is affixed; and (4) a statement as to whether, in the opinion of such Person, such
provision has been complied with (5) a statement of the assumptions upon which such.certificate
or opinion is based, and that such assumptions are reasonable.
Any such certificate or opinion made or given by an officer of the City or the Corporation
may be based, insofar as it relates to legal, accounting or health care matters, upon a certificate or
opinion of or representation by counsel, an accountant or a management consultant, unless such
officer knows, or in the exercise of reasonable care should have known, that the certificate,
opinion or representation with respect to the matters upon which such certificate or statement
may be based, as aforesaid, is erroneous. Any such certificate or opinion -made or given by
counsel, an accountant or a management consultant may be based, insofar as it relates to factual
matters (with respect to which information is in the possession of the City or the Corporation, as
the case may be) upon a certificate or opinion of or representation by an officer of the City or the
Corporation, unless such counsel, accountant or management consultant knows, or in the
exercise of reasonable care should have known, that the certificate or opinion or representation
•with respect to the matters upon which such person's certificate or opinion or representation may
be based, as aforesaid, is erroneous. The same officer of the City or the Corporation, or the same
counsel or accountant or management consultant, as the case may be, need not certify to all of
the matters required to be certified under any provision of this Bond Indenture, but different
officers, counsel, accountants or management consultants may certify to different matters,
respectively.
•
SECTION 1.03. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the
singular shall include the plural and vice versa and the use of the neuter, masculine or feminine
gender is for convenience only and shall be deemed to mean and include the neuter, masculine or
feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents
hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect
the meaning, construction or effect hereof
(c) All references herein to "Articles;" "Sections" and other
subdivisions are to the corresponding Articles, Sections or subdivisions of this Bond Indenture;
the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to
this Bond Indenture as a whole and not to any particular Article, Section or subdivision hereof.
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DOCSSCL356339.8 -
ARTICLE II
• THE BONDS
SECTION 2.01. Authorization of Bonds. There are hereby created three Series
of Bonds to be issued hereunder in order to obtain money to carry out the purposes of the
Program, for the benefit of the City and the Corporation. The Bonds are to be designated as
"City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series
2005A, Series 2005B and Series 20050 ". The aggregate principal amount of Bonds that may be
issued and Outstanding under this Bond Indenture shall not exceed to hundred million dollars
($200,000,000). The aggregate principal amount of the Bonds of each Series which may be
issued and Outstanding under this Bond Indenture shall not exceed the following amounts:
Series Principal Amount
2005A $65,000,000
2005B $65,000,000
2005C $70,000,000
This Bond Indenture constitutes a continuing agreement with the Holders from
time to time of the Bonds to secure the full payment of the principal of and premium, if any, and
interest on all such Bonds subject to the covenants, provisions and conditions herein contained.
• SECTION 2.02. Terms of the Bonds; Registration, Denominations: Payment of
Principal and Interest.
(A) The Bonds shall be issued as fully registered Bonds without coupons in
Minimum Authorized Denominations. The Bonds shall be registered in the name of "Cede &
Co.," as initial nominee of the Securities Depository, and shall be evidenced by one Bond
certificate for each Series of Bonds in the total aggregate principal amount of the Bonds of such
Series. Registered ownership of the Bonds, or any portion thereof, may not thereafter be
transferred except as set forth in Section 2.15.
The Bonds shall be dated the Date of Issuance. The Bonds of each Series shall be
numbered in consecutive numerical order from R -I upwards.
(B) (1) The Bonds shall bear interest, payable in lawful money of the
United States of America, at the rates determined pursuant to this Article II from the date thereof.
(2) For any Weekly Interest Rate Period, interest shall be payable on
each Interest Payment Date for the period commencing on the immediately preceding Interest
Accrual Date (or, if any Interest Payment Date is not a Wednesday, commencing on the second
preceding Interest Accrual Date) and ending on the Tuesday (whether or not a Business Day)
immediately preceding the Interest Payment Date (or, if sooner, the last day of the Weekly
Interest Rate Period). For any Short-Term Interest Rate Period or Serial Bond Interest Rate
• Period, interest shall be payable on each Interest Payment Date for the period commencing on
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DOCSSCI:356339.8
the immediately preceding Interest Accrual Date and ending on the day immediately preceding
• such Interest Payment Date. For any ARS Interest Rate Period, interest shall be payable as
provided in Section 2.08.
(3) Interest on the Bonds of each Series shall be payable for the final
Interest Rate Period to the date on which the Bonds of such Series shall have been paid in full.
Interest shall be computed, in the case of a Serial Bond Interest Rate Period, on the basis of a
360 -day year consisting of twelve 30 -day months, in the case of ARS, on the basis bf a 360 -day
year for the actual number of days elapsed, and in the case of any other Interest Rate Period, on
the basis of a 365 or 366 -day year, as appropriate, and the actual number of days elapsed.
(4) The determination of the Weekly Interest Rate and Serial Bond
Interest Rate and each Bond Interest Term and Bond Interest Term Rate by the Remarketing
Agent, shall be conclusive and binding upon the Corporation, the Obligated Group Members, the
Bond Trustee, the Remarketing Agent and the Holders of such Bonds.
(5) Interest on the Bonds shall be payable on each Interest Payment
Date by the Bond Trustee during any Weekly Interest Rate Period or Serial Bond Interest Rate
Period by check mailed on the date on which due to the Holders of Bonds at the close of business
on the Record Date in respect of such Interest Payment Date at the registered addresses of
Holders as shall appear on the registration books of the Bond Trustee. In the case of (i) Bonds
bearing interest at a Bond Interest Term Rate or (ii) any Holder of Bonds bearing interest at other
than a Bond Interest Term Rate in an aggregate principal amount in excess of $1,000,000 as
shown on the registration books of the Bond Trustee who, prior to the Record Date next
• preceding any Interest Payment Date, shall have provided the Bond Trustee with written wire
transfer instructions, interest payable on such Bonds shall be paid in accordance with such wire
transfer instructions provided by the Holder of such Bonds;. provided, however, that during any
Short-Term Interest Rate Period for any Series of Bonds, except for Bonds registered in the name
of the Securities Depository (or its nominee), interest on any Bond of such Series shall be
payable only upon presentation of such Bond to the Bond Trustee at its designated corporate
office for delivery of Bonds.
(6) If available funds are insufficient on any Interest Payment Date to
pay the interest then due on the Bonds, interest shall continue to accrue thereon but shall cease to
be payable to the Holder as of such related Record Date. If sufficient funds for the payment of
such overdue interest thereafter become available, the Bond Trustee shall (A) establish a "special
interest payment date" for the payment of the overdue interest and a Special Record Date (which
shall be a Business Day) for determining the Bondholders entitled to such payment and (B) mail
notices by first class mail of such dates as soon as practicable. Notice of each such date so
established shall be mailed to each Bondholder at least ten (10) days prior to the Special Record
Date but not more than thirty (30) days prior to the special interest payment date. The overdue
interest shall be paid on the special interest payment date to the Holders, -as shown on the
registration books of the Bond Trustee as of the close of business on the Special Record Date.
The form of such notice shall be provided to the Bond Trustee by the Corporation.
(7) Notwithstanding the foregoing provisions of this Section 2.02(B),
• (A) Liquidity Facility Bonds shall bear interest at the Liquidity Facility Rate and the payment
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DOCSSCl:356339.8
terms of Liquidity Facility Bonds shall be governed by the Liquidity Facility, and (B) the interest
• rate and payment terms of ARS shall be governed by the provisions of Section 2.08 hereof.
(C) (1) The Bonds shall mature on the Maturity Date.
(2) The Sinking Fund Installments established for the Bonds of any
Series pursuant to Section 5.04 shall be redesignated as maturity dates and other Sinking Fund
Installments for the Bonds of such Series on the Fixed Rate Conversion Date for such Series of
Bonds as follows:
(i) If the Fixed Rate Conversion Date for any Series of the
Bonds is on or before December 1, 20[29], principal of such Bonds shall mature
(a) in ten serial maturities in amounts equal to the Sinking Fund Installments
established for such dates pursuant to Section 5.04, commencing on the
December 1 immediately succeeding the Fixed Rate Conversion Date, and on
December 1 of each of the succeeding years, and (b) in a term maturity on the
Maturity Date for such Series of Bonds.
(ii) If the Fixed Rate Conversion Date for any Series of the
Bonds is after December 1, 20[29], principal of such Bonds shall mature in serial
maturities in principal amounts equal to the Sinking Fund Installments established
for such dates pursuant to Section 5.04 commencing on the December 1
immediately succeeding the Fixed Rate Conversion Date and on December 1 of
each of the succeeding years.
• (iii) Sinking Fund Installments for each term maturity of each
Series of the Bonds established pursuant to subparagraph (i) above shall be in
principal amounts equal to the Sinking Fund Installments established for such
dates pursuant to Section 5.04 for such Series of Bonds and be payable on
December 1 of each year, commencing on December 1 of the year immediately
following the next preceding maturity, date of Bonds and ending on the respective
Maturity Date for such Series.
(iv) Notwithstanding anything above to the contrary, if, due to
the serialization of the Bonds pursuant to this subsection (C)(2), a Favorable
Opinion of Bond Counsel cannot be delivered, then no such serialization shall
occur.
(v) In accordance with this Section 2.02, the Bond Trustee
shall select the Bonds of each maturity date by lot.
(3) The principal or Redemption Price of the Bonds shall be payable in
lawful money of the United States of America at the Principal Office of the Bond Trustee upon
surrender of the Bonds to the Bond Trustee for cancellation; provided that the Bond Trustee may
agree with the Holder of any Bond that such Holder may, in lieu of surrendering the same for a
new Bond, endorse on such Bond a record of partial payment of the principal of such Bond in the
• form set forth below (which shall be typed or printed on such Bond):
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DOCSSCI:356339.8
•
Payment Date
PAYMENTS ON ACCOUNT OF PRINCIPAL
Principal Balance of Principal Signature
Amount Paid Amount Unpaid of Holder
The Bond Trustee shall maintain a record of each such partial payment made in
accordance with the foregoing agreement and such record of the Bond Trustee shall be
conclusive. Such partial payment shall be valid upon payment of the amount thereof to the
Holder of such Bond, and the City and the Bond Trustee shall be fully released and discharged
from all liability to the extent of such payment regardless of whether such endorsement shall or
shall not have been made upon such Bond by the Holder thereof and regardless of any error or
omission in such endorsement.
(D) The Bonds shall be subject to redemption as provided in Article IV.
(E) The Bond Trustee shall identify all payments (whether made by check or
by wire transfer) of interest, principal and premium by CUSIP number of the Bonds.
SECTION 2.03. Initial Interest Rate. Subsequent Interest Rates.
• (A) The initial Interest Rate Period for the Bonds shall be an ARS Interest
Rate Period and the initial Auction Period shall be the period commencing on and including the
Date of Issuance and ending on and including September 2, 2005 with respect to the Series
2005A Bonds; August 31, 2005 with respect to the Series 2005B Bonds and September 2, 2005
with respect to the Series 2005C Bonds. The Bonds shall initially bear interest at the rates per
annum set forth below:
Series Initial Interest Rate
2005A
2.25%
2005B
2.25
2005C
2.25
The first Auction shall occur on September 2, 2005 with respect to the Series
2005A Bonds; August 31, 2005 with respect to the Series 2005B Bonds and September 2, 2005
with respect to the Series 2005C Bonds. The interest rate on any Series of the Bonds may
thereafter be adjusted to a Weekly Interest Rate, a Bond Interest Term Rate,-or a Serial Bond
Interest Rate, as provided in this Article II.
(B) In the manner hereinafter provided, the term of each Series of the Bonds
will be divided into consecutive Interest Rate Periods during each of which such Bonds shall
. bear interest at the Weekly Interest Rate, Bond Interest Term Rates, Serial Bond Interest Rate or
_qq_
DO6SCI:356339.8
ARS Interest Rate; provided, however, that no Bond shall bear interest in excess of the
Maximum Interest Rate.
SECTION 2.04. Weekly Interest Rate Period.
(A) Determination of Weekly Interest Rates. During each Weekly Interest
Rate Period with respect to a Series of Bonds, the Bonds of such Series shall bear interest at the
Weekly Interest Rate, which shall be determined by the Remarketing Agent by no later than 5:00
p.m., New York City time, on Tuesday of each week during such Weekly Interest Rate Period, or
if such day shall not be a Business Day, then on the next succeeding Business Day. The first
Weekly Interest Rate for each Weekly Interest Rate Period shall be determined on or prior to the
first day of such Weekly Interest Rate Period and shall apply to the period commencing on the
fist day of such Weekly Interest Rate Period and ending on the next succeeding Tuesday
(whether or not a Business Day). Thereafter, each Weekly Interest Rate shall apply to the period
commencing on the first Wednesday on or after the date of determination thereof (whether or not
a Business Day) and ending on the next succeeding Tuesday (whether or not a Business Day),
unless such Weekly Interest Rate Period shall end on a day other than Tuesday; in which event
the last Weekly Interest Rate for such Weekly Interest Rate Period shall apply to the period
commencing on the Wednesday (whether or not a Business Day) preceding the last day of such
Weekly Interest Rate Period and ending on the last day of such Weekly Interest Rate Period.
The Weekly Interest Rate shall be the rate of interest per annum determined by the. Remarketing
Agent to be the minimum interest rate which, if borne by the Bonds of such Series, would enable
the Remarketing Agent to sell such Bonds on the effective date and at the time of such
determination at a price (without regarding accrued interest) equal to the principal amount
•thereof. In the event that the Remarketing Agent fails to establish a Weekly Interest Rate for any
week, then the Weekly Interest Rate for such week shall be the same as the Weekly Interest Rate
for the immediately preceding week if the Weekly Interest Rate for such preceding week was
determined by the Remarketing Agent. Subject to the provisions of Section 2.07(D), in the event
that the Weekly Interest Rate for the immediately preceding week was not determined by the
Remarketing Agent, or in the event that the Weekly Interest Rate determined by the Remarketing
Agent shall be held to be invalid or unenforceable by a court of law, then the interest rate for
such week shall be equal to 110% of the BMA Index on the day such Weekly Interest Rate
would otherwise be determined as provided herein for such Weekly Interest Rate Period.
(B) Adjustment to Weekly Interest Rate. Subject to Section 2.07, at any time,
the Corporation, by written direction to the Bond. Trustee, the Tender Agent (if any), the
Liquidity Facility Provider (if any), the Remarketing Agent (if any), the Auction Agent (if any)
and the Broker - Dealer (if any), may elect that the Bonds of any Series shall bear interest at a
Weekly Interest Rate. Such direction of the Corporation shall specify (i) the proposed effective
date of such adjustment to a Weekly Interest Rate Period, which date shall be (1) a Business Day
not earlier than the thirtieth (30th) day following the second Business Day after receipt by the
Bond Trustee of such direction, (2) in the case of an adjustment kom a Serial Bond Interest Rate
Period, the day immediately following the last day of the then- current Serial Bond Interest Rate
Period with respect to the Bonds of such Series or a day on which the Bonds of such Series
otherwise would be subject to optional redemption pursuant to Section 4.01(C) if such
adjustment did not occur, (3) in the case of an adjustment from a Short-Term Interest Rate
Period, the day immediately following the last day of the Short-Term Interest Rate Period with
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DOCSSCl:356339.8
respect to the Bonds of such Series and (4) in the case of an adjustment from an ARS Interest
• Rate Period, an ARS Interest Payment Date for the Bonds of such Series; and (ii) the date of
delivery for such Bonds to be purchased on the effective date of such adjustment to a Weekly
Interest Rate Period. In addition, such direction shall be accompanied by (1) a letter of Bond
Counsel that it expects to be able to give a Favorable Opinion of Bond Counsel on the effective
date of the adjustment to the Weekly Interest Rate Period and (2) a form of the notice to be
mailed by the Bond Trustee to the Holders of the Bonds of such Series as provided. in
Section 2.04(C). During each Weekly Interest Rate Period for a Series of Bonds commencing on
a date so specified and ending on the day immediately preceding the effective date of the next
succeeding Interest Rate Period for a Series of Bonds, the interest rate home by the Bonds of
such Series shall be a Weekly Interest Rate.
(C) Notice of Adjustment to Weekly Interest Rate. The Bond Trustee shall
give notice by first -class mail of an adjustment to a Weekly Interest Rate Period for the Bonds of
any Series to the Holders of the Bonds of such Series not less than thirty (30) days prior to the
proposed effective date of such Weekly Interest Rate Period. Such notice shall state: (i) that the
interest rate on the Bonds of such Series will be adjusted to a Weekly Interest Rate unless Bond
Counsel fails to deliver a Favorable Opinion of Bond Counsel to the Bond Trustee, the
Corporation and the Remarketing Agent as to such adjustment on the effective date of such
adjustment in the Interest Rate Period; (ii) the proposed effective date of such Weekly Interest
Rate Period; and (iii) that the Bonds of such Series are subject to mandatory tender for purchase
on such proposed effective date, regardless of whether any or all conditions to the adjustment are
met (unless the Bonds were previously bearing interest at an ARS Interest Rate), and setting
• forth the applicable Purchase Price and the place of delivery for purchase of such Bonds.
SECTION 2.05. Serial Bond Interest Rate Period.
(A) Determination of Serial Bond Interest Rate. During the Serial Bond
Interest Rate Period with respect to a Series of Bonds, the Bonds of such Series shall bear
interest at the Serial Bond Interest Rate. The Serial Bond Interest Rate shall be determined by
the Remarketing Agent on a Business Day no later than the Serial Bond Conversion Date.
Subject to the provisions of Section 2.05(D), the Serial Bond Interest Rate shall be the rate of
interest per annum determined by the Remarketing Agent to be the minimum interest rate which,
if borne by the Bonds of the applicable Series, would enable the Remarketing Agent to sell such
Bonds on the date and at the time of such determination at a price (without regarding accrued
interest) equal to the principal amount thereof. If, for any reason, the Serial Bond Interest Rate is
not so determined for the Serial Bond Interest Rate Period by the Remarketing Agent on or prior
to the first day of such Serial Bond Interest Rate Period, then the Bonds of the applicable Series
shall bear interest at the Weekly Interest Rate as provided in Section 2.04, and shall continue to
bear interest at a Weekly Interest Rate determined in accordance with Section 2.04 until such
time as the interest rate on the Bonds of such Series shall have been adjusted to Bond Interest
Term Rates, a Serial Bond Interest Rate or an ARS Interest Rate as provided herein.
(B) Adjustment to or Continuation of Serial Bond Interest Rate.
(1) Subject to Section 2.07, at any time, the Corporation, by
• written direction to the Bond Trustee, the Tender Agent (if any), the Liquidity
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DOCSSC1:356339.8 ..
Facility Provider (if any), the Remarketing Agent (if any), the Auction Agent (if
• any) and the Broker- Dealer (if any), may elect that the Bonds of any Series shall
bear interest at a Serial Bond Interest Rate. Such direction of the Corporation (i)
shall specify the proposed effective date of the Serial Bond Interest Rate Period,
which date shall be (1) a Business Day not earlier than the thirtieth (30th) day
following receipt by the Bond Trustee of such direction, (2) in the case of an
adjustment from a Short-Term Interest kate Period to a Serial Bond Interest Rate
Period, the day immediately following the last day of the Short-Term -Interest
Rate Period, (3) in the case of an adjustment from one Serial Bond Interest Rate
Period to another Serial Bond Interest Rate Period, the day immediately. following
the last day of the then- current Serial Bond Interest Rate Period for such Series or
a day on which the Bonds of such Series otherwise would be subject to optional
redemption pursuant to Section 4.01(C) if such adjustment did not occur and (4)
in the case of an adjustment from an ARS Interest Rate Period, an ARS Interest
Payment Date for the Bonds of such Series; and (ii) with respect to any such
Serial Bond Interest Rate Period, may specify redemption prices and periods
different from those set forth in this Bond Indenture, if approved by Bond
Counsel as provided in Section 2.05(B)(2).
The last day of the Serial Bond Interest Rate Period shall be
determined by the Remarketing Agent on a Business Day not later than the Serial
Bond Conversion Date (which last day shall be either the day immediately prior
to the Maturity Date for such Series, or a day which is at least one hundred
• eighty-one (18 1) days after the effective date thereof).
(2) The direction of the Corporation described in Section
2.05(B)(1) shall be accompanied by a letter of Bond Counsel that it expects to be
able to give a Favorable Opinion of Bond Counsel on the Serial Bond Conversion
Date and by a form of the notice to be mailed by the Bond Trustee to the Holders
of the Bonds of such Series as provided in Section 2.05(C). During the Serial
Bond Interest Rate Period for a Series of Bonds commencing and ending on the
dates so determined and during each successive Serial Bond Interest Rate Period,
if any, so determined, the interest rate borne by the Bonds of such Series shall be
a Serial Bond Interest Rate.
•
(3) If, by the twenty -ninth (29th) day prior to the last day of
any Serial Bond Interest Rate Period with respect to the Bonds of any Series
which ends on a day other than the day immediately preceding the Maturity Date
of such Bonds, the Bond Trustee shall not have received notice of the
Corporation's election that, during the next succeeding Interest Rate Period, the
Bonds of such Series shall bear interest at a Weekly Interest Rate, a Serial Bond
Interest Rate or an ARS Interest Rate or at Bond Interest Term Rates, the next
succeeding Interest Rate Period for such Bonds shall be a Weekly Interest Rate
Period until such time as the interest rate on such Bonds shall be adjusted to a
Serial Bond Interest Rate, Bond Interest Term Rates or an ARS Auction Rate as
provided in this Article II.
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DOCSSC1:356339.8
(4) After the Fixed Rate Conversion Date for a Series of
• Bonds, the Bonds of such Series shall no longer be subject to or have the benefit
of the provisions of Sections 4.06 through 4.20.
(C) Notice of Adiustment to or Continuation of Serial Bond Interest Rate. The
Bond Trustee shall give notice of an adjustment to a (or the establishment of another) Serial
Bond Interest Rate Period for the Bonds of any Series to the Holden; of such Bonds not less than
thirty (30) days prior to the proposed effective date of such Serial Bond Interest Rate, Period.
Such notice shall state: (i) that the interest rate on the Bonds of the applicable Series shall be
adjusted to, or continue to be, a Serial Bond Interest Rate unless Bond Counsel fails to deliver a
Favorable Opinion of Bond Counsel to the Bond Trustee, the Corporation and the Remarketing
Agent as to such adjustment in the Interest Rate Period on the effective date of such adjustment;
(ii) the proposed effective date of such Serial Bond Interest Rate Period; and (iii) that the Bonds
of such Series are subject to mandatory tender for purchase on such proposed effective date,
regardless of whether any or all conditions to the adjustment are met (unless the Bonds were
previously bearing interest at an ARS Interest Rate), and setting forth the applicable Purchase
Price and the place of delivery for purchase of such Bonds.
(D) Sale at Premium or Discount. Notwithstanding the provisions of
Section 2.05(A), the Serial Bond Interest Rate shall be the rate of interest per annum determined
by the Remarketing Agent to be the interest rate which, if borne by.the Bonds of the applicable
Series, would enable the Remarketing Agent to sell such Bonds on the date and at the time of
such determination at a price which will result in the lowest net interest cost for the Bonds of
such Series, after taking into account any premium or discount at which such Bonds are sold by
• the Remarketing Agent, provided that:
•
(1) the Remarketing Agent certifies to the Bond Trustee, the Tender
Agent and the Corporation that the sale of the Bonds of such Series at the interest rate
and premium or discount specified by the Remarketing Agent is expected to result in the
lowest net interest cost for such Bonds on the Serial Bond Conversion Date;
(2) the Corporation consent in writing to the sale of the Bonds of such
Series by the Remarketing Agent at such premium or discount;
(3) in the case of Bonds to be sold at a discount, either (a) a Liquidity
Facility is in effect with respect to such Series of Bonds and provides for the purchase of
such Bonds at such discount or (b) the Corporation agrees to transfer to the Tender Agent
on the Serial Bond Conversion Date, in immediately available funds, for deposit in the
Corporation Purchase Account, an amount equal to such discount;
(4) in the case of Bonds to be sold at a premium, the Remarketing
Agent shall transfer to the Bond Trustee for deposit in the- Revenue -Fund an amount
equal to such premium;
(5) on or before the date of the determination of the Serial Bond
Interest Rate, the Corporation delivers to the Bond Trustee and the Remarketing Agent a
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DOCSSCI.356339.8
letter of Bond Counsel to the effect that Bond Counsel expects to be able to give a
• Favorable Opinion of Bond Counsel on the Serial Bond Conversion Date; and
(6) on or .before the Serial Bond Conversion Date, a Favorable
Opinion of Bond Counsel shall have been received by the Bond Trustee and confirmed to
the Corporation and the Remarketing Agent.
SECTION 2.06. Short-Term Interest Rate Periods.
(A) Determination of Bond Interest Terms and Bond Interest Term Rates.
During each Short-Term Interest Rate Period with respect to a Series of Bonds, each Bond of
such Series shall bear interest during each Bond Interest Term for such Bond at the Bond Interest
Term Rate for such Bond. The Bond Interest Term and the Bond Interest Term Rate for each
Bond need not be the same for any two Bonds, even if determined on the same date. Each of
such Bond Interest Terms and Bond Interest Term Rates for each Bond shall be determined by
the Remarketing Agent no later than the first day of each Bond Interest Term. Each Bond
Interest Term shall be- for a period of days within the range or ranges announced as possible
Bond Interest Terms no later than 9:30 a.m., New York City time, on the first day of each Bond
Interest Term by the Remarketing Agent. Each Bond Interest Terris for each Bond shall be a
period of not more than one hundred eighty (180) days, determined by the Remarketing Agent to
be the period which, together with all other Bond Interest Terms for all Bonds of the applicable
Series then Outstanding, will result in the lowest overall interest expense on the Bonds of such
Series over the next succeeding one hundred eighty (180) days. Each Bond Interest Term shall
end on either a day which immediately precedes a Business Day or on the day immediately
• preceding the Maturity Date for such Series. No Bond Interest Term shall be set to end on a day
later than the fifth day preceding the expiration of any Liquidity Facility applicable to the subject
Series. If, for any reason, a Bond Interest Tern for any Bond cannot be so determined by the
Remarketing Agent, or if the determination of such Bond Interest Term is held by a court of law .
to be invalid or unenforceable, then such Bond Interest Term shall be thirty (30) days, but if the
last day so determined shall not be a day immediately preceding a Business Day, shall end on the
first day immediately preceding the Business Day next succeeding such last day, or if such last
day would be after the day immediately preceding the Maturity Date, ,shall end on the day
immediately preceding such Maturity Date for such Series. In determining the number of days in
each Bond Interest Term, the Remarketing Agent shall take into account the following factors:
(1) existing short-term, tax - exempt market rates and indices of such short-term rates; (II) the
existing market supply and demand for short-term tax - exempt securities; (III) existing yield
curves for short-term and long -term tax- exempt securities for obligations of credit quality
comparable to the Bonds of such Series; (IV) general economic conditions; (V) industry
economic and financial conditions that may affect or be relevant to the Bonds of such Series;
(VI) the Bond Interest Terms of other Bonds of such Series; and (VII) such other facts,
circumstances and conditions pertaining to financial markets as the Remarketing Agent, in its
sole discretion, shall determine to be relevant.
The Bond Interest Term Rate for each Bond Interest Term for each Bond in a
Short-Term Interest Rate Period shall be the rate of interest per annum determined by the
Remarketing Agent to be the minimum interest rate which, if borne by such Bond, would enable
• the Remarketing Agent to sell such Bond on the date and at the time of such determination at a
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DOCSSCI:356339.8
price equal to the principal amount thereof. Subject to the provisions of Section 2.07(D), if, for
• any reason, a Bond Interest Term Rate for any Bond in a Short-Term Interest Rate Period is not
so established by the Remarketing Agent for any Bond Interest Term, or if such Bond Interest
Term Rate is determined by a court of law to be invalid or unenforceable, then the Bond Interest
Term Rate for such Bond Interest Term shall be the rate per annum equal to 110% of the BMA
Index on the first day of such Bond Interest Term.
•
(B) Adjustment to Bond Interest Term Rates. Subject to Section 2.0'x, at any
time, the Corporation, by written direction to the Bond Trustee, the Tender Agent (if any), the
Liquidity Facility Provider (if any), the Remarketing Agent (if any), the Auction Agent (if any)
and the Broker - Dealer (if any), may elect that the Bonds of any Series shall bear interest at Bond
Interest Term Rates. Such direction of the Corporation shall specify (i) the proposed effective
date of the Short-Term Interest Rate Period (during which the Bonds of such Series shall bear
interest at Bond Interest Term Rates), which date shall be (1) a Business Day not earlier than the
thirtieth (30th) day following the second Business Day after receipt by the Bond Trustee of such
direction, (2) in the case of an adjustment from a Serial Bond Interest Rate Period for a Series,
the day immediately following the last day of the then- current Serial Bond Interest Rate Period
for such Series or a day on which the Bonds of such Series otherwise would be subject to
optional redemption pursuant to Section 4.01(C) if such adjustment did not occur, (3) in the case
of an adjustment from a Weekly Interest Rate Period the day immediately following the last day
of such Interest Rate Period with respect to the Bonds and (4) in the case of an adjustment from
an ARS Interest Rate Period, an ARS Interest Payment Date for the Bonds of such Series; and
(ii) the date of delivery of such Bonds to be purchased. In addition, the direction of the
Corporation shall be accompanied by (1) a letter of Bond Counsel that it expects to be able to
give a Favorable Opinion of Bond Counsel on the effective date of the adjustment to the Short-
Term Interest Rate Period and (2) a form of the notice to be mailed by the Bond Trustee to the
Holders of the Bonds of such Series as provided in Section 2.06(C). During each Short-Term
Interest Rate Period for a Series of Bonds commencing on the date so specified and ending, with
respect to each Bond of such Series, on the day immediately preceding the effective date of the
next succeeding Interest Rate Period with respect to such Bond, each such Bond shall bear
interest at a Bond Interest Term Rate during each Bond Interest Term for such Bond.
(C) Notice of Adiustment to Bond Interest Term gates.. The Bond Trustee
shall give notice by first -class marl of an adjustment to a Short-Term Interest Rate Period for the
Bonds of any Series to the Holders of such Bonds not less than thirty (30) days prior to the
proposed effective date of such Short-Term Interest Rate Period: Such notice shall state: (i) that
the Bonds of the applicable Series shall bear interest at Bond Interest Term Rates unless Bond
Counsel fails to deliver a Favorable Opinion of Bond Counsel to the Bond Trustee, the
Corporation and the Remarketing Agent as to such adjustment on the effective date of such
adjustment in the Interest Rate Period or other conditions precedent to such adjustment are not
met; (ii) the proposed effective date of such Short=Term Interest Rate Period; and (iii) that such
Bonds are subject to mandatory tender for purchase on such proposed effective date of such
Short-Term Interest Rate Period, regardless of whether any or all conditions precedent to the
adjustment are met (unless the Bonds were previously bearing interest at an ARS Interest Rate),
and setting forth the applicable Purchase Price and the place of delivery for purchase of the
Bonds of such Series.
DOCSSCL356339.8 -50-
(D) Adjustment from Short-Term Interest Rate Period. Subject to
Section 2.07(B), at any time during a Short-Term Interest Rate Period with respect to a Series of
Bonds, the Corporation may elect, pursuant to Sections 2.04(B), 2.05(B) or 2.08, that such Bonds
no longer shall bear interest at Bond Interest Term Rates and shall instead bear interest at a
Weekly Interest Rate, a Serial Bond Interest Rate or an ARS Interest Rate, as specified in such
election. The date on which all Bond Interest Terms determined for the Bonds of such Series
shall end shall be the last day of the then- current Short-Term Interest Rate Period and the day
next succeeding such date shall be the effective date of the Weekly Interest Rate Period, Serial
Bond Interest Rate Period or ARS Interest Rate Period elected by the Corporation for such
Bonds.
SECTION 2.07. Notice of Conversion: Conditions.
(A) In the event that the Corporation shall elect to adjust the interest rate on a
Series of Bonds to a Weekly Interest. Rate, Serial Bond Interest Rate, Bond Interest Term Rates
or an Applicable ARS Rate, as provided in Sections 2.04(B), 2.05(B), 2.06(B) or 2.08(J)(2) then
the written direction furnished by the Corporation as required by such sections shall be made by
registered or certified mail, or by telecopy, confirmed by registered or certified mail. The Bond
Trustee shall also provide written notice to S &P of any Conversion hereunder.
(B) Notwithstanding anything in this Article II, in connection with any
Conversion of the Interest Rate Period for a Series of Bonds, the Corporation shall have the right
to deliver to the Bond Trustee, the Remarketing Agent (if any), the Tender Agent (if any), the
Liquidity Facility Provider (if any), the City, the Auction Agent (if any), the Broker - Dealer(s) (if
•any) on or prior to 10:00 a.m., New York City time, on the second Business Day preceding the
effective date of any such Conversion a notice to the effect that the Corporation elects to rescind
its election to make such Conversion. If the Corporation rescinds its election to make such
Conversion, then the Interest Rate Period shall not be converted and the Bonds of such Series
shall continue to bear interest at the Weekly Interest Rate, Serial Bond Interest Rate or Bond
Interest Term Rates, as the case may be, as in effect immediately prior to such proposed
Conversion (provided, that the period of any such continuing Serial Bond Interest Rate Period
shall be one year); provided that in the case of a Series of ARS, such ARS shall bear interest at
the ARS Maximum Rate until the next succeeding Auction Period that commences at least two
Business Days following such proposed Conversion Date, then at the ARS Interest Rate. In any
event,. if notice of a Conversion has been mailed to the Holders of such Series as provided in
Section 2.04(C), 2.05(C), 2.06(C) or 2.080(2) and the Corporation rescinds its election to make
such Conversion, then the Bonds of such Series (except ARS, which shall not be subject to
mandatory tender) shall continue to be subject to mandatory tender for purchase on the date -
which would have been the effective date of the Conversion as provided in Section 4.08.
U
(C) No Conversion from one Interest Rate Period to another shall take effect
under this Bond Indenture unless each of the following conditions, to the extent applicable, shall
have been satisfied.
(i) Except with respect to a Conversion from a Serial Bond
Interest Rate Period to a Weekly Interest Rate Period pursuant to
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DOCSSCI:356339.8
Section 2.05(B)(3), the Bond Trustee and the City shall have received a Favorable
• Opinion of Bond Counsel with respect to such Conversion.
(ii) In the case of any Conversion with respect to which there
shall be no Liquidity Facility in effect to provide funds for the purchase of Bonds
of any Series on the Conversion Date, the remarketing proceeds available on the
Conversion Date shall not be less than the amount required to purchase all of the
Bonds of such Series at the Purchase Price (unless the Corporation, in. its sole
discretion, elects to transfer to the Tender Agent the amount of such deficiency on
or before the Conversion Date).
(iii) In the case of any Conversion of a Series of Bonds from
any ARS Interest Rate Period to any other Interest Rate_ Period (except a Serial
Bond Interest Rate Period effective to the Maturity Date for such Series), prior to
the Conversion Date the Corporation shall have appointed a Tender Agent and a
Remarketing Agent with respect to such Series and there shall have been executed
and delivered with respect to such Series a Tender Agent Agreement and a
Remarketing Agreement.
. (iv) In the case of any Conversion of a Series of Bonds to an
ARS Interest Rate Period, prior to the Conversion Date the Corporation shall have
appointed an Auction Agent and a Broker - Dealer with respect to such Series and
there shall have been executed and delivered, with respect to such Series, an
Auction Agent Agreement and a Broker - Dealer Agreement.
• (D) If any condition to the Conversion of a Series of Bonds shall not have
been satisfied, then the Interest Rate Period shall not be converted and the Bonds of such Series
(except ARS) shall continue to bear interest at the Weekly Interest Rate, Serial Bond Interest
Rate or Bond Interest Term Rates, as the case may be, as in effect immediately prior to such
proposed Conversion (provided, that the period of any such continuing Serial Bond Interest Rate
Period shall be one year), and the Bonds of such Series (except ARS) shall continue to be subject
to mandatory tender for purchase on the date which would have been the effective date of the
Conversion as provided in Section 4.08. In the case of a Series of ARS, such Series of ARS
shall bear interest at the ARS Maximum Rate until the next succeeding Auction Period then at
the Applicable ARS Rate.
•
(E) Notwithstanding anything in this Article II to the contrary, in connection
with the adjustment from a Serial Bond Interest Rate Period that would require the mandatory
tender for purchase of Bonds at a Purchase Price greater than the principal amount thereof as
provided in Section 4.08, the Corporation, as a condition to exercising its option to cause an
adjustment in the Interest Rate Period, shall deliver to the Bond Trustee prior to the mailing of
notice of such adjustment, immediately available funds for the purpose of paying such premium,
unless the Liquidity Facility, if any, then in effect with respect to such Bonds provides for the
payment of such premium.
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SECTION 2.08. ARS Provisions.
• This Section 2.08 governs the interest rates and payment terms of Bonds which
are ARS. With respect to Bonds other than ARS, such matters are governed by Sections 2.02-
2.07 and Section 2.09.
(A) Payments with Respect to ARS.
(1) Interest with respect to each Series of ARS shall accrue from and
including, as applicable, the Date of Issuance, the Conversion Date or the most
recent Interest Accrual Date to which interest has been paid or duly provided for.
(2) The Bond Trustee shall determine the aggregate amount of interest
payable in accordance with subsection (5) below with respect to each Series of
ARS on each ARS Interest Payment Date. The Bond Trustee shall promptly
notify the Securities Depository of its calculations, as provided in Section
2.08(Q
(3) Interest on each Series of ARS shall be computed on the basis of a
360 -day year for the actual number of days elapsed. The Applicable ARS Rate
for each ARS Interest Period after the first ARS Interest Period shall be the
Auction "Rate relating to such Series; provided that if the Auction Agent fails to
calculate or, for any reason, fails to timely provide the Auction Rate for any
Series of ARS for any Auction Period (except as contemplated otherwise herein
• pursuant to (x), (y) or (z) below), the new Auction Period for any Series of ARS
shall be the same as the preceding Auction Period and the Auction Rate for the
new Auction Period for such Series shall be the same as the Auction Rate for such
•
Series for the preceding Auction Period.
Notwithstanding the foregoing:
(x) if the ownership of a Series of ARS is no longer maintained in book -entry
form by a Securities Depository, the Applicable ARS Rate with respect to such Series for
any ARS_Interest Period commencing after the delivery of certificates representing such
Series of ARS pursuant to Section 2.15 shall equal the ARS Maximum Rate;
(y) if an ARS Payment Default shall have occurred with respect to a Series of
ARS, the Applicable ARS Rate for the ARS Interest Period commencing on or
immediately after such ARS Payment Default and for each ARS Interest Period
thereafter, to and including the ARS Interest Period, if any, during which, or commencing
less than two Business Days after, such ARS Payment Default is cured in accordance
with this Bond Indenture, shall equal the Non - Payment Rate on the first day of each such
ARS Interest Period, provided that if an Auction occurred on -the Business Day
immediately preceding any such ARS Interest Period, the Applicable ARS Rate for such
Series for such ARS Interest Period shall be the Non - Payment Rate ; or
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(z) for any Auction Period during which there is no duly appointed Auction
• Agent, or during which there is no duly appointed Broker- Dealer, no Auction will be held
and the Auction Rate will be the ARS Maximum Rate.
(4) Medium of Payment.
(a) The principal of and premium, if any, and interest on each Series
of ARS shall be payable in any currency of the United States of America which on the respective
dates for payment thereof is legal tender for the payment of public and private debts. The
principal of and interest on each Series of ARS (other than at maturity) shall be payable by check
mailed to the registered owner thereof on the Record Date at the address of such registered
owner as it appears on the registration books maintained by the Bond Trustee.
(b) Interest payable on any ARS Interest Payment Date to a registered
owner of ARS in the aggregate principal amount of $1,000,000 or more may, upon written
request by such registered owner received by the Bond Trustee prior to the Record Date
preceding such ARS Interest Payment Date, be paid by wire transfer to a designated account in
the United States of America. Such written request shall remain in effect. until rescinded in
writing by such registered owner. The principal of each ARS at maturity will be paid upon
presentation and surrender thereof at the Principal Office of the Bond Trustee.
(c) Unless otherwise requested by the Securities Depository, payments
of the principal of ARS, at maturity or upon redemption, and payments of interest on ARS made
by wire transfer, shall be made by the Bond Trustee in immediately available funds, provided,
•however, that such method of payment may be modified by written agreement among the Bond
Trustee, the Securities Depository and the Auction Agent.
(5) Computation of Interest Distributable on ARS. The amount of interest
distributable to ARS Beneficial Owners, in-respect of each $25,000 in principal amount thereof
for any ARS Interest Period or part thereof shall be calculated by the Bond Trustee by applying
the Applicable ARS Rate with respect to the ARS of such Series, for such ARS Interest Period or
part thereof; to the principal amount of $25,000, multiplying such product by the actual number
of days in such ARS Interest Period or part thereof divided by 360 and rounding the resultant
figure to the nearest cent (half a cent being rounded upward).
(6) ARS Defaulted Interest.
(a) The Bond Trustee shall determine not later than 2:00 p.m., New
York City time, on each ARS Interest Payment Date, whether an ARS Payment Default has -
occurred. If an ARS Payment Default has occurred, the Bond Trustee shall, not later than 2:30
p.m., New York City time, on such Business Day, send a Notice of ARS Payment Default to the
Auction Agent and each Broker- Dealer by telecopy or similar means and, if such ARS Payment
Default is cured, the Bond Trustee shall immediately send a Notice of Cure of ARS Payment
Default to the Auction Agent and each Broker - Dealer by telecopy or similar means.
(b) ARS Defaulted Interest shall forthwith cease to be payable to the
ARS Beneficial Owner on the relevant Record Date by virtue of having been such ARS
• Beneficial Owner and such ARS Defaulted Interest shall be payable to the Person in whose name
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the ARS with respect to such ARS Payment Default occurred are registered at the close of
• business on a Special Record Date fixed therefor by the Bond Trustee, which shall not be more
than 15 days and not less than ten days prior to the date of the proposed payment of ARS
Defaulted Interest. The Bond Trustee shall promptly notify the City and the Corporation of the
Special Record Date and at the Corporation's expense mail to each ARS Beneficial Owner of
ARS as to which it has knowledge and ARS Defaulted Interest is payable, not less than ten days
before the Special Record Date, notice of the date of the proposed payment of such ARS
Defaulted Interest.
(B) Calculation of All -Hold Rate. The Auction Agent shall calculate the All -
Hold Rate on each Auction Date. The determination by the Auction Agent of the Applicable
ARS Rate and the All -Hold Rate shall (in the absence of manifest error) be final and binding
upon all Holders and ARS Beneficial Owners and all other parties. If calculated or determined by
the Auction Agent, the Auction Agent shall promptly advise the Bond Trustee of the All -Hold
Rate.
(C) Notification of Rates. Amounts and Payment Dates.
(1) So long as the ownership of the ARS is maintained in book -entry form by
the Securities Depository, the Bond Trustee shall advise the Securities Depository (i) of each
Record Date for the ARS at least two Business Days prior thereto and (ii) of each succeeding
Interest Payment Date on each Interest Payment Date.
(2) On the Business Day preceding each ARS Interest Payment Date with
•respect to a Series of ARS, the Bond Trustee shall advise the Securities Depository, so long as
the ownership of such Series of ARS is maintained in book -entry form by the Securities
Depository, of the amount of interest distributable in respect of each $25,000 in principal amount
(taken without rounding to the nearest .000001) of such Series for any ARS Interest Period or
part thereof, calculated in accordance with Section 2.08(A)(5).
(3) If any day scheduled to be an ARS Interest Payment Date shall be changed
after the Bond Trustee shall have given notice, the Bond Trustee shall, not later than 9:15 a.m.,
New York City time, on the Business Day next preceding the earlier of the day prior to the new
ARS Interest Payment Date or the old ARS Interest Payment Date, by such means as the Bond
Trustee deems practicable, give notice of such change to the Auction Agent, so long as no ARS
Payment Default has occurred and is continuing and the ownership of such Series of ARS is
maintained in book -entry form by the Securities Depository.
(D) Amendment of ARS Provisions. Notwithstanding any other provision of
this Bond Indenture relating to ARS, including without limitation the mandatory tender
provisions and the definitions of terms used in this Section 2.08 (including without limitation the
definitions of Applicable ARS Rate, All -Hold Rate, ARS Maximum Rate and Non - Payment
Rate), the ARS provisions may be amended by the City at the written request of the Corporation,
(i) upon obtaining an Opinion of Counsel that the same does not materially adversely affect the
rights of the ARS Beneficial Owners or (ii) by obtaining the consent of a majority of the ARS
Beneficial Owners and, in each case, delivering a Favorable Opinion of Bond Counsel. In the
case of clause (ii) above, the Bond Trustee shall mail notice of such amendment to the ARS
•
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Beneficial Owners of which it has knowledge and if, on the first Auction Date occurring at least
• 20 days after the date on which the Bond Trustee mailed such notice, Sufficient Clearing Bids
have been received or. all of the ARS are subject to Submitted Hold Orders, the proposed
amendment shall be deemed to have been consented to by the ARS Beneficial Owners. Written
notice of each such amendment shall be delivered by the City to the Bond Trustee, the
Corporation, the Auction Agent and each Broker - Dealer.
(E) Auction Agent. The Bond Trustee shall, at the direction, of the
Corporation and subject to the provisions herein, appoint an Auction Agent when entering into
an Auction Agent Agreement.
(1) Any Auction Agent shall be (i) subject to the written approval of each
Broker- Dealer, (ii) a bank or trust company duly organized under the laws of the United States of
America or any state or territory thereof having its principal place of business in the Borough of
Manhattan, New York, or such other location as approved by the Bond Trustee in writing and
having a combined capital stock or surplus of at least $50,000,000, or (iii) a Member of the
National Association of Securities Dealers, Inc., -having a capitalization of at least$50,000,000,
and, in either case, authorized by law to perform all the duties imposed upon it hereunder and
under the Auction Agent Agreement. The Auction Agent may at any time resign as Auction
Agent for a Series and be discharged of the duties and obligations created by this Bond Indenture
by giving at least 45 days' notice to the Bond Trustee, the Broker - Dealer, the City and the
Corporation. The Auction Agent may be removed as Auction Agent for a Series at any time by
the Bond Trustee and, upon the written direction of (i) the City, (ii) the Corporation, (iii) the
ARS Beneficial Owners of 66 -2/3% of the aggregate principal amount of the ARS of that Series
• then Outstanding, by an instrument signed by the Bond Trustee and filed with the Auction
Agent, the City, and the Corporation upon at least 30 days' notice. Neither the resignation nor
the removal of the Auction Agent pursuant to the preceding two sentences shall be effective until
and unless a substitute Auction Agent has been appointed and has accepted such appointment. If
required by a Broker - Dealer, a substitute Auction Agent Agreement shall be entered into with a
substitute Auction Agent. Notwithstanding the foregoing, the Auction Agent may terminate the
Auction Agent Agreement if, within 45 days after notifying the Bond Trustee, the City, the
Corporation and the Broker - Dealers in writing that it has not received payment of any Auction
Agent Fee due it in accordance with the terms of the Auction Agent Agreement, the Auction
Agent does not receive such payment. The Bond Trustee shall not be liable for any action taken,
suffered or omitted by the Auction Agent.
(2) If the Auction Agent shall resign or be removed or be dissolved, or if the
property or affairs of the Auction Agent shall be taken under the control of any state or federal
court or administrative body because of bankruptcy or insolvency, or for any other reason, the
Bond Trustee, at the direction of the Corporation, shall use its best efforts to appoint a substitute
Auction Agent.
(3) The Auction Agent will act in accordance with the Auction Agent
Agreement in connection with Auctions. In the absence of misconduct, negligent failure to act or
negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or
omitted or any error of judgment made by it in the performance of its duties under the Auction
• Agent Agreement and shall not be liable for any error of judgment made in good faith unless the
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Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent
• facts.
(4) Subject to the provisions of clause (1) above, the Auction Agent may be
removed at any time, at the written request of the Corporation for any breach of its obligations
hereunder or under the Auction Agent Agreement.
(5) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Bond Indenture arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control, including without
limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; labor disputes; acts of civil or military authority or governmental actions; acts
of terrorism; failure of telephone (or other communication systems); computer systems
(hardware or software); it being understood that the Auction Agent shall use reasonable efforts
which are consistent with accepted practices in the banking industry to resume performance as
soon as practicable under the circumstances.
(F) Broker - Dealers.
(1) The Corporation may, from time to time, appoint one or more Persons to
serve as Broker - Dealers under Broker - Dealer Agreements and shall be responsible for providing
such Broker - Dealer Agreements to the Bond Trustee and the Auction Agent.
(2) Any Broker - Dealer may be removed at any time at the written request of
• the Corporation.
(G) Provisions Relating to Auctions. None of the Corporation, the City, the
Bond Trustee or the Auction Agent shall be responsible for any failure of a Broker - Dealer to
submit an Order to the Auction Agent on behalf of any Existing Holder or Potential Holder, nor
shall any of the Corporation, the City, the Bond Trustee or the Auction Agent be responsible for
failure by any Securities Depository to effect any transfer or to provide the Auction Agent with
current information regarding registration of transfers. None of the Corporation, the City, the
Bond Trustee, the Auction Agent or the Broker - Dealer(s) shall have any liability in the event that
there are not Sufficient Clearing Bids from time to time pursuant to the Auction Procedures.
(H) Agreement of Holders. By purchasing ARS, whether in an Auction or
otherwise, each prospective purchaser of ARS and its Broker - Dealer will be deemed to have
agreed to the provisions for the replacement of the Auction Agent and each Broker - Dealer as
provided in this Bond Indenture, and relevant agreements among the City, the Corporation, the
Bond Trustee, the Auction Agent and the Broker - Dealer(s), as appropriate.
(I) Changes in Auction Period or Auction Date.
(1) Changes in Auction Period.
(a) The Auction Period for each Series of Bonds with respect to each
ARS Interest Rate Period, if any, for such Series shall commence on the Conversion Date and
shall be either a seven -day period or a 35 -day period commencing generally on a Monday,
•
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generally on a Tuesday, generally on a Wednesday, generally on a Thursday or generally on a
•Friday, in each case as announced by the Corporation in its notice of the proposed Conversion to
such subsequent ARS Interest Rate Period as provided in Section 2.08(J).
(b) During any ARS Interest Rate Period, the Corporation may from
time to time on any ARS Interest Payment Date with respect to a Series of ARS, change the
length of the Auction Period with respect to all of the Bonds of such Series between seven -days
and 35 -days or change the first day of each Auction Period, or both, in each case in prder to
accommodate economic and financial factors that may affect or be relevant to the length of the
Auction Period and the interest rate borne by the Bonds of such Series. The Corporation shall
initiate the change in the length or day of commencement of the Auction Period, or both, by
giving written notice to the Bond Trustee, the City, the Auction Agent, the Broker- Dealer, and
the Securities Depository that the Auction Period shall change if the conditions described herein
are satisfied and the proposed effective date of the change, at least three Business Days prior to
the Auction Date for such Auction Period
(c) Any such changed Auction Period shall be, for a..period of seven
days or 35 days and shall be for all of the Bonds of a Series.
(d) The change in length of the Auction Period for any Series of Bonds
shall take effect only if Sufficient Clearing Bids exist at the Auction on the Auction Date for the
first such Auction Period and the Bond Trustee receives a Favorable Opinion of Bond Counsel
with respect to such change on or before such Auction Date. For purposes of the Auction for
such first Auction Period only, each Existing Holder shall be deemed to have submitted Sell
•Orders with respect to all of its ARS of such Series except to the extent such Existing Holder
submits a Hold Order with respect to such ARS. If the condition referred to in the first sentence
of this clause (d) is not met, the Auction Rate for the next Auction Period shall be the ARS
Maximum Rate, and the Auction Period shall be the Auction Period already in effect.
(2) Changes in Auction Date. During any ARS Interest Rate Period, the
Corporation may specify an earlier Auction Date for any Business Day earlier (but in no event
more than five Business Days earlier) than the Auction Date that would otherwisg be determined
in accordance with the definition of "Auction Date" in order to conform with then current market
practice with respect to similar securities or to accommodate economic and financial factors that
may affect or be relevant to the day of the week constituting an Auction Date and the interest rate
borne on the applicable Series of ARS. The Corporation shall provide notice of its determination
to specify an earlier Auction Date for an Auction Period by means of a written notice delivered
at least 45 days prior to the proposed changed Auction Date to the Bond Trustee, the Broker -
Dealer and the Securities Depository accompanied by a Favorable Opinion of Bond Counsel
with respect to such change.
(J) Conversion of a Series to ARS Interest Rate Period.
(1) Conversion to Applicable ARS Rate. Subject to Section 2.07 hereof, the
Corporation, from time to time, by written direction to the Bond Trustee, the Tender Agent (if
any), the Liquidity Facility Provider (if any), the Remarketing Agent (if any), the Auction Agent
• (if any), and each Broker - Dealer (if any), may elect that a Series of Bonds shall bear interest at
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the Applicable ARS Rate. The direction of the Corporation shall specify (A) the proposed
• effective date of the Conversion to the Applicable ARS Rate, which date shall be (1) a Business
Day not earlier than the 30th day following the second Business Day after receipt by the Bond
Trustee of such direction, (2) in the case of a Conversion from a Serial Bond Interest Rate
Period, the day immediately following the last day of the then- current Serial Bond Interest Rate
Period or a day on which the Bonds of such Series would otherwise be subject to optional
redemption pursuant to Section 4.01(C) if such Conversion did not occur and (3) in the case of a
Conversion from a Short-Term Interest Rate Period, the day immediately following the last day
of the Short-Term Interest Rate Period, (B) the Purchase Date for the Bonds of such Series to be
purchased, which shall be the proposed effective date of the. adjustment to the Applicable ARS
Rate and (C) the initial Auction Period. for such Series. In addition, the direction of the .
Corporation shall be accompanied by a form of notice to be mailed to the Holders of such Series
of Bonds by the Bond Trustee as provided in Section 2.08(x)(2) and a Favorable Opinion of
Bond Counsel. During each ARS Interest Rate Period for a Series of Bonds commencing on a
date so specified and ending on the day immediately preceding the effective date of the next
succeeding Interest Rate Period, the interest rate borne by such Series of Bonds shall be the
Applicable ARS Rate.
(2) Notice of Conversion to Applicable ARS Rate. The Bond Trustee shall
give notice of an adjustment to an ARS Interest Rate Period to the Holders of the affected Series
not less than 30 days prior to the proposed effective date of such ARS Interest Rate Period. Such
notice shall state (i) that the interest rate shall be adjusted to the Applicable ARS Rate unless the
Corporation rescinds its election'to adjust the interest rate to the Applicable ARS Rate as
provided in Section 2.07; (ii) the proposed effective date of the ARS Interest Rate Period; and
• (iii) that such Series of Bonds is subject to mandatory tender for purchase on the proposed
effective date, regardless of whether any or all conditions to the adjustment are met and setting
forth the Purchase Price and the place of delivery for purchase of the such Bonds.
(K) If the Auction Rate on the Bonds shall be the Maximum Interest Rate, the
ARS Maximum Rate, or Non - Payment Rate for a period (A) in excess of thirty (30) days, the
Corporation agrees to take all steps necessary to ensure that the Auction Rate does not exceed the
interest rate payable on similar securities (taking into account the interest period and
enhanced/insured rating of the Bonds) or (B) in excess of sixty (60) days, the Corporation agrees
to (i) convert, or cause to be converted, all Bonds to a Serial Bond Interest Rate Period through
maturity or, with the approval of the Bond Insurer, to a Weekly Interest Rate Period or Short-
Term Interest Rate Period, in each case at the lowest interest rate that will permit the
Remarketing Agent to sell all the Bonds on the Conversion Date at a price equal to 100% of the
principal amount 'thereof plus accrued interest thereon. If an Event of Default shall have
occurred and be continuing under the Bond Indenture or the Corporation fails to cause a
conversion of the Bonds to another Interest Rate Period as required by the foregoing sentence,
the Bond Insurer may, in its discretion, direct the conversion of the Bonds to a Serial. Bond
Interest Rate Period or any other Interest Rate Period.
SECTION 2.09. Execution of Bonds. The Bonds shall be executed in the name
and on behalf of the City with the manual or facsimile signature of its Mayor, under its seal and
attested by the manual or facsimile signature of its City Clerk. Such seal may be in the form of a
• facsimile of the City's seal and may be reproduced, imprinted or impressed on the Bonds. The
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Bonds shall then be delivered to the Bond Trustee for authentication by it. In case any of the
•officers who shall have signed or attested any of the Bonds shall cease to be such officer or
officers of the City before the Bonds so signed or attested shall have been authenticated or
delivered by the Bond Trustee or issued by the City, such Bonds may nevertheless be
authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as
binding upon the City as though those who signed and attested the same had continued to be
such officers of the City, and also any Bond may be signed and attested on behalf of the City by
such persons as at the actual date of execution of such Bond shall be the proper officers of the
City although at the nominal date of such Bond any such person shall not have been such officer
of the City.
Only such of the Bonds as shall bear thereon a certificate of authentication
substantially in the form hereinbefore recited, manually executed by an authorized signatory of
the Bond Trustee as authentication agent, shall be valid or obligatory for any purpose or entitled
to the benefits of this Bond Indenture, and such certificate of the Bond Trustee shall be
conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and
delivered hereunder and are entitled to the benefits of this Bond Indenture.
SECTION 2.10. Transfer of Bonds. Subject to the provisions of Section 2.15,
any Bond may, in accordance with its terms, be transferred, upon the books required to be kept
pursuant to the provisions of Section 2.12, by the Person in whose name it is registered, in person
or by such Person's duly authorized attorney, upon surrender of such Bond for cancellation,
accompanied by delivery of a written instrument of transfer, duly executed in a form approved
by the Bond Trustee.
• Whenever any Bond or Bonds shall be surrendered for transfer, the City shall
execute and the Bond Trustee shall authenticate and deliver a new Bond or Bonds, of the same
Series and maturity and for a like aggregate principal amount. The Bond Trustee shall require
the Bondholder requesting such transfer to pay any tax or other governmental charge required to
be paid with respect to such transfer, and the Bond Trustee may also require the Bondholder
requesting such transfer to pay a reasonable sum to cover expenses incurred by the Bond Trustee
or the City in connection with such transfer. The Bond Trustee shall not be required to transfer,
except to the Bond Insurer, (i) any Bond during the fifteen (15) days next preceding the date on
which notice of redemption of Bonds is given or during the (15) days next preceding an Interest
Payment Date (except for any Series of ARS during a 7-day Auction Period, for the three
Business Days preceding an ARS Interest Payment Date)or (ii) any Bond called for redemption.
SECTION 2.11. Exchange of Bonds. Bonds may be exchanged at the Principal
Office of the Bond Trustee for a like aggregate principal amount of Bonds of other Minimum
Authorized Denominations of the same Series and maturity. The Bond Trustee shall require the
Bondholder requesting such exchange to pay any tax or other governmental charge required to be
paid with respect to such exchange and the Bond Trustee may also require the Bondholder
requesting such exchange to pay a reasonable sum to cover expenses incurred by the Bond
Trustee or the City in connection with such exchange. The Bond Trustee shall not be required to
exchange, except to the Bond Insurer, (i) any Bond during the fifteen (15) days next preceding
the date on which notice of redemption of Bonds is given or during the (15) days next preceding
. an Interest Payment Date (except for any Series of ARS during a 7 -day Auction Period, for the
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three Business Days preceding an ARS Interest Payment Date) or (ii) any Bond called for
• redemption.
SECTION 2.12. Bond Reig ster. The Bond Trustee will keep or cause to be kept
sufficient books for the registration and transfer of the Bonds, which shall at all times (during
regular business hours at the location where such books are kept) be open to inspection by any
Bondholder or such Bondholder's agent duly authorized in writing, the City, the Bond Insurer or
the Corporation; and, upon presentation for such purpose, the Bond Trustee shall, under such
reasonable regulations as it may prescribe, register or transfer or cause to be registered or
transferred, on such books, Bonds as hereinbefore provided.
SECTION 2.13. Temporary Bonds. The Bonds may be issued in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bond may be
printed, lithographed or typewritten, shall be of such denomination as may be determined by the
City, shall be in fully registered form without coupons and may contain such reference to any of
the provisions of this Bond Indenture as may be appropriate. Every temporary Bond shall be
executed by the City and be authenticated by the Bond Trustee upon the same conditions and in
substantially the same manner as the definitive Bonds. If the City issues temporary Bonds it will
execute and deliver definitive Bonds as promptly thereafter as-practicable, and thereupon the
temporary Bonds shall be surrendered, for cancellation, in exchange therefor at the Principal
Office of the Bond Trustee, and the Bond Trustee shall authenticate and deliver in exchange for
such temporary Bonds an equal aggregate principal amount of definitive Bonds of Minimum
Authorized Denominations of the same Series and maturity. Until so exchanged, the temporary
Bonds shall be entitled to the same benefits under this Bond Indenture as definitive Bonds
• authenticated and delivered hereunder.
SECTION 2.14. Bonds Mutilated, Lost. Destroved or Stolen. If any Bond shall
become mutilated, the City, at the expense of the Holder of said Bond, shall execute, and the
Bond Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and
substitution for the Bond so mutilated, but only upon surrender to the Bond Trustee of the Bond
so mutilated. Every mutilated Bond so surrendered to the Bond Trustee shall be canceled by it.
If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be
submitted to the City and the Bond Trustee and, if such evidence be satisfactory to both and
indemnity satisfactory to them shall be given, the City, at the expense of the Holder, shall
execute, and the Bond Trustee shall thereupon authenticate and deliver, a new Bond of like tenor
in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall
have matured or shall be about to mature, instead of issuing a substitute Bond, the Bond Trustee
may pay the same without surrender thereof). The Bond Trustee may require payment of a sum
not exceeding the actual cost of preparing each new Bond issued under this Section and of the
expenses which may be incurred by the City and the Bond Trustee in complying with this
Section. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be
lost, destroyed or stolen shall replace the Bond alleged to be lost, stolen or destroyed as an
original contractual obligation on the part of the City, and shall be entitled to the benefits of this
Bond Indenture with all other Bonds secured by this Bond Indenture.
SECTION 2.15. Use of Securities Depository. Notwithstanding any provision of
• this Bond Indenture to the contrary:
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(A) The Bonds shall be initially issued as provided in Section 2.02. Registered
• ownership of the Bonds, or any portion thereof, may not thereafter be transferred except:
(1) To any successor of the Securities Depository or its nominee, or to any
substitute depository designated pursuant to clause (2) of this subsection (A) ( "substitute
depository"); provided that any successor of the Securities Depository or substitute depository
shall be qualified under any applicable laws to provide the service proposed to be provided by it;
(2) To any substitute depository designated by the City upon (a) the
resignation of the Securities Depository or its successor (or any substitute depository or its
successor) from its functions as depository or (b) a determination by the City that the Securities
Depository or its successor (or any substitute depository or its successor) is no longer able to
carry out its functions as depository, provided that any such substitute depository shall be
qualified under any applicable laws to provide the services proposed to be provided by it; or
(3) To any Person as provided below, upon (a) the resignation of the
Securities Depository • or its successor (or substitute depository or its - successor) from its
functions as depository; provided that no substitute depository can be obtained or (b) a
determination by the City that it is in the best interests of the City to remove the Securities
Depository or its successor (or any substitute depository or its successor) from its functions as
depository.
(B) In the case of any transfer pursuant to clause (1) or clause (2) of
subsection (A), upon receipt of the Outstanding Bonds by the Bond Trustee, together with a
•Certificate of the City to the Bond Trustee, a single new Bond of the applicable Series shall be
executed and delivered in the aggregate principal amount of the Bonds of such Series then
Outstanding, registered in the name of such successor or such substitute depository, or their
nominees, as the case may be, all as specified in such Certificate of the City. In the case of any
transfer pursuant to clause (3) of subsection (A), upon receipt of the Outstanding Bonds by the
Bond Trustee together with a Certificate of the City to the Bond Trustee, new Bonds shall be
executed and delivered in such Minimum Authorized Denominations and registered in the names
of such Persons as are requested in such a Certificate of the City, subject to the limitations of
Section 2.02, provided the Bond Trustee shall not be required to deliver such new Bonds within a
period less than sixty (60) days from the date of receipt of such a Certificate of the City.
(C) In the case of partial redemption or an advance refunding of any Series of
Bonds evidencing all or a portion of such principal amount Outstanding, the Securities
Depository shall make an appropriate notation on such Bonds indicating the date and amounts of
such reduction in principal, in form acceptable to the Bond Trustee.
(D) The City, the Bond Insurer and the Bond Trustee shall be entitled to treat
the Person in whose name any Bond is registered as the Bondholder . thereof for all purposes of
the Bond Indenture and any applicable laws, notwithstanding any notice to the contrary received
by the Bond Trustee, the Bond Insurer or the City; and the City, the Bond Insurer and the Bond
Trustee shall have no responsibility for transmitting payments to, communicating with, notifying
or otherwise dealing with any beneficial owners of the Bonds. None of the City, the Bond
• Insurer or the Bond Trustee will have any responsibility or obligations, legal or otherwise, to the
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DOCSSCI :356339.8
•
•
beneficial owners or to any other party including the Securities Depository or its successor (or
substitute depository or its successor), except for the Holder of any Bond.
(E) So long as the Outstanding Bonds are registered in the name. of Cede &
Co. or its registered assign, the City and the Bond Trustee shall cooperate with Cede & Co., as
sole registered Bondholder, and its registered assigns in effecting payment of the principal of and
redemption premium, if any, and interest on the Bonds by arranging for payment in such manner
that funds for such payments are properly identified and are made immediately available on the
date they are due.
(F) So long as all Bonds no longer bear interest at Auction Rates, the
Corporation may, with the consent of the City and the Bond Trustee, determine not to continue
with the Securities Depository or the book - entry-only system in accordance with the provisions
of this Bond Indenture. In such event, the Corporation shall use its best efforts to identify
another qualified Securities Depository.
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of Bonds. At any time after the execution of this Bond
Indenture, the City may execute and the Bond Trustee shall authenticate and, upon Request of
the City, deliver the Bonds of each Series in the aggregate principal amount set forth below:
Serigi
Principal Amount
2005A
$65,000,000
2005B
$65,000,000
2005C
$70,000,000
SECTION 3.02. Application of Proceeds of Bonds. The proceeds received from
the sale of the Bonds (being $196,879,904.85, comprised of the aggregate principal amount of
the Bonds, less an underwriters' discount of $610,000.00, less the bond insurance premium paid
to the Bond Insurer in the amount of $2,510,095.15) shall be deposited in trust with the Bond
Trustee, who shall forthwith deposit such proceeds as follows:
(A)
Issuance Fund.
A
Fund.
The Bond Trustee shall deposit the sum of $653,900.00 in the Costs of -
The Bond Trustee shall deposit the sum of $196,226,004.85 in the Project
SECTION 3.03. Establishment and Application of Costs of Issuance Fund. The
Bond Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs
of Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by
the Bond Trustee to pay the Costs of Issuance upon Requisition of the Corporation substantially
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in the form attached hereto as Exhibit D stating the Person to whom payment is to be made, the
• amount to be paid, the purpose for which the obligation was incurred and that such payment is a
proper charge against the Costs of Issuance Fund. On the date no later than 180 days after the
Date of Issuance, or upon the earlier Request of the Corporation, amounts, if any, remaining in
the Costs of Issuance Fund shall be transferred to the Project Fund and the Costs of Issuance
Fund shall be closed.
SECTION 3.04. Establishment and Application of the Proiect Fund
(A) The Bond Trustee shall establish, maintain and hold in trust a separate
fund . designated as the "Project Fund" The moneys in the Project Fund shall be used and
withdrawn by the Bond Trustee to pay the capital costs of the Project [or in the event of an
Event of Default under Section 7.01 hereof, if directed by the Bond Insurer, to pay
principal of and interest on the Bonds. NOTE: This Bond Insurer Requirement Could
Cause the Bonds to Become Taxable] No moneys in the Project Fund shall be used to pay
Costs of Issuance.
(B) Before any payment from the Project Fund shall be made, the Corporation
shall file or cause to be filed with the Bond Trustee a Requisition, in substantially the form
attached hereto as Exhibit C, stating:
(1) the item number of such payment;
(2) the name of the Person to whom each such payment is due, which may be
• the Corporation in the case of reimbursement for Project costs theretofore paid by the
Corporation;
(3) the respective amounts to be paid;
(4) the purpose by general classification for which each obligation to be paid
was incurred; and
(5) that obligations in the stated amounts have been incurred by the
Corporation and are presently due and payable and that each item thereof is a proper charge
against the Project Fund and has not been previously paid from the Project Fund.
Upon receipt of such a Requisition, the Bond Trustee shall pay the amount set
forth in such Requisition as directed by the terns thereof out of the Project Fund. The Bond
Trustee shall not make any such payment if it has received any written notice- of claim of lien,
right to lien or attachment upon, or claim affecting the right to receive payment of, any of the
monies to be so paid, that has not been released or will not be released simultaneously with such
payment. Each such Requisition shall be sufficient evidence to the Bond Trustee of the facts
stated therein and the Bond Trustee shall have no duty to confirm the accuracy of such facts.
(C) When the Project shall have been completed, there shall be delivered to
the Bond Trustee a Certificate of the Corporation stating the fact and date of such completion
and stating that all of the costs thereof have been determined and paid (or that all of such costs
• have been paid less specified claims that are subject to dispute and for which a retention in the
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DOCSSC 1:356339.8
\I-
Project Fund is to be maintained in the full amount of such claims until such dispute is resolved).
• Upon the receipt of such Certificate, the Bond Trustee shall, as directed by said Certificate,
transfer any remaining balance in such Project Fund to the Optional Redemption Account. Upon
such transfer, the Project Fund shall be closed.
SECTION 3.05. Validity of Bonds. The validity of the authorization and
issuance of the Bonds is not dependent on and shall not be affected in any way by. any
proceedings taken by the City or the Bond Trustee with respect to or in connection With the Loan
Agreement. The recital contained in the Bonds that the same are issued pursuant to the Law and
the Constitution and laws of the State of California shall be conclusive evidence of their validity
and of compliance with the provisions of law in their issuance.
ARTICLE IV
REDEMPTION AND TENDER OF BONDS
SECTION 4.01. Terms of Redemption.
(A) The Bonds are subject to redemption prior to their stated maturity, at the
option of the City (which option shall be exercised upon Request of the Corporation given to the
Bond Trustee (unless waived by the Bond Trustee) with at least the same number of days notice
to the Bond Trustee then applicable to such Bonds as set forth in this Section 4.01(B) -(E) prior to
the date fixed for redemption) in whole or in part on any date,. from hazard insurance or
condemnation proceeds received with respect to the facilities of any of the Members and
• deposited in the Special Redemption Account, at a Redemption Price equal to the principal
amount thereof, plus accrued interest thereon (if any)to the date fixed for redemption, without
premium.
(B) While any Weekly Interest Rate is in effect with respect to a Series of
Bonds, the Bonds of such Series are also subject to redemption prior to their stated maturity, at
the option of the City (which option shall be exercised upon Request of the Corporation given to
the Bond Trustee (unless waived by the Bond Trustee) at least twenty-five (25) days prior to the
date fixed for redemption), in whole or in part (in such amounts as may be specified by the
Corporation), on any date at a Redemption Price equal to the principal amount of Bonds called
for redemption, plus accrued interest thereon (if any) to the date fixed for redemption, without
premium.
(C) While any Serial'Bond Interest Rate is in effect with respect to a Series of
Bonds, the Bonds of such Series are also subject to redemption prior to their stated maturity, at _
the option of the City (which option shall be exercised upon Request of the Corporation given to
the Bond Trustee (unless waived by the Bond Trustee) at least forty -five (45) days prior to the
date fixed for redemption), in whole or in part, on the first day following such Serial Bond
Interest Rate Period at a Redemption Price equal to the principal amount of Bonds called for
redemption, plus accrued interest thereon (if any) to the date fixed for redemption, without
premium, and thereafter, during the periods specified below (or if approved by Bond Counsel,
during the periods and at the Redemption Prices specified in a notice of the Corporation to the
Bond Trustee) in whole or in part on any date, at the Redemption Prices (expressed as a
•
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DOCSSCl:356339.8
•
0
percentage of principal amount) hereinafter indicated or specified in the notice of the
Corporation to the Bond Trustee, plus accrued interest thereon (if any) to the date fixed for
redemption:
Length of Serial Bond
Interest Rate Period
(expressed in years)
greater than 20
less than or equal to 20
and greater than 15
less than or equal to 15
and greater than 10
less than or equal to 10
Redemption
Price
after 10 years at 102% declining by 1% every
year to 100%
after 7 years at 102% declining by 1 % every
year to 100%
after 5 years at 102% declining by 1 % every
year to 100%
not subject to optional redemption
The foregoing notwithstanding, if the Corporation delivers to the Bond Trustee, the Remarketing
Agent, and the City prior to any Conversion Date to the Serial Bond Interest Rate a notice
containing an alternative redemption schedule setting forth different dates on which, or different
redemption prices at which, the Bonds may be redeemed while the Serial Bond Interest Rate is in
effect and a Favorable Opinion of Bond Counsel, then during such Serial Bond Interest Rate
Period such alternative redemption schedule shall apply to the redemption of the Bonds.
(D) While any Bond Interest Term Rate is in effect with respect to a Series of
Bonds, the Bonds of such Series subject to such Bond Interest Term Rate are also subject to
redemption prior to their stated maturity, at the option of the City (which option shall be
exercised upon Request of the Corporation given to the Bond Trustee (unless waived by the
Bond Trustee) at least twenty-five (25) days prior to the date fixed for redemption), in whole or
in part (in such amounts as may be specified by the Corporation), on the day succeeding the last
day of such Bond Interest Term at a Redemption Price equal to the principal amount of Bonds
called for redemption, plus accrued interest thereon (if any) to the date fixed for redemption,
without premium.
(E) While any ARS Interest Rate is in effect with respect to a Series of Bonds,
the Bonds of such Series are also subject to redemption prior to their stated maturity, at the
option of the City (which option shall be exercised upon Request of the Corporation given to the
Bond Trustee (unless waived by the Bond Trustee) at least. forty (40) days prior to the date fixed
for redemption), in whole or in part, on any ARS Interest Payment Date for such Series at a
Redemption Price equal to the principal amount of Bonds called for redemption, plus accrued
interest thereon (if any) to the date fixed.for redemption, without premium.
DOCSSC1:356339.8
N
.5.
(F) The Bonds are also subject to redemption in part prior to their stated
• maturity from Sinking Fund Installments established pursuant to Section 5.04 on any Sinking
Fund Installment Date.
Cl
(G) The Bonds are also subject to redemption prior to their maturity at the
option of the City (which option shall be exercised upon Request of the Corporation given to the
Bond Trustee (unless waived by the Bond Trustee) with at least the same number of days notice
to the Bond Trustee then applicable to such Bonds as set forth in this Section 4.01(B) -(E) prior to
the date fixed for redemption) as a whole (but not in part) on any date at the principal amount
thereof and interest accrued thereon (if any) to the date fixed for redemption, without premium,
if as -a result of any changes in the Constitution of the United States of America or any state, or
legislative or administrative action or inaction by the United States of America or any state, or
any agency or political subdivision thereof, or by reason of any judicial decisions there is a good
faith determination by any Member that (a) the Master Indenture has become void or
unenforceable or impossible to perform, or (b) unreasonable burdens or excessive liabilities have
been imposed on such Member, including without limitation, federal, state or other ad valorem
property, income or other taxes being then imposed which were not being imposed on the Date
oflssuance.
SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is
made in this Bond Indenture for the redemption of less than all of the Bonds of any Series or any
given portion thereof, the Bond Trustee shall select the Bonds of such Series to be redeemed,
from all Bonds subject to redemption or such given portion thereof not previously called for
redemption, by lot in any manner which the Bond Trustee in its sole discretion shall deem
appropriate and fair; provided, however, that Bonds shall be redeemed in the following order of
priority (and by lot within each priority):
FIRST: Any Bonds of such Series which are Liquidity Facility Bonds; and
SECOND: Any other Bonds of such Series.
SECTION 4.03. Notice of Redemption. Notice of redemption shall be mailed by
the Bond Trustee, not less than thirty (30) days nor more than sixty (60) days (except in the case
of the redemption of Bonds bearing interest at a Weekly Interest Rate, and except in the case of
the redemption of Bonds bearing interest at the Bond Interest Term Rate pursuant to Section
4.01(D), in which case no less than ten (10) days prior to the redemption date and except for
redemption of Bonds bearing interest at an ARS Interest Rate in which case no less than twenty-
five (25) days prior to the redemption date), to the Holders of Bonds called for redemption at
their addresses appearing on the bond registration books of the Bond Trustee and to the Master
Trustee and the Bond Insurer, with a copy to the City. The Bond Trustee shall also give notice
of redemption by overnight mail or courier service to the Remarketing Agent, the Auction Agent,
each Broker- Dealer and such securities depositories and/or securities information services as
shall be designated in a Certificate of the Corporation. For any redemption in whole, the Bond
Trustee shall also mail notice of such redemption to S&P. Each notice of redemption shall state
the date of such notice, the Series designation and date of issue of the Bonds, the redemption
date, the Redemption Price, the place or places of redemption (including the name and
appropriate address or addresses of the Bond Trustee), the maturity, the CUSIP numbers, if any,
DOCSSCI:356339.8
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and, in the case of Bonds to be redeemed in part only, the respective portions of the principal
• amount thereof to be redeemed. Each such notice shall also state that, subject to prior rescission
as provided in the next paragraph of this Section, on said date there will become due and payable
on each of said Bonds the Redemption Price thereof or of said specified portion of the principal
amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued
thereon to the redemption date, and that from and after such redemption date interest thereon
shall cease to accrue, and shall require that such Bonds be then surrendered. Each notice shall
also state that redemption is conditioned upon receipt by the Bond Trustee of sufficient funds to
pay the Redemption Price of the Bonds so redeemed.
Any notice given pursuant to this Section 4.03 may be rescinded by written notice
given to the Bond Trustee by the Corporation no later than five (5) Business Days prior to the
date specified for redemption. The Bond Trustee shall give notice of such rescission as soon
thereafter as practicable in the same manner, and to the same Persons, as notice of such
redemption was given pursuant to this Section 4.03.
Failure by the Bond Trustee to give notice pursuant to this Section 4.03 to the
Bond Insurer, Auction Agent, Broker - Dealer, Remarketing Agent or any one or more of the
securities information services or depositories designated by the Corporation or the insufficiency
of any such notice shall not affect the sufficiency of the proceedings for redemption. Failure by
the Bond Trustee to mail notice of redemption in accordance with this Section 4.03 to any one or
more of the respective Holders of any Bonds designated for redemption shall not affect the
sufficiency of the proceedings for redemption with respect to the Holders to whom such notice
was mailed.
• Notice of redemption of Bonds shall be given by the Bond Trustee, at the expense
of the Corporation, for and on behalf of the City.
If any Bonds are to be redeemed and those Bonds are held by a Securities
Depository, the Trustee shall include in the notice of the call for redemption delivered to the
Securities Depository (i) under an item entitled "Publication Date for. Securities Depository
Purposes" and such date shall be two Business Days after the Auction Date immediately
preceding such Redemption Date and (ii) an instruction to Securities Depository to (x) determine
on such Publication Date after the Auction held on the immediately preceding Auction Date has
settled, the Security Depository Participants whose Securities Depository positions shall be
redeemed and the principal amount of such Auction Rate Bonds to be redeemed from each such
position (the "Securities Depository Redemption Information), and (y) notify the Auction Agent
immediately after the such determination of the (1) the positions of the Securities Depository
Participants in such Bonds immediately prior to such Auction settlement, (2) the position of the -
Securities Depository Participants in such Auction Rate Bonds immediately follow such Auction
settlement, and (3) the Security Depository Redemption Information
SECTION 4.04. Partial Redemption of Bonds. Upon surrender of any Bond
redeemed in part only, the City shall execute (but need not prepare) and the Bond Trustee shall
authenticate and deliver to the Holder thereof, at the expense of the Corporation, a new Bond or
Bonds of Minimum Authorized Denominations, and of the same Series and maturity, equal in
• aggregate principal amount to the unredeemed portion of the Bond surrendered.
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DOCSSCI:356339.8
SECTION 4.05. Effect of Redemption. Notice of redemption having been duly
•given as aforesaid, and moneys for payment of the Redemption Price of, together with interest
accrued to the redemption date on, the Bonds (or portions thereof) so called for redemption being
held by the Bond Trustee, on the redemption date designated in such notice, the Bonds (or
portions thereof) so called for redemption shall become due and payable at the Redemption Price
specified in such notice together with interest accrued thereon to the redemption date, interest on
the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall
cease to be entitled to any benefit or security under this Bond Indenture and the Holders of said
Bonds shall have no rights in respect thereof except to receive payment of said Redemption Price
and accrued interest to the date fixed for redemption from funds held by the Bond Trustee for
such payment.
All Bonds redeemed pursuant to the provisions of this Article shall be canceled
upon surrender thereof.
SECTION 4.06. Optional Tender During Weekly Interest Rate Period. During
any Weekly Interest Rate Period for a Series of Bonds, any Eligible Bond of such Series shall be
purchased from its Holder at the option of the Holder on any Business Day at -the Purchase Price
payable in immediately available funds, upon delivery to the Tender Agent at its Principal Office
for delivery of notices and to the Remarketing Agent of an irrevocable written notice which
states the name and Series designation of the Bond, the principal amount and the date on which
the same shall be purchased, which date shall be a Business Day not prior to the seventh day next
succeeding the date of the delivery of such notice to.the Tender Agent. Any notice delivered to
the Tender Agent after 4:00 p.m., New York City time, shall be deemed to have been received on
•the next succeeding Business Day. For payment of such Purchase Price on the date specified in
such notice, such Bond must be delivered, at or prior to 10:00 a.m., New York City time, on the
date specified in such notice, to the Tender Agent at its Principal Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the
Holder thereof or by the Holder's duly- authorized attorney, with such signature guaranteed by a
commercial bank, trust company or member firm of the New York Stock Exchange.
•
SECTION 4.07. Mandatory Tender for Purchase On Day Next Succeeding the
Last Day of Each Bond Interest Term. On the day next succeeding the last day of each Bond
Interest Term for an Eligible Bond in a Short-Term Interest Rate Period, unless such day is the
first day of a new Interest Rate Period for such Bond (in which event such Bond shall be subject
to mandatory purchase pursuant to Section 4.08), such Bond shall be purchased from its Holder
at the Purchase Price payable in immediately available funds, if such Bond is delivered to the
Tender Agent on or prior to 10:00 a.m., New York City time, on such day, or if delivered after
10:00 a.m., New York City time, on the next succeeding Business Day; provided, however, that
in any event such Bond will not bear interest at the Bond Interest Term Rate after the last day of
each Bond Interest Term. The.Purchase Price of any Bond so purchased shall be payable only
upon surrender of such Bond to the Tender Agent at its Principal -Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the
Holder thereof or by the Holder's duly- authorized attorney, with such signature guaranteed by a
commercial bank, trust company or member firm of the New York Stock Exchange.
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DOCSSC 1:356339.8
SECTION 4.08. Mandatory Tender for Purchase on First Day of Each Interest
• Rate Period. Eligible Bonds shall be subject to mandatory tender for purchase on the first day of
each Interest Rate Period with respect to such Bonds, or, except ARS, on the day which would
have been the first day of an Interest Rate Period for such Bonds had one of the events specified
in Section 2.07(B) not occurred which resulted in the interest rate not being adjusted, at the
Purchase Price, payable in immediately available funds. The Purchase Price of any Bond so
purchased shall be payable only upon surrender of such Bond to the Tender Agent at its Principal
Office, accompanied by an instrument of transfer thereof, in form satisfactory to such Tender
Agent, executed in blank by the Holder thereof or by the Holder's duly- authorized attorney, with
such signature guaranteed by a commercial bank, trust company or member firm of the New
York Stock Exchange at or prior to 10:00 a.m., New York City time, on the date specified for
such delivery in this paragraph or in the notice provided pursuant to Section 2.07.
SECTION 4.09• Mandatory Tender Upon Termination or Expiration of Liquidity
Facility or Delivery of an Alternate Liquidity Facility (If Liquidity Facility Provided). If a
Liquidity Facility is delivered to the Tender Agent for a Series of the Bonds in accordance with
the provisions of the Loan Agreement, the Bonds of such Series shall be subject to mandatory
tender for purchase prior to the Noticed Termination Date or the Expiration Date for such
Liquidity Facility and upon delivery of an Alternate Liquidity Facility (on the dates and upon
notice to Bondholders, which notice shall include the other information set out in Section 4.20),
at the Purchase Price; payable in immediately available funds. The Purchase Price of any Bond
so purchased shall be payable only upon surrender of such Bond to the Tender Agent at its
Principal Office, accompanied by an instrument of transfer thereof, in form satisfactory to the
•Tender Agent, executed in blank by the Holder thereof or by the Holder's duly authorized
attorney, with such signature guaranteed by a commercial bank, trust company or member firm
of the New York Stock Exchange, at or prior to 10:00 am., New York City time, on the date
specified for such delivery in a notice provided to the Holders by the Bond Trustee. Upon the
Noticed Termination Date or Expiration Date for any Liquidity Facility or delivery of an
Alternate Liquidity Facility, the Bond Trustee shall deliver written notice thereof to S &P.
SECTION 4.10. General Provisions Relating to Tenders.
(A) Creation of Bond Purchase Fund.
(i) There shall be created and established hereunder with the Tender
Agent a fund to be designated the `Bond Purchase Fund" to be held in trust only for the benefit
of the Holders of tendered Bonds who shall thereafter be restricted exclusively to the moneys
held in such fund for the satisfaction of any claim for the Purchase Price of such tendered Bonds.
Neither the Corporation nor the City shall have any right, title or interest in any of the funds held
on deposit in the Remarketing Proceeds Account or the Liquidity Facility Account nor any
remarketing proceeds held for any period of time by the Remarketing Agent.
(ii) There shall be created and designated the following accounts
within the Bond Purchase Fund: the "Remarketing Proceeds Account," the "Liquidity Facility
Account" and the "Corporation Purchase Account" Moneys paid to the Tender Agent for the
purchase of tendered or deemed tendered Bonds received from (i) the Remarketing Agent shall
• be deposited in the Remarketing Proceeds Account in accordance with the provisions of
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Section 4.10(D)(i), (ii) payments pursuant to a Liquidity Facility, if any, shall be deposited in the
•Liquidity Facility Account in accordance with the provisions of Section 4.10(D)(ii), and (iii) the
Corporation or any other Member shall be deposited in the Corporation Purchase Account in
accordance with the provisions of Section 4.10(D)(iii). Moneys provided from payments made
under the Liquidity Facility (if any) not required to be used in connection with the purchase of
tendered Bonds shall be returned to the Liquidity Facility Provider in accordance with Section
4.10(D) and (E). Moneys provided by the Corporation or other Member not required to be used
in connection with the purchase of tendered Bonds shall be returned to the Corporation in
accordance with Sections 4.10(D) and (E).
(iii) Moneys in the Liquidity Facility Account, the Corporation
Purchase Account and the Remarketing Proceeds Account shall not be commingled with other
funds held by the Tender Agent and shall remain uninvested.
(B) Deposit of Bonds. The Tender Agent agrees to hold all Bonds delivered to
it pursuant to Sections 4.06, 4.07, 4.08 and 4.09 of this Bond Indenture in trust for the benefit of
the respective Holders "which shall have so delivered such Bonds until moneys Pepresenting the
Purchase Price of such Bonds have been delivered to such Holder in accordance with the
provisions of this Bond Indenture and until such Bonds shall have been delivered by the Tender
Agent in accordance with Section 4.10(F).
(C) Remarketing of Bonds.
(i) Immediately upon its receipt, but not later than 12:00 noon, New
•York City time, on the following Business Day in the case of a Bond bearing interest at a
Weekly Interest Rate, from a Holder of a notice pursuant to Section 4.06 of this Bond Indenture,
the Tender Agent shall notify the Remarketing Agent, the Liquidity Facility Provider (if any),
and the Corporation by telephone, promptly confirmed in writing, or by telecopy, of such receipt,
specifying the principal amount of Bonds for which it has received a notice pursuant to Section
4.06 of this Bond Indenture, the names of the Holders thereof and the date on which such Bonds
are to be purchased in accordance with Section 4.06.
The date on which Bonds are to be purchased pursuant to Sections 4.06, 4.07,
4.08 or 4.09 of this Bond Indenture is hereinafter referred to as the "Purchase Date," and the
Bonds to be purchased pursuant to such subsections are hereinafter collectively referred to as the
"Purchased Bonds."
(ii) • As soon as practicable, but in no event later than 11:30 a.m., New
York City time, on the Purchase Date in the case of Bonds to be purchased pursuant to Section -
4.07 and by no later than 4:00 p.m., New York City time, on the last Business Day prior to the
Purchase Date in the case of Bonds to be purchased pursuant to Sections 4.06, 4.08 or 4.09, the
Remarketing Agent shall inform the Tender Agent by telephone, promptly confirmed in writing,
of the principal amount of Purchased Bonds for which the Remarketing Agent has identified
prospective purchasers and of the name, address and taxpayer identification number of each such
purchaser, the principal amount of Purchased Bonds to be purchased and the Minimum
Authorized Denominations in which such Purchased Bonds are to be delivered. Upon receipt
• from the Remarketing Agent of such information, the Tender Agent shall prepare Purchased
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Bonds in accordance with such information received from the Remarketing Agent for the
• registration of transfer and redelivery to the Remarketing Agent.
(iii) By 11:45 a.m., New York City time, on the Purchase Date in the
case of Bonds to be purchased pursuant to Section 4.07 and by 11:30 a.m., New York City time,
on the Purchase Date in the case of Bonds to be purchased pursuant to Sections 4.06, 4.08 or
4.09, the Tender Agent shall notify the Liquidity Facility Provider (if any), and the Corporation
by telephone, promptly confirmed in writing, as to the_ aggregate Purchase Price of the Purchased
Bonds and as to the projected Funding Amount.
The term "Funding Amount" is hereby defined to mean an amount equal to the
difference between (1) the total Purchase Price of those Purchased Bonds to be purchased
pursuant to Sections 4.06, 4.07, 4.08 and 4.09, and (2) the Purchase Price of those Purchased
Bonds to be purchased pursuant to Sections 4.06, 4.07, 4.08 or 4.09 with respect to which the
Remarketing Agent expects to transfer, or to cause to be transferred, immediately available funds
to the Tender Agent by 12:00 noon, New York City time, on the Purchase Date for deposit in the
Remarketing Proceeds Account pursuant to Section 4.10(D).
As used herein, the term "Purchase Price" of any Purchased Bond means the
principal amount thereof plus accrued interest to, but not including, the Purchase Date; provided,
however, that (1) if the Purchase Date for any Purchased Bond is an Interest Payment Date, the
Purchase Price thereof shall be the principal amount thereof, and interest on such Bond shall be
paid to the Holder of such Bond pursuant to this Bond Indenture and (2) in the case of a purchase
on the fast day of an Interest Rate Period which is preceded by a Serial Bond Interest Rate
•Period and which commences prior to the day originally established as the last day of such
preceding Serial Bond Interest Rate Period, "Purchase Price" of any Purchased Bonds means the
optional redemption price set forth in Section 4.01(C) which would have been applicable to such
Bond if the preceding Serial Bond Interest Rate Period had continued to the day originally
established as its last day, plus accrued interest, if any.
U
(iv) Any Purchased Bonds which are subject to mandatory tender for
purchase in accordance with Sections 4.07, 4.08 or 4.09 which are not presented to the Tender
Agent on the Purchase Date and any Purchased Bonds which are the subject of a notice pursuant
to Section 4.06 which are not presented to the Tender Agent on the Purchase Date, shall, in
accordance with the provisions of Section 4.12, be deemed to have been purchased upon the
deposit of moneys equal to the Purchase Price thereof into any or all of the accounts of the Bond
Purchase Fund.
(v) Notwithstanding anything to the contrary contained in this -
Section 4.10, in the case of Bonds to be purchased on the first day of an Interest Rate Period that
immediately follows a Serial Bond Interest Rate Period, such Bonds shall not be remarketed by
the Remarketing Agent but instead shall be purchased by the Corporation at the Purchase Price.
Thereafter, the Corporation may request the Remarketing Agent to remarket such bonds in
accordance with the terms hereof and the Remarketing Agreement.
(D) Deposits of Funds.
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(i) The Remarketing Agent shall transfer, or to cause to be transferred,
•to the Tender Agent the proceeds derived by the Remarketing Agent from remarketing of Bonds
pursuant to Section 4.10(C) in immediately available funds by 12:00 noon (New York City time)
on the Purchase Date for deposit in the Remarketing Proceeds Account. The Tender Agent shall
deposit into the Remarketing Proceeds Account any amounts received by it from the
Remarketing Agent against receipt of Bonds by the Remarketing Agent pursuant to
Section 4.10(F) and on account of Purchased Bonds remarketed pursuant to the terms of the
Remarketing Agreement.
(ii) By 12:30 p.m., New York City time, on the Purchase Date, the
Tender Agent shall notify the Liquidity Facility Provider (if any) for the Purchased Bonds, and
the Corporation by telephone, immediately confirmed in writing, of the amount of funds, if any,
required to be transferred to the Tender Agent (the "Additional Funding Amount') which shall
be the amount, if any, by which the total Purchase Price of the Purchased Bonds exceeds the sum
of the amounts then on deposit in the Remarketing Proceeds Account. The Additional Funding
Amount may be different from the Funding Amount to the extent that the Remarketing Agent
deposits moneys associated with Bonds remarketed in the interim period. If a Liquidity Facility
is in effect with respect to the Purchased Bonds, the Tender Agent shall, at or before 1:00 p.m.,
New York City time, on the Purchase Date, present drafts for payment or otherwise request
amounts under the Liquidity Facility, in accordance with its terms, in an amount equal to the
Additional Funding Amount so that payment is received under the Liquidity Facility at or before
3.00 p.m., New York City time. The Tender Agent shall deposit such amounts in the Liquidity
Facility Account. If more than one Liquidity Facility is then in effect, the Tender Agent shall
establish a separate subaccount in the Liquidity Facility Account for each Liquidity Facility and
• apply the moneys in such subac.counts solely to pay the purchase price of Purchased Bonds
subject to such Liquidity Facility.
•
(iii) The Corporation has agreed in Section 3.5 of the Loan Agreement
and in Obligation No. 14 to pay to the Tender Agent in immediately available funds the
Additional Funding Amount by 3:00 p.m., New York City time, (a) if a Liquidity Facility is not
in effect with respect to the Purchased Bonds, (b) if the Liquidity Facility Provider has not paid
the full amount required by clause (ii) of this subsection (D) at the times required therein, or (c)
if such Bonds bear a Serial Bond Interest Rate. The Tender Agent shall deposit such amounts
into the Corporation Purchase Account.
(iv) The Tender Agent shall hold all proceeds received from the
Remarketing Agent, the Liquidity Facility Provider or the Corporation pursuant to this Section
4.10(D) in trust for the tendering Bondholders. In holding such proceeds and moneys, the
Tender Agent will be acting on behalf of such Bondholders by facilitating purchase of the Bonds
and not on behalf of the City, any Liquidity Facility Provider, or the Corporation and will not be
subject to the control of any of them. Subject to the provisions of Section 4.10(E), following the
discharge of the lien created by Section 5.01 of this Bond Indenture or after-payment in full of
the Bonds, the Tender Agent shall pay any moneys remaining in any account of the Bond
Purchase Fund directly to the Persons for whom such money is held upon presentation of
evidence reasonably satisfactory to the Bond Trustee that such Person is rightfully entitled to
such money and the Tender Agent shall not pay such amounts to any other Person.
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DOCSSC3:356339.9
(E) Disbursements: Payment of Purchase Price. Moneys delivered to the
•Tender Agent on a Purchase Date shall be applied at or before 3:30 p.m., New York City time,
on such Purchase Date to pay the Purchase Price of Purchased Bonds in immediately available
funds as follows in the indicated order of application (but subject to Section 4.10(c)(v)) and, to
the extent not so applied on such date, shall be held in the separate and segregated accounts of
the Bond Purchase Fund for the benefit of the Holders of the Purchased Bonds which were to
have been purchased:
FIRST: Moneys deposited in the Remarketing Proceeds Account.
SECOND: Moneys deposited in the Liquidity Facility Account.
THIRD: Moneys deposited in the Corporation Purchase Account.
Any moneys held by the Tender Agent in the Corporation Purchase Account remaining
unclaimed by the Holders of the Purchased Bonds which were to have been purchased for two
(2) years after the respective Purchase Date for.such Bonds shall be paid, upon the written
request of the Corporation to the Corporation, against written receipt therefor. The Holders of
Purchased Bonds who have not yet claimed money in respect of such Bonds shall thereafter be
entitled to look only to the Tender Agent, to the extent it shall hold moneys on deposit in the
Bond Purchase Fund or the Corporation to the extent moneys have been transferred in
accordance with this Section.
(F) Delivery of Purchased Bonds.
• (i) The Remarketing Agent shall give telephonic or telegraphic notice,
promptly confirmed by a written notice, to the Tender Agent on each date on which Bonds shall
have been purchased pursuant to Sections 4.06, 4.07, 4.08 and 4.09, specifying the principal
amount of such Bonds, if any, sold by it pursuant to Section 4.13(A) along with a list of such
purchasers showing the names and Authorized Minimum Denominations in which such Bonds
shall be registered, and the addresses and social security or taxpayer identification numbers of
such purchasers. By 1:30 p.m., New York City time, on the Purchase Date; a principal amount
of Bonds equal to the amount of Purchased "Bonds purchased with moneys from the Remarketing
Proceeds Account shall be made available by the Tender Agent "to the Remarketing Agent
against payment therefor in immediately available funds. The Tender Agent shall prepare each
Bond to be so delivered in such names as directed by the Remarketing Agent pursuant to Section
4.10(C)(ii).
(ii) A principal amount of Bonds equal to the amount of Purchased
Bonds purchased from moneys on deposit in the Liquidity Facility Account shall be delivered on
the day of purchase by the Tender Agent to or as directed by the Liquidity Facility Provider. The
Tender Agent shall register such Bonds in the name of the Liquidity Facility Provider or as
otherwise provided in the Liquidity Facility.
(iii) A principal amount of Bonds equal to the amount of Purchased
Bonds purchased from moneys on deposit in the Corporation Purchase Account shall be
delivered on the day of such purchase by the Tender Agent to or as directed by the Corporation.
•
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The Tender Agent shall register such Bonds in the name of the Corporation or as otherwise
• directed by the Corporation.
SECTION 4.11. Notice of Mandatory Tender for Purchase on First Day of Each
Interest Rate Period. In connection with any mandatory tender for purchase of Bonds in
accordance with Section 4.08, the Tender Agent shall give the notice provided herein as a part of
the notice given pursuant to Sections 2.04(C), 2.05(C), 2.06(C) or 2.08(1)(2). Such notice shall
state: (1) that the Purchase Price of any Bond so subject to mandatory tender for pnrchsse shall
be payable only upon surrender of such Bond to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer thereof, in form satisfactory to the Tender Agent,
executed in blank by the Holder thereof or by the Holder's duly- authorized attorney, with such
signature guaranteed by a commercial bank, trust company or member firm of the New York
Stock Exchange; (2) that all Bonds so subject to mandatory tender for purchase shall be
purchased on the mandatory purchase date which shall be explicitly stated; and (3) that in the
event that any Holder of a Bond so subject to mandatory tender for purchase shall not surrender
such Bond to the Tender Agent for purchase on such mandatory purchase date, then such Bond
shall be deemed to be an Undelivered Bond, and that no interest shall accrue thereon on and after
such mandatory purchase date and that the Holder thereof shall have no rights under this Bond
Indenture other than to receive payment of the Purchase Price thereof.
SECTION 4.12. Irrevocable Notice Deemed to be Tender of Bond: Undelivered
Bonds.
(A) The giving of notice by a Holder of a Bond as provided in Section 4.06
• shall constitute the irrevocable tender for purchase of each such Bond with respect to which such
notice shall have been given, regardless of whether such Bond is delivered to the Tender Agent
for purchase on the relevant Purchase Date as provided. in this Article IV.
(B) The Tender Agent may refuse to accept delivery of any such Bonds for
which a proper instrument of transfer has not been provided; such refusal, however, shall not
affect the validity of the purchase of such Bond as herein described. For purposes of this Article
IV, the Tender Agent for the Bonds shall determine timely and proper delivery of such Bonds
and the proper endorsement of such Bonds. Such determination shall be binding on the Holders
of such Bonds, the Corporation and the Remarketing Agent, absent manifest error. If any Holder
of a Bond who shall have given notice of tender of purchase pursuant to Section 4.06 or any
Holder of a Bond subject to mandatory tender for purchase pursuant to Sections 4.07, 4.08 or
4.09 shall fail to deliver such Bond to the Tender Agent at the place and on the applicable date
and at the time specified, or shall fail to deliver such Bond properly endorsed, such Bond shall
constitute an Undelivered Bond. If funds in the amount of the Purchase Price of the Undelivered
Bond are available for payment to the Holder thereof on the date and at the time specified, from
and after the date and time of that required delivery, (1) the Undelivered Bond shall be deemed
to be purchased and shall no longer be deemed to be Outstanding.under this Bond Indenture; (2)
interest shall no longer accrue thereon; and (3) funds in the amount of the Purchase Price of the
Undelivered Bond shall be held by the Tender Agent for such Bond for the benefit of the Holder
thereof, to be paid on delivery (and proper endorsement) of the Undelivered Bond to the Tender
Agent at its Principal Office. Any funds held by the Tender Agent as described in clause (3) of
• the preceding sentence shall be held uninvested.
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SECTION 4.13. Remarketing of Bonds, Notice of Interest Rates.
• (A) Upon a mandatory tender or notice of the tender for purchase of Bonds,
the Remarketing Agent shall offer for sale and use its best efforts to sell such Bonds, any such
sale to be made on the date of such purchase in accordance with this Article IV at a price equal to
the principal amount thereof plus accrued interest, if any, thereon to the purchase date. The
Remarketing Agent agrees that it shall not sell any Bonds purchased pursuant to this Article IV
to the Corporation or any other Member, or to any Person who controls, is controlled by, or is
under common control with the Corporation or any other Member or a Person who is otherwise a
guarantor of the Loan Repayments.
(B) The Remarketing Agent shall offer for sale and use its best efforts to sell
Liquidity Facility Bonds at a price equal to the principal amount thereof plus accrued interest to
the date of purchase (based on the rate per annum which would have been applicable to such
Bonds if they were not Liquidity Facility Bonds). Liquidity Facility Bonds shall not be delivered
upon remarketing unless the Tender Agent shall have received a written confirmation from the
Liquidity Facility Provider that the Liquidity Facility is reinstated in accordance.with its terms to
the full amount of the then Required Stated Amount.
(C) The Remarketing Agent shall determine the rate of interest to be home by
the Bonds during each Interest Rate Period (other than during an ARS Interest Rate Period) for
such Bonds and by each Bond during each Bond Interest Tenn for such Bond and the Bond
Interest Terms for each Bond during each Short -Tenn Interest Rate Period as provided in Article
lI hereof and shall furnish to the Tender Agent and to the Corporation upon request, in a timely
•fashion each rate of interest and Bond Interest Term so determined by telephone, telecopy,
electronic mail or readily accessible electronic means,, promptly confirmed in writing.
(D) Anything in this Bond Indenture to the contrary notwithstanding, (i)
during the period during which a Liquidity Facility is required to be in effect, if there is no
Liquidity Facility in effect, there shall be no remarketing of Bonds tendered or deemed tendered
for purchase, and (ii) if there shall have occurred and is continuing an Event of Default, there
shall be no remarketing of Bonds tendered or deemed tendered for purchase.
SECTION 4.14. The Remarketing Agent. The Remarketing Agent shall be
authorized by law to perform all the duties imposed upon it pursuant to the Remarketing
Agreement. The Remarketing Agent or any successor shall signify its acceptance of the duties
and obligations imposed upon it pursuant to the Remarketing Agreement by an agreement under
which the Remarketing Agent will agree to-
(A) determine the interest rates applicable to the Bonds, (other than ARS) and
give notice to the Tender Agent of such rates and periods in accordance with Article lI hereof;
(B) keep such books and records as shall be consistent with prudent industry
practice; and .
(C) use its best efforts to remarket Bonds in accordance with the Remarketing
• Agreement.
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The Remarketing Agent shall hold all amounts received by it in accordance with
•any remarketing of Bonds pursuant to Section 4.13 in trust only for the benefit of the Holders of
tendered Bonds and shall not commingle such amounts with any other moneys.
SECTION 4.15. Qualifications of Remarketing Agent: Resienation: Removal.
(A) Each Remarketing Agent shall be a Member of the National Association
of Securities Dealers, having a combined capital stock, surplus and undivided profits of at least
$50,000,000 and authorized by law to perform all the duties imposed upon it by this Bond
Indenture. Any successor Remarketing Agent shall have senior unsecured long -term debt which
shall, be rated, so long as the Bonds with respect to which it is serving as Remarketing Agent
shall be rated by Moody's, at least Baa3/P -3 or otherwise qualified by Moody's.
(B) A Remarketing Agent may at any time resign and be discharged of the
duties and obligations created by the Remarketing Agreement by giving thirty (30) days written
notice to the Tender Agent, the City, the Liquidity Facility Provider (if any) and the.Corporation.
A Remarketing Agent-may be removed at the direction of the Corporation or-at any time on
forty -five (45) days prior written notice, by an instrument signed by the Corporation, filed with
such Remarketing Agent, the Liquidity Facility Provider (if any), the Bond Trustee, and the
Tender Agent.
SECTION 4.16. Successor Remarketing Agents.
(A) Any corporation, association, partnership or firm which succeeds to the
•business of the Remarketing Agent as a whole or substantially as a whole, whether by sale,
merger, consolidation or otherwise, shall thereby become vested with all the property, rights and
powers of such Remarketing Agent hereunder.
(B) In the event that the Remarketing Agent has given notice of resignation or
has been notified of its impending removal in accordance with Section 4.15(B), the Corporation
shall appoint a successor Remarketing Agent.
(C) In the event that the property or affairs of the Remarketing Agent shall be
taken under control of any state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, and the Corporation shall not have appointed its successor,
the City shall appoint a successor and, if no appointment is made within thirty (30) days, the
Tender Agent shall apply to a court of competent jurisdiction for such appointment.
SECTION 4.17. The Tender Agent.
(A) Any Tender Agent and each successor Tender Agent appointed in
accordance with this Bond Indenture shall designate its Principal Office and signify its
acceptance of the duties and obligations imposed upon it as described herein by a written
instrument of acceptance delivered to the City, the Bond Trustee, the Liquidity Facility Provider
(if any), and the Corporation under which each Tender Agent will agree, particularly:
(1) to hold all Bonds delivered to it for purchase hereunder in trust for
is the exclusive benefit of the respective Holders that shall have so delivered such Bonds
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until moneys representing the purchase price of such Bonds shall have been delivered to
• or for the account of or to the order of such Holders;
(2) to hold all moneys delivered to it hereunder for the purchase of
Bonds in trust for the exclusive benefit of the Person that shall have so delivered such
moneys until the Bonds purchased with such moneys shall have been delivered to it for
the account of such Person and, thereafter, for the benefit of the Holders tendering such
Bonds; and
(3) to keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available for inspection by the
City, the Bond Trustee, the Remarketing Agent, the Liquidity Facility Provider (if any)
and the Corporation.
SECTION 4.18. Qualifications of Tender Agent, Resignation. Removal. Any
successor Tender Agent shall be a commercial bank or trust company duly organized under the
laws of the United States of America or any state or territory thereof having a combined capital
stock, surplus and undivided profits of at least $50,000,000 and authorized by law to perform all
the duties imposed upon it by this Bond Indenture. Subject to the next succeeding paragraph,
any Tender Agent may resign at any time, and be discharged of the duties and obligations
created by this Bond Indenture by giving at least sixty (60) days' notice to the City, the Liquidity
Facility Provider (if any), the Corporation and the Bond Trustee. Subject to the next succeeding
paragraph, any Tender Agent may be removed at any time, by an instrument signed by the
Corporation and filed with the Bond Trustee, the Remarketing Agent, the Liquidity Facility
• Provider (if any) and the City.
Upon the resignation or removal of the Tender Agent, the Tender Agent shall pay
over, assign and deliver any moneys and/or Bonds held by it in such capacity to its successor and
shall transfer any documentation relating to the Liquidity Facility in its custody, if any, to its
successor. In the event of the resignation of a Tender Agent who is also serving in the capacity
of Bond Trustee, the Bond Trustee shall also tender its resignation in accordance with the
provisions of this Bond Indenture. No such resignation or removal shall be effective until a
successor has been appointed and accepted such duties.
SECTION 4.19. Successor Tender Agents.
(A) Any corporation, association, partnership or firm which succeeds to the
business of the Tender Agent as a whole or substantially as a whole, whether by sale, merger,
consolidation or otherwise, shall thereby become vested with all the property, rights and powers
of such Tender Agent hereunder.
(B) In the event that the Tender Agent has given notice of resignation or has
been notified of its impending removal in accordance with Section 4.18, the Corporation shall
appoint a successor Tender Agent. The Bond Trustee shall provide notice of any successor
Tender Agent to S &P.
(C) In the event that the Tender Agent shall resign, be removed or be
• dissolved, or if the property or affairs of the Tender Agent shall be taken under control of any
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DOCSSC1356339.9
state or federal court or administrative body because of bankruptcy or insolvency, or for any
• other reason, and the Corporation shall not have appointed its successor, the City shall appoint a
successor and, if no appointment is made within thirty (30) days, the Tender Agent shall apply to
a court of competent jurisdiction for such appointment.
SECTION 4.20. Termination of Liquidity Facility Prior to Expiration Date:
Purchase by Liquidity Facility Provider: Notices.
(A) The obligation of the Liquidity Facility Provider to provide funds for the
purchase of tendered Bonds pursuant to the Liquidity Facility shall expire or be suspended
automatically and without prior notice upon the occurrence of certain defaults as shall be set
forth in the Liquidity Facility.
(B) If an Immediate Termination Date occurs, the Bond Trustee shall
immediately upon receiving written notice thereof notify the Tender Agent, the Remarketing
Agent and the Holders of all Outstanding Bonds subject to such Liquidity Facility that the
Liquidity Facility has been terminated or suspended and the reasons therefor, that the funds will
no longer be available under .the Liquidity Facility to purchase Bonds and the Liquidity Facility
Provider will be under no obligation to advance funds under the Liquidity Facility or to purchase
Bonds.
(C) Following the Noticed Termination Date, funds will no longer be available
to the Tender Agent under the Liquidity Facility to purchase Bonds. Promptly upon the receipt
of notice of the proposed Noticed, Termination Date from the Liquidity Facility Provider, but in
• no event more than three (3) Business Days after receipt, the Bond Trustee shall give notice to
the Remarketing Agent and the Holders of all Eligible Bonds subject to such Liquidity Facility
of the proposed Noticed Termination Date and the proposed Purchase Date for such Bonds,
which shall be no later than five (5) days prior to the Noticed Termination Date. At least
fourteen (14) days prior to the Expiration Date of the Liquidity Facility (if any), the Bond
Trustee shall also give notice to the Holders of Eligible Bonds of the applicable Series of the
scheduled Expiration Date for the Liquidity Facility and the proposed Purchase Date for such
Bonds, which shall be no later than five (5) days prior to the Expiration Date, except that the
Purchase Date may be the Business Day preceding the Expiration Date if expiration is due to the
delivery of an Alternate Liquidity Facility. In either case, such notice shall be given by first -
class mail and shall (i) state that funds will no longer be available to the Tender Agent under the
Liquidity Facility (and the Liquidity Facility Provider will have no obligation) to purchase (or
provide funds for the purchase of) Eligible Bonds after the proposed Noticed Termination Date
or the Expiration Date, as applicable, (ii) specify the Noticed Termination Date. or the Expiration
Date, as applicable, (iii) state that the Eligible Bonds of the applicable Series are subject to
mandatory purchase on or not less than five (5) days prior to such Noticed Termination Date or
the Expiration Date or on the Business Day preceding the Expiration Date if expiration is due to
delivery of an Alternate Liquidity Facility, as applicable, (iv) ..specify, if applicable, that the
Corporation will be the only party obligated to purchase Eligible Bonds of the applicable Series
after the Noticed Termination Date or the Expiration Date, as applicable, (v) state, if applicable,
the name of the provider of the proposed Alternate Liquidity Facility and the terms thereof, and
(vi) state that all Eligible Bonds of the applicable Series (if subject to mandatory purchase) must
• be delivered for purchase to the Tender Agent and that on such Purchase Date, the Tender Agent
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will hold moneys equal to-the Purchase Price for all Eligible Bonds of such Series in trust for the
•Holders of such Bonds, which moneys will be paid upon surrender of such Bonds to the Tender
Agent. Any notice given substantially as provided in this.subsection (C) shall be conclusively
presumed to have been duly given, whether or not actually received by each Bondholder.
(D) Upon receipt of the notice specified in (C) above, all Holders of
Outstanding Eligible Bonds of such Series shall be required to tender their Bonds to the Tender
Agent for purchase on such mandatory purchase date. In addition, in the event that a Holder of
Bonds of such Series has delivered a tender notice pursuant to Section 4.06 on or prior to the
date on which the Liquidity Facility Provider has sent notice to the Bond Trustee of the proposed
Noticed Termination Date or the Expiration Date with a Purchase Date to occur on or after the
date of the related mandatory tender (but prior to the Noticed Termination Date or the Expiration
Date), the Bonds to which such tender notice relates shall be purchased by the Tender Agent on
the mandatory purchase date and not on the date specified in such tender notice. Any Eligible
Bond of such Series so delivered shall be purchased by the Tender Agent at the Purchase Price.
(E) In addition to the notice specified in subsection (C) above, the Bond
Trustee shall give notice to the Holders of the Bonds of the applicable Series and the
Remarketing Agent of the provision, extension, substitution or voluntary termination of any
Liquidity Facility at least thirty (30) days prior to any such provision, extension, substitution or
termination.
ARTICLE V
• REVENUES
SECTION 5.01. Pledge and Assignment, Revenue Fund.
(A) Subject only to the provisions of this Bond Indenture permitting the
application thereof for the purposes and on the terms and conditions set forth herein, there are
hereby pledged to secure the payment of the principal of and premium, if any, and interest on the
Bonds in accordance with their terms and the provisions of this Bond Indenture, all of the
Revenues and any other amounts held in any fund or account established pursuant to this Bond
Indenture (other than the Bond Purchase Fund and the Rebate Fund). Said pledge shall
constitute a lien on and security interest in such assets and shall attach, be perfected and be valid
and binding from and after delivery by the Bond Trustee of the Bonds, without any physical
delivery thereof or further act.
(B) The City hereby transfers in trust, grants a security interest in and assigns
to the Bond Trustee, for the benefit of the Holders from time to time of the Bonds, all of the
Revenues and other assets pledged in subsection (A) of this Section and all of the right, title and
interest of the City in the Loan Agreement (except for (i) the right to receive any Administrative
Fees and Expenses to the extent payable to the City, (ii) any rights of the City to indemnification,
(iii) the obligation of the Corporation to make deposits pursuant to the Tax Agreement) and (iv)
as otherwise expressly set forth in the Loan Agreement and Obligation No. 14. The Bond
Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues
• collected or received by the City shall be deemed to be held, and to have been collected or
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received, by the City as the agent of the Bond Trustee and shall forthwith be paid by the City to
• the Bond Trustee. The Bond Trustee also shall be entitled to and shall take all steps, actions and
proceedings reasonably necessary in its judgment to enforce all of the rights of the City and all of
the obligations of the Corporation under the Loan Agreement and of the Obligated Group
Members under Obligation No. 14.
(C) All Revenues shall be promptly deposited by the Bond Trustee upon
receipt thereof in a special fund designated as the "Revenue Fund" which the Bond Trustee is
hereby directed to establish, maintain and hold in trust, except as otherwise provided in Sections
5.06 and 5.07 and except that all moneys received by the Bond Trustee and required by the Loan
Agreement, or Obligation No. 14 to be deposited in the Bond Purchase Fund or the Redemption
Fund, shall be promptly deposited in the Bond Purchase Fund and Redemption Fund,
respectively. All Revenues deposited with the Bond Trustee shall be held, disbursed, allocated
and applied by the Bond Trustee only as provided in this Bond Indenture.
SECTION 5.02. Allocation of Revenues. On or before the dates specified below,
the Bond Trustee shall-transfer from the Revenue Fund and deposit into the following respective
accounts (each of which the Bond Trustee is hereby directed to establish and maintain within the
Revenue Fund) the following amounts, in the following order of priority, the requirements of
each such account. (including the making up of any deficiencies in any such account resulting
from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to
be satisfied before any transfer is made to any account subsequent in priority:
First: on or before each Interest Payment Date, to the Interest Account, the
• amount of interest becoming due and payable on such Interest Payment Date on all Bonds
then Outstanding, until the balance in said account is equal to said amount of interest;
Second: to the Principal Account, on or before Sinking Fund Installment Date,
the amount of the Sinking Fund Installment becoming due and payable on such date, until
the balance in said account is equal to said amount of such Sinking Fund Installment; and
Third: to the Rebate Fund, such amounts as are required to be deposited therein
by this Bond Indenture (including the Tax Certificate and Agreement).
Any moneys remaining in the Revenue Fund after the foregoing transfers shall be
transferred to the Corporation as an overpayment of Loan Repayments.
SECTION 5.03. Application of Interest Account. All amounts in the Interest
Account shall be used and withdrawn by the Bond Trustee solely for the purpose of paying
interest on the Bonds as it shall become due and payable (including accrued interest on any
Bonds purchased or redeemed prior to maturity from funds on deposit in the Principal Account
or the Redemption Fund pursuant to this Bond Indenture).
SECTION 5.04. Application of Principal Account.
(A) All amounts in the Principal Account shall be used and withdrawn by the
Bond Trustee solely to purchase or redeem or pay Sinking Fund Installments or *pay at maturity
• the Bonds as provided herein.
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(B) On each Sinking Fund Installment Date established pursuant to this
•Section 5.04, the Bond Trustee shall apply the Sinking Fund Installment required on that date to
the redemption (or payment at maturity, as the case may be) of Bonds, upon the notice and in the
manner provided in Article IV; provided that, at any time prior to giving such notice of such
redemption, the Bond Trustee may apply moneys in the Principal Account to the purchase of
Bonds at public or private sale, as and when and at such prices (including brokerage and other
charges, but excluding accrued interest, which is payable from the Interest Account) as directed
in writing by the Corporation, except that the purchase price (excluding accrued interest) shall
not exceed the par amount of the Bonds so purchased. If, during the twelve -month period
immediately preceding a Sinking Fund Installment payment date, the Bond Trustee has
purchased Bonds with moneys in the Principal Account, or, during said period and prior to
giving said notice of redemption, the Corporation has deposited Bonds with the Bond Trustee
(together with a Request of the Corporation, to apply such Bonds to the Sinking Fund Installment
due on said date), or Bonds were at any time purchased or redeemed by the Bond Trustee from
the Redemption Fund and allocable to said Sinking Fund Installment, such Bonds shall be
applied, to the extent of the full principal amount thereof, to reduce said Sinking Fund
Installment. All Bonds purchased or deposited pursuant to this subsection, if any, shall be
cancelled by the Bond Trustee. Bonds purchased from the Principal Account, purchased or
redeemed from the Redemption Fund, or deposited by the Corporation with the Bond Trustee
shall be allocated as a credit against such future Sinking Fund Installments as the Corporation
may specify in writing.
•
L
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DOCSSCI'356339.8
(C) Subject to the terms and conditions set forth in this Section and in
•Section 4.01(F), the Series 2005A Bonds shall be redeemed (or paid at maturity, as the case may
be) by application of Sinking Fund Installments in the following amounts and on the following
Sinking Fund Installment Dates:
Sinking Fund
Installment Date
(December It)
Sinking Fund Installments
2016
$1,850,000
2017
1,900,000
2018
1,950,000
2019
2,000,000
2020
2,025,000
2021
2,125,000
2022
2,175,000
2023
2,225,000
2024'
2,300,000
2025
2,325,000 .
2026.
2,425,000
2027
2,475,000
2028
2,550,000
2029
2,625,000
2030
2,700,000
2031
2,750,000
2032
•
2,850,000
2033
2,925,000
2034
3,000,000
2035
3,075,000
2036
3,175,000
2037
3,250,000
2038
3,350,000
2039
3,450,000
2040*
3,525,000
f Subject to adjustment as provided in the definition of Sinking Fund Installment Dates.
* Final maturity.
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DOCSSC1;356339.8
• (D) Subject to the terms and conditions set forth in this Section and in
Section 4.01(F), the Series 2005B Bonds shall be redeemed (or paid at maturity, as the case may
be) by application of Sinking Fund Installments in the following amounts and on the following
Sinking Fund Installment Dates:
•
•
Sinking Fund
Installment Date
(December It)
Sinking Fund Installments
2016
$1,850,000
2017
1,900,000
2018
1,950,000
2019
2,000,000
2020
2,025,000
2021
2,125,000
2022.
2,175,000
2023
2,225,000 .
2024
2,300,000
2025.
2,325,000
2026
2,425,000
2027
2,475,000
2028
2,550,000
2029
2,625,000
2030
2,700,000
2031
2,750,000
2032
2,850,000
2033
2,925,000
2034
3,000,000
2035
3,075,000
2036
3,175,000
2037
3,250;000
2038
3,350,000
2039
3,450,000
2040*
3,525,000
f Subject to adjustment as provided in the definition of Sinking Fund Installment Dates.
* Final maturity.
DOCSSC1:356339.8
84
•(E) Subject to the terms and conditions set forth in this Section and in
Section 4.01(F), the Series 2005C Bonds shall be redeemed (or paid at maturity, as the case may
be) by application of Sinking Fund Installments in the following amounts and on the following
Sinking Fund Installment Dates:
•
•
Sinking Fund
Installment Date
(December It)
Sinking Fund Installments
2016
$1,975,000
2017
2,025,000
2018
2,100,000
2019
2,150,000
2020
2,200,000
2021
2,250,000
2022.
2,325,000
2023
2,425,000
2024
2,450,000
2025
2,525,000
2026
2,600,000
2027
2,700,000
2028
2,750,000
2029
2,825,000
2030
2,900,000
2031
2,975,000
2032
3,050,000
2033
3,150,000
2034
3,250,000
2035
3,350,000
2036
3,375,000
2037
3;525,000
2038
3,600,000
2039
3,700,000
2040*
3,825,000
f Subject to adjustment as provided in the definition of Sinking Fund Installment Dates.
*Final maturity.
DOCSSC1:356339.8
EM
•SECTION 5.05. Application of Redemption Fund. The Bond Trustee shall
establish, maintain and hold in trust a fund separate from any other fund established and
maintained hereunder designated as the "Redemption Fund" and within the Redemption Fund a
separate Optional Redemption Account and a separate Special Redemption Account. All
amounts deposited in the Optional Redemption Account and in the Special Redemption Account
shall be used and withdrawn by the Bond Trustee solely for the purpose of redeeming Bonds, in
the manner and upon the terms and conditions specified in Article IV, at the next succeeding date
of redemption for which notice has not been given and at the Redemption Prices then applicable
to redemptions from the Optional Redemption Account and the Special Redemption Account,
respectively; provided that, at any time prior to giving such notice of redemption, the Bond
Trustee shall, upon direction of the Corporation, apply such amounts to the purchase of Bonds at
public or private sale, as and when and at such prices (including brokerage and other charges, but
excluding accrued interest, which is payable from the Interest Account) as the Corporation may
direct, except that the purchase price (exclusive of accrued interest) may not exceed the
Redemption Price then applicable to such Bonds; and provided further that, in-the case of the
Optional Redemption Account, in lieu of redemption at such next succeeding date of redemption,
or in combination therewith, amounts in such account may be transferred to the Revenue Fund
and credited against Loan Repayments in order of their due date as set forth in a Request of the
Corporation.
SECTION 5.06. Rebate Fund.
• (A) The Bond Trustee shall establish and maintain a fund separate from any
other fund established and maintained hereunder designated as the Rebate Fund. Within the
Rebate Fund, the Bond Trustee shall maintain such accounts as shall be specified by the Tax
Agreement. Subject to the transfer provisions provided in subsection (E) below, all money at
any time deposited in the Rebate Fund shall be held by the Bond Trustee in trust, to the extent
required to satisfy the Rebate Requirement (as defined in the Tax Agreement), for payment to the
federal government of the United States of America. Neither the City, the Corporation, nor the
Holder of any Bonds shall have any rights in or claim to such money. All amounts deposited
into or on deposit in the Rebate Fund shall be governed by this Section, by Section 6.06 and by
the Tax Agreement (which is incorporated herein by reference). The Bond Trustee shall be
deemed conclusively to have complied with such provisions if it follows the written directions of
the Corporation including supplying all necessary information in the manner provided in the Tax
Agreement, and shall have no liability or responsibility to enforce compliance by the Corporation
or the City with the terms of the Tax Agreement. The City shall be deemed conclusively to have
complied with the provisions of this Section if it takes such action as may reasonably be
requested by the Corporation pursuant to the Tax Agreement.
(B) Upon the Corporation's written direction, an amount shall be deposited to
the Rebate Fund by the Bond Trustee from deposits by the Corporation or from available
investment earnings on amounts held in the Revenue Fund, if and to the extent required, so that
the balance in the Rebate Fund shall equal the Rebate Requirement. Computations of the Rebate
Requirement shall be furnished to the Bond Trustee by or on behalf of the Corporation in
accordance with the Tax Agreement.
•
DOCSSC1:356339.8
(C) The Bond Trustee shall have no obligation to rebate any amounts required
to be rebated pursuant to this Section, other than from moneys held in the funds and accounts
created under this Bond Indenture or from other moneys provided to it by the Corporation.
(D) At the written direction of the Corporation, the Bond Trustee shall invest
all amounts held in the Rebate Fund in Investment Securities, subject to the restrictions set forth
in the Tax Agreement. Neither the City nor the Bond Trustee shall be liable for any
consequences arising from such investment. Money shall not be transferred from the Rebate
Fund except as provided in subsection (E) below.
(E) Upon receipt of the Corporation's written directions, the Bond Trustee
shall remit part or all of the balances in the Rebate Fund to the United States, as so directed In
addition, if the Corporation so directs in writing, the Bond Trustee will deposit money into or
transfer money out of the Rebate Fund from or into such accounts or funds, as so directed. Any
funds remaining in the Rebate Fund after redemption and payment of all of the Bonds and
payment and satisfaction of any Rebate Requirement, or provision made therefor satisfactory to
the Bond Trustee, shalt be withdrawn and remitted to the Corporation
(F) Notwithstanding any other provision of this Bond Indenture, including in
particular Article X, the obligation to remit the Rebate Requirements to the United States. and to
comply with all other requirements of this Section, Section 6.06 and the Tax Agreement shall
survive the defeasance or payment in full of the Bonds.
•SECTION 5.07. Investment of Moneys in Funds and Accounts. All moneys in
any of the funds and accounts established pursuant to this Bond Indenture (other than the Bond
Purchase Fund) shall be invested by the Bond Trustee, upon direction of the Corporation, solely
in Investment Securities. Moneys in the Bond Purchase Fund shall remain uninvested.
Investment Securities shall be purchased at such prices as the Corporation may direct. The
directions of the Corporation shall be subject to the limitations set forth in Section 6.06. All
Investment Securities shall be acquired subject to the limitations as to maturities hereinafter in
this Section set forth and such additional limitations or requirements consistent with the
foregoing as may be established by Request of the Corporation. No Request of the Corporation
shall impose any duty on the Bond Trustee inconsistent with its fiduciary responsibilities. In the
absence of directions from the Corporation, the Bond Trustee shall invest in Investment
Securities specified in subsection (f) of the definition thereof in Section 1.01.
Moneys in the Bond Purchase Fund shall remain uninvested. Moneys in all other .
funds and accounts shall be invested in Investment Securities maturing not later than the date on -
which it is estimated that such moneys will be required for the purposes specified in this Bond
Indenture. Investment Securities purchased under a repurchase agreement or investment contract
may be deemed to mature on the date or dates on which the Bond Trustee may deliver such
Investment Securities for repurchase under such agreement.
All interest, profits and other income received from the investment of moneys in
the Rebate Fund shall be deposited when received in such fund. All interest, profits and other
income received from the investment of moneys in any other fund or account established
• pursuant to this Bond Indenture shall be deposited when received (1) prior to the delivery of the
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DOCSSC1356339.8
Certificate of the Corporation required by Section 3.04(C) in the Project Fund and (2) thereafter
in the Revenue Fund. Notwithstanding anything to the contrary contained in this paragraph, an
amount of interest received with respect to any Investment Security equal to the amount of
accrued interest, if any, paid as part of the purchase price of such Investment Security shall be
credited to the fund or account for the credit of which such Investment Security was acquired.
Investment Securities acquired as an investment of moneys in any fund or account
established under this Bond Indenture shall be credited to such fund or account. For the.purpose
of determining the amount in any such fund or account all Investment Securities credited to such
fund or account shall be valued at the lower of cost (exclusive of accrued interest after the first
payment of interest following acquisition) or par value (plus, prior to the first payment of interest
following acquisition, the amount of interest paid as part of the purchase price).
The Bond Trustee may commingle any of the amounts on deposit in the funds or
accounts established pursuant to this Bond Indenture (other than the Bond Purchase Fund or the
Rebate Fund) into a separate fund or funds for investment purposes only, provided that all funds
or accounts held by the Bond Trustee hereunder shall be accounted for separately as required by
this Bond Indenture. The Bond Trustee may act as principal or agent in the making or disposing
of any investment. The Bond Trustee may sell at the best price reasonably obtainable, or present
for redemption, any Investment Securities so purchased whenever it shall be necessary to provide
moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or
account to which such Investment Security is credited, and, subject to the provisions of Section
8.03 with respect to the Bond Trustee, neither the City nor the Bond Trustee shall be liable or
•responsible for any loss resulting from any investment made in accordance with the provisions of
this Section 5.07.
The City (and the Corporation by its execution of the Loan Agreement)
acknowledges that, to the extent regulations of the Comptroller of the Currency or other
applicable regulatory. entity grant the City or the Corporation the right to receive brokerage
confirmations of security transactions as ,they occur, the City and the Corporation will not
receive such confirmations to the extent permitted by law. The Bond Trustee will furnish the
City and the Corporation periodic cash transaction statements as provided herein which include
detail for all investment transactions made by the Bond Trustee hereunder.
ARTICLE VI
PARTICULAR COVENANTS
SECTION 6.01. Punctual Payment. The City shall punctually cause to be paid.
the principal or Redemption Price and interest to become due in respect of all the Bonds, in strict
conformity with the terms of the Bonds and of this Bond Indenture, according to the true intent
and meaning thereof, but only out of Revenues and other assets pledged for -such payment as
provided in this Bond Indenture.
SECTION 6.02. Extension of Payment of Bonds. Except as set forth in Section
9.01, the City shall not directly or indirectly extend or assent to the extension of the maturity of
• any of the Bonds or the time of payment of any claims for interest by the purchase or funding of
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DDCSSC1:356339.8
such Bonds or claims for interest or by any other arrangement and in case the maturity of any of
• the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds
or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this
Bond Indenture, except subject to the.prior payment in full of the principal of all of the Bonds
then Outstanding and of all claims for interest thereon which shall not have been so extended.
Nothing in this Section shall be deemed to limit the right of the City to issue obligations for the
purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to
constitute an extension of maturity of Bonds.
SECTION 6.03. Against Encumbrances. The City shall not create any pledge,
lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under
this Bond Indenture while any of the Bonds are Outstanding, except the pledges and assignments
created by this Bond Indenture, and will assist the Bond Trustee in contesting any such pledge,
lien, charge or other encumbrance which may be created. Subject to this limitation, the City
expressly reserves the right to enter into one or more other indentures for any of its corporate
purposes, including other programs under the Law, and reserves the right. to issue other
obligations for such purposes.
SECTION 6.04. Power to Issue Bonds and Make Pledge and Assim went. The
City is duly authorized pursuant to law to issue the Bonds and to enter into this Bond Indenture
and to pledge and assign the Revenues and other assets purported to be pledged and assigned,
respectively, under this Bond Indenture in the manner and to the extent provided in this Bond
Indenture. The Bonds and the provisions of this Bond Indenture are and will be the legal, valid
•and binding limited obligations of the City in accordance with their terms, and the City and Bond
Trustee shall at all times, to the extent permitted by law, defend, preserve and protect said pledge
and assignment of Revenues and other assets and all the rights of the Bondholders under this
Bond Indenture against all claims and demands of all Persons whomsoever.
SECTION 6.05. Accounting Records and Financial Statements.
(A) The Bond Trustee shall at all times keep, or cause to be kept, proper books
of record and account prepared in accordance with trust accounting standards, in which complete
and accurate entries shall be made of all transactions relating to the receipt, investment,
disbursement, allocation and application of the proceeds of the Bonds, the Revenues, the Loan
Agreement and all funds and accounts established pursuant to this Bond Indenture. Such books
of record and account shall be available for inspection by the City, the Bond Insurer, the
Liquidity Facility Provider (if any), the Corporation and any Bondholder or such Bondholder's
agent or representative duly authorized in writing, during the Bond Trustee's business hours on
days on which the Bond Trustee is open for business.
(B) The Bond Trustee shall file and furnish on or before the 15th day of each
month to the Corporation, the Bond Insurer and to each Bondholder who shall have filed such
Bondholder's name and address with the Bond Trustee for such purpose, and to the City if
requested in writing, a complete financial statement (which need not be audited) covering
receipts, disbursements, allocation and application of Revenues and any other moneys (including
proceeds of Bonds) in any of the funds and accounts established pursuant to this Bond Indenture
• for the preceding month.
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DOCSSC1:356339.8
(C) The Trustee shall furnish to any Bondholder and the Bond Insurer (upon
• such Bondholder's request or the Bond Insurer's request), and the City if requested in writing a
statement of the aggregate principal amount of Bonds Outstanding and the redemption history of
the Bonds (i.e., the dates, amounts, sources of funds, and distribution of calls to the maturities of
any previously occurring redemptions).
SECTION 6.06. Tax Covenants. The City shall at all times do and perform all
acts and things permitted by law and this Bond Indenture which are necessary of desirable in
order to assure that interest paid on the Bonds (or any of them) will be excluded from gross
income for federal income tax purposes and shall take no action that would result in such interest
not being so excluded. Without limiting the generality of the foregoing, the City agrees to
comply with the provisions of the Tax Agreement. This covenant shall survive payment in full
or defeasance of the Bonds.
SECTION 6.07. Enforcement of Loan Agreement and Obligation No. 14. The
Bond Trustee shall promptly collect all amounts due from the Corporation pursuant to the Loan
Agreement and from the Obligated Group pursuant to Obligation No. 14, shall perform all duties
imposed upon it pursuant to the Loan Agreement and shall enforce, and take all steps, actions
and proceedings reasonably necessary (subject to the rights of the Bond Insurer with respect to
the enforcement of remedies) for the enforcement of, all of the rights of the City and all of the
obligations of the Corporation.
SECTION 6.08. Amendment -of Loan Agreement.
• (A) Except as provided in Section 6.08(B), the City shall not amend, modify
or terminate any of the terms of the Loan Agreement, or consent to any such amendment,
modification or termination, unless the written conser t of the Holders of a majority in principal
amount of the Bonds then Outstanding and the Bond Insurer to such amendment, modification or
termination is filed with the Bond Trustee; provided that no such amendment, modification or
termination shall reduce the amount of Loan Repayments to be made to the City or the Bond
Trustee by the Corporation pursuant to the Loan Agreement, or extend the time for making such
payments, without the written consent of all of the Holders of the Bonds then Outstanding.
•
(B) Notwithstanding the provisions of Section 6.08(A), the terms of the Loan
Agreement may also be modified or amended from time to time and at any time by the City, with
the consent of the Bond Insurer, without the necessity of obtaining the consent of any
Bondholders, only to the extent permitted by law and only for any one or more of the following
purposes:
(1) to add to the covenants and agreements of the City or the
Corporation contained in the Loan Agreement other covenants and agreements thereafter
to be observed, to pledge or assign additional security for the Bonds (or any portion
thereof), or to surrender any right or power therein reserved to or conferred upon the City
or the Corporation, provided, that no such covenant, agreement, pledge, assignment or
surrender shall materially adversely affect the interests of the Holders of the Bonds;
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DOCSSC1:356339.8
(2) to make such provisions for the purpose of curing any ambiguity,
• inconsistency or omission, or of curing or correcting any defective provision, contained
in the Loan Agreement, or in regard to matters or questions arising under the Loan
Agreement, as the City may deem necessary or desirable and not inconsistent with the
Loan Agreement or this Bond Indenture, and which shall not materially adversely affect
the interests of the Holders of the Bonds;
(3) to evidence or give effect to, or to conform to the terms and
provisions of, any Liquidity Facility;
(4) to evidence or give effect to, or to conform to the terns and
provisions of, any insurance policy, letter of credit or other credit enhancement for any
Series of the Bonds;
(5) to maintain the exclusion from gross income of interest payable
with respect to the Bonds; and
(6). to make any modification or amendment to the Loan Agreement
which will be effective upon the remarketing of Bonds following the mandatory tender of
the Bonds pursuant to Section 4.08.
(C) In executing or consenting to any amendment to the Loan Agreement
permitted by this Section, the City, and the Bond Trustee shall receive, and shall be fully
• protected in relying upon, an Opinion of Bond Counsel addressed to the City and the Bond
Trustee stating that the execution of such amendment is authorized or permitted by the Loan
Agreement and this Bond Indenture and applicable law, will upon the execution and delivery
thereof be valid and binding obligations of the parties thereto, and that the execution and delivery
thereof will not adversely affect the exclusion from federal gross income of interest on the
Bonds.
(D) Upon Request of the Corporation, the Bond Trustee, as holder of
Obligation No. 14, shall consent to any amendment to the Master Indenture requested by the
Corporation, provided that the Bond Trustee shall have received the prior written consent of the
Bond Insurer and the Liquidity Facility Provider, if any, to such amendments.
SECTION 6.09. Waiver of Laws. The City shall not at any time insist upon or
plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or
extension law now or at any time hereafter in force that may affect the covenants and agreements
contained in this Bond Indenture or in the Bonds, and all benefit or advantage of any such law or "
laws is hereby expressly waived by the City to the extent permitted by law.
SECTION 6.10. Further Assurances. The City.shall make, execute and deliver
any and all such further indentures, instruments and assurances as may be reasonably necessary
or proper to cant' out the intention or to facilitate the performance of this Bond Indenture and for
the better assuring and confirming unto the Holders of the Bonds of the rights and benefits
provided in this Bond Indenture.
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DOCSSC1:356339.8
SECTION 6.1 L Continuinz-Disclosure. Pursuant to Section 5.8 of the Loan
•Agreement, the Corporation has undertaken all responsibility for compliance with continuing
disclosure requirements to the extent set forth therein, and the City shall have no liability to the
Holders of the Bonds or any other Person with respect to S.E.C. Rule 15c2 -12. Notwithstanding
any other provision of this Bond Indenture, failure of the Corporation or the Dissemination
Agent (as defined in the Continuing Disclosure Certificate) to comply with the Continuing
Disclosure Certificate shall not be considered an Event of Default; however, the Bond Trustee
may (and, at the request of any Participating Underwriter (as defined in the Continuing
Disclosure Certificate) or the Holders of at least 25% aggregate principal amount of Outstanding
Bonds, shall) or any Bondholder or Beneficial Owner may take such actions as may be. necessary
and appropriate, including seeking mandate or specific performance by court order, to cause the
Corporation to comply with its obligations under Section 5.8 of the Loan Agreement or to cause
the Bond Trustee to comply with its obligations under this Section 6.11.
SECTION 6.12. Replacement of Obligation No. 14. At the option of the
Corporation, Obligation No. 14 shall be surrendered by the Bond Trustee and _delivered to the
Master Trustee for cancellation upon receipt by the Bond Trustee of all of the following:
(1) a Request of the Corporation requesting such surrender and delivery and
stating that the Corporation has. become a member of an obligated group under a master
indenture (other than the Master Indenture) or has obligated itself pursuant to another form of
indebtedness security arrangement, and that an obligation is being issued to the Bond Trustee
under such replacement master indenture or security arrangement ("Replacement
• Arrangemenf');
(2) a properly executed obligation (the "Replacement Obligation") issued
under the Replacement Arrangement and registered in the name of the Bond Trustee with the
same tenor and effect as Obligation No. 14; duly authenticated by the master trustee under the
Replacement Arrangement;
(3) an Opinion of Counsel to the effect that the Replacement Obligation has
been validly issued under the Replacement Arrangement and constitutes a valid and binding
obligation of the Corporation and each other member of the obligated group under the
Replacement Arrangement;
(4) a copy of the Replacement Arrangement, certified as a true and accurate
copy by the master trustee under the Replacement Arrangement; and
(5) written confirmation from each Rating Agency then rating the Bonds that
the replacement of Obligation No. 14 in accordance with the provisions of this Section will not,
by itself, result in a reduction in the then - current. ratings on the Bonds; and
(6) the written consent of the Bond Insurer.
Upon satisfaction of such conditions, all references herein and in the Loan Agreement to
Obligation No. 14 shall be deemed to be references to the Replacement Obligation, all references
•to the Master Indenture shall be deemed to be references to the Replacement Arrangement, all
references to the Master Trustee shall be deemed to be references to the master trustee under the
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DOCSSC1:356339.8
Replacement Arrangement, all references to the Obligated Group and the Members shall be
•deemed to be references to the obligated group and the members of the obligated. group under the
Replacement Arrangement and all references to Supplemental Master Indenture for Obligation
No. 14 shall be deemed to be references to the document pursuant to which the Replacement
Obligation is issued.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 7.01. Events of Default. The following events shall be Events of
Default:
(A) default in the due and punctual payment of the principal or Redemption
Price of any Bond when and as the same shall become due and payable, whether at maturity as
therein expressed, by proceedings for redemption, by acceleration or otherwise or default in the
redemption of any Bonds from Sinldng Fund Installments in the amount and at the times
provided therefor;
(B) default in the due and punctual payment of any installment of interest on
any Bond when and as such interest installment shall become due and payable;
•(C) failure to pay the Purchase Price of any Bond tendered or subject to
mandatory tender pursuant to Article IV;
(D) default in any material respect by the City in the observance of any of the
other covenants, agreements or conditions on its part in this Bond Indenture or in the Bonds
contained, if such default shall have continued for a period of sixty (60) days after written notice
thereof specifying such default and requiring the same to be remedied, shall have been given to
the City and the Corporation by the Bond Trustee, or to the City, the Corporation and the Bond
Trustee by the Bond Insurer or Holders of not less than twenty-five per cent (25 %) in aggregate
principal amount of the Bonds at the time Outstanding; or
•
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(E) a Loan Default Event.
• Upon actual knowledge of the existence of any Event of Default, the Bond
Trustee and the City shall notify the Corporation, the City, the Bond Insurer, the Master Trustee
and the Bond Trustee in writing as soon as practicable (but no later than 30 days after obtaining
actual knowledge thereof); provided, however, that the Bond Trustee or City need not provide
notice of any Loan Default Event if the Corporation has expressly acknowledged the existence of
such Loan Default Event in a writing delivered to the Bond Trustee, the City, the Bond, Insurer
and the Master Trustee. Additionally, the Bond Trustee shall immediately notify the Bond
Insurer if at any time there are insufficient moneys to make any payments of principal of and/or
interest on the Bonds and immediately upon the occurrence of any Event of Default hereunder
and shall provide such additional information as the Bond Insurer shall reasonably request.
SECTION 7.02. Acceleration of Maturities. Whenever any Event of Default
referred to in Section 7.01 shall have happened and be continuing, the Bond Trustee may take the
following remedial steps:
(A) In the case of an Event of Default described in Section 7.01 (A), (B), or
(C) of this Bond Indenture, the Bond Trustee may notify the City and the Master Trustee of such
Event of Default, may make a demand for payment under Obligation No. 14 and request the
Master Trustee in writing to give notice pursuant to Section 6.02 of the Master Indenture to the
Obligated Group Members declaring the principal of all obligations issued under the Master
Indenture then outstanding to be due and immediately payable. Thereupon, the Bond Trustee
•shall declare the principal of all the Bonds then Outstanding, and the interest accrued thereon, to
be due and payable immediately, and upon any such declaration the same shall become and shall
be immediately due and payable, anything in this Bond Indenture to the contrary
notwithstanding. In addition, the Bond Trustee may take whatever action at law or in equity is
necessary or desirable to collect the payments due under Obligation No. 14;
•
(B) In the case of an Event of Default described in Section 7.01(D) of this
Bond Indenture, the Bond Trustee may take whatever action at law or in equity is necessary or
desirable to enforce the performance, observance or compliance by the City with any covenant,
condition or agreement by the City under this Bond Indenture; and
(C) In the case of an Event of Default described in Section 7.01(E) of this
Bond Indenture, the Bond Trustee may take whatever action the City would be entitled to take,
and shall take whatever action the City would be required to take, pursuant to the Loan
Agreement in order to remedy the Loan Default Event.
Notwithstanding any other provision of this Bond Indenture or any right, power or
remedy existing at law or in equity or by statute, the Bond Trustee shall not under any
circumstance in which an Event of Default has occurred declare -the entire_ unpaid aggregate
principal amount of the Bonds .Outstanding to be immediately due and payable except in
accordance with the directions of the Master Trustee in the event that the Master Trustee shall
have declared the principal amount of Obligation No. 14 and all interest due thereon immediately
due and payable in accordance with the Master Indenture.
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Any such declaration, however, is subject to the condition that if, at any time after
•such declaration and before any judgment or decree for the payment of the moneys due shall
have been obtained or entered, the City or the Corporation shall deposit with the Bond Trustee a
sum sufficient to pay all the principal (including any Sinking Fund Installments) or redemption
price of and installments of interest on the Bonds, payment of which is overdue, with interest on
such overdue principal at the rate borne by the respective Bonds, and the reasonable charges and
expenses of the Bond Trustee, and if the Bond Trustee has received notification from the Master
Trustee that the declaration of acceleration of Obligation No. 14 has been annulled pursuant to
the Master Indenture and any and all other defaults known to the Bond Trustee (other than in the
payment of principal of and interest on the Bonds due and payable solely by reason of such
declaration) shall have been made good or cured to the satisfaction of the Bond Trustee or
provision deemed by the Bond Trustee to be adequate shall have been made therefor, then, and in
every such case, the Bond Trustee shall, on behalf of the Holders of all of the Bonds, rescind and
annul such declaration and its consequences and waive such default; but no such rescission and
annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any
right or power consequent thereon.
Notice of such declaration having been given as aforesaid, anything to the
contrary contained in this Bond Indenture or in the Bonds to the contrary notwithstanding,
interest shall cease to accrue on such Bonds from and after the date set forth in such notice
(which shall be not more than seven days from the date of such declaration),
. Nothing contained herein, however, shall require the Bond Trustee to exercise any
remedies in connection with an Event of Default unless the Bond Trustee shall have actual
• knowledge or shall have received written notice of such Event of Default.
Notwithstanding the foregoing provisions, the Bond Trustee shall not without the
written consent of the Bond Insurer (i) declare the principal of the Bonds, or the interest accrued
with respect thereto, to be due and payable immediately, or (ii) rescind and annul any declaration
of acceleration or waive any default hereunder with respect to the Bonds.
E
Upon declaration of acceleration of the Bonds, the Bond Trustee shall send notice
thereof to S &P.
SECTION 7.03. A_wfication of Revenues and Other Funds After Default. If an
Event of Default shall occur and be continuing, all Revenues and any other funds then held or
thereafter received by the Bond Trustee under any of the provisions of this Bond Indenture
(subject to Section 11.10 and other than moneys required to be deposited in the Rebate Fund or
the Bond Purchase Fund) shall be applied by the Bond Trustee as follows and in the following -
order:
(1) To the payment of any expenses necessary in the opinion of the Bond
Trustee to protect the interests of the Holders of the Bonds and payment of reasonable fees and
expenses of the Bond Trustee (including reasonable fees and disbursements of its counsel)
incurred in and about the performance of its powers and duties under this Bond Indenture; and
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(2) To the payment of the principal or Redemption Price of and interest then
•due on the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the
payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of this
Bond Indenture (including Section 6.02), as follows:
(i) Unless the principal of all of the Bonds shall have become
or have been declared due and payable,
First: To the payment to the Persons entitled thereto of all installments of interest
then due in the order of the maturity of such installments, and, if the amount available
shall not be sufficient to pay in full any installment or installments maturing on the same
date, then to the payment thereof ratably, according to the amounts due thereon, to the
Persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the Persons entitled thereto of the unpaid principal
(including Sinking Fund Installments) or Redemption Price of any Bonds which shall
have become due, whether at maturity or by call for redemption, in the order of their due
dates, with interest on the overdue principal at the rate borne by the. respective Bonds,
and, if the amount available shall not be sufficient to pay in full all the Bonds due on any
date, together with such interest, then to the payment thereof ratably, according to the
amounts of principal or Redemption Price due on such date to the Persons entitled
thereto, without any discrimination or preference.
(ii) If the principal of all of the Bonds shall have become or
• have been declared due and payable, to the payment of the principal and interest
then due and unpaid upon the Bonds, with interest on the overdue principal at the
rate borne by the respective Bonds, and,. if the amount available shall not be
sufficient to pay in full the whole amount so due and unpaid, then to the payment
thereof ratably, without, preference or priority of principal over interest, or of
interest over principal, or of any installment of interest over any other installment
of interest, or of any Bond over any other Bond, according to the amounts due
respectively for principal and interest, to the Persons entitled thereto without any
discrimination or preference.
SECTION 7.04. Bond Trustee to Represent Bondholders. The Bond Trustee is
hereby irrevocably appointed (and the successive respective Holders of the Bonds, by taking and
holding the same, shall be conclusively deemed to have so appointed the Bond Trustee) as Bond
Trustee and true and lawful attorney -in -fact of the Holders of the Bonds for the purpose of
exercising and prosecuting on their behalf such rights and remedies as may be available to such
Holders under the provisions of the Bonds, this Bond Indenture, the Loan Agreement, Obligation
No. 14, the Law and applicable provisions of any other law. Upon the occurrence and
continuance of an Event of Default or other occasion giving rise to a right in the Bond Trustee to
represent the Bondholders, the Bond Trustee in its discretion may, and upon the written request
of the Holders of not less than twenty -five percent (25 %) in aggregate principal amount of the
Bonds then Outstanding (and in either case subject to the rights of the Bond Insurer with respect
to the enforcement of remedies related to the Bonds as described herein) and upon being
• indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights
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of such Holders by such appropriate action, suit, mandamus or other proceedings as it shall deem
most effectual to protect and enforce any such right, at law or in equity, either for the specific
•performance of any covenant or agreement contained herein, or in aid of the execution of any
power herein granted, or for the enforcement of any other appropriate legal or equitable right or
remedy vested in the Bond Trustee or in such Holders under this Bond Indenture, the Loan
Agreement, Obligation No. 14, the Law or any other law; and upon'instituting such proceeding,
the Bond Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the
Revenues and other amounts and assets pledged under this Bond Indenture, pending such
proceedings. If more than one such request is received by the Bond Trustee from the Holders,
the Bond Trustee shall follow the written request executed by the Holders of the greater
percentage of Bonds then Outstanding in excess of twenty-five percent (25 %). All rights of
action under this Bond Indenture or the Bonds or otherwise may be prosecuted and enforced by
the Bond Trustee without the possession of any of the Bonds or the production thereof in any
proceeding relating thereto, and any such suit, action or proceeding instituted by the Bond
Trustee shall be brought in the name of the Bond Trustee for the benefit and protection of all the
Holders of such Bonds, subject to the provisions of this Bond Indenture (including Section 6.02).
SECTION 7.05. Bond Insurer's and Bondholders' Direction of Proceeding.
Anything in this Bond Indenture to the contrary notwithstanding, the Bond Insurer or Holders of
a majority in aggregate principal amount of the Bonds then Outstanding, but with the consent of
the Bond Insurer, shall have the right, by an instrument or concurrent instruments in writing
executed and delivered to the Bond Trustee, and upon indemnifying the Bond Trustee to its
satisfaction therefor, to direct the method of conducting all remedial proceedings taken by the
Bond Trustee hereunder, provided that such'direction shall not be otherwise than in accordance
•with law and the provisions of this Bond Indenture, and that the Bond Trustee shall have the
right to decline to follow any such direction which in the opinion of the Bond Trustee would be
unjustly prejudicial to Bondholders not parties to such direction.
SECTION 7.06. Limitation on Bondholders' Right to Sue. No Holder of any
Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the
protection or enforcement of any right or remedy under this Bond Indenture, the Loan
Agreement, Obligation No. 14, the Law or any other applicable law with respect to such Bond,
unless (1) such Holder shall have given to the Bond Trustee written notice of the occurrence of
an Event of Default; (2) the Holders of not less than twenty-five per cent (25 %) in aggregate
principal amount of the Bonds then Outstanding shall have made written request upon the Bond
Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding
in its own name; provided, however, that if more than one such request is received by the Bond
Trustee from the Holders, the Bond Trustee shall follow the written request executed by the
Holders of the greater percentage of Bonds then Outstanding in excess of twenty-five percent
(25 %); (3) such Holder or said Holders shall have tendered to the Bond Trustee indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such
request; and (4) the Bond Trustee shall have refused or omitted to comply with such request for a
period of sixty (60) days after such written request shall have been received by, and said tender
of indemnity shall have been made to, the Bond Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby
• declared, in every case, to be conditions precedent to the exercise by any Holder of Bonds of any
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remedy hereunder or under law; it being understood and intended that no one or more Holders of
•Bonds shall have any right in any manner whatever by such Holder's or Holders' action to affect,
disturb or prejudice the security of this Bond Indenture or the rights of any other Holders of
Bonds, or to enforce any right under this Bond Indenture, the Loan Agreement, Obligation No.
14, the Law or other applicable law with respect to the Bonds; except in the manner herein
provided, and that all proceedings at law or in equity to enforce any such right shall be instituted,
had and maintained in the manner herein provided and for the benefit and protection of all
Holders of the Outstanding Bonds, subject to the provisions of this Bond Indenture (including
Section 6.02).
SECTION 7.07. Absolute Obligation of City. Nothing in Section 7.06 or in any
other provision of this Bond Indenture, or in the Bonds, contained shall affect or impair the
obligation of the City, which is absolute and unconditional, to pay the principal or Redemption
Price of and interest on the Bonds to the respective Holders of the Bonds at their respective dates
of maturity, or upon call for redemption, as herein provided, but only out of the Revenues and
other assets herein pledged therefor, and not otherwise, or affect or impair the right of such
Holders, which is also absolute and unconditional, to enforce such payment by virtue of the
contract embodied in the Bonds.
SECTION 7.08. Termination of Proceedings. In case any proceedings taken by
the Bond Trustee, the Bond Insurer or any one or more Bondholders on account of any Event of
Default shall have been discontinued or abandoned for any reason or shall have been determined
adversely to the Bond Trustee, the Bond Insurer or the Bondholders, then in every such case the
•City, the Bond Trustee, the Bond Insurer, the Liquidity Facility Provider (if any) and the
Bondholders, subject to any determination in such proceedings, shall be restored to their former
positions and rights hereunder, severally and respectively, and all rights, remedies, powers and
duties of the City, the Bond Trustee, the Bond Insurer, the Liquidity Facility Provider (if any)
and the Bondholders shall continue as though no such proceedings had been taken.
SECTION 7.09. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Bond Trustee, the Bond Insurer or to the Holders of the Bonds is intended to be
exclusive of any other remedy or remedies, and each and every such remedy, to the extent
permitted by law, shall be cumulative and in addition to any other remedy given hereunder or
now or hereafter existing at law or in equity or otherwise.
SECTION 7.10. No Waiver of Default. No delay or omission of the Bond
Trustee, the Bond Insurer or of any Holder of the Bonds to exercise any right or power arising
upon the occurrence of any default shall impair any such right or power or shall be construed to -
be a waiver of any such default or an acquiescence therein; and every power and remedy given
by this Bond Indenture to the Bond Trustee, the Bond Insurer or to the Holders of the Bonds may
be exercised from time to time and as often as may be deemed expedient.
SECTION 7.11. Consent of Bond Insurer in the Event of Insolvency. The Bond
Insurer shall have the right to vote on behalf of all Holders of Bonds in any insolvency,
reorganization or liquidation proceeding with respect to the Corporation or any Member of the
.Obligated Group, and to consent to any reorganization or liquidation plan with respect to the
Corporation.
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DOCSSC1356339.8
• SECTION 7.12. Payment Procedure Pursuant to Bond Insurance Policy. The
following payment procedures shall be applicable to the Bond Insurance Policy:
(A) If, on the third day preceding any Interest Payment Date for the Bonds
there is not on deposit with the Bond Trustee sufficient moneys available to pay all principal of
and interest on Bonds due on such date, the Bond Trustee shall immediately notify the Bond
Insurer and U.S. Bank Trust National Association, New York, New York or its successor as its
Fiscal Agent (the "Fiscal Agent') of the amount of such deficiency. If, by said Interest Payment
Date, the Corporation has not provided the amount of such deficiency, the Bond. Trustee shall
simultaneously make available to the Bond Insurer and to the Fiscal Agent the registration books
for the Bonds maintained by the Bond Trustee. In addition:
(1) The Bond Trustee shall provide the Bond Insurer with a list of the
Bondholders entitled to receive principal or interest payments from the Bond Insurer
under the terms of the Bond Insurance Policy and shall make arrangements for the Bond
Insurer and its Fiscal Agent (A) to mail checks or drafts to Bondholders entitled to
receive full or partial interest payments from the Bond Insurer and (B) to pay principal of
the Bonds surrendered to the Fiscal Agent by the Bondholders entitled to receive full or
partial principal payments from the Bond Insurer; and
(2) The Bond Trustee shall, at the time it makes the registration books
available to the Bond Insurer pursuant to (1) above, notify Bondholders entitled to
receive the payment of principal of or interest on the Bonds from the Bond Insurer (A) as
• to the fact of such entitlement, (B) that the Bond Insurer will remit them all or part of the
interest payments coming due subject to the terms of the Bond Insurance Policy, (C) that,
except as provided in paragraph (B) below, in the event that any Bondholder is entitled to
receive full payment of principal from the Bond Insurer, such Bondholder must tender its
Bond with the instrument of transfer in the form provided on the Bond executed in the
name of the Bond Insurer, and (D) that, except as provided in paragraph (B) below, in the
event that such Bondholder is entitled to receive partial payment of principal from the
Bond Insurer, such Bondholder must tender his Bond for payment first to the Bond
Trustee, which shall note on such Bond the portion of principal paid by the Bond Trustee,
and then, with an acceptable form of assignment executed in the name of the Bond
Insurer, to the Fiscal Agent, which will then pay the unpaid portion of principal to the
Bondholder subject to the terms of the Bond Insurance Policy.
(B) In the event that the Bond Trustee has notice that any payment of principal
or interest on a Bond has been recovered from a Bondholder pursuant to the United States
Bankruptcy Code by the trustee in bankruptcy in accordance with the final, nonappealable order
of a court having competent jurisdiction, the Bond Trustee shall, at the time it provides notice to
the Bond Insurer, notify all Bondholders that in the event that any Bondholder's payment is so
recovered, such Bondholder will be entitled to payment from the Bond Insurer to the extent of
such recovery, and the Bond Trustee shall furnish to the Bond Insurer its records evidencing the
payments of principal of and interest on the Bonds which have been made by the Bond Trustee
and subsequently recovered from Bondholders, and the dates on which such payments were
• made.
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DOCSSCI:356339.8
•(C) The Bond Insurer shall, to the extent it makes payment of principal of or
interest on the Bonds, become subrogated to the rights of the recipients of such payments in
accordance with the terms of the Bond Insurance Policy and, to evidence such subrogation, (i) in
the case of subrogation as to claims for past due interest, the Bond Trustee shall 'note the Bond
Insurer's rights as subrogee on the registration books maintained by the Bond Trustee upon
receipt from the Bond Insurer of proof of the payment of interest thereon to the Bondholders of
such Bonds and (ii) in the case of subrogation as to claims for past due principal, the Bond
Trustee shall note the Bond Insurer's rights as subrogee on the registration books for the Bonds
maintained by the Bond Trustee upon receipt of proof of the payment of principal thereof to the
Bondholders. Notwithstanding anything in this Bond Indenture or the Bonds to the contrary, the
Bond Trustee shall make payment of such past due interest and past due principal directly to the
Bond Insurer to the extent that the Bond Insurer is a subrogee with respect thereto.
ARTICLE VIII
THE BOND TRUSTEE
SECTION 8.01. Duties. Immunities and Liabilities of Bond Trustee.
(A) The Bond Trustee shall, prior to an Event of Default, and after the curing
of all Events of Default which may have occurred, perform such duties and only such duties as
are specifically set forth in this Bond Indenture, and, except to the extent required by law; no
implied covenants or obligations shall be read into this Bond Indenture against the Bond Trustee.
•The Bond Trustee shall, during the existence of any Event of Default (which has not been cured),
exercise such of the rights and powers vested in it by this Bond Indenture, and use the same
degree of care and skill in their exercise, as a prudent person that customarily engages in
activities essentially similar to those provided for the Bond Trustee hereunder would exercise or
use under the circumstances in the conduct of such person's own affairs.
(B) The City may, and upon written request of (i) the Bond Insurer (if an
Event of Default or an event that with the passage of time or the giving of notice or both has
occurred and is continuing) or (ii) the Corporation shall, remove the Bond Trustee at any time
unless an Event of Default shall have occurred and then be continuing, and shall remove the
Bond Trustee if at any time requested.to do so by an instrument or concurrent instruments in
writing signed by the Holders of not less than a majority in aggregate principal amount of the
Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Bond
Trustee shall cease to be eligible in accordance with subsection (E) of this Section, or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or 'a receiver of the -
Bond Trustee or its property shall be appointed, or any public officer shall take control or charge
of the Bond Trustee or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, in each case by giving written notice of such removal to the Bond Trustee, and
thereupon shall appoint, with the written consent of the.Corporation, a successor Bond Trustee
by an instrument in writing. The City, the Corporation or any Holder may at any time petition
any court of competent jurisdiction for the removal for cause of the Bond Trustee.
• (C) The Bond Trustee may at any time resign by giving written notice of such
resignation to the City, the Bond Insurer, the Liquidity Facility Provider (if any), the Corporation
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DOCSSCI:356339.8
and the Bond Insurer and by giving the Bondholders notice of such resignation by mail at the
• addresses shown on the registration books maintained by the Bond Trustee. Upon receiving such
notice of resignation, the City shall promptly appoint, with the written consent of the Corporation
and the Bond Insurer, a successor Bond Trustee by an instrument in writing. The Bond Trustee
shall not be relieved of its duties until such successor Bond Trustee has accepted appointment. If
the Bond Trustee has or shall acquire any conflicting interest, as defined in the Trust Indenture
Act of 1939, as amended, it shall, within 90 days after ascertaining that it has a conflicting
interest, or within 30 days after receiving written notice from the City or the Coiporation (so
long as the Corporation is not in default under the Loan Agreement) that it has a conflicting
interest, either eliminate such conflicting interest or resign in the manner and with the effect
specified in this Subsection (C).
(D) Any removal or resignation of the Bond Trustee and appointment of a
successor Bond Trustee shall only become effective upon written approval of such successor
Bond Trustee by the Bond Insurer and acceptance of appointment by the successor Bond
Trustee. If no successor Bond Trustee shall have been appointed and have accepted appointment
within thirty (30) days of giving notice of removal or notice of resignation as aforesaid, the
resigning Bond Trustee "or any Bondholder (on behalf of such Bondholder and all other
Bondholders) may petition any court of.competent jurisdiction for the appointment of a
successor Bond Trustee, and such court may thereupon, after such notice (if any) as it may deem
proper, appoint such successor Bond Trustee. Any successor Bond Trustee appointed under this
Bond Indenture shall signify its acceptance of such appointment by executing and delivering to
the City and the Bond Insurer and to its predecessor Bond Trustee a written acceptance thereof,
•and thereupon such successor Bond Trustee, without any further act, deed or conveyance, shall
become vested with all the moneys, estates, properties, rights, powers, trusts, duties and
obligations of such predecessor Bond Trustee, with like effect as if originally named Bond
Trustee herein; but, nevertheless at the request of the City or the request of the successor Bond
Trustee, such predecessor Bond Trustee shall execute and deliver any and all instruments of
conveyance or further assurance and do such other things as may reasonably be required for
more fully and certainly vesting in and confirming to such successor Bond Trustee all the right,
title and interest of such predecessor Bond Trustee in and to any property held by it under this
Bond Indenture and shall pay over, transfer, assign and deliver to the successor Bond Trustee
any money or other property subject to the trusts and conditions herein set forth. Upon request
of the successor Bond Trustee, the City shall execute and deliver any and all instruments as may
be reasonably required for more fully and certainly vesting in and confirming to such successor
Bond Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations:
Upon written approval of a successor Bond Trustee by the Bond Insurer and acceptance of
appointment by a successor Bond Trustee as provided in this .subsection, the successor Bond
Trustee shall mail a notice of the succession of such Bond Trustee to the trusts hereunder to the
Bondholders at the addresses shown on the registration books maintained by the Bond Trustee.
(E) The Bond Trustee and any successor Bond Trustee shall be a trust
company or bank having a combined capital and surplus of at least fifty million dollars
($50,000,000) (or providing a guarantee of the full and prompt performance by the Bond Trustee
of its obligations under this Bond Indenture by. a guarantor with such combined capital and
surplus), and subject to supervision or examination by federal or state authority. If such bank or
trust company publishes a report of condition at least annually, pursuant to law or to the
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requirements of any supervising or examining authority above referred to, then for the purpose of
•this subsection the combined capital and surplus of such bank or trust company shall be deemed
to be its combined capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Bond Trustee shall cease to be eligible in accordance with the
provisions of this subsection (E), the Bond Trustee shall resign immediately in the manner and
with the effect specified in this Section.
SECTION 8.02. Mercer or Consolidation. Any company into which the Bond
Trustee may be merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which it shall be a party or any
company,to which the Bond Trustee may sell or transfer all or substantially all of its corporate
trust business, provided such company shall be eligible under subsection (E) of Section 8.01,
shall be the successor to such Bond Trustee without the execution or filing of any paper or any
further act, anything herein to the contrary notwithstanding.
SECTION 8.03. Liability of Bond Trustee.
(A) The recitals of facts herein and in the Bonds contained shall be taken as
statements of the City, and the Bond Trustee assumes no responsibility for the correctness of the
same, makes no representations as to the validity or sufficiency of this Bond Indenture, of the
Loan Agreement, of the Remarketing Agreement, of Obligation No. 14, or of the Bonds, and
shall incur no responsibility in respect thereof, other than in connection with the duties or
obligations herein or in the Bonds assigned to or imposed upon it except for any recital or
•representation specifically relating to the Bond Trustee or its powers. The Bond Trustee assumes
no responsibility or liability for any information, statement or recital in any offering
memorandum or other disclosure material prepared or distributed in connection with the issuance
of the Bonds. The Bond Trustee shall, however, be responsible for its representations contained
in its certificate of authentication on the Bonds. The Bond Trustee shall not be liable in
connection with the performance of its duties hereunder, except for its own negligence or'willful
misconduct. The Bond Trustee may become the owner of Bonds with the same rights it would
have if it were not Bond Trustee, and, to the extent permitted by law, may act as depositary for
and permit any of its officers or directors to act as a member of, or in any other capacity with
respect to, any committee formed to protect the rights of Bondholders, whether or not such
committee shall represent the Holders of a majority in principal amount of the Bonds then
Outstanding.
•
(B) The Bond Trustee shall not be liable for any error of judgment made in
good faith by any of its officers, employees, agents or representatives, unless ii shall be proved -
that the Bond Trustee was negligent in ascertaining the pertinent facts.
(C) The Bond Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the Holders of not less
than twenty-five percent (25 %) in aggregate principal amount of the Bonds at the time
Outstanding relating to the time, method and place of conducting any proceeding for any remedy
available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee
under this Bond Indenture.
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• (D) The Bond Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Bond Indenture (except for drawing or otherwise accessing funds
from the Liquidity Facility when required under this Bond. Indenture and except for declaring an
acceleration of the Bonds in accordance with Section 7.02 hereof) at the request, order or
direction of any of the Bondholders pursuant to the provisions of this Bond Indenture unless such
Bondholders shall have offered to the Bond Trustee security or indemnity, satisfactory to the
Bond Trustee, against the costs, expenses and liabilities which may be incurred therein or
thereby. The Bond Trustee has no obligation or liability to the Holders for the payment of
interest on, principal of or redemption premium, if any, with respect to the Bonds from its own
funds; but rather the Bond Trustee's obligations shall be limited to the performance of its duties
hereunder.
(E) Except with respect to Events of Default specified in Section 7.01(A) or
(B), the Bond Trustee shall not be deemed to have knowledge of any Event of Default unless and
until an officer at the Principal Office responsible for the administration of its duties hereunder
shall have actual knowledge thereof or the Bond Trustee shall have received written notice
thereof at the Principal'Ofbce. The Bond Trustee shall not be bound to ascertain or inquire as to
the performance or observance of any of the terms, conditions, covenants or agreements herein
or of any of the documents executed in connection with the Bonds, or as to the existence of a
default or Event of Default thereunder. The Bond Trustee shall not be responsible for the
validity or effectiveness of any collateral given to or held by it.
(F) The Bond Trustee may execute any of the trusts or powers hereunder or
•perform any duties hereunder either directly or by or through attorneys -in -fact, agents, receivers,
officers, employees or . representatives, and shall not be answerable for the negligence or
misconduct of any such. attorney -in -fact, agent, receiver, officer, employee or representative
selected by it with due care. The Bond Trustee shall be entitled to advice of counsel and other
professionals concerning all matters of trust and its duty hereunder, but the Bond Trustee shall
not be answerable for the professional malpractice of any counsel or other professional
(including without limiting the generality of the foregoing, attorneys -in -law or certified public
accountants) in connection with the rendering of such counsel's or other professionals' advice in
accordance with "the terms of this Bond Indenture, if such counsel or other professional was
selected by the Bond Trustee with due care.
(G) The Bond Trustee shall not be concerned with or accountable to anyone
for the subsequent use or application of any moneys that shall be released or withdrawn in
accordance with the provisions hereof.
(H) Whether or not therein expressly so provided, every provision of this Bond
Indenture, the Loan Agreement, Obligation No. 14 or related documents relating to the conduct
or affecting the liability of or affording protection to the Bond Trustee shall_ be subject to the
provisions of this Article.
SECTION 8.04. RiWit of Bond Trustee to Relv on Documents. The Bond
Trustee shall be protected in acting upon any notice, resolution, request, consent, order,
•certificate, report, opinion, bond or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties. The Bond Trustee may consult
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with counsel, who may be counsel of or to the City and/or counsel selected by the Bond Trustee,
• with regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
Whenever in the administration of the trusts imposed upon it by this Bond
Indenture the Bond Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved
and established by a Certificate of the City, and such Certificate shall be full warrant to the Bond
Trustee for any action taken or suffered in good faith under the provisions of this Bond Indenture
in reliance upon such Certificate, but in its discretion the Bond Trustee may, in lieu thereof,
accept other evidence of such matter or may require such additional evidence as to it may deem
reasonable.
SECTION 8.05. Preservation and Inspection of Documents. All documents
received by the Bond Trustee under the provisions of this Bond Indenture shall be retained in its
possession and shall be subject at all reasonable times to the inspection of the City, the
Corporation, the Liquidity Facility Provider (if any), the Bond Insurer and any Bondholder, and
their agents and representatives duly authorized in writing, at reasonable hours and under
reasonable conditions.
SECTION 8.06. Compensation and Indemnification. The Corporation shall pay
• to the Bond Trustee from time to time reasonable compensation for all services rendered under
this Bond Indenture, and also all reasonable expenses, charges, legal and consulting fees and
other disbursements and those of its attorneys, agents and employees, incurred in and about the
performance of its powers and duties under this Bond Indenture.
No provision of this Bond Indenture shall require the Bond Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of its rights or powers, if it has not received the agreed
compensation for such services or, in cases where the Bond Trustee has a right to reimbursement
or indemnification for such performance or exercise, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 8.07. Bond Trustee's Relationship to Citv.
(A) The Bond Trustee acknowledges that the Bonds are payable solely from
Revenues, including payments to be made by the Corporation pursuant to the Loan Agreement
and the Bonds, that the City is a passive conduit for the payments to be made by the Corporation
pursuant to the Loan Agreement and the Bonds and that the Bonds are not general obligations of
the City. The Bond Trustee, by execution of this Bond Indenture, has accepted the assignment
by the City to the Bond Trustee of the payments to be made by the Corporation pursuant to the
Loan Agreement and the Bonds and of certain of the rights of the City under the Loan
Agreement and the Bonds and, to the extent permitted by law and subject to the limiting
• provisions contained herein, has assumed any and all responsibilities of the City (other than the
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right of the City to indemnification under the Loan Agreement and administration expense and
• fees under the Loan Agreement and as otherwise set forth therein) under the Loan Agreement
and the Bonds to enforce those rights. The Bond Trustee will notify the City of any default
known to the Bond Trustee under the Loan Agreement or the Bonds, and will at the expense of
the Corporation and upon receipt of a Request of the City provide the City with any information
reasonably available to the Bond Trustee which the City may reasonably request regarding any
events of default.
(B) The Bond Trustee agrees to provide the City at the expense of the
Corporation and within a reasonable time after the receipt of a Request of the City any financial
or other information it may reasonably request relating to the Corporation or to the Bond
Indenture or the Loan Agreement and the Bonds which the City finds necessary or desirable and
which is reasonably available to the Bond Trustee.
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE BOND INDENTURE
SECTION 9.01. Amendments Permitted.
(A) This Bond Indenture and the rights and obligations of the City and of the
Holders of the Bonds and of the Bond Trustee may be modified or amended from time to time
and at any time by an indenture or indentures supplemental hereto, which the City and the Bond
• Trustee may enter into when the written consent of the Bond Insurer, the Holders of a majority in
aggregate principal amount of the Bonds then Outstanding and the Corporation shall have been
filed with the Bond Trustee. No such modification or amendment shall (1) extend the stated
maturity of any Bond, or reduce the amount of principal thereof, or extend the time of payment
or change the method of computing the rate of interest thereon, or extend the time of payment of
interest thereon, or reduce any premium payable upon the redemption thereof or change the
Purchase Price to be paid to Holders tendering their Bonds, without the consent of the Holder of
each Bond so affected, or (2) reduce the aforesaid percentage of Bonds, the consent of the
Holders of which is required to effect any such modification or amendment, or permit the
creation of any lien on the Revenues and other assets pledged under this Bond Indenture prior to
or on a parity with the lien created by this Bond Indenture, or deprive the Holders of the Bonds
of the lien created by this Bond Indenture on such Revenues and other assets (except as expressly
provided in this Bond Indenture), without the consent of the Holders of all Bonds then
Outstanding. It shall not be necessary for the consent of the Bondholders to approve the
particular form of any Supplemental Bond Indenture, but it shall be sufficient if such consent
shall approve the substance thereof. Promptly after the execution by the City and the Bond
Trustee of any Supplemental Bond Indenture pursuant to this subsection (A), the Bond Trustee
shall mail a notice, setting forth in general terms the substance of such Supplemental Bond
Indenture to the Bondholders at the addresses shown on the registration books-maintained by the
Bond Trustee. Any failure to give such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such Supplemental Bond Indenture.
(B) This Bond Indenture and the rights and obligations of the City, of the
• Bond Trustee and of the Holders of the Bonds may also be modified or amended from time to
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time and at any time in accordance with Section 2.08(D) hereof or by an indenture or indentures
supplemental hereto, which the City and the Bond Trustee may enter into with the consent of the
•
Corporation and the Bond Insurer, but without the necessity of obtaining the consent of any
Bondholders, only to the extent permitted by law and only for any one or more of the following
purposes:
(1) to add to the covenants and agreements of the City contained in
this Bond Indenture other covenants and agreements thereafter to be observed, to pledge
or assign additional security for the Bonds (or any portion thereof), or to surrender any
right or power herein reserved to or conferred upon the City, provided, that no such
covenant, agreement, pledge, assignment or surrender shall materially adversely affect
the interests of the Holders of the Bonds;
(2) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision, contained
in this Bond Indenture, or in regard to matters or questions arising under this Bond
Indenture, as the City or the Bond Trustee may deem necessary or desirable and not
inconsistent with this Bond Indenture, and which shall not materially adversely affect the
interests of the Holders of the Bonds;
(3) to modify, amend or supplement this Bond Indenture in such
manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as
amended, or any similar federal statute hereafter in effect, and to add such other terms,
conditions and provisions as may be permitted by said act or similar federal statute, and
• which shall not materially adversely affect the interests of the Holders of the Bonds;
(4) to evidence or give effect to, or to conform to the terms and
provisions of, any Liquidity Facility;
(5) to evidence or give effect to, or to conform to the terms and
provisions of, any insurance policy, letter of credit or other credit enhancement for the
Bonds;
(6) to facilitate and implement any book entry system (or any
termination of a book entry system) with respect to the Bonds;
(7) to maintain the exclusion from gross income of interest payable
with respect to the Bonds; or
(8) to make any modification or amendment to the Bond Indenture
which will be effective upon the remarketing of Bonds following the mandatory tender of
the Bonds pursuant to Section 4.08.
(C) The Bond Trustee may in its discretion, but shall not be obligated to, enter
into any such Supplemental Bond Indenture authorized by subsections (A) or (B) of this Section
which materially adversely affects the Bond Trustee's own rights, duties or immunities under
. this Bond Indenture or otherwise.
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(D) In executing, or accepting the additional trusts created by, any
• Supplemental Bond Indenture permitted by this Article or the modification thereby of the trusts
created by this Bond Indenture, the Bond Trustee and the City shall receive, and shall be fully
protected in relying upon, a Favorable Opinion of Bond Counsel addressed and delivered to the
Bond Trustee and the City stating that the execution of such Supplemental Bond Indenture is
permitted by and in compliance with this Bond Indenture, and that the execution and delivery
thereof will not adversely affect the exclusion from federal gross income of interest on the
Bonds.
(E) Notwithstanding the foregoing provisions of this Section 9.01, no
provision of the Bond Indenture which expressly recognizes or grants rights in or to the Bond
Insurer may be amended in any manner which affects the rights of the Bond Insurer without the
prior written consent of the Bond Insurer.
(F) For purposes of this Section 9.01, in determining whether a modification,
amendment or supplement of this Bond Indenture will have a materially adverse effect on the
interests of the Holders of the Bonds, the Trustee shall consider the effect on the Holders of the
Bonds as if the Bond Insurance Policy were not in effect.
(G) Copies of all Supplemental Indentures shall be provided to the Bond
Insurer by the Bond Trustee. The Bond Trustee shall also provide written notice and a copy of
any amendment to the Bond Indenture, the Loan Agreement or the Liquidity Facility to S &P at
least fifteen (15) days in advance (unless S &P waives or reduces such time period) of the
•execution of any amendment to such documents. The Bond Insurer shall be provided with a full
transcript of all proceedings relating to the execution of any amendments or supplements to the
Bond Indenture of the Loan Agreement.
SECTION 9.02. Effect of Supplemental Bond Indenture. Upon the execution of
any Supplemental Bond Indenture pursuant to this Article, this Bond Indenture shall be deemed
to be modified and amended in accordance therewith, and. the respective rights, duties and
obligations under this Bond Indenture of the City, the Bond Trustee and all Holders of Bonds
Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modification and amendment, and all the terms and conditions of any such
Supplemental Bond Indenture shall be deemed to be part of.the terms and conditions of this
Bond Indenture for any and all purposes.
SECTION 9.03. Endorsement of Bonds- Preaaration of New Bonds. Bonds
delivered after the execution of any Supplemental Bond Indenture pursuant to this Article may,
and if the City so determines shall, bear a notation by endorsement or otherwise in form
approved by the City and the Bond Trustee as to any modification or amendment provided for in
such Supplemental Bond Indenture, and, in that case, upon demand of the Holder of any Bond
Outstanding at the time of such execution and presentation of such Holder's Bond for the
purpose at the Principal Office of the Bond Trustee or at such additional offices as the Bond
Trustee may select and designate for that purpose, a suitable notation shall be made on such
Bond. If the Supplemental Bond Indenture shall so provide, new Bonds so modified as to
conform, in the opinion of the City and the Bond Trustee, to any modification or amendment
• contained in such Supplemental Bond Indenture, shall be prepared by the Bond Trustee at the
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expense of the Corporation, executed by the City and authenticated by the Bond Trustee, and
• upon demand of the Holders of any Bonds then Outstanding shall be exchanged at the Principal
Office of the Bond Trustee, without cost to any Bondholder, for Bonds then Outstanding, upon
surrender for cancellation of such Bonds, in equal aggregate principal amounts of the same
maturity.
SECTION 9.04. Amendment of Particular Bonds. The provisions of this Article
shall not prevent any Bondholder from accepting any amendment as to the particular Bonds held
by such Bondholder, provided that due notation thereof is made on such Bonds.
ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture. The Bonds may be paid by the City or
the Bond Trustee on behalf of the City in any of the following ways:
(A) by_paying or causing to be paid the principal or Redemption Price of and
interest on all Bonds Outstanding, as and when the same become due and payable;
(B) by depositing with the Bond Trustee, in trust, at or before maturity,
moneys or securities in the necessary amount (as provided in Section 10.03) to pay when due or
redeem all Bonds then Outstanding; or
• (C) by delivering to the Bond Trustee, for cancellation by it, all Bonds then
Outstanding.
If the City shall also pay or cause to be paid all otherr sums payable hereunder by the City and the
Corporation shall have paid all Administrative Fees and Expenses payable to the City pursuant to
the Loan Agreement, then and in that case at the election of the City (evidenced by a Certificate
of the City filed with the Bond Trustee signifying the intention of the City to discharge all such
indebtedness and this Bond Indenture), and notwithstanding that any Bonds shall not have been
surrendered for payment, this Bond Indenture and the pledge of Revenues and other assets made
under this Bond Indenture and all covenants, agreements and other obligations of the City under
this Bond Indenture (except as otherwise provided in Section 5.06) shall cease, terminate,
become void and be completely discharged and satisfied. In such event; upon the request of the
City, the Bond Trustee shall cause an accounting for such period or periods as may be requested
by the City to be prepared and filed with the City and shall execute and deliver to the City all
such instruments as may be necessary to evidence such discharge and satisfaction, and the Bond
Trustee shall pay over, transfer, assign or deliver to the Corporation all moneys or securities or
other property held by it pursuant to this Bond Indenture which are not required for the payment
or redemption of Bonds not theretofore surrendered for such payment or redemption; provided
that in all events moneys in the Rebate Fund shall be subject to the provisions of Section 5.06.
SECTION 10.02. Discharge of Liability on Bonds. Upon the deposit with the
Bond Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as
•provided in Section 10.03) to pay or redeem any Outstanding Bond (whether upon or prior to its
maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed
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•prior to maturity, notice of such redemption shall have been given as in Article IV provided or
provision satisfactory to the Bond Trustee shall have been made for the. giving of such notice,
then all liability of the City in respect of such Bond shall cease, terminate and be completely
discharged, except only that thereafter the Holder thereof shall be entitled to payment of the
principal of and interest on such Bond by the City, and the City , shall remain liable for such
payments, but only out of such money or securities deposited with the Bond Trustee as aforesaid
for their payment, subject, however, to the provisions of Section 10.04.
The City may at any time surrender to the Bond Trustee for cancellation by it any
Bonds previously issued and delivered, which the City may have acquired in any manner
whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid
and retired.
Notwithstanding anything in this Section 10.02 to the contrary, if the interest on
or principal of the Bonds shall have been paid by the Bond Insurer pursuant to the Bond
Insurance Policy, the obligations of the City hereunder and under the Bonds shall not be deemed
discharged or satisfied, the Bonds shall remain Outstanding .for all purposes of this Bond
Indenture, the assignment and pledge contained in Section 5.01 of this Bond Indenture and all
obligations of the City under this Bond Indenture shall continue to exist and run to the benefit of
the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of Holders of the Bonds
including, without limitation, any rights that such Holders of Bonds may have in respect of
securities law violations arising from the offer and sale of the Bonds.
• SECTION 10.03. Deuosit of Money or Securities with Bond Trustee. Whenever
in this Bond Indenture it is provided or permitted that there be deposited with or held in trust by
the Bond Trustee money or securities in the necessary amount to pay or redeem any Bonds, the
money or securities to be so deposited or held may include money or securities held by the Bond
Trustee in the funds and accounts established pursuant to this Bond Indenture (other than the
Rebate Fund) and shall be:
(A) lawful money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity (based on an assumed
interest rate equal to the Maximum Interest Rate for periods for which the actual interest rate on
the Bonds cannot be determined), except that, in the case of Bonds which are to be redeemed
prior to maturity and in respect of which notice of such redemption shall have been given as in
Article IV provided or provision satisfactory to the Bond Trustee shall have been made for the
giving of such notice, the amount to be deposited or held shall be the principal amount or
Redemption Price of such Bonds and all unpaid interest thereon to the redemption date; or
(B) United States Goverment Obligations (not callable by the City thereof
prior to maturity), the principal of and interest on which when due (without any income from the
reinvestment thereof) will provide money sufficient to pay the principal or Redemption Price of
and all unpaid interest to maturity (based on an assumed interest rate equal to the Maximum
Interest Rate for periods for which the actual interest rate on the Bonds cannot be determined), or
to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such
• principal or Redemption Price and interest become due; provided that, in the case of Bonds
which are to be redeemed prior to the maturity thereof, notice of such redemption shall have
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• been given as in Article IV provided or provision satisfactory to the Bond Trustee shall have
been made for the giving of such notice;
provided, in each case, that the Bond Trustee shall have been irrevocably instructed (by the terms
of this Bond Indenture or by Request of the City) to apply such money to the payment of such
principal or Redemption Price and interest with respect to such Bonds, and provided further, if
the Bonds are then rated by S &P, the Bond Trustee shall have received written confirmation
from S &P that the rating on the Bonds will not be reduced or withdrawn solely as a result of the
defeasance; and provided further, that with respect to the deposit of United States Government
Obligations pursuant to subsection (B) in connection with an advance refunding, the Bond
Trustee and the Bond Insurer shall have received a verification report from a firm of independent
accountants or other qualified verifier acceptable to the Bond Insurer, addressed to the City, the
Bond Trustee and the Bond Insurer, acceptable in form and substance to the Bond Trustee and
the Bond Insurer, to the effect that the amount deposited is sufficient to make the payments
specified therein.
SECTION 10.04. Payment of Bonds After Discharge of. Band Indenture.
Notwithstanding any provisions of this Bond Indenture, any moneys held by the Bond Trustee in
trust for the payment of the principal of or premium, if any, or interest on, any Bonds and
remaining unclaimed for three years (or, if shorter, one day before such moneys would escheat to
the State of California under then applicable California law) after such principal or interest, as
the case may be, has become due and payable (whether at maturity or upon call for redemption
or by acceleration as provided in this Bond Indenture), if such moneys were so held at such date,
• or three years (or, if shorter, one day before such moneys would escheat to the State of California
under then applicable California law) after the date of deposit of such moneys if deposited after
said date when all of the Bonds became due and payable, shall be repaid to the Corporation free
from the trusts created by this Bond Indenture upon receipt of an indemnification agreement
acceptable to the City and the Bond Trustee indemnifying the City and the Bond Trustee with
respect to claims of Holders of Bonds which have not yet been paid and containing the
agreement of the Corporation to remain liable for the amount so repaid to the Corporation, and
all liability of the City and the Bond Trustee with respect to such moneys shall thereupon cease;
provided, however, that before the repayment of such moneys to the Corporation as aforesaid,
the Bond Trustee may (at the cost of the Corporation) first mail to the Holders of Bonds which
have not yet been paid, at the addresses shown on the registration books maintained by the Bond
Trustee, a notice, in such form as may be deemed appropriate by the Bond Trustee with respect
to the Bonds so payable and not presented and with respect to the provisions relating to the
repayment to the Corporation of the moneys held for the payment thereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Limited Liability of City. Notwithstanding anything in this
Bond Indenture or in the Bonds contained, the City shall not be required to advance any moneys
derived from any source other than the Revenues and other assets pledged under this Bond
Indenture for any of the purposes in this Bond Indenture mentioned, whether for the payment of
. the principal or Redemption Price of or interest on the Bonds or for any other purpose of this
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Bond Indenture. Nevertheless, the City may, but shall not be required to, advance for any
• purposes hereof any funds of the City that may be made available to it for such purposes.
SECTION 11.02. Successor is Deemed Included in All References to
Predecessor. Whenever in this Bond Indenture either the City or the Bond Trustee is named or
referred to, such reference shall be deemed to include the successors or assigns thereof, and all
the covenants and agreements in this Bond Indenture contained by or on behalf of the City or the
Bond Trustee shall bind and inure to the benefit of the respective successors and assigns thereof
whether so expressed or not.
SECTION 11.03. Limitation of Rights to Parties, City, Bond Trustee the
Corporation, the Liquidity Facility Provider, the Bond Insurer and Bondholders. Nothing in this
Bond Indenture or in the Bonds expressed or implied is intended or shall be construed to give to
any Person other than the City, the Bond Insurer, the Bond Trustee, the Corporation, the
Liquidity Facility Provider (if any), and the Holders of the Bonds, any legal or equitable right,
remedy or claim under or in respect of this Bond Indenture or any covenant, condition or
provision therein or herein contained; and all such covenants, conditions and provisions are and
shall be held to be for the sole and exclusive benefit of the City, the Bond Trustee, the
Corporation, the Liquidity Facility Provider (if any), the Bond Insurer and the Holders of the
Bonds.
SECTION 11.04. Waiver of Notice. Whenever in this Bond Indenture the giving
of notice by mail or otherwise is required, the giving of such notice may be waived in writing by
•the Person entitled to receive such notice and in any such case the giving or receipt of such
notice shall not be a condition precedent to the validity of any action taken in reliance upon such
waiver.
SECTION 11.05. Destruction of Bonds. Whenever in this Bond Indenture
provision is made for the cancellation by the Bond Trustee and the delivery to the City of any
Bonds, the Bond Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds and
deliver a certificate of such destruction to the City.
SECTION 11.06. Severability of Invalid Provisions. If any one or more of the
provisions contained in this Bond Indenture or in the Bonds shall for any reason be held to be
invalid, illegal or unenforceable in any respect, then such provision or provisions shall be
deemed severable from the remaining provisions contained in this Bond Indenture and such
invalidity, illegality or unenforceability shall not affect any other provision of this Bond
Indenture, and this Bond Indenture shall be construed as if such invalid or illegal or -
unenforceable provision had never been contained herein.
SECTION 11.07. Notices.
(A) Subject to Section 11.04, any notice or request to or demand upon the
Bond Trustee shall be in writing and may be served or presented, and such demand may be
made; at the Principal Office of the Bond Trustee or at such other address as may have been filed
in writing by the Bond Trustee with the City. Any notice to or demand upon the City, the
is Corporation, Bond Insurer and the Tender Agent shall be deemed to have been sufficiently given
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DOCSSCl:356339.8
•or served for all purposes by being delivered or sent by confirmed facsimile transmission or by
being deposited, postage prepaid, in a post office letter box, addressed as follows:
E
•
(1) to the City at:
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 926
Attention: Treasurer
Telephone: (949) 644 -3123
Facsimile: (949) 644 -3339
(2) to the Corporation at:
Hoag Memorial Hospital Presbyterian
One Hoag Drive
P.O. Box 6100
Newport Beach, California 92658 -6100
Attention: Chief Financial Officer
Telephone: (949) 764 -4411
Facsimile: (949) 764 -4416
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DOCSSCI356339.8
(3) to the Bond Trustee at:
Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Services
Telephone: (213) 614 -3350
Facsimile: (213) 614 -3355
(4) to the Bond Insurer at:
Financial Guaranty Insurance Company
125 Park Avenue
New York, NY 10017
Attention: Risk Management
Telephone: (212) 312 -3000
Facsimile: (212) 312 -3093
(5) to the Bond Insurer Fiscal Agent at:
U.S. Bank Trust National Association
100 Wall Street, 19th Floor
New York, New York 10005
Attention: Corporate Trust Department.
Telephone: (212) 312 -3000
Facsimile: (212) 312 -3093
• (B) S &P shall be entitled to written notice (in the same fashion as is specified
for notices in subsection (A) above to the following address (or such other address as may be
filed in writing with the Bond Trustee upon the occurrence of each of the following events: (1)
a Noticed Termination Date, Expiration Date or extension of the term of any Liquidity Facility or
the delivery of an Alternate Liquidity Facility; (2) redemption of the Bonds in whole; (3)
acceleration of the Bonds; (4) a Conversion; (5) an amendment or modification of the Loan
Agreement, Bond Indenture or Liquidity Facility; and (6) appointment of a new or successor
Tender Agent.
Standard & Poor's
55 Water Street, 38th Floor
New York, NY 1. 0041
Attn: Municipal Structured Surveillance
Telephone: (212) 438 -2021
Facsimile: (212) 438 -2151
(or in each case at such other or additional addresses as may have been filed in writing with the
Bond Trustee).
SECTION 11.08. Evidence of Rights of Bondholders. Any request, consent or
other instrument required or permitted by this Bond Indenture to be signed and executed by
.Bondholders may be in any number of concurrent instruments of substantially similar tenor and
shall be signed or executed by such Bondholders in person or by an agent or agents duly
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appointed in writing. Proof of the execution of any such request, consent or other instrument or
of a writing appointing any such agent, or of the holding by any Person of Bonds transferable by
delivery, shall be sufficient for any purpose of this Bond Indenture and shall be conclusive in
favor of the Bond Trustee and of the City if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such request, consent or
other instrument or writing may be proved by the certificate of any notary public or other officer
of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying
that the Person signing such request, consent or other instrument acknowledged to such notary
public or officer the execution thereof, or by an affidavit of a witness of such execution duly
sworn to before such notary public or other officer.
The ownership of Bonds shall be proved by the bond registration books held by
the Bond Trustee.
Any request, consent or other instrument or writing of the Holder of any Bond
shall bind every future Holder of the same Bond and the Holder of every Bond issued in
exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the
Bond Trustee or the City in accordance therewith or reliance thereon.
SECTION 11.09. Disqualified Bonds. In determining whether the Holders of the
requisite aggregate principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Bond Indenture, Bonds which are owned or held by or for the
• account of the City, the Corporation or any of the other Obligated Group Members or by any
other obligor on the Bonds, or by any Person directly or indirectly controlling or controlled by,
or under direct or indirect common control with, the City, the Corporation or any of the other
Obligated Group Members or any other obligor on the Bonds, shall be disregarded and deemed
not to be Outstanding for the purpose of any such determination. Bonds so owned which have
been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the
pledgee shall establish to the satisfaction of the Bond Trustee the pledgee's right to vote such
Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the City, the Corporation or any of the other
Obligated Group Members or any other obligor on the Bonds. In case of a dispute as to such
right, any decision by the Bond Trustee taken upon an Opinion of Counsel shall be full
protection to the Bond Trustee.
SECTION 11.10. Monev Held for Particular Bonds. The money held by the
Bond Trustee for the payment of the interest, principal or Redemption Price due on any date with -
respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only)
shall, on and after such date and pending such payment, be set aside on its books and held in
trust by it for the Holders of the Bonds entitled thereto, subject, however, to the provisions of
Section 10.04.
SECTION 11.11. Funds and Accounts. Any fund required by this Bond
Indenture to be established and maintained by the Bond Trustee may be .established and
maintained in the accounting records of the Bond Trustee either as a fund or an account, and
• may, for the purposes of such records, any audits thereof and any reports or statements with
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respect thereto, be treated either as a fund or as an account; but all such records with respect to
•all such funds shall at all times be maintained in accordance with customary standards of the
industry, to the extent practicable, and with due regard for the requirements of Section 6.06 and
for the protection of the security of the Bonds and the rights of every Holder thereof.
SECTION 11.12. Waiver of Personal Liability. No member, officer, agent or
employee of the City shall be individually or personally liable for the payment of the principal
(or Redemption Price) of or interest on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof; but nothing herein contained shall relieve any
such member, officer, agent or employee from the performance of any official duty provided by
law or by this Bond Indenture.
SECTION 11.13. Business Days. If any date specified herein shall not be a
Business Day, any action required on such date may be made on the next succeeding Business
Day with the same effect as if made on such date.
SECTION 11.14. Affiliates Not Liable. No organization with whom - the
Corporation is affiliated in any manner, other than the Obligated Group Members, is liable under
the Bond Indenture, the Master Indenture, Obligation No. 14, or the Loan Agreement for the
commitments of the Corporation or any of the Obligated Group Members.
SECTION 11.15. Governin%x_Law, Venue. This Bond Indenture and the Bonds
are contracts made under the laws of the State of California, and shall be governed by and
• construed in accordance with the Constitution and such laws applicable to contracts made and
performed in said State.
SECTION 11.16. Execution in Several CountMarts. This Bond Indenture may
be executed in any number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original; and all such counterparts, or as many of them as the City and the Bond
Trustee shall preserve undestroyed, shall together constitute but one and the same instrument.
SECTION 11.17. Consent Rights of the Bond Insurer; Bond Insurer Deemed
Holder of Bonds in Certain—Circumstances. Whenever in this Bond Indenture the consent of the
Holders of the Bonds is required, the consent of the Bond Insurer shall also be required. The
Bond Insurer shall be deemed to be the Holder of all Bonds then Outstanding for purposes of this
Bond Indenture, including without limitation, for purposes of granting any consents or waivers
or approving any amendments and exercising all remedies following the occurrence of an Event
of Default. Notwithstanding any other provision hereof, any provision of this Bond Indenture
requiring the consent of, the giving of notice to, or control of proceedings by the Bond Insurer
shall be in effect for so long as, and only during such time as (1) the Bonds are Outstanding and
(2) no default shall have occurred and be continuing by the Bond Insurer with respectlo the
payment provisions under the Bond Insurance Policy.
To the extent that this Bond Indenture confers upon or gives or grants to the Bond
Insurer any right, remedy or claim under or by such documents, the Bond Insurer shall be a third -
party beneficiary, under such documents and may enforce any such right, remedy or claim
• conferred, given or granted thereunder.
-
DOCSSC1 356339.9 -
•
IN WITNESS WHEREOF, CITY OF NEWPORT BEACH has caused this Bond
Indenture to be signed in its name by its Mayor and its seal to be hereunto affixed and attested by
its City Clerk, and WELLS FARGO BANK, NATIONAL ASSOCIATION, in token of its
acceptance of the trusts created hereunder, has caused this Bond Indenture to be signed in its
corporate name by its duly authorized officer, all as of the day and year first above written.
[SEAL]
Attest:
� /
BYC/1�r l/D
City Clerk
DOCSSCI :356339.6
CITY OF NEWPORT BEACH
By 2 4t ^-'
Ili Mayor
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
as Bond Trustee
M
Authorized Officer
IN WITNESS WHEREOF, CITY OF NEWPORT BEACH has caused this Bond
Indenture to be signed in its name by its Mayor and its seal to be hereunto affixed and attested by
its City Clerk, and WELLS FARGO BANK, NATIONAL ASSOCIATION, in token of its
acceptance of the trusts created hereunder, has caused this Bond Indenture to be signed in its
corporate name by its duly authorized officer, all as of the day and year first above written.
[SEAL]
9 Attest:
m
DOCSSCI:356339.6
City Clerk
CITY OF NEWPORT BEACH
a
Mayor
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
as Bond Trustee
By OA4&4/2/
Authorized Officer
• EXHIBIT A
AUCTION AND SETTLEMENT PROCEDURES
Section 1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the meanings given such terms in the Bond Indenture.
"Available Series ARS" has the meaning set forth in Section 2(c)(i)(A) hereof.
"Bid" has the meaning set forth in Section 2(a)(i) hereof.
`Bidder" has the meaning set forth in Section 2(a)(i) hereof.
"Buyer's Broker - Dealer" has the meaning set forth in Section 3(a)(iv) hereof.
"Hold Order" has the meaning set forth in Section 2(a)(i) hereof.
"Order" has the meaning set forth in Section 2(a)(i) hereof.
"Sell Order" has the meaning set forth in Section 2(a)(i) hereof.
"Seller's Broker- Dealer" has the meaning set forth in Section 3(a)(iii) hereof.
"Series ARS" has the meaning given in the Auction Agreement.
"Submission Deadline" has the meaning set forth in Section 2.4 of the Auction
Agreement.
"Submitted Bid" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Hold Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Ordee, has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Sell Order" has the meaning set forth in Section 2(c)(i) hereof.
"Sufficient Clearing Bids" has the meaning set forth in Section 2(c)(i)(B) hereof.
"Winning Bid Rate" has the meaning set forth in Section 2(c)(i)(C) hereof.
Section 2. Auction Procedures. So long as the ownership of the Series ARS is
maintained in book -entry form by the Securities Depository, an Existing Holder may sell,
transfer or otherwise dispose of Series ARS only pursuant to a Bid or Sell Order placed in an
Auction or through a Broker - Dealer, provided that, in the case of all transfers other than pursuant
to Auctions, such Existing Holder, its Broker - Dealer or its Participant advises the Auction Agent
of such transfer. Subject to the provisions of Section 2.08 of the Bond Indenture, Auctions shall
DOCSSC1:356339.8 A -1
be conducted on each Auction Date, if there is an Auction Agent on such Auction Date, in the
• following manner:
(a) Submission of Orders
\(i) Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder of Series ARS may submit to a Broker - Dealer by
telephone or otherwise any information as to:
(I) the principal amount of outstanding Series ARS, if any, held by
such Existing Holder which such Existing Holder desires to continue to hold without
regard to the Auction Rate for the next succeeding ARS Interest Period;
(In the principal amount of outstanding Series ARS, if any, which such
Existing Holder offers to sell if the Auction Rate for the next succeeding ARS Interest
Period shall be less than the rate per annum specified by such Existing Holder, and/or
(III) the principal amount of outstanding Series ARS, if any, held by
such Existing Holder which such Existing Holder offers to sell without regard to the
Auction Rate for the next succeeding ARS Interest Period; and
(B) one or more Broker - Dealers may contact. Potential Holders to determine
the principal amount of Series ARS which each Potential Holder offers to purchase, if the
•Auction Rate for the next succeeding ARS Interest Period shall not be less than the rate per
annum specified by such Potential Holder.
•
The statement of an Existing Holder or a Potential Holder referred to in (A)-or (B)
of this paragraph (i) is hereinafter referred to as an "Order," and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an Order described in
clause (A)(I) is hereinafter referred to as a "Hold Order"; an Order described in clause (A)(II) or
(B) is hereinafter referred to as a "Bid "; and an Order described in clause (A)(III) is hereinafter
referred to as a "Sell Order."
(ii) (A) Subject to the provisions of Section 2(b) hereof, a Bid by an
Existing Holder shall constitute an irrevocable offer to sell (in each case for settlement in same
day funds on the next ARS Interest Payment Date therefor at a price equal to 100% of the
principal amount thereof):
(I) the principal amount of outstanding Series ARS specified in such
Bid if the Auction Rate determined as provided herein shall be less than the rate specified
in such Bid; or
(In such principal amount or a lesser principal amount of outstanding
Series ARS to be determined as set forth in Section 2(d)(i)(D), if the Auction Rate
determined as provided herein shall be equal to the rate specified in such Bid; or
nocssci:356339.8 _ A -2
(III) such principal amount or a lesser principal amount of outstanding
Series ARS to be determined as set forth in Section 2(d)(ii)(C) if the rate specified therein
shall be higher than the ARS Maximum Rate and Sufficient Clearing Bids have not been
made.
(B) Subject to the provisions of Section 2(b) hereof, a Sell Order by an
Existing Holder shall constitute an irrevocable offer to sell (in each case for settlement in same
day funds on the next ARS Interest Payment Date therefor at a price equal to 100 % of the
principal amount thereof):
(I) the principal amount of outstanding Series ARS specified in such
Sell Order if Sufficient Clearing Bids exist; or
i
(II) such principal amount or a lesser principal amount of outstanding
Series ARS set forth in Section 2(d)(ii)(C), if Sufficient Clearing Bids have not been
made.
(C) Subject to the provisions of Section 2(b) hereof, a Bid by a Potential
Holder shall constitute an irrevocable offer to purchase (in each case for settlement in same day
funds on the next ARS Interest Payment Date therefor at a price equal to 100% of the principal.
amount thereof):
(I) the principal amount of outstanding Series ARS specified in such
Bid if the Auction Rate determined as provided herein shall be higher than the rate
• specified in such Bid; or
(II) such principal amount or a lesser principal amount of outstanding
Series ARS set forth in Section 2(d)(i)(E), if the Auction Rate determined as provided
herein shall be equal to the rate specified in such Bid.
(b) Validity of Orders
(i) Each Broker - Dealer shall submit in writing to the Auction Agent prior to
the Submission Deadline on each Auction Date all Orders obtained by such Broker - Dealer and
shall specify with respect to each such Order:
Order,
(A) the name of the Bidder placing such Order,
(B) the aggregate principal amount of Series ARS that are the subject of such -
(C) to the extent that such Bidder is an Existing Holder:
(1) the principal amount of Series ARS, if any, subject to any Hold
Order placed by such Existing Holder;
(II) the principal amount of Series ARS, if any, subject to any Bid
• placed by such Existing Holder and the rate specified in such Bid; and
DOCSSM 356339.8 - A -3
(III) the principal amount of Series ARS, if any; subject to any Sell
• Order placed by such Existing Holder, and
(D) to the extent such Bidder is a Potential Holder, the rate specified in such
Potential Holder's Bid.
(ii) If any rate specified in any Bid contains mom than three figures to the
right of the decimal point, the Auction Agent shall round such rate up to the next higher one
thousandth (.001) of 1 %.
(iii) If an Order or Orders covering all outstanding Series ARS field by an
Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the
Auction Agent shall deem a Hold Order to have been submitted on behalf of such Existing
Holder covering the principal amount of outstanding Series ARS held by such Existing Holder
and not subject to an Order submitted to the Auction Agent.
(iv) None of the Corporation, the City, the Bond Trustee nor the Auction
Agent shall be responsible for any failure of a Broker - Dealer to submit an Order to the Auction
Agent on behalf of any Existing Holder or Potential Holder, nor shall any such party be
responsible for failure by any Securities Depository to effect any transfer or to provide the
Auction Agent with current information regarding registration of transfers.
(v) If any Existing Holder submits through a Broker - Dealer to the Auction
Agent one or more Orders covering in the aggregate more than the principal amount of
outstanding Series ARS held by such Existing Holder, such Orders shall be considere&valid as
follows and in the following order of priority:
(A) All Hold Orders shall be considered valid, but only up to and including in
the aggregate the principal amount of outstanding Series ARS held by such Existing Holder, and
if the aggregate principal amount of Series ARS subject to such Hold Orders exceeds the
aggregate principal amount of Series ARS held by such Existing Holder, the aggregate principal
amount of Series ARS subject to each such Hold Order shall be reduced so that the aggregate
principal amount of Series ARS subject to such Hold Orders equals the aggregate principal
amount of outstanding Series ARS held by such Existing Holder.
(B) (1) any Bid shall be considered valid up to and including the excess of
the principal amount of outstanding Series ARS held by such Existing Holder over the aggregate
principal amount of Series ARS subject to any Hold Order referred to in subsection (v)(A)
above;
(II) subject to subsection (v)(B)(I) above, if more than one Bid with the
same rate is submitted on behalf of such Existing Holder and the aggregate principal
amount of outstanding Series ARS subject to such Bids is greater than such excess, such
Bids shall be considered valid up to and including the amount of such excess;
(III) subject to subsections (v)(B)(I) and (v)(B)(II) above, if more than
• one Bid with different rates is submitted on behalf of such Existing Holder, such Bids
shall be considered valid first in the ascending order of their respective rates until the
DocssCi:ascsay.s - A-4
highest rate is reached at which such excess exists and then at such rate up to and
• including the amount of such excess; and.
(IV) in any such event, the amount of outstanding Series ARS,. if any,
subject to Bids not valid under this subsection (B) shall be treated as the subject of a Bid
by a Potential Holder at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to and including the excess of
the principal amount of outstanding Series ARS held by such Existing Holder over the aggregate
principal amount of Series ARS subject to Hold Orders referred to in subsection (v)(A) and valid
Bids referred to in subsection (v)(B).
(vi) If more than one Bid for Series ARS is submitted on behalf of any
Potential Holder, each Bid submitted shall be a separate Bid with the rate and principal amount
therein specified.
(vii) Any Bid or Sell Order submitted by an Existing Holder covering an
aggregate principal amount of Series ARS not equal to a Minimum Authorized Denomination
shall be rejected and shall be deemed a Hold Order. Any Bid submitted by a Potential Holder
covering an aggregate principal amount of Series ARS not equal to a Minimum Authorized
Denomination shall be rejected.
(viii) Any Bid specifying a rate higher than the ARS Maximum Rate will be
•treated as a Sell Order if submitted by an Existing Holder and will not be accepted if submitted
by a Potential Holder. Any Bid submitted by an Existing Holder or on behalf of a Potential
Holder specifying a rate lower than the All -Hold Rate shall be considered as valid and shall be
selected in the ascending order of their respective rates contained in the Submitted Bids.
•
(ix) [Reserved].
(c) Determination of Sufficient Clearing Bids and Winning Bid Rate
(i) Not earlier than the Submission Deadline on each Auction Date,
the Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by
the Broker - Dealers (each such Order as submitted or deemed submitted by a Broker -
Dealer being hereinafter referred to individually as a "Submitted Hold Order," a
"Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted
Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted
Sell Orders," as the case may be, or as "Submitted Orders') and shall determine: -
(A) the excess of the total principal amount of outstanding Series ARS over
the sum of the aggregate principal amount of outstanding Series ARS subject to Submitted Hold
Orders (such excess being hereinafter referred to as the "Available Series ART), and
(B) from the Submitted Orders whether:
DOCSSC1356339.8 A -5
(I) the aggregate principal amount of outstanding Series ARS subject
• to Submitted Bids by Potential Holders specifying one or more rates equal to or lower
than the ARS Maximum Rate
exceeds or is equal to the sum of:
(In the aggregate principal amount of outstanding Series ARS subject
to Submitted Bids by Existing Holders specifying one or more rates higher than the ARS
Maximum Rate, and
(III) the aggregate principal amount of outstanding Series ARS subject
to Submitted Sell Orders
(in the event such excess or such equality exists, other than because all of the outstanding Series
ARS are subject to Submitted Hold Orders, such Submitted Bids described in subclause (I)
above shall be referred to collectively as "Sufficient Clearing Bids'); and
(C) if Sufficient Clearing Bids exist, the lowest rate _specified in such
Submitted Bids (the "Winning Bid Rate ") such that if:
(1) (aa) each such Submitted Bid from Existing Holders specifying
such lowest rate and (bb) all other Submitted Bids from Existing Holders specifying
lower rates were rejected, thus entitling such Existing Holders to continue to hold the
principal amount of Series ARS subject to such Submitted Bids, and
• (II) (aa) each such Submitted Bid from Potential Holders specifying
such lowest rate and (bb) all other Submitted Bids from Potential Holders specifying
lower rates were accepted,
•
the result would be that such Existing Holders described in subsection (C)(1)
above would continue to hold an aggregate principal amount of outstanding Series ARS which, -
when added to the aggregate principal amount of outstanding Series ARS to be purchased by
such Potential Holders described in subsection (C)(II) above, would equal not less than the
Available Series ARS.
(ii) Promptly after the Auction Agent has made the determinations pursuant to
Section 2(c)(i) hereof, the Auction Agent shall advise the Broker - Dealer and the Bond Trustee of
the All -Hold Rate and the components thereof on the Auction Date and,. based on such
determinations, the Auction Rate for the next succeeding ARS Interest Period as follows: "
(A) if Sufficient Clearing Bids exist, that the Auction Rate for the next
succeeding ARS Interest Period shall be equal to the Winning Bid Rate so determined;
(B) if Sufficient Clearing Bids do not exist (other than because all of the
outstanding Series ARS are subject to Submitted Hold Orders), that the Auction Rate for the next
succeeding ARS Interest Period shall be equal to the ARS Maximum Rate; or
nocsscr.'356339.9 - A -6
(C) if all outstanding Series ARS are subject to Submitted Hold Orders, that
•the Auction Rate for the next succeeding ARS Interest Period shall be equal to the All -Hold
Rate.
(d) Acceptance and Rejection of Orders
Existing Holders shall continue to hold the principal amount of Series ARS that
are subject to Submitted Hold Orders, and, based on the determinations made pursuant to Section
2(c)(i) hereof, Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(i) if Sufficient Clearing Bids have been made, all Submitted Sell Orders
shall be accepted and, subject to the provisions of Sections 2(d)(iv) and 2(d)(v), Submitted Bids
shall be accepted or rejected as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is higher than
the Winning Bid Rate shall be accepted, thus requiring each such Existing.Holder to sell the
aggregate principal amount of Series ARS subject to such Submitted Bids;
(B) Existing Holders' Submitted Bids specifying any rate that is lower than
the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to
hold the aggregate principal amount of Series ARS subject to such Submitted Bids;
•(C) Potential Holders' Submitted Bids specifying any rate that is lower than
the Winning Bid Rate shall be accepted;
(D) each Existing Holder's Submitted Bid specifying a rate that is equal to the
Winning Bid Rate shall be rejected, thus entitling such Existing Holder to continue to hold the
aggregate principal amount of Series ARS subject to such Submitted Bid, unless the aggregate
principal amount of, outstanding Series ARS subject to all such Submitted Bids shall be greater
than the principal amount of Series ARS (the "remaining principal amount ") equal to the excess
of the Available Series ARS over the aggregate principal amount of Series ARS subject to
Submitted Bids described in subsections (B) and (C) of this Section 2(d)(i), in which event such
Submitted Bid of such Existing Holder shall be rejected in part, and such Existing Holder shall
be entitled to continue to hold the principal amount of Series ARS subject to such Submitted Bid,
but only in an amount equal to the aggregate principal amount of Series ARS obtained by
multiplying the remaining principal amount by a fraction, the numerator of which shall be the
principal amount of outstanding Series ARS held by such Existing Holder subject to such
Submitted Bid and the denominator of which shall be the sum of the principal amount of
outstanding Series ARS subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate; and
. (E) Each Potential Holder's Submitted Bid specifying a rate that is equal to
the Winning Bid Rate shall be accepted, but only in an amount equal to the principal amount of
Series ARS obtained by multiplying the excess of the aggregate principal amount of Available
Series ARS over the aggregate principal amount of Series ARS subject to Submitted Bids
is described in subsections (B), (C) and (D) of this Section 2(d)(i) by a fraction the numerator of
DOCSSCI:356339.8 _ A -%
which shall be the aggregate principal amount of outstanding Series ARS subject to such
•Submitted Bid and the denominator of which shall be the sum of the principal amount of
outstanding Series ARS subject to Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because all of
the outstanding Series ARS are subject to submitted Hold Orders), subject to the provisions of
Sections 2(d)(iv) and (v), Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is equal to or
lower than the ARS Maximum Rate shall be rejected, thus entitling such Existing Holders to
continue to hold the aggregate principal amount of Series ARS subject to such Submitted Bids;
(B) Potential Holders' Submitted Bids specifying any rate that is equal to or
lower than the ARS Maximum Rate shall be accepted, and specifying any rate that is higher than
the ARS Maximum Rate shall be rejected; and
(C) each Existing Holder's Submitted Bid specifying any rate that is higher
than the ARS Maximum Rate and the Submitted Sell Order of each Existing Holder shall be
accepted, thus entitling each Existing Holder that submitted any such Submitted Bid or
Submitted Sell Order to sell the Series ARS subject to such Submitted Bid or Submitted Sell
Order, but in both cases only in an amount equal to the aggregate principal amount of Series
•ARS obtained by multiplying the aggregate principal amount of Series ARS subject to Submitted
Bids described in subsection (B) of this Section 2(d)(ii) which are accepted by a fraction the
numerator of which shall be the aggregate principal amount of outstanding Series ARS held by
such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator
of which shall be the aggregate principal amount of outstanding Series ARS subject to all such
Submitted Bids and Submitted Sell Orders.
U
(iii) If all outstanding Series ARS are subject to Submitted Hold Orders, all
Submitted Bids shall be rejected.
(iv) If, as a result of the procedures described in Section 2(d)(i) or 2(d)(ii), any
Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled
or required to purchase, a principal amount of Series ARS that is not equal to a Minimum
Authorized Denomination the Auction Agent shall, in such manner as in its sole discretion it
shall determine, round up or down the principal amount of Series ARS to be purchased or sold
by any Existing Holder or Potential Holder so that the principal amount of Series ARS purchased -
or sold by each Existing Holder or Potential Holder shall be .equal to a Minimum Authorized
Denomination.
(v) If, as a result of the procedures described in Section 2(d)(ii), any Potential
Holder would be entitled or required to purchase less than a Minimum Authorized Denomination
of Series ARS, the Auction Agent shall, in such manner as in its sole discretion it shall
determine, allocate Series ARS for purchase among Potential Holders so that only Series ARS in
DOCSSCl356339.8 A -8
Minimum Authorized Denominations are purchased by any Potential Holder, even if such
• allocation results in one or more of such Potential Holders not purchasing any Series ARS.
(vi) The Corporation, the City, Bond Trustee, Broker- Dealer and Auction
Agent shall have no liability in the event that there are not Sufficient Clearing Bids from time to
time pursuant to the Auction Procedures.
(e) Settlement Determinations
Based on the result of each Auction, the Auction Agent shall determine the
aggregate principal amount of Series ARS to be purchased and the aggregate principal amount of
Series ARS to be sold by Potential Holders and Existing Holders on whose behalf each Broker -
Dealer Submitted Bids or Sell Orders and, with respect to each Broker - Dealer, to the extent that
such aggregate principal amount of Series ARS to be sold differs from such aggregate principal
amount of Series ARS to be purchased, determine to which other Broker- Dealer or Broker
Dealers acting for one or more purchasers such Broker- Dealer shall deliver, or from which other
Broker - Dealer or Broker - Dealers acting for one or more sellers such Broker - Dealer shall receive,
as the case maybe, Series ARS.
(f) Rate Determination
Any calculation by the Auction Agent (or the Bond Trustee, if applicable) of the
Applicable ARS Rate, the All -Hold Rate and the Non - Payment Rate shall, in the absence of
• manifest error, be binding on all ARS Beneficial Owners and all other parties.
Section 3. Settlement Procedures.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the
Auction Agent shall notify by telephone (or by other means acceptable to the parties) each
Broker - Dealer that participated in the Auction held on such Auction Date and submitted an
Order on behalf of an Existing Holder or Potential Holder of-
(i) the Auction Rate fixed for the next ARS Interest Period;
(ii) whether there were Sufficient Clearing Bids in such Auction;
(iii) if such Broker - Dealer (a "Seller's Broker - Dealer ") submitted a Bid or a
Sell Order on behalf of an Existing Holder, whether such Bid or Sell Order was accepted or
rejected, in whole or in part, and the principal amount of Series ARS, if any, to be sold by such
Existing Holder;
(iv) if such Broker - Dealer (a "Buyer's Broker - Dealer") submitted a Bid on
behalf of a Potential Holder, whether such Bid was accepted or rejected, in whole or in part, and
the principal amount of Series ARS, if any, to be purchased by such Potential Holder,
(v) if the aggregate principal amount of Series ARS to be sold by all Existing
Holders on whose behalf such Broker- Dealer submitted a Bid or a Sell Order exceeds the
•
aggregate principal amount of Series ARS to be purchased by all Potential Holders on whose
DOCSSCI:356339.8 A-9
behalf such Broker - Dealer submitted a Bid, the name or names of one or more Buyer's Broker-
Dealers (and the name of the Participant, if any, of each such Buyer's Broker - Dealer) acting for
one or more purchasers of such excess principal amount of Series ARS and the principal amount
of Series ARS to be purchased from one or more Existing Holders on whose behalf such Broker -
Dealer acted by one or more Potential Holders on whose behalf each of such Buyer's Broker -
Dealers acted;
(vi) if the principal amount of Series ARS to be purchased by'all Potential
Holders on whose behalf such Broker- Dealer submitted a Bid exceeds the aggregate principal
amount of Series ARS to be sold by all Existing Holders on whose behalf such Broker - Dealer
submitted a Bid or a Sell Order, the name or names of one or more Seller's Broker - Dealers (and
the name of the Participant, if any, of each such Seller's Broker- Dealer) acting for one or more
sellers of such excess principal amount of Series ARS and the principal amount of Series ARS to
be sold to one or more Potential Holders on whose behalf such Broker - Dealer acted by one or
more Existing Holders on whose behalf each of such Seller's Broker - Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker - Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose behalf such
Broker - Dealer submitted a Bid or Sell Order in the Auction on such Auction Date whether such
• Bid or Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker - Dealer that is a Buyer's Broker - Dealer, advise each
Potential Holder on whose behalf such Broker - Dealer submitted a Bid that was accepted, in
whole or in part, to instruct such Potential Holder's Participant to pay to such Broker - Dealer (or
its Participant) through the Securities Depository the amount necessary to purchase the principal
amount of Series ARS to be purchased pursuant to such Bid against receipt of such Series ARS;
(iii) in the case of a Broker - Dealer that. is a Seller's Broker - Dealer, instruct
each Existing Holder on whose behalf such Broker - Dealer submitted a Sell Order that was
accepted, in whole or in part, or a Bid that was accepted, in whole or in part, to instruct such
Existing Holder's Participant to deliver to such Broker - Dealer (or its Participant) through the
Securities Depository the principal amount of Series ARS to be sold pursuant to such Order
against payment therefor;
(iv) advise each Existing Holder on whose behalf such Broker - Dealer
submitted an Order and each Potential Holder on.whose behalf such Broker - Dealer submitted a
Bid of the Auction Rate for the next ARS Interest Period;
(v) advise each Existing Holder on whose behalf such Broker - Dealer
submitted an Order of the next Auction Date; and
(vi) advise each Potential Holder on whose behalf such Broker - Dealer
• submitted a Bid that was accepted, in whole or in part, of the next Auction Date.
DOCSSC1:356339.8- A -10
•(c) On the basis of the information provided to it pursuant to Section 3(a),
each Broker - Dealer that submitted a Bid or Sell Order in an Auction is required to allocate any
funds received by it in connection with such Auction pursuant to Section 3(b)(ii), and any.Series
ARS received by it in connection with such Auction pursuant to Section 3(b)(iii) among the
Potential Holders, if any, on whose behalf such Broker - Dealer Submitted Bids, the Existing
Holders, if any on whose behalf such Broker - Dealer Submitted Bids or Sell Orders in such
Auction, and any Broker - Dealers identified to it by the Auction Agent following such Auction
pursuant to Section 3(a)(v) or 3(a)(vi).
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder with an Order in the Auction on
such Auction Date shall instruct its Participant as provided in Section 3(b)(ii) or 3(b)(iii), as the
case may be;
(ii) each Seller's Broker - Dealer that is not a Participant of the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to the
Participant of the Existing Holder delivering Series ARS to such Broker - Dealer following such
Auction pursuant to Section 3(b)(iii) the amount necessary to purchase such Series ARS against
receipt of such Series ARS, and (B) deliver such Series ARS through the Securities Depository
to a Buyer's Broker - Dealer (or its Participant) identified to such Seller's Broker - Dealer pursuant
to Section 3(a)(v) against payment therefor; and
•(iii) each Buyer's Broker - Dealer that is not a Participant in the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to Seller's
Broker - Dealer (or its Participant) identified following such Auction pursuant to Section 3(a)(vi)
the amount necessary to purchase the Series ARS to be purchased pursuant to Section 3(b)(ii)
against receipt of such Series ARS, and (B) deliver such Series ARS through the Securities
Depository to the Participant of the purchaser thereof against payment therefor.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date referred
to in Section 3(d)(i) shall instruct the Securities Depository to execute the transactions described
under Section 3(b)(ii) or 3(b)(iii) for such Auction, and the Securities Depository shall execute
such transactions;
(ii) each Seller's Broker - Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in Section 3(d)(ii) for such Auction, and the -
Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker - Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in Section 3(d)(iii) "for such Auction, and the
Securities Depository shall execute such transactions.
(f) If an Existing Holder selling Series ARS in an Auction fails to deliver
• such Series ARS (by authorized book - entry), a Broker - Dealer may deliver to the Potential
Holder on behalf of which it submitted a Bid that was accepted a principal amount of Series ARS
Docssci:356339.8 A -11
•that is less than the principal amount of Series ARS that otherwise was to be purchased by such
Potential Holder. In such event, the principal amount of Series ARS to be so delivered shall be
determined solely by such Broker - Dealer. Delivery of such lesser principal amount of Series
ARS shall constitute good delivery. Notwithstanding the foregoing terms of this subsection, any
delivery or nondelivery of Series ARS which shall represent any departure from the results of an
Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction
Agent shall have been notified of such delivery or nondelivery in accordance with the provisions
of the Auction Agent Agreement and the Broker - Dealer Agreements.
•
is
DOCSSCI356339.8 A-12
•
EXHIBIT B
FORM OF NOTICE OF CURE OF ARS PAYMENT DEFAULT
CITY OF NEWPORT BEACH'
INSURED REVENUE BONDS
(HOAG MEMORIAL HOSPITAL PRESBYTERIAL
SERIES 2005A, 2005B AND 2005C
NOTICE IS HEREBY GIVEN that the ARS Payment Default with respect to
Series 2005_ of the Bonds identified above has been waived or cured. The next ARS Interest
Payment Date is and the next scheduled Auction Date is
Dated:
Wells Fargo Bank, National Association,
as Bond Trustee
DOCSSCl:356339.8 B -1
Authorized Signatory
• EXHIBIT C
FORM OF REQUISITION - PROJECT FUND
REQUISITION NO. _ - PROJECT FUND
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005A. 2005B and 2005C
Hoag Memorial Hospital Presbyterian (the "Corporation ") hereby requests Wells
Fargo Bank, National Association (the "Bond Trustee "), as trustee under that certain bond
indenture between the City of Newport Beach (the "City") and the Bond Trustee, dated as of
August 1, 2005, relating to the City of Newport Beach Insured Revenue Bonds (Hoag Memorial
Hospital Presbyterian), Series 2005A, 2005B and 2005C (the "Bonds "), to pay to the following
Persons the following amounts for the following purposes from the Project Fund:
Item
No. To Amount Purpose
• The Corporation hereby certifies that obligations in the amounts stated above
have been incurred by the Corporation and are presently due and payable, and that each item is a
proper charge against the indicated fund and has not been previously paid from said fund or from
tlie proceeds of the Bonds.
•
Dated:
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
Lo
DOCSSCI:356339.8 _ C -1
Authorized Representative
EXHIBIT D
• FORM OF REQUISITION - COSTS OF ISSUANCE FUND
REQUISITION NO. _ - COSTS OF ISSUANCE FUND
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005A. 2005B and 2005C
Hoag Memorial Hospital Presbyterian (the "Corporation ") hereby requests Wells
Fargo Bank, National Association (the "Bond Trustee "), as Bond Trustee under that certain
bond indenture between the City of Newport Beach (the "City") and the Bond Trustee, dated as
of August 1, 2005, relating to the City of Newport Beach Insured Revenue Bonds (Hoag
Memorial Hospital Presbyterian), Series 2005A, 2005B and 2005C (the "Bonds "), to pay to the
following Persons the following amounts for the following purposes from the Costs of Issuance
Fund:
ITEM NO. TO AMOUNT PURPOSE
The Corporation hereby certifies that obligations in the amounts stated above
•have been incurred by the Corporation and are presently due and payable, and that each item is a
proper charge against the Costs of Issuance Fund and has not been previously paid from said
fund or from the proceeds of the Bonds.
E
Dated: 200
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
DOCSSC1:356339.6 .._ D -1
Authorized Representative
EXHIBIT NO.5
Loan Agreement
(executed by the City and
the Corporation)
(BC)
Cl
•
•
DOCSSCl:3563335
EXECUTION COPY
CITY OF NEWPORT BEACH
and
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
LOAN AGREEMENT
Dated as of August 1, 2005
relating to
$200,000,000
CITY OF NEWPORT BEACH
INSURED REVENUE BONDS
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005A, 2005B and 2005C
TABLE OF CONTENTS
• Page
ARTICLE I
DEFINITIONS; INTERPRETATION
Section I.I. Definitions ................................................. : ................................ .......... 2
Section 1.2. Interpretation ......................................................... ............................... 2
Section 1.3. Content of Certificates and Opinions ..................... ..............................2
ARTICLE H
ISSUANCE OF BONDS AND OBLIGATION NO. 14
Section2.1. The Bonds ............................................................. ............................... 2
Section 2.2. Issuance of Obligation No. 14 .............................. ... ............................. 2
Section 2.3. Restrictions on Number and Transfer of Obligation No. 14 ................ 3
ARTICLE III
LOAN OF PROCEEDS; PAYMENTS
• Section 3.1. Loan of Proceeds; Payments of Principal, Premium and Interest........ 3
Section 3.2. Additional Payments .................................................. :......................... 4
Section 3.3. Credits for Payments ............................................. ............................... 5
Section3.4. Prepayment ......:.................................................... ............................... 5
Section 3.5. Payment of Purchase Price of Purchased Bonds ... ............................... 6
Section 3.6. Obligations Unconditional .................................... ............................... 6
Section 3.7. Condition Precedent .............................................. ............................... 7
ARTICLE IV
FINDINGS BY THE CITY; REPRESENTATIONS
AND WARRANTIES OF THE CORPORATION
Section 4.1. Findings by the City ............................................. : ............................... 7
Section 4.2. Representations and Warranties of the Corporation ............................ 8
ARTICLE V
COVENANTS
Section 5.1. Incorporation by Reference ................................... .............................10
DOCSSC1:356333.5 _j_
TABLE OF CONTENTS
(continued)
• Page
Section 5.2. Prohibited Uses ..................................................... .............................10
Section 5.3.
Nonliability of the City ......................................... .............................10
15
Section5.4.
Expenses ............................................................... .............................11
Section 5.5.
Tax Covenant ...................................................... ...............................
l l
Section 5.6.
Indemnification of the Bond Trustee and the City .................:...........12
Section 5.7.
Liquidity Facility; Alternate Liquidity Facility .... .............................13
Section 5.8.
Continuing Disclosure .......................................... .............................14
Section 5.9.
Acquisition, Construction and Installation of the Project ..................14
Section 5.10.
Disbursements from the Project Fund ................... .............................15
Section 5.11.
Compliance with Bond Indenture ......................... .............................15
Section 5.12.
Waiver of Personal Liability ................................. .............................15
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
• Section 6.1.
Events of Default ................................................ ...............................
15
Section 6.2.
Remedies on Default ............................................. .............................16
Section 6.3.
Discontinuance or Abandonment of Default Proceedings .................17
Section 6.4.
Remedies Cumulative ........................................... .............................17
Section 6.5.
Application of Moneys Collected ......................... .............................17
Section 6.6.
Attorney's Fees and Other Expenses .................... .............................17
Section 6.7..
Notice of Default ................................................... .............................17
Section 7.1.
Section 7.2.
Section 7.3.
Section 7.4.
Section 7.5.
Section 7.6.
• Section 7.7.
DOCSSC1:356333.5
ARTICLE VII
MISCELLANEOUS
Amendments and Supplements ............................. .............................18
Time of the Essence; Non - Business Days ............ .............................18
BindingEffect ....................................................... .............................18
Entire Agreement; Third Party Beneficiaries ....... .............................18
Severability........................................................... .............................18
Notices.................................................................. .............................18
Consent of the Bond Insurer ................................. .............................19
_ll_
•
•
TABLE OF CONTENTS
(continued)
Page
Section7.8. Term .................................................................... ............................... 20
Section 7.9. Counterparts .......................................................... .............................20
Section 7.10. Governing Law; Venue ......................................... .............................20
DOCSSC1356333.5
-iii-
This LOAN AGREEMENT, dated as of August 1, 2005 (the "Loan Agreement "),
• between the CITY OF NEWPORT BEACH, a municipal corporation and charter city duly
organized under a freeholder's charter under the Constitution and laws of the State of California
(the "City"), and HOAG MEMORIAL HOSPITAL PRESBYTERIAN (the "Corporation"), a
nonprofit public benefit corporation duly organized and existing under the laws of the State of
California;
WITNESSETH:
WHEREAS, the City has the right and power to make and enforce all laws and
regulations in respect to municipal affairs and certain other matters in accordance with and as
more particularly provided in Sections 3, 5 and 7 of Article XI of the Constitution of the State of
California and Section 200 of Article II of the charter of the City (the "Charter");
WHEREAS, the City Council of the City, acting under and pursuant to the powers
reserved to the City under Sections 3, 5 and 7 of Article XI of the Constitution of the State of
California and Section 200 of Article II of the Charter, has duly enacted Ordinance No. 85 -23
and 84 -4 of the City (the "Law"), establishing a procedure for the authorization, sale and
issuance of revenue bonds by the City for the purpose, inter alia, of making loans to participating
health institutions to finance and refinance health facilities as provided iri the Law;
WHEREAS, the Corporation has requested the assistance of the City in the
financing of the acquisition, construction, and equipping of health facilities located within the
• City;
WHEREAS, after due investigation and deliberation, the City has approved said
request and authorized the issuance of its Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, 2005B and 2005C (collectively, the `Bonds') in the aggregate
principal amount of two hundred million dollars ($200,000,000) to accomplish such purposes in
accordance with the Law;
WHEREAS, pursuant to a master indenture, dated as of October 1, 1984 (the
"Master, Indenture "), as supplemented or amended, between the Corporation and such other
Members as may join the obligated group as defined therein (the "Obligated Group') and Wells
Fargo Bank, National Association, as successor master trustee (the "Master Trustee "), and a
Supplemental Master Indenture for Obligation No. 14, dated as of August 1, 2005, between the
Corporation and the Master Trustee ( "Supplement No. 14 "), the Corporation has issued its
Obligation No. _ 14 to evidence the obligation of the Members to make all payments under this
Loan Agreement, including amounts sufficient to pay the principal of and premium and interest
on the Bonds;
WHEREAS, the Corporation has requested the City to enter into this loan
agreement specifying the terms and conditions of a loan by the City to the Corporation of the
proceeds of the Bonds and of the payment by the Corporation to the City of the amounts required
for the payment of the principal of, and interest and premium, if any, on the Bonds and certain
• related expenses;
DOCSSCI:356333.5
WHEREAS, the City and the Corporation have each duly authorized the
• execution, delivery and performance of this Loan Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1. Definitions. Unless otherwise required by the context, all terms
used herein shall have the meanings assigned to such terms in Section 1.01 of the Bond
Indenture between the City and Wells Fargo Bank, National Association, as trustee (the "Bond
Trustee "), dated as of August 1, 2005, as originally executed and as amended or supplemented
from time to time.
Section- 1.2. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular
shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is
for convenience only and shall be deemed to mean and include the neuter, masculine or feminine
gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof
• are solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof.
Section 1.3. Content of Certificates and Opinions. Every certificate or opinion
provided for in this Loan Agreement with respect to compliance with any provision hereof shall
include the requirements set forth in Section 1.02 of the Bond Indenture.
ARTICLE II
ISSUANCE OF BONDS AND OBLIGATION NO. 14
Section 2.1. The Bonds. Pursuant to the Bond Indenture, the City has
authorized the issuance of the Bonds in the aggregate principal amount of two hundred million
dollars ($200,000,000). The Corporation hereby approves the Bond Indenture, the assignment
thereunder to the Bond Trustee of the right, title and interest of the City (with certain exceptions
noted therein) in this Loan Agreement and Obligation No. 14 and the issuance thereunder by the
City of the Bonds. All rights accruing to or vested in the City with respect to Obligation No. 14
may be exercised by the Bond Trustee.
Section 2.2. Issuance of Obligation No. 14. In consideration of the issuance of
the Bonds by the City and the application of the proceeds thereof as provided in the Bond
Indenture, the Corporation agrees to issue and to cause to be authenticated and delivered to the
• City or its designee, pursuant to the Master Indenture and Supplement No. 14, concurrently with
the issuance and delivery of the Bonds, Obligation No. 14 in substantially the form set forth in
DOCSSC13563335 2 +
•Section 11 of Supplement No: 14. The City agrees that Obligation No. 14 shall be registered in
the name of the Bond Trustee. The Corporation agrees that the aggregate principal amount of
Obligation No. 14 shall be limited to two hundred million dollars ($200,000,000), except for any
Obligation No. 14 authenticated and delivered in lieu of another Obligation No. 14 as provided
in Section 6 of Supplement No. 14 with respect to the mutilation, destruction, loss or theft of
Obligation No. 14, issuance and delivery of the Bonds by the City shall be a condition of the
issuance and delivery of Obligation No. 14.
Section 2.3. Restrictions on Number and Transfer of Obligation No. 14.
(a) The Corporation agrees that, except as provided in subsection (b) of this
Section, so long as any Bond remains Outstanding, Obligation No. 14 shall be issuable only as a
single obligation without coupons, registered as to principal and interest in the name of the Bond
Trustee, and no transfer of Obligation No. 14 shall be registered under the Master Indenture or be
recognized by the Corporation except for transfers to a successor Bond Trustee.
(b) Upon the principal of all Obligations Outstanding (withirf the meaning of
that term as used in the Master Indenture) being declared immediately- due and payable,
Obligation No. 14 may be transferred if and to the extent that the Bond Trustee requests that the
restrictions of subsection (a) of this Section on transfers be terminated.
ARTICLE III
• LOAN OF PROCEEDS; PAYMENTS
Section 3.1. Loan of Proceeds: Payments of Principal, Premium and Interest.
•
(a) The City hereby lends and advances to the Corporation, and the
Corporation hereby borrows and accepts from the City a loan in a principal amount equal to the
aggregate principal amount of the Bonds, the net proceeds of which loan shall be equal to the net
proceeds received from the sale of the Bonds, such proceeds to be applied under the terms and
conditions of this Loan Agreement and the Bond Indenture. In consideration of the loan of such
proceeds to the Corporation, the Corporation agrees to pay, or cause to be. paid, "Loan
Repayments" in an amount sufficient to enable the Bond Trustee to make the transfers and
deposits required at the times and in the amounts pursuant to Section 5.02 of the Bond Indenture.
Each Loan Repayment shall be made in immediately available funds at least three days prior to
the time the Bond Trustee must make each transfer and deposit pursuant to Section 5.02 of the
Bond Indenture. Notwithstanding the foregoing, the Corporation agrees to make payments, or
cause payments to be made, at the times and in the amounts required to be paid as principal or
Redemption Price of and interest on the Bonds from time to time Outstanding under the Bond
Indenture and other amounts required to be paid under the Bond Indenture, as the same shall
become due whether at maturity, upon redemption, by declaration of acceleration or otherwise.
(b) Except as otherwise expressly provided herein, all amounts payable with
respect to Obligation No. 14 or hereunder by the Corporation to the City shall be paid to the
Bond Trustee or other parties entitled thereto as assignee of the City and this Loan Agreement
DOCSSC1356333.5 3
and all right, title and interest of the City in any such payments are hereby assigned and pledged
• to the Bond Trustee so long as any Bonds remain Outstanding.
Section 3.2. Additional Payments. In addition to Loan Repayments and
payments on Obligation No. 14, the Corporation shall also pay to the City, the Bond Trustee, the
Tender Agent, (if any) the Liquidity Facility Provider (if any), the Bond Insurer, the Auction
Agent (if any), the Broker - Dealer (if any) or the designated agent of any of them, as the case may
be, "Additional Payments," as follows:
(a) All taxes and assessments of any type or character charged to the City or
to the Bond Trustee affecting the amount available to the City or the Bond Trustee from
payments to be received hereunder or in any way arising due to the transactions contemplated
hereby (including taxes and assessments assessed or levied by any public agency or
governmental authority of whatsoever character having power to levy taxes or assessments) but
excluding franchise taxes based upon the capital and/or income of the Bond Trustee and taxes
based upon or measured by the net income of the. Bond Trustee; provided, however, that the
Corporation shall have the right to protest any such taxes or assessments and to require the City
or the Bond Trustee, at the Corporation's expense, to protest and contest' any such taxes or
assessments levied upon them and that the Corporation shall have the right to withhold payment
of any such taxes or assessments pending disposition of any such protest or contest unless such
withholding, protest or contest would adversely affect the rights or interests of the City or the
Bond Trustee;
• (b) All reasonable fees, charges, expenses and indemnities of the Bond
Trustee and the Tender Agent (if any) hereunder and under the Bond Indenture, the reasonable
fees, charges, expenses and indemnities of the Liquidity Facility Provider (if any) under the
Liquidity Facility (if any), the Auction Agent (if any) and the Broker - Dealer (if any), as and
when the same become due and payable;
n
(c) The reasonable fees and expenses of such accountants, consultants,
attorneys and other experts as may be engaged by the City or the Bond Trustee to prepare audits,
financial statements, reports, opinions or provide such other services required under this Loan
Agreement, Supplement No. 14, Obligation No. 14 or the Bond Indenture;
(d) The reasonable fees and expenses of the City, or any agent selected by the
City to act on its behalf, in connection with this Loan Agreement, Supplement No. 14,
Obligation No. 14, the Bonds or the Bond Indenture, including any and all fees and expenses
incurred in connection with the authorization, issuance, sale and delivery of any such Bonds or
by the City's attorneys in connection with any litigation which may at any time be instituted
involving this Loan Agreement, Supplement No. 14, Obligation No. 14, the Bonds or the Bond
Indenture or any of the other documents contemplated thereby, or in connection with the
supervision or inspection of the Corporation, any Members, their properties, assets or operations
or otherwise in connection with the administration of this Loan Agreement;
(e) Any amounts due to the Bond Insurer hereunder or under the Bond
Indenture; and
DOCSSC1356333.5
(f) All other reasonable and necessary fees and expenses attributable to the
Bonds, this Loan Agreement, Obligation No. 14 or related documents, including without
•
limitation all payments required pursuant to the Tax Agreement.
Such Additional Payments shall be billed to the Corporation by or upon direction
of the City, the Bond Trustee, the Tender Agent, (if any), the Auction Agent (if any), the Broker -
Dealer (if any), the Bond Insurer or the Liquidity Facility Provider (if any) from time to time,
together with a statement certifying that the amount billed has been incurred or paid for one or
more of the above items. After such a demand, amounts so billed shall be paid by the
Corporation within thirty (30) days after receipt of the bill by the Corporation.
The obligations of the Corporation under this Section shall survive the resignation
or removal of the Bond Trustee or Tender Agent (if any) under the Bond Indenture and payment
of the Bonds and discharge of the Bond Indenture.
Section 3.3. Credits for Payments. The Corporation shall receive credit against
its payments required'to be made under Section 3.1, in addition to any credits iesulting from
payment or repayment from other sources, as follows:
(a) on installments of interest in an amount equal to moneys deposited in the
Interest Account, which amounts are available to pay interest on the Bonds, to the extent such
amounts have not previously been credited against such payments;
• (b) on installments of principal in an amount equal to moneys deposited in the
Principal Account, which amounts are available to pay principal of the Bonds, to the extent such
amounts have not previously been credited against such payments;
(c) on installments of principal and interest in an amount equal to the
principal amount of Bonds for .the payment at maturity or redemption of which sufficient
amounts (as determined by Section 10.03 of the Bond Indenture) in cash or United States
Goverment Obligations are on deposit as provided in Section 10.03 of the Bond Indenture to the
extent such amounts have not previously been credited against such payments, and the interest
on such Bonds from and after the date fixed for payment at maturity or redemption thereof. Such
credits shall be made against the installments of principal and interest which would have been
used, but for such call for redemption, to pay principal of and interest on such Bonds when due;
and
(d) on installments of principal and interest in an amount equal to the
principal amount of Bonds acquired by the Corporation and surrendered to the Bond Trustee for
cancellation or purchased by the Bond Trustee on behalf of the Corporation and canceled, and
the interest on such Bonds from and after the date interest thereon has been paid prior to
cancellation. Such credits shall be made against the installments of principal and interest which
would have been used, but for such cancellation, to pay principal of and interest on such Bonds
when due.
Section 3.4. Prenavment. The Corporation shall have the right, so long as all
• amounts which have become due hereunder have been paid, at any time or from time to time to
prepay all or any part of the Loan Repayments and the City agrees that the Bond Trustee shall
DOCSSCI:356333.5
accept such prepayments when the same are tendered. Prepayments may be made by payments
• of cash, deposit of United States Government Obligations or surrender of Bonds, as
contemplated by subsections 3.3(c) and (d). All such prepayments (and the additional payment
of any amount necessary to pay the applicable premium, if any, payable upon the redemption of
Bonds) shall be deposited upon receipt at the Corporation's direction in (i) the Principal
Account, (ii) the Optional Redemption Account of the Redemption Fund if the Bonds are to be
redeemed _pursuant to Section 4.01(B), (C), (D) or (E) of the Bond Indenture, or (iii) the Special
Redemption Account of the Redemption Fund if the Bonds are to be redeemed pursuant to
Section 4.01(A) or (G) of the Bond Indenture (or in such other Bond Trustee escrow account as
may be specified by the Corporation) and, at the request of and as determined by the
Corporation, credited against payments due hereunder or used for the redemption or purchase of
Outstanding Bonds in the manner and subject to the terms and conditions set forth in the Master
Indenture and the Bond Indenture. Notwithstanding any such prepayment or surrender of Bonds,
as long as any Bonds remain Outstanding or any Additional Payments required to be made
hereunder remain unpaid, the Corporation shall not be relieved of its obligations hereunder.
Section 3.5. Payment of Purchase Price of Purchased Bonds.
(a) The Corporation agrees that, if a Liquidity Facility is not in effect with
respect to a Series of Bonds or if the Liquidity Facility Provider has not paid the full amount
required by the Bond Indenture at the times required under the Bond Indenture, it shall pay to the
Tender Agent all amounts necessary for the purchase of Bonds of such Series pursuant to.Section
4.10 of the Bond Indenture and not deposited with the Tender Agent by the Remarketing Agent
• from the proceeds of the sale of such Bonds pursuant to Section 4.10 of the Bond Indenture.
Each such payment by the Corporation to the Tender Agent pursuant to this Section shall be in
immediately available funds and paid to the Tender Agent at its Principal Office by 3:00 p.m.,
New York City time, on each date upon which a payment is to be made pursuant to Section 4.10
of the Bond Indenture.
is
(b) If the Fixed Rate Conversion Date for a Series of Bonds is established
pursuant to the Bond Indenture, the obligations of the Corporation pursuant to this Section 3.5
with respect to such Bonds shall be terminated following the Fixed Rate Conversion Date.
Section 3.6. Obligations Unconditional. The obligations of the Corporation
hereunder and pursuant to Obligation No. 14 are absolute and unconditional, notwithstanding
any other provision of this Loan Agreement, Supplement No. 14, Obligation No. 14, the Master
Indenture or the Bond Indenture. Until this Loan Agreement is terminated and all payments
hereunder are made, the Corporation:
(a) will pay all amounts required hereunder and under Obligation No. 14
without abatement, deduction or setoff except as otherwise expressly provided in this Loan
Agreement;
(b) will not suspend or discontinue any payments due hereunder or under
Obligation No. 14 for any reason whatsoever, including, without limitation, any right of setoff or
counterclaim;
DOCSSC1356333.5 6
(c) will perform and observe all its other agreements contained in this Loan
• Agreement; and
(d) except as provided herein, will not terminate this Loan Agreement for any
cause, including, without limiting the generality of the foregoing, damage, destruction or
condemnation of the facilities financed or refinanced with the proceeds of the Bonds or any part
thereof, commercial frustration of purpose, any change in the tax or other laws of the United
States of America, the State of California or any political subdivision of either, or any failure of
the City to perform and observe any agreement, whether express or implied, duty, liability or
obligation arising out of or connected with this Loan Agreement. Nothing contained in this
Section 3.6 shall be construed to release the City from the performance of any of the agreements
on its part contained herein, and in the event the City should fail to perform any such agreement
on its part, the Corporation may institute such action against the City as the Corporation may
deem necessary to compel performance.
The rights of the Bond Trustee, the Bond Insurer or any party or parties on behalf
of whom the Bond Trustee is acting shall not be subject to any defense, setoff,-c6unterclaim or
recoupment whatsoever, whether arising out of any breach of any duty or obligation of the City,
the Master Trustee, the Bond Insurer or the Bond Trustee owing to the Corporation, or by reason
of any other indebtedness or liability at any time owing by the City, the Master Trustee, the Bond
Insurer or the Bond Trustee to the Corporation.
Section 3.7. Condition Precedent. The obligation of the City to make the loan
as herein provided shall be subject to the receipt by it of the proceeds of the issuance and sale of
• the Bonds.
ARTICLE IV
•
FINDINGS BY THE CITY;
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
Section 4.1. Findings by the City. The City hereby finds and determines based
upon the representations, warranties and agreements of the Corporation and such other
information as the City deems necessary that (i) the Corporation is a "participating health
institution" and the Project is a "health facility" as such terms are defined in the Law; (ii) the
loan to be made hereunder with the proceeds of the Bonds will promote the purposes of the Law
by providing funds to pay the cost of acquiring, constructing, rehabilitating or improving health
facilities or to refinance indebtedness incurred for that purpose; (iii) said loan is in the public
interest, serves a public purpose, promotes the health, welfare and safety of the citizens of the
State of California, and meets the requirements of the Law; (iv) the portion of the proceeds of the
Bonds allocable to the cost of financing of the Project does not exceed the total cost thereof as
determined by the Corporation; and (v) no member of the City council, department head or other
officer of the City (except a member of any board or commission) is financially interested,
directly or indirectly (as interpreted in accordance with Section 608 of the Charter of the City) in
the transactions contemplated by this Loan Agreement.
DOCSSC1:356333.5
Section 4.2. Representations and Warranties of the Comoration. The
• Corporation represents and warrants to the City that, as of the date of execution of this Loan
Agreement and as of the date of delivery of the Bonds to the initial purchasers thereof and of
Obligation No. 14 to the Bond Trustee (such representations and warranties to remain operative
and in full force and effect regardless of the issuance of the Bonds or any investigation by or on
behalf of the City or the results thereof):
(a) the Corporation is a nonprofit public benefit corporation duly incorporated
and in good standing under the laws of the State of California; the Corporation has full legal
right, power and authority to enter into this Loan Agreement, Supplement No. 14 and Obligation
No. 14. and to carry out and consummate all transactions contemplated hereby and thereby and
by proper corporate action has duly authorized the execution, delivery and performance of this
Loan Agreement, Supplement No. 14 and Obligation No. 14;
(b) the officers of the Corporation executing this Loan Agreement,
Supplement No. 14 and Obligation No. 14 are duly and properly in office and fully authorized to
execute the same;
(c) this Loan Agreement, Supplement No. 14 and Obligation No. 14 have
been duly authorized, executed and delivered by the Corporation;
(d) the Master Indenture has been duly authorized, executed and delivered by
the Corporation and the Corporation has full legal right, power and authority to carry out and
• consummate all transactions contemplated;
(e) . this Loan Agreement and Obligation No. 14, when assigned to the Bond
Trustee pursuant to the Bond Indenture, will constitute the legal, valid and binding agreements'of
the Corporation, enforceable against the Corporatio)a in accordance with their terms for the
benefit of the Holders of the Bonds, and any rights of the City and obligations of the Corporation
not so assigned to the Bond Trustee constitute the legal, valid, and binding agreements of the
Corporation enforceable against the Corporation, as applicable, in accordance with their terms;
except as enforcement may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally and by the application of equitable principles if
equitable remedies are sought;
is
(f) the execution and delivery of this Loan Agreement, Supplement No. 14,
Obligation No. 14 and the consummation of the transactions herein and therein contemplated and
the fulfillment of or compliance with the terms and conditions hereof and thereof, will not
conflict with or constitute a violation or breach of or default under the articles of incorporation of
the Corporation, its bylaws or any applicable law or administrative rule or regulation, or any
applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, loan
agreement, lease, contract or other agreement or instrument to which the Corporation is a party
or by which it or its properties are otherwise subject or bound, or result in the creation or
imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of
the property or assets of the Corporation, which conflict, violation, breach, default, lien, charge
or encumbrance might have consequences that would materially and adversely affect the
DOCSSC1:3563335
consummation of the transactions contemplated by this Loan Agreement, Obligation No. 14,
• Supplement No. 14 or the financial condition, assets, properties or operations of the Corporation;
(g) no consent or approval of any trustee or holder of any indebtedness of the
Corporation and no consent, permission, authorization, order or license of, or filing or
registration with, any governmental authority is necessary in connection with the execution and
delivery of this Loan Agreement, Supplement No. 14 or Obligation No. 14 or heretofore required
for the consummation of any transaction herein or therein contemplated, except as have been
obtained or made and as are in full force and effect;
(h) there is no action, suit, proceeding, inquiry or .investigation, before or by
any court or federal, state, municipal or other governmental authority, pending, or to the
knowledge of the Corporation, after reasonable investigation, threatened, against or affecting the
Corporation or the assets, properties or operations of the Corporation which, if determined
adversely to the Corporation or its interests, would have a material adverse effect upon the
consummation of the transactions contemplated by, or the validity of, this Loan Agreement,
Obligation No. 14 or Supplement No. 14 or upon the financial condition, assets; properties or
operations of the Corporation, and the Corporation is not in default with respect to any order or
decree of any court or. any order, regulation or demand of any federal, state, municipal or other
governmental authority, which default might have consequences that would materially and
adversely affect the.consummation of the transactions contemplated by this Loan Agreement,
Obligation No. 14 or Supplement No. 14 or the financial condition, assets, properties or
operations of the Corporation. All tax returns (federal, state and local) required to be filed by or
on behalf of the Corporation have been filed, and all taxes shown thereon to be due, including
•' interest and penalties, except such, if any, as are being actively contested by the Corporation, in
good faith, have been paid or adequate reserves have been made for the payment thereof,
(i) the consolidated audited financial statements of the Corporation and its
affiliates (described in such financial statements) as of August 31, 2004, and the other financial
information and consolidated related statements of operations and changes in net assets and cash
flows for the year ended on such date (copies of which, certified by Ernst & Young, LLP
independent auditors, have been furnished to the City), fairly state the financial position of the
Corporation and its affiliates at August 31, 2004, and the results of operations of the Corporation
and its affiliates for the year ended on such date, and since August 31, 2004, there has been no
material adverse change in the condition (financial or otherwise) of the Corporation and its
affiliates, except as is specifically disclosed in the Official Statement;
(j) no written information, exhibit or report furnished to the City by the
Corporation in connection with the negotiation of this Loan Agreement, Obligation No. 14 or
Supplement No. 14 (including, without limitation, information in the Official Statement of the
City for the Bonds) contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(k) the Corporation is an organization described in Section 501(c)(3) of the
Code, is exempt from federal income tax under Section 501(a) of the Code and is not a private
• foundation as described in Section 509(a) of the Code;
DOCSSC1:356333.5 .9
(1) the Corporation is and has at all times been in compliance with all
• applicable Environmental Laws in all respects material to the ability of the Corporation to
perform its obligations with respect to the transactions contemplated by this Loan Agreement,
Obligation No. 14 or Supplement No. 14;
(m) there has been no spill, discharge, release, cleanup, contamination of any
Hazardous Materials or toxic waste or substance used, generated, treated, stored, disposed of or
handled by the Corporation which spill, discharge, release, cleanup, or contamination is, material
to the ability of the Corporation to. perform its obligations . with respect to the transactions
contemplated by this Loan Agreement, Obligation No. 14 or Supplement No. 14;
(n) except for such Hazardous Materials or toxic substances or wastes as
occur, are handled, and are disposed of in the ordinary course of business of the Corporation and
in all respects material to the ability of the Corporation to perform its obligations with respect to
the transactions contemplated by this Loan Agreement, Obligation No. 14 or Supplement No. 14,
no Hazardous Materials or toxic substances or wastes are located at, or have been removed from
the Corporation's properties other than as is disclosed in the Official Statemeni with respect to
the Bonds under the caption "BONDHOLDERS' RISKS" — Other Risk Factors — Natural Gas.';
(o) The Corporation is a "participating health institution" and operates "health
facilities," as those terms are defined in the "Law"; and
(p) the Corporation has good title to the facilities it owns and operates free
• and clear from all encumbrances other than Permitted Liens;
ARTICLE V
COVENANTS
Section 5.1. Incorporation by Reference. The covenants of the Obligated
Group as set forth in the Master Indenture are hereby incorporated by reference and reaffirmed
for the benefit of the City and the Holders of the Bonds.
Section 5.2. Prohibited Uses. No portion of the proceeds of the Bonds will be
used to finance or refinance any facility, place or building used or to be used or to be used (1)
primarily for sectarian instruction or study or as a place for devotional activities or religious
worship or (2) by a Person that is not an organization described in Section 501(c)(3) of the Code
or a Governmental Unit or by an organization described in Section 501(c)(3) of the Code
(including the Corporation) in an "unrelated trade or business" (as set forth in Section 513(a) of
the Code), in such a manner or to such extent as would result in any of the Bonds being treated
as an obligation not described in Section 103(a) of the Code.
Section 5.3. Nonliability of the City. (a) The City shall not be obligated to pay
the principal of, premium, if any, and interest on the Bonds, except from payments received
hereunder, under Obligation No. 14 and other Revenues. Neither the faith and credit nor the
taxing power of the City or the State of California or any political subdivision thereof is pledged,
• to the payment of the principal of, premium or interest on the Bonds. The City shall not be
liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind or any
DOCSSCl:356333.5 10
conceivable theory, under or by reason of or in connection with this Loan Agreement, Obligation
• No. 14, the Bonds or the Bond Indenture, except only to the extent amounts are received for the
payment thereof from the Corporation under this Loan Agreement or under Obligation No. 14.
(b) The Corporation hereby acknowledges that the City,'s sole source of
moneys to repay the Bonds will be provided by the payments made by the Corporation hereunder
and pursuant to Obligation No. 14 and other Revenues, together with amounts on deposit in, and
investment income on; certain funds and accounts held by the Bond Trustee under the Bond
Indenture, and hereby agrees that if the payments to be made hereunder and under Obligation
No. 14 shall ever prove insufficient to pay all principal of, premium, if any, and interest on or
Purchase Price of the Bonds as the same shall become due (whether by maturity, redemption,
acceleration, tender or otherwise), then upon notice from the Bond Trustee, the Corporation shall
pay such amounts as are required from time to time to prevent any deficiency or default in the
payment of such principal, premium, interest or Purchase Price, including, but not limited to, any
deficiency caused by acts, omissions, nonfeasance or malfeasance on the part of the Bond
Trustee, the Auction Agent, the Broker - Dealer, the Master Trustee, the Members_, the City or any
third party, as the case may be.
Section 5.4. Exnenses. The Corporation covenants and agrees to pay and to
indemnify the City and the Bond Trustee against all costs and charges, including reasonable fees
of attorneys, accountants, consultants and other experts, incurred in good faith and arising out of
or in connection with the transactions contemplated hereby and by the Bonds, the Bond
Indenture, the Master Indenture, Supplement No. 14, Obligation No. 14, or the Tax Agreement.
• The obligations under this Section and Section 5.6 shall remain valid and in effect
notwithstanding the repayment of the loan hereunder or termination of this Loan Agreement or
the Bond Indenture.
Section 5.5. Tax Covenant. The Corporation covenants and agrees that it will
at all times do and perform all acts and things permitted by law, the Tax Agreement and this
Loan Agreement which are necessary in order to assure that interest paid on the Bonds (or any of
them) will be excluded from gross income for federal income tax purposes and will take no
action that would result in such interest not being so excluded. Without limiting the generality of
the foregoing, the Corporation agrees. to comply with the provisions of the Tax Agreement. This
covenant shall survive payment in full or defeasance of the Bonds.
DOCSSC1:356333.5 I I
Section 5.6. Indemnification of the Bond Trustee and the Citv.
• (a) To the fullest extent permitted by law, the Corporation agrees to
indemnify, hold harmless and defend the City, the Bond Trustee, and each of their respective
officers, governing members, directors, officials, employees, attorneys and agents (collectively,
the "Indemnified Parties'), against any and all losses, damages, claims, actions, liabilities, costs
and expenses of any conceivable nature, kind or character (including, without limitation,
reasonable attorneys' fees, litigation and court costs, amounts paid in settlement and - amounts
paid to discharge judgments) to which the Indemnified Parties, or any of them, may become
subject under or any statutory law (including federal or state securities laws) or at common law
or otherwise, arising out of or based upon or in any way relating to:
(i) the Bonds, the Bond Indenture, this Loan Agreement, the Master
Indenture, Supplement No. 14, Obligation No. 14 or the Tax Agreement or the execution or
amendment hereof or thereof or in connection with transactions contemplated hereby or thereby,
including the issuance, sale or resale of the Bonds;
(ii) any act or omission of the Corporation or any of the Members or their
agents, contractors, servants, employees or licensees in connection with the Project or any of
their facilities, the operation of the Project or any of their facilities, or the condition,
environmental or otherwise, occupancy, use, possession; conduct or management of work done
in or about, or from the planning, design, acquisition, installation or construction of, the Project
or any of their facilities or any part thereof,
• (iii) any lien or charge upon payments by the Corporation to the City and the
Bond Trustee hereunder, or any taxes (including, without limitation, all ad valorem taxes and
sales taxes), assessments, impositions and other charges imposed on the City or the Bond Trustee
in respect of any portion of the Project or any of their facilities;
(iv) any violation of any Environmental Laws with respect to, or the release of
any Hazardous Materials from, the Project or any of their facilities or any part thereof,
(v) the defeasance and/or redemption, in whole or in part, of the Bonds;
(vi) any untrue statement or misleading statement or alleged untrue statement
or alleged misleading statement of a material fact contained in any offering statement or
disclosure or continuing disclosure document for the Bonds or any of the documents relating to
the Bonds, or any omission or alleged omission from any offering statement or disclosure or
continuing disclosure document for the Bonds of any material fact necessary to be stated therein
in order to make the statements made therein, in the light of the circumstances under which they
were made, not misleading;
(vii) any declaration of taxability of interest on the Bonds, or allegations (or
regulatory inquiry) that interest on the Bonds is taxable, for federal tax purposes;
(viii) the Bond Trustee's acceptance or administration of the trust of the Bond
• Indenture, or the exercise or performance of any of its powers or duties thereunder or under any
of the documents relating to the Bonds to which it is a party;
DOCSSC1:356333.5 12
except (A) in the case of the foregoing indemnification of the Bond Trustee or any of its
• respective officers, members, directors, officials, employees, attorneys and agents, to the extent
such damages are caused by the negligence or misconduct of such Indemnified Party; or (B) in
the case of the foregoing indemnification of the City or any of its officers, members, directors,
officials, employees, attorneys and agents, to the extent such damages are caused by the willful
misconduct of such Indemnified Party. In the event that any action or proceeding is brought
against any Indemnified Party with respect to which indemnity may be sought hereunder, the
Corporation, upon written. notice from the Indemnified Party, shall assume the investigation and
defense thereof, including the employment of counsel selected by the Indemnified Party and
reasonably acceptable to the Corporation, and shall assume the payment of all expenses related
thereto, with full power to litigate, compromise or settle the same in its discretion; provided that
the Indemnified Party shall have the right to review and approve or disapprove any such
compromise or settlement. Each Indemnified Party shall have the right to employ separate
counsel in any such action or proceeding and participate in the investigation and defense thereof,
and the Corporation shall pay the reasonable fees and expenses of such separate counsel;
provided, however, that such Indemnified Party may only employ separate- c ' ounsel at the
expense of the Corporation if in the reasonable judgment of such Indemnified Par a conflict of
interest exists by reason of common representation or if all parties commonly represented do not
agree as to the action (or inaction) of counsel.
(b) The rights of any Persons to indemnity hereunder and rights to payment of
fees and reimbursement of expanses pursuant to Section 5.4 or this Section 5.6 and Section 6.6
shall survive the final payment or defeasance of the Bonds and in the case of the Bond Trustee
any resignation or removal. The provisions of this Section shall survive the termination of this
• Loan Agreement.
Section 5.7. Liuuidity Facility: Alternate Liquidity Facili
(a) The Corporation may, at any time at its sole option (subject to any
provisions of the Master Indenture), furnish a Liquidity Facility (or, if a Liquidity Facility is then
in existence, an Alternate Liquidity Facility in substitution for the Liquidity Facility then in
effect) to provide for the purchase of Bonds of any Series upon their optional or mandatory
tender in accordance with the Bond Indenture. Any Liquidity Facility (or Alternate Liquidity
Facility) shall be a facility provided by a commercial bank or other financial institution in an
amount equal to the Required Stated Amount for such Series with a term of at least 364 days
from the effective date thereof. The Liquidity Facility Provider shall be of sufficient financial
strength to cause the short-term ratings for any Series of Bonds to be secured by such Liquidity
Facility Provider's Liquidity Facility to be rated at least "A -1" by S &P and VMIG -1 by
Moody's; the Corporation shall provide written evidence of such rating to the Bond Trustee and
the Bond Insurer prior to delivery of a Liquidity Facility.
(b) If a Liquidity Facility has been delivered in accordance with subsection (a)
of this Section with respect to a Series of Bonds, prior to the Fixed Rate Conversion Date for
such Series of'Bonds, the Corporation (1) shall maintain the Liquidity Facility or an Alternate
Liquidity Facility, in an amount equal to the Required Stated Amount for such Series prior to its
termination, and (2) shall not voluntarily terminate the Liquidity Facility or any Alternate
• Liquidity Facility without at least sixty (60) days written notice to the Bond Trustee, the Tender
DOCSSC1:356333.5 .13
Agent and the Bond Insurer and without providing for an Alternate Liquidity Facility prior to the
• effective date of termination. So long as the Bond Insurance Policy is in effect and the Bond
Insurer is not in default thereunder, the Bond Insurer retains the right to consent to the provider
of a Liquidity Facility or an Alternate Liquidity Facility and the. terms thereof relating to
payment with respect to the Bonds.
(c) So long as the Bond Insurer is not in default under the Bond Insurance
Policy, the Bond Insurer may require the Corporation to provide an Alternate Liquidity Facility
with respect to such Series upon at least sixty (60) days' written notice to the Corporation, the
City and the Bond Trustee if the Liquidity Facility Provider for such Series (1) receives a short-
term rating downgrade below the highest short-term Rating Categories or below the top three
highest long -term Rating Categories of any Rating Agency then rating such Bonds or (2) defaults
in payment under such Liquidity Facility.
(d) The Bond Insurer shall be provided with notice (and a copy) of all
renewals, amendments and supplements to a Liquidity Facility.
Section 5:8. Continuing Disclosure. The Corporation hereby covenants and
agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure
Certificate. Notwithstanding any other provision of this Loan Agreement or the Master
Indenture, failure of the Corporation to enter into and comply with the Continuing Disclosure
Certificate shall not be considered a Loan Default Event or an Event of Default; however, the
Bond Trustee may (and, at the request of any Participating Underwriter (as defined in the
• Continuing" Disclosure Certificate) or the Holders of at least 25% in aggregate principal amount
of Outstanding Bonds, shall) or any Bondholder or Beneficial Owner may, take such actions as
may be necessary 'and appropriate, including seeking specific performance by court order, to.
cause the Corporation to comply with its obligations under this Section 5.8.
Section 5.9. Acquisition, Construction and Installation of the Project. The
Corporation shall acquire, construct and install the Project or cause such Project to be acquired,
constructed and installed and shall proceed with due diligence and use its best efforts to cause the
construction and installation of the Project to be completed by no later than the third anniversary
date of the Date of Issuance, delays beyond the reasonable. control of the Corporation only
excepted. The Corporation has entered or will enter into purchase commitments and agreements
which, provide, in the aggregate, for the acquisition, installation and construction of the Project
by such date and at a price which will permit completion of the Project for an amount not to
exceed the amount of money deposited in the Project Fund and other available funds. The
Corporation hereby grants, subject to applicable law, to the City, until completion of the Project,
all reasonable rights of access necessary for the City to carry out its obligations and to enforce its
rights hereunder. It is expressly understood and agreed that the City and the Bond Trustee shall
be under no liability of any kind or character whatsoever for the payment of any cost of the
Project or any expense incurred in connection with the Project and that all such costs and
expenses shall be paid by the Corporation. The acquisition, installation and construction of the
Project shall be in accordance with all applicable zoning, planning and building regulations, and
the Corporation shall obtain all necessary governmental permits, licenses, certificates,
authorizations and approvals necessary to be obtained for the acquisition, installation,
• construction and operation of the Project.
DOCSSCr356333.5 14
Section 5.10. Disbursements from the Proiect Fund. Disbursements will be
• made from the Project Fund to pay the costs of the Project and subject to the terms and
conditions set forth in the Bond Indenture. If amounts in the Project Fund are not sufficient to
pay the costs of the Project in full, the Corporation shall use its best efforts to cause the
completion of the Project elements financed with proceeds of the Bonds and shall pay at its own
expense such costs in excess of amounts available in the Project Fund, from its own funds,
without any diminution or postponement of any Loan Repayment or Additional Payment and
without any right of reimbursement from the City or the Bond Trustee. Nothing herein shall
obligate the Corporation to complete every element of the Project.
Section 5.11. Compliance with Bond Indenture. The Corporation hereby
covenants and agrees that it will comply with and carry out all of the provisions of the Bond
Indenture to be performed by the Corporation or the Obligated Group.
Section 5.12. Waiver of Personal Liability. No, officer, agent or employee of the
City or any member, officer, director, agent or employee of the Corporation or any other
Member shall be individually or personally liable for the payment of any principal of or interest
or premium on any Bonds or any other sum hereunder or be subject to any personal liability or
accountability by reason of the execution an d delivery of this Loan Agreement, but nothing
herein shall relieve any such member, director, officer, agent or employee from the performance
of any official duty provided by law or by this Loan Agreement.
ARTICLE VI
• EVENTS OF DEFAULT AND REMEDIES
Section 6.1. Events of Default. Each of the following events shall constitute
and be referred to herein as a "Loan Default Event":
(a) failure by the Corporation to pay in full any payment required hereunder
or under Obligation No. 14 when due, whether on an interest payment date at maturity, upon a
date fixed for prepayment, by declaration, upon tender of the Bonds for purchase pursuant to the
Bond Indenture, or otherwise pursuant to the terms hereof or thereof;
(b) if any material representation or warranty made by the Corporation herein
or made by the Corporation or any Member in any document, instrument or certificate famished
to the Bond Trustee or the City in connection with the issuance of Obligation No. 14 or the
Bonds shall at any time prove to have been incorrect in any respect as of the time made;
(c) if the Corporation shall fail to observe or perform any other covenant,
condition, agreement or provision in this Loan Agreement on its part to be observed or
performed, other than as referred to in subsection (a) or (b) of this Section, or shall breach any
warranty by the Corporation herein contained, for a period of sixty (60) days after written notice,
specifying such failure or breach and requesting that it be remedied, has been given to the
Corporation by the City, the Bond Insurer or the Bond Trustee; except that, if such failure or
breach can be remedied but not within such sixty -day period and if the Corporation has taken all
• action reasonably possible to remedy such failure or breach within such sixty-day period, such
DOCSSC1356333.5 15
failure or breach shall not become a Loan Default Event for so long as the Corporation shall
• diligently proceed to remedy such failure or breach in accordance with and subject to any
directions or limitations of time established by the Bond Trustee and the Bond Insurer;
(d) If the Corporation files a petition in voluntary bankruptcy, for the
composition of its affairs or for its corporate reorganization under any state or federal bankruptcy
or insolvency law, or makes an assignment for the benefit of creditors, or admits in writing to its
insolvency or inability to pay debts as they mature, or consents in writing to the appointment of a
trustee or receiver for itself or for the whole or any substantial part of the Corporation's facilities;
(e) If a court of competent jurisdiction shall enter an order, judgment or
decree declaring the Corporation an insolvent, or adjudging it bankrupt, or appointing a trustee or
receiver of the Corporation or of the whole or any substantial part of the Corporation's facilities,
or approving a petition filed against the Corporation seeking reorganization of the Corporation
under any applicable law or statute of the United States of America or any state thereof; and such
order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from
the date of the entry thereof,
(f) If, under the provisions of any other law for the relief or aid of debtors,
any court of competent jurisdiction shall assume custody or control of the Corporation's
facilities, and such custody or control shall not be terminated within sixty (60) days from the date
of assumption of such custody or control;
• (g) If the Corporation shall abandon the Corporation's facilities or any
substantial part thereof and such abandonment shall continue for a period of sixty (60) days after
written notice thereof shall have been given to the Corporation by the City or the Bond Trustee;
(h) any Event of Default as defined in and under the Bond Indenture; or
(i) any Event of Default as defined in and under the Master Indenture.
Section 6.2. Remedies on Default. If a Loan Default Event shall occur, then,
and in each and every such case during the continuance of such Loan Default Event, the Bond
Trustee on behalf of the City, but subject to the limitations in the Bond Indenture as to the
enforcement of remedies, may take such action as it deems necessary or appropriate to collect
amounts due hereunder, to enforce performance and observance of any obligation or agreement
of the Corporation hereunder or to protect the interests securing the same, and may, without
limiting the generality of the foregoing:
(a) Exercise any or all rights and remedies given hereby or available
hereunder or given by or available under any other instrument of any kind securing the
Corporation's performance hereunder (including, without limitation, Obligation No. 14 and the
Master Indenture);
(b) By written notice to the Corporation declare all Loan Repayments and
Additional Payments to be immediately due and payable under this Loan Agreement, whereupon
• the same shall become immediately due and payable; and
DOCSSCt:356333.5 16
(c) Take any action at law or in equity to collect the payment required
• hereunder then due, whether on the stated due date or by declaration of acceleration or otherwise,
for damages or for specific performance or otherwise to enforce performance and observance of
any obligation, agreement or covenant of the Corporation hereunder.
Section 6.3. Discontinuance or Abandonment of Default Proceedings. If any
proceeding taken by the Bond Trustee on account of any Loan Default Event shall have been
discontinued or abandoned for any reason, or shall have been determined adversely to the Bond
Trustee, then and in every case the City, the Bond Trustee, the Bond Insurer and the Corporation
shall be restored to their former position and rights hereunder, respectively, and. all rights,
remedies and powers of the City, the Bond Insurer and the Bond Trustee shall continue as though
no such proceeding had taken place.
Section 6.4. Remedies Cumulative. No remedy conferred upon or reserved to
the City or the Bond Trustee hereby or now or hereafter existing at law or in equity or by statute,
shall be .exclusive but shall be cumulative with all others. Such remedies are not mutually
exclusive and no election need be made among them, but any such remedy or any combination
of such remedies may be pursued at the same time or from time to time so long as all amounts
realized are properly applied and credited as provided herein. No delay or omission to exercise
any right or power accruing upon any Loan Default Event shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right or power may be exercised from
time to time and as often as may be deemed expedient by the City or the Bond Trustee. In the
event of any waiver of a Loan Default Event hereunder, the parties shall be restored to their
• . former positions and rights hereunder, but no such waiver shall extend to any other or subsequent
Loan Default Event or impair any right arising as a result thereof. In order to entitle the Bond
Trustee to exercise any remedy reserved to it, it shall not be necessary to. give notice other than
as expressly required herein.
•
Section 6.5. Application of Moneys Collected. Any amounts collected
pursuant to action taken under this Article shall be applied in accordance with the provisions of
Article VII of the Bond Indenture and to the extent applied to the payment of amounts due on the
Bonds shall be credited against amounts due on Obligation No. 14.
Section 6.6. Attorney's Fees and Other Expenses. If, as a result of the
occurrence of a Loan Default Event, the City or the Bond Trustee employs attorneys or incurs
other expenses for the collection of payments due hereunder or for the enforcement of
performance or observance of any obligation or agreement on the part of the Corporation, the
Corporation will, on demand, reimburse the City or the Bond Trustee, as the case may be, for the
reasonable fees of such attorneys and such other reasonable expenses so incurred.
Section 6.7. Notice of Default The Corporation agrees that, as soon as is
practicable, and in any event within ten (10) days, the Corporation will furnish the Bond Trustee
and'the Bond Insurer notice of any event which is a Loan Default Event pursuant to Section 6.1
which has occurred and is continuing on the date of such notice, which notice shall set forth the
nature of such event and the action which the Corporation proposes to take with respect thereto;
provided, however, that with respect to a Loan Default Event pursuant to Section 6.1(a), the
DOCSSCI:3563335 17
Bond Trustee shall give the Corporation and the Bond Insurer immediate telephonic notice on
• the date such default occurs.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Amendments and Supplements. This Loan Agreements may be
amended, changed or modified only as provided in Section 6.08 of the Bond Indenture.
Section 7.2. Time of the Essence; Non - Business Days. Time shall be of the
essence for purposes of this Loan Agreement. When any action is provided for herein to be done
on a day named or within a specified time period, and the day or the last day of the period falls
on a day other than a Business Day, such action may be performed on the next ensuing Business
Day with the same effect as though performed on the appointed day or within the specified
period.
Section 7.3. Binding Effect. This instrument shall inure to the benefit of and
shall be binding upon the City and the Corporation and their respective successors and assigns,
subject to the limitations contained herein; provided, however, that the Bond Trustee shall have
only such duties and obligations as are expressly given to it hereunder.
Section 7.4. Entire Agreement: Third Party Beneficiaries. This Loan
Agreement, together with all agreements and documents incorporated by reference herein,
constitutes the entire agreement of the parties and is not subject to modification, amendment,
• qualification or limitation except as expressly provided herein. The City and the Corporation
recognize and agree that the Bond Insurer is a third -party beneficiary to the provisions of this
Agreement. No other Person shall be deemed a third -party beneficiary hereof.
•
Section 7.5. Severabilitv. If any covenant, agreement or provision, or any
portion thereof contained in this Loan Agreement, where the application thereof to any Person or
circumstance is held to be unconstitutional, invalid or unenforceable, the remainder of this Loan
Agreement and the application of such covenant, agreement or. provision, or portion thereof, to
other Persons or circumstances, shall be deemed severable and shall not be affected thereby, and
this Loan Agreement shall remain valid, and the Bondholders shall retain all valid rights and
benefits accorded to them under this Loan Agreement and the Constitution and laws of the State
of California.
Sect ion 7.6.- Notices.
(a) Unless otherwise expressly specified or permitted by the terms hereof, all
notices, consents or other communications required or permitted hereunder shall be deemed
sufficiently given or served if given by confirmed facsimile transmission or in writing, mailed by
first -class mail, postage prepaid and addressed as follows:
DOCSSC1:356333.5 18
(1) to the City at:
• City of Newport Beach
3300 Newport Boulevard; P.O. Box 1768
Newport Beach, California 92658 -8915
Attention:
Telephone: (949) 644 -3123
Facsimile: (949) 644 -3339
(2) to the Corporation at:
Hoag Memorial Hospital Presbyterian
One Hoag Drive
P.O. Box 6100
Newport Beach, California 92658 -6100
Attention: Chief Financial Officer
Telephone: (949) 764 -4411
Facsimile: (949) 764 -4416
(3) to the Bond Trustee at:
Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
• Attention: Corporate Trust Services
Telephone: (213) 614 -3350
Facsimile: (213) 614 -3355
•
(4) to the Bond Insurer at:
Financial Guaranty Insurance Company
125 Park Avenue
New York, NY 10017
Attention: Risk Management
Telephone: (212) 312 -3000
Facsimile: (212) 312 -3093
(b) The Corporation, the City, the Bond Insurer and the Bond Trustee may at
any time and from time to time by notice in writing to the other Persons listed in Section 7:6(a)
designate a different address or addresses for notice under this Loan Agreement.
Section 7.7. Consent of the Bond Insurer. Notwithstanding any other provision
hereof, any provision requiring the consent of, or control of proceedings by, the Bond Insurer
shall be in effect for so long as, and only during such time as, the Bond Insurance Policy is in
effect and no default by the Bond Insurer under the Bond Insurance Policy has occurred and is
then continuing.
DOCSSC1:356333.5 19
0
L�
Section 7.8. Term. Except as otherwise provided herein this Loan Agreement
shall remain in full force and effect from the date of execution hereof until no Bonds remain
Outstanding under the Bond Indenture and all payments required hereunder have been made.
Section 7.9. Counterparts. This Loan Agreement may be executed in. several
counterparts, each of which shall be an original and all of which shall constitute one instrument.
Section 7.10. Governing Law, Venue. This Loan Agreement shall be governed
by and construed according to the Constitution and laws of the State of California applicable to
contracts made and performed within such State.
DOCSSC1:356333.5 20
• IN WITNESS WHEREOF, the City and the Corporation have caused this Loan
Agreement to be executed in their respective names as of the date first written above.
0
0
[Seal]
Attest:
By: //1R V 8 �r2 —/ �l < 16�
City Clerk
CITY OF NEWPORT BEACH
By:
Mayor
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
5a
DOCSSC1:356333.4 21
Authorized Representative
IN WITNESS WHEREOF, the City and the Corporation have caused this Loan
Agreement to be executed in their respective names as of the date first written above.
CITY OF NEWPORT BEACH
Mayor
[Seal]
Attest:
By:
City Clerk
AHOAG MEMORIAL HOSPITAL
PRESBYTERIAN
0
By: C.f/M��
AuthLized Representative
DOCSSCI :356333.4 21
EXHIBIT NO.6
Broker - Dealer
Agreement
(executed by the Corporation, the
Auction Agent and the
Broker - Dealer)
(BC)
0
0
DOCSSC13573291
EXECUTION COPY
BROKER- DEALER AGREEMENT
between
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Auction Agent,
CITIGROUP GLOBAL MARKETS INC.,
as Broker - Dealer
and
HOAG MEMORIAL HOSPITAL PRESBYTERIAN,
as Corporation
Dated as of August 1, 2005
Relating to
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B and Series 2005C
V
C
TABLE OF CONTENTS
•
Section 1.
Definitions and Rules of Construction ............................................... ...............................
1
1.1
Terms Defined by Ref erence .............................................................. ...............................
1
1.2
Terms Defined Herein ........................................................................ ...............................
1
1.3
Rules of Construction ......................................................................... ...................:...........
2
Section2.
The Auction ......................................................................................... ..............................3
2.1
Auction Procedures and Settlement Procedures ................................. ...............................
3
2.2
Preparation for Each Auction ............................................................. ...............................
3
2.3
Auction Schedule ............................................................................... ...............................
4
2.4
Notices ................................................................................................. ..............................5
2.5
Broker - Dealer Fee to Be Paid to Citigroup ................ .............................._
....................... 5
2.6
Settlement ............................................................................................ ..............................6
Section3.
The Auction Agent ............................................................................. ...............................
7
3.1
Duties and Responsibilities ................................................................ ...............................
7
3.2
Rights of the Auction Agent .............................................................. ...............................
7
Section4.
Miscellaneous ..................................................................................... ...............................
8
• 4.1 Termination ......................................................................................... ..............................8
4.2 Indemnification and Contribution ...................................................... ............................... 9
.4.3 Participant ........................................................................................... .............................11
4.4 Communications .................................................................:.............. .............................11
4.5 Benefits ............................................................................................... .............................12
4.6 Amendment; Waiver ........................................................................ ............................... 12
4.7 Successors and Assigns .................................................................... ............................... 12
4.8 Severability ......................................................................................... .............................12
4.9 Execution in Counterparts ................................................................ ............................... 12
4.10 Disclosure ........................................................................................... .............................12
4.11 Entire Agreement ..........................................................:.................. ............................... 13
Section5. Governing Law .................................................. :............................................................. 13
•
DOCSSCI:3573292 -i-
•
BROKER - DEALER AGREEMENT
This BROKER- DEALER AGREEMENT dated as of August 1, 2005 (the
"Agreement ") among WELLS FARGO BANK, NATIONAL ASSOCIATION, as auction agent
(together with its successors and assigns, the "Auction Agent "), CITIGROUP GLOBAL
MARKETS INC. (together with its successor and assigns, hereinafter referred to as, "Citigroup ")
and Hoag Memorial Hospital Presbyterian (the "Corporation ").
WHEREAS, the City of Newport Beach (the "City") proposes to cause or has
caused Wells Fargo Bank, National Association, as bond trustee (the "Bond Trustee') to
authenticate and deliver $200,000,000 aggregate principal amount of its Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) Series 2005A, Series 2005B and Series 2005C
(collectively, referred to as the "Series ART) pursuant to a Bond Indenture, dated as of August
1, 2005 (as from time to time in effect, the `Bond Indenture "), between the City and the Bond
Trustee.
WHEREAS, the Bond Indenture provides that the interest rate with respect to the
Series ARS for each Auction Period after the initial ARS Interest Period shall, except under
certain conditions, equal the rate per annum that the Auction Agent advises results from
implementation of the Auction Procedures (the "Auction Rate ").
WHEREAS, Citigroup is an Authorized Broker - Dealer listed in the Auction
• Agent Agreement, and the Auction Agent is entering into this Agreement pursuant to Section
2.8(a) of the Auction Agent Agreement.
WHEREAS, the Auction Procedures require the participation of one or more
Broker - Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Auction Agent, as agent of the Bond Trustee, and Citigroup agree as follows:
Section 1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference. Capitalized terms used herein and not otherwise defined
shall have the meanings given such terms in the Bond Indenture or the Auction Agent Agreement.
1.2 Terms Defined Herein. As used herein and in each Appendix hereto, the following terms
shall have the following meanings, unless the context otherwise requires:
U
"ARS Beneficial Owner" shall mean the Person who is the beneficial owner of
Series ARS according to the records of (i) a Securities Depository while the Series ARS are in
book -entry form or (ii) the Bond Trustee while the Series ARS are not in book -entry form.
DOCSSC1:357329.2
"Auction" shall have the meaning specified in Section 2.1 hereof.
. "Auction Agent Agreement" shall mean the Auction Agent Agreement, dated as
• of August 1, 2005, by and between the Bond Trustee and the Auction Agent relating to the Series
ARS, as acknowledged by the Corporation, and as amended from time to time.
"Auction Procedures" shall mean the provisions that are set forth in Section 2 of
Exhibit B of the Auction Agent Agreement.
"Authorized Officer" shall mean each Senior Vice President, Vice President and
Assistant Vice President and authorized representative of the Auction Agent assigned to its
Corporate Trust Services Department and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes of this Agreement in a written
communication to Citigroup.
"Notice of Failure to Deliver" shall mean a notice substantially in the form of
Exhibit C hereto.
"Notice of Transfer" shall mean a notice substantially in the form of Exhibit B
hereto.
"Order Form" shall mean the form to be submitted by any Broker - Dealer on any
Auction Date in a form acceptable to the Auction Agent.
"Participant " shall mean a member of, or participant in, the Securities
Depository.
• "Settlement Procedures" shall mean the Settlement Procedures attached hereto as
Exhibit A.
" Citigroup Officer" shall mean each officer or employee of Citigroup designated
as a " Citigroup Officer" for purposes of this Agreement in a written communication to the
Auction Agent.
1.3 Rules of Construction. Unless the context or use indicates another or different meaning
or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and
vice versa.
The captions and headings herein are solely for convenience of reference and
shall not constitute a part of this Agreement nor shall they affect its meaning, construction or
effect.
The words "hereof," "herein," "hereto," and other words of similar import refer to
this Agreement as a whole.
All references herein to a particular time of day shall be to New York City time.
-2-
DOCSSC1:3573292
Section 2. The Auction.
• 2.1 Auction Procedures and Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable ARS Rate for the
next Auction Period. Each periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed
to be a part of this Agreement to the same extent as if such provisions were fully set forth herein.
(c) Citigroup agrees to act as, and assumes the obligations of and limitations
and restrictions placed upon, a Broker - Dealer under the Bond Indenture and as otherwise set
forth in this Agreement.
(d) Citigroup and other Broker - Dealers may participate in Auctions for their
own accounts. The Auction Agent shall have no duty or liability with respect to monitoring the
provisions of this subsection (d).
2.2 Preparation for Each Auction.
(a) Not later than 9:30 a.m., New York City time, on each Auction Date for
• the Series ARS, the Auction Agent shall advise Citigroup by telephone or other electronic
communication acceptable to the parties of the All-Hold Rate and the Index used in determining
such rate.
(b) In the event the Auction Date for any Auction shall be changed after the
Auction Agent has given notice of such Auction Date pursuant to clause (vii) of paragraph (a) of
the Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems
practicable, shall give notice of such change to Citigroup not later than the earlier of 9:15 a.m.,
New York City time, on the new Auction Date and 9:15 a.m., New York City time, on the
original Auction Date. Thereafter, Citigroup shall use its best efforts to promptly notify its
customers who are Existing Holders of such change in the Auction Date.
(c) The Auction Agent may, but shall have no duty to, request, from time to
time, Citigroup to provide it with the number of its customers Citigroup believes are Existing
Holders and the aggregate amount held by Citigroup. Citigroup shall comply with any such
request, and the Auction Agent shall keep confidential any such information, including
information received as to the identity of Bidders in any Auction, and shall not disclose any such
information so provided to any person other than the Bond Trustee, the City, the Corporation and
Citigroup, provided that the Auction Agent reserves the right to disclose any such information if
(i) it is ordered to do so by a court or regulatory judicial or quasi-judicial agency or authority, or
(ii) it is advised by its counsel that its failure to do so would be unlawful or would impose upon it
any actual or potential loss, claim, damage, liability, or expense for which it has not received
• indemnity satisfactory to it.
-3-
DOCSSCl:3573292
2.3 Auction Schedule. (a) The Auction Agent shall conduct Auctions in accordance with the
�chedule set forth below. Such schedule may be changed by the Auction Agent with the consent of
he Bond Trustee and the Broker Dealers, which consent shall not be unreasonably withheld or
delayed. The Auction Agent shall give notice pursuant. to Section 4.4 hereof of any such change to
each Broker- Dealer. Such notice shall be given prior to the first Auction Date on which any such
change shall be effective. Notwithstanding the foregoing, the Auction Agent will follow the Bond
Market Association's Market Practice Recommendation for shortened trading days for the bond
markets (the "BMA Recommendation ") unless the Auction Agent is instructed otherwise- In the
event of a BMA Recommendation on an Auction Date, the Submission Deadline shall be 11:30 am.
instead of 1:00 p.m., and as a result the notices set forth in Section 2.4 will occur earlier.
By 9:00 a.m. The Auction Agent determines the All -Hold Rate and the Index.
By 9:30 a.m.
The Auction Agent advises the Bond Trustee and the
Broker - Dealers of the All -Hold Rate and the Index, as set forth in
Section 2.2(a) hereof.
9:30 a.m.-1:00 p.m.
The Auction Agent assembles information (the - "Bid Information ")
communicated to it by Broker Dealers as provided in Section
2(b)(i) of the Auction and Settlement Procedures. The submission
deadline (the "Submission Deadline ") is 1:00 p.m., New York City
time; provi d however, that the Auction Agent shall be entitled
to accept an Order from any Broker - Dealer following the
Submission Deadline (but in any event prior to the communication
•
of Auction results as. provided below), so long as the Order from
such Broker- Dealer is accompanied by a certification to the
Auction Agent from such Broker - Dealer to the effect that (i) such
Order shall have been communicated to, and time - stamped by,
such Broker - Dealer prior to the Submission Deadline; and (ii) a
force majeure event (including, without limitation, a technological
failure or malfunction) impeded the Broker - Dealer's ability to
submit the Bid Information prior to the Submission Deadline.
As soon as practical
after
1:00 P.M.
The Auction Agent makes the determination pursuant to Section
2(c)(i) of the Auction Procedures.
By approximately
3:00 p.m., but no later than close of business
The Auction Agent advises the Bond Trustee and the Broker -
Dealers of the Auction Rate for the next Auction Period and the
results of the Auction as provided in Section 2(c)(ii) of the Auction
Procedures. Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and principal amount of
Series ARS is allocated as provided in Section 2(.d) of the Auction
Procedures. The Auction Agent gives notice of Auction results as
• set forth in paragraph (a) of the Settlement Procedures.
_4-
DOCSSC1:357329,2
(b) In each Auction in which Citigroup submits one or more Orders, Citigroup may
• aggregate the Orders of different Potential Owners or Existing Owners on whose behalf
Citigroup is submitting Orders; provided, however, Bids may only be aggregated if the interest
rates on the Bids are the same when rounded pursuant to the provisions . of the Auction
Procedures. Notwithstanding the foregoing, the Auction Agent may at any time request that such
Orders be separate for each different Potential Owner or Existing Owner: Each Order shall be in
writing.
(c) Citigroup shall deliver to the Auction Agent (i) a Notice of Transfer in writing of
any transfer. of Series ARS made through Citigroup by an Existing Holder to another person
other than pursuant to an Auction, and (ii) a Notice of a Failure to Deliver in writing of the
failure of any Series ARS to be transferred to or by any person that purchased or sold Series ARS
through Citigroup pursuant to an Auction. The Auction Agent is not required to accept any
notice delivered pursuant to the terns of the foregoing sentence with respect to an Auction
unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the Business
Day next preceding the applicable Auction Date.
(d) Citigroup and other Broker - Dealers may submit Orders in Auctions for their own
accounts; provided, however, that any Broker - Dealer that is an affiliate of the City or of the
Corporation must submit at the next Auction therefor a Sell Order covering all Series ARS held
for its own account. The Auction Agent shall have no duty or liability with respect to monitoring
or enforcing the requirements of this subsection (d).
• (e) Citigroup agrees to handle its customers' Orders in accordance with its duties
under applicable securities laws and rules.
2.4 Notices.
(a) On each Auction Date, the Auction Agent shall .notify Citigroup by
telephone or other electronic communication acceptable to the parties of the results of the
Auction as set forth in paragraph (a) of the Settlement Procedures. The Auction Agent shall
notify Citigroup in writing of the disposition of all Orders submitted by Citigroup in the Auction
held on such Auction Date by 10:30 a.m., New York City time, on the Business Day next
succeeding such Auction Date if previously requested by Citigroup.
(b) Citigroup shall notify each Existing Holder or Potential Holder on whose
behalf Citigroup has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required by Citigroup pursuant to the Settlement
Procedures.
(c) The Auction. Agent shall deliver to Citigroup all notices and certificates
which the Auction Agent is required to deliver to Citigroup pursuant to Section 2 of the Auction
Agent Agreement after receipt of such notices and certificates at the times and in the manner set
forth in the Auction Agent Agreement.
2.5 Broker - Dealer Fee to Be Paid to Citigroup. On the first ARS Interest Payment Date and
• each ARS Interest Payment Date immediately following an Auction Date, the Auction Agent
-5-
DOCSSC1:357329.2
shall pay to Citigroup from moneys received from the Corporation pursuant to Section 4.5(b) of
• the Auction Agent Agreement an amount equal to the product of (i) 0.25 of 1% per annum, .
multiplied by (ii) (A) in the case of the fast ARS Interest Payment Date, the aggregate principal
amount of Series ARS placed by Citigroup on the Closing Date or (B) in the case of each ARS
Interest Payment Date immediately following an Auction Date, for the period just elapsed, the
sum of (x) the aggregate principal amount of the Series ARS placed by Citigroup in such
Auction that were (1) the subject of Submitted Bids of Existing Holders submitted by Citigroup
and continued to be held as a result of such submission and (2) the subject of Submitted Bids of
Potential Holders submitted by Citigroup and purchased as a result of such submission and (y)
the aggregate principal amount of the Series ARS subject to valid Hold Orders (determined in
accordance with the Bond Indenture) that were acquired by such Existing Holders through
Citigroup, or (C) if an Auction was not held on such Auction Date, the aggregate principal
amount of the Series ARS that were acquired by Existing Holders through Citigroup, multiplied
by (iii) the number of days in such ARS Interest Period divided by (iv) 360. For purposes of
subclauses (ii)(B)(x)(1) and (ii)(B)(y) of the foregoing sentence, if any Existing Holder who
acquired Series ARS through Citigroup transfers those Series ARS to another person other than
pursuant to an Auction, then the Broker- Dealer for the Series ARS so transferred shall continue
to be Citigroup; provided, however, that if the transfer was effected by, or if the transferee is a
Broker - Dealer other than Citigroup, then such Broker - Dealer shall be the Broker - Dealer for such
Series ARS.
2.6 Settlement.
•(a) If any Existing Holder on whose behalf Citigroup has submitted a Bid or
Sell Order for Series ARS that was accepted in whole or in part fails to instruct its Participant to
deliver the Series ARS subject to such Bid or Sell Order against payment therefor, Citigroup
shall instruct such Participant to deliver such Series ARS against payment therefor and Citigroup
may deliver to the Potential Holder on whose behalf Citigroup submitted a Bid that was accepted
in whole or in part, a principal amount of the Series ARS that is less than the principal amount of
the Series ARS specified in such Bid to be purchased by such Potential Holder. Notwithstanding
the foregoing terms of this Section, any delivery or nondelivery of Series ARS which represents
any departure from the results of an Auction, as determined by the Auction Agent, shall be of no
effect unless and until the Auction. Agent shall have been notified of such delivery or non-
delivery in accordance with the terms of Section 23(b) hereof. The Auction Agent shall have no
duty or liability with respect to enforcement of this subsection (a).
•
(b) None of the Auction Agent, the Bond Trustee, the Broker - Dealers, the
Corporation or the City shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder or its respective Participant to deliver Series ARS or to pay
for Series ARS sold or purchased pursuant to the Auction Procedures or otherwise.
-6-
DOCSSC1:357329.2
Section 3. The Auction Agent.
• 3.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as a non - fiduciary agent for the Bond
Trustee hereunder and owes no duties or otherwise to any other person by reason of this
Agreement.
(b) The Auction Agent undertakes hereunder to perform such duties and only
such duties as are specifically set forth in the Auction Agent Agreement or herein or expressly
incorporated in the Auction Agent Agreement or herein by reference against the Auction Agent
and no implied covenants or obligations shall be read into this Agreement by means of the
provisions of the Bond Indenture or otherwise against the Auction Agent.
(c) In the absence of willful misconduct or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted or for any error of judgment
made by it in the performance of its duties under this Agreement. The Auction -Agent shall not
be liable for any error of judgment made in good faith unless the Auction Agent shall have been
grossly negligent in ascertaining (or failing to ascertain) the pertinent facts necessary to make
such judgment, as determined by a court of competent jurisdiction. In no event shall the Auction
Agent be liable for special, indirect or consequential loss or damages of any kind whatsoever.
(d) The Auction Agent shall: (i) not be required to and shall make no
• representations and have no responsibilities as to the validity, accuracy, value or genuineness of
any signatures or endorsements, other than its own; (ii) not be required to and shall make no
representations and have no responsibilities as to the validity, accuracy, value of genuineness of
this Agreement, the Auction Agent Agreement, or any disclosure documents, (iii) not be
obligated to take any legal action hereunder that might, in its judgment, involve any expense or
liability, unless it has been furnished with indemnity satisfactory to it; and (iv) not be responsible
for or liable in any respect on account of the identity, authority or rights of any person executing
or delivering or purporting to execute or deliver any document under this Agreement.
•
3.2 Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely and shall be fully protected in
acting or refraining from acting upon any communication authorized by this Agreement and
upon any written instruction, 'notice, request, direction, consent, report, certificate or other
instrument, paper, document or communication reasonably believed by it to be genuine. The
Auction. Agent shall not be liable for acting or refraining from acting upon any telephone
communication or other electronic communication acceptable to the parties authorized by this
Agreement which the Auction Agent believes in good faith to have been given by the Bond
Trustee or by a Broker - Dealer. The Auction Agent may record telephone communications with
the Broker - Dealers, and Citigroup may record telephone communications with the Auction
Agent.
-7-
DOCSSC1357329.2
(b) The Auction Agent may consult with counsel of its own choice, and the
• advice of such counsel shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the performance of its
duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by it with due care
hereunder..
(e) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this agreement arising out of or caused, directly
or indirectly, by circumstances beyond its reasonable control, including without limitation, acts
of God; earthquakes;, fires; floods; wars; civil or military disturbances; sabotage; acts of
terrorism; epidemics; riots; interruptions, loss or malfunctions or utilities; communications or
computer (hardware or software) services; accidents; labor disputes; acts of civil or military
authority or governmental actions; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
(f) The Auction Agent makes no representations as to and shall have no
• liability with respect to the correctness of the recitals in, or the validity, accuracy or adequacy of
this Agreement, any offering material used in connection with the offer and sale of the Series
ARS or any other agreement or instrument executed in connection with the transactions
contemplated herein.
Section 4. Miscellaneous.
4.1 Termination. Citigroup may resign at any time, upon at least (30) Business Days notice
to the other parties hereto; provided, however, that Citigroup may resign immediately if (a) it
determines, in its reasonable judgment, that for any reason, including, without limitation, (i) a pending
or proposed change in applicable tax laws, (ii) a material adverse change in the financial condition of
the Corporation, (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war or other calamity or crisis, (iv) a down - grading of
the Series ARS or (v) an imposition of material restrictions on the Series ARS or similar obligations,
it is not advisable to attempt to auction the Series ARS, or (b) a Disclosure Statement, as hereinafter
defined, is necessary or desirable pursuant to Section 4.10(b) hereof and the Corporation fails to
provide Citigroup with a Disclosure Statement reasonably satisfactory to Citigroup and its counsel.
The Auction Agent at the written direction of the Corporation shall terminate this Broker - Dealer
Agreement at any time on at least five (5) Business Days notice to the other parties hereto. This
Broker - Dealer Agreement shall terminate on termination of the Auction Agent Agreement.
•
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DOCSSCI:3573292
4.2 Indemnification and Contribution.
• (a) The Corporation agrees to indemnify and hold harmless Citigroup, the
directors, officers, employees and agents of Citigroup and each person who controls Citigroup
within the meaning of either the Securities Act of 1933 (the "Securities Act ") or the Exchange
Act of 1934 (the "Exchange Act ") against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material fact contained in
the Official Statement relating to the Series ARS (the "Final Official Statement') or a Disclosure
Statement (or in any supplement or amendment thereto), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any
legal or other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, .however, that the
Corporation will not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in the Final Official Statement or Disclosure Statement, or in
any amendment thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to the Corporation by or on behalf of Citigroup specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the Corporation may
• otherwise have.
(b) Citigroup agrees to indemnify and hold harmless the Corporation, each of its official,
directors, officers and employees, and each person who controls the Corporation within the
meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing
indemnity from the Corporation to Citigroup, but only with reference to written information
relating to Citigroup furnished to the Corporation by Citigroup specifically for inclusion in the
Final Official Statement or Disclosure Statement (or in any amendment or supplement thereto).
This indemnity agreement will be .in addition to any liability which Citigroup may otherwise
have. The Corporation acknowledges that the statements set forth'in the section entitled
"UNDERWRITING" and the paragraph related to stabilization in the Final Official Statement
and the Disclosure Statement, constitute the only information furnished in writing by or on
behalf of Citigroup for inclusion in the Final Official Statement or Disclosure Statement (or in
any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section 4.2 of notice of the
commencement of any action, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 4.2, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will
not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party
• from any obligations to any indemnified party other than the indemnification obligation provided
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DOCSSC1:3573292
in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the
• indemnifying party's choice at the indemnifying partys expense to represent the indemnified
party in any action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election
to appoint counsel to represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and the indemnifying party
shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those available to the
indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a reasonable time after notice of
the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release of each
• indemnified party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 4.2 is
unavailable to or insufficient to hold harmless an indemnified party for any reason, the
Corporation and Citigroup agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection with investigating
or defending same) (collectively "Losses') to which the Corporation and Citigroup may be
subject in such proportion as is appropriate to reflect the relative benefits received by the
Corporation on the one hand and by Citigroup on the other from the offering of the Series ARS.
If the allocation provided by the immediately preceding sentence is unavailable for any reason,
the Corporation and Citigroup shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Corporation on the one hand and of
Citigroup on -the other in connection with the statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. In no case shall Citigroup be
responsible for any amount in excess of the commission applicable to the Series ARS for which
Citigroup has acted. as Broker - Dealer. Benefits received by the Corporation shall be deemed to
be equal to the total net proceeds from the offering (before deducting expenses) received by it,
and benefits received by Citigroup shall be deemed to be equal to the commissions applicable to
Series ARS for which Citigroup has acted as Broker - Dealer. Relative fault shall be determined
by reference to, among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information
provided by the Corporation on the one hand or Citigroup on the other, the intent of the parties
• and their relative knowledge, information and opportunity to correct or prevent such untrue
statement or omission. The Corporation and Citigroup agree that it would not be just and
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DOCSSC1:357329.2
equitable if contribution were determined by pro rata allocation or any other method of allocation
• which does not take account of the equitable considerations referred to above. Notwithstanding
the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4.2, each
person who controls Citigroup within the meaning of either the Securities Act or the Exchange
Act and each director, officer, employee and agent of Citigroup shall have the same rights to
contribution as Citigroup, and each person who controls the Corporation within the meaning of
either the Securities Act or the Exchange Act and each official, director, officer and employee of
the Corporation shall have the same rights to contribution as the Corporation, subject in each
case to the applicable terms and conditions of this paragraph (d).
4.3 Participant. Citigroup is, and shall remain for the term of this Agreement, a member of,
or Participant in, the Securities Depository (or an affiliate of such a member or Participant).
4.4 Communications. Except for (i) communications authorized to be made by telephone
pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the
Auctions (other than those expressly required to be in writing or other electronic communication
acceptable to the parties shall be deemed to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party, addressed to it, at its address or facsimile number set forth below:
• If to Citigroup, addressed:
•
If to the Auction Agent, addressed:
If to the Bond Trustee, addressed:
If to the City, addressed:
DOCSSC1:357329.2
CITIGROUP GLOBAL MARKETS INC.
390 Greenwich Street, 5a' Floor
New .York, NY 10013
Attention: Auction Rate Trading
Telephone (212) 723 -7082
Facsimile (212) 723 -8809
Wells Fargo Bank, National Association
45 Broadway, 12th Floor
New York, NY 10006
Telephone: 212 -515 -5270
Facsimile: 212 -509 -1760
Email: wfauctions@wellsfargo.com
Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Department
Telephone: (213) 614 -3350
Facsimile: (213) 614 -3355
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
Attention: Treasurer
• Telephone: (949) 644 -3123
Facsimile: (949) 644 -3339
If to the Corporation, addressed: Hoag Memorial Hospital Presbyterian
One Hoag Drive, P.O. Box 6100
Newport Beach, California 92658 -6100
Attention: Chief Financial Officer
Telephone: (949) 764 -4411
Facsimile: (949) 764 -4416
or such other address or facsimile number as such party may hereafter specify for such
purpose by notice to the other party. Each such notice, request or communication shall be
effective when delivered at the address specified herein. Communications shall be given on
behalf of Citigroup by a Citigroup Officer and on behalf of the Auction Agent by an
Authorized Officer. Citigroup may record telephone communications with the Auction
Agent.
4.5 Benefits. Nothing in this.Agreement, express or implied, shall give to any person, other
than the Auction Agent, Citigroup and their respective successors and assigns, any benefit of any legal
or equitable right, remedy or claim under this Agreement.
4.6 Amendment, Waiver.
• (a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written instrument
signed by a duly authorized representative of each of the parties hereto..
(b) Failure of either party to this Agreement to exercise any right or remedy
hereunder in the event of a breach of this Agreement by the other party shall not constitute a
waiver of any such right or remedy with respect to any subsequent breach.
4.7 Successors and Assigns. This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the respective successors and permitted assigns of each of Citigroup and the
Auction Agent.
4.8 . Severabiliri. If any clause, provision or section of this Agreement shall be ruled invalid
or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such
clause, provision or section shall not affect any remaining clause, provision or sections hereof.
4.9 Execution in Countemarts. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same instrument.
4.10 Disclosure.
(a) The Corporation agrees to supply to Citigroup, at the Corporation's
expense, such number of copies of the Final Official Statement as Citigroup shall reasonably
• request from time to time and, upon request of Citigroup, to amend the Final Official Statement
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DOCSSC13573292
so that the Final Official Statement will not contain any untrue statement of a material fact or
• omit to state a material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) The Corporation shall promptly notify Citigroup of any material
adverse change in the affairs of the Corporation, financial or otherwise. If Citigroup determines
(upon consultation and mutual agreement with the Corporation) that it is necessary or desirable
to use a disclosure statement (other than the Final Official Statement), relating specifically to the
Series ARS (a "Disclosure Statement ") in connection with the solicitation of orders for the Series
ARS, Citigroup will notify the Corporation, and the Corporation will provide Citigroup with a
Disclosure Statement reasonably satisfactory to Citigroup and its counsel. The Corporation will
supply Citigroup, at the Corporation's expense, with such number of copies of such Disclosure
Statement as Citigroup requests from time to time and will, upon request of Citigroup, amend
such Disclosure Statement (as well as the documents incorporated by reference therein) so that
such Disclosure Statement will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. In connection with the use of any
Disclosure Statement by Citigroup in its solicitation of orders for the Series ARS (other than the
Final Official Statement), the Corporation will fiunish to Citigroup such certificates, accountants'
letters and opinions of counsel as would be customary in a public offering of tax - exempt
securities underwritten by Citigroup. In addition, the Corporation will, at its own expense, take
all steps reasonably requested by Citigroup that Citigroup or its counsel may consider necessary
or desirable to effect compliance with applicable federal or state securities laws.
4.11 Entire Agreement. This Broker - Dealer Agreement, and the other agreements and
instruments executed and delivered in connection with the issuance of the Series ARS, contain the
entire agreement between the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral, written or inferred,
between the parties relating to the subject matter hereof.
•
Section 5. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be performed in said State, without
giving effect to principles of conflicts of law thereof. The parties agree that all actions and
proceedings arising out of this Agreement or any of the transactions contemplated hereby shall
be brought in the United States District Court in the County of New York and, in connection
with any such action or proceeding submit to the jurisdiction of, and venue in, such court. To the
extent permitted by law, each of the parties hereto also irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions
contemplated hereby.
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DOCSSC1:357329.2
0
0
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered under seal by their proper and duly authorized officer as of the date first
above written.
DOCSSCI :357329.2
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Auction Agent
By:
orized Officer
CITIGROUP GLOBAL MARKETS INC.,
as Broker-Dealer
By: (20- �-
Authorized Officer
HOAG MEMORIAL HOSPITAL PRESBYTERIAN, as
Corporation
Un
Authorized Officer
• IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered under seal by their proper and duly authorized officer as of the date first
above written.
01
t
DOCSSCl:357329.2
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Auction Agent
M
Authorized Officer
CITIGROUP GLOBAL MARKETS INC.,
as Broker - Dealer
M
Authorized Officer
HOAG MEMORIAL HOSPITAL PRESBYTERIAN, as
Corporation
Exhibit r
Broker - Dealer
Agreement
SETTLEMENT PROCEDURES
Capitalized terms used herein shall have the meanings given such, terms in the
Bond Indenture.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the
Auction Agent shall notify by telephone (or by other means acceptable to the parties) each
Broker - Dealer that participated in the Auction held on such Auction Date and submitted an
Order on behalf of an Existing Holder or Potential Holder of
(i) the Auction Rate fixed for the next Auction Period;
(ii) whether there were Sufficient Clearing Bids -in such
Auction; ...
(iii) if such . Broker - Dealer (a "Seller's Broker - Dealer")
submitted a Bid or a Sell Order on behalf of an Existing Holder, whether
such Bid or Sell Order was accepted or rejected, in.whole or in part, and
the principal amount of Series ARS, if any, to be sold by such Existing
Holder;
• (iv) if such Broker- Dealer (a "Buyer's Broker - Dealer')
submitted a Bid on behalf of a Potential Holder, whether such Bid was
accepted or rejected, in whole or in part, and the principal amount of
Series ARS, if any, to be purchased by such Potential Holder,
(v) if the aggregate amount of Series ARS to be sold by all
Existing Holders on whose behalf such Broker - Dealer submitted a Bid or
a Sell Order exceeds the aggregate principal amount of Series ARS to be
purchased by all Potential Holders on whose behalf such Broker - Dealer
submitted a Bid, the name or names of one or more Buyer's
Broker - Dealers (and the name of the Participant, if any, of each such
Buyer's Broker - Dealer) acting for one or more purchasers of such excess
principal amount of Series ARS and the principal amount of Series ARS to
be purchased from one or more Existing Holders on whose behalf such
Broker - Dealer acted by one or more Potential Holders on whose behalf
each of such Buyer's Broker- Dealers acted;
(vi) if the principal amount of Series ARS to be purchased by
all Potential Holders on whose behalf such Broker - Dealer submitted a Bid
exceeds the amount of Series ARS to be sold by all Existing Holders on
whose behalf such Broker - Dealer submitted a Bid or a Sell Order, the
name or names of one or more Seller's Broker - Dealers (and the name of
the Participant, if any, of each such Seller's Broker - Dealer) acting for one
or more sellers of such excess principal amount of Series AM and the
A -1
DOCSSC1:357329.2
principal amount of Series ARS to be sold to one or more Potential
• Holders on whose behalf such Broker - Dealer acted by one or more
Existing Holders on whose behalf each of such Seller's Broker - Dealers
acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker - Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose
behalf such Broker - Dealer submitted a Bid or Sell Order in the Auction on
such Auction Date whether such Bid or Sell Order was accepted or
rejected, in whole or in part;
(ii) in the case of a Broker - Dealer that is a Buyer's
Broker - Dealer, advise each Potential Holder on whose .behalf such
Broker - Dealer submitted a Bid that was accepted, in whole or in part, to
instruct such Potential Holder's Participant to pay to such Broker - Dealer
(or its Participant) through the Securities Depository the amount necessary
to purchase the principal amount of Series ARS to be purchased pursuant
to such Bid against receipt of such Series ARS;
(iii) in the case "of a Broker - Dealer that is a Seller's
Broker - Dealer, instruct each Existing Holder on whose behalf such
• Broker - Dealer submitted a Sell Order that was accepted, in whole or in
part, or a Bid that was accepted, in whole or in part, to instruct such
Existing Holder's Participant to deliver to such Broker - Dealer (or its
Participant) through the Securities Depository the principal amount of
Series ARS to be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Holder on whose behalf such
Broker - Dealer submitted an Order and each Potential Holder on whose
behalf such Broker - Dealer submitted a Bid of the Auction Rate for the
next Auction Period;
(v) advise each Existing Holder on whose behalf such
Broker - Dealer submitted an Order of the next Auction Date; and
(vi) advise each Potential Holder on whose behalf such
Broker - Dealer submitted a Bid that was accepted, in whole or in part, of
the next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph (a)
above, each Broker - Dealer that submitted a Bid or Sell Order in an Auction is required to
allocate any fupds received by it in connection with such Auction pursuant to paragraph (b)(ii)
above, and any Series ARS received by it in connection with such Auction pursuant to paragraph
(b)(iii) above among the Potential Holders, if any, on whose behalf such Broker - Dealer
• submitted Bids, the Existing Holders, if any on whose behalf such Broker - Dealer submitted Bids
A -2
DMSSC1:3573292
or Sell Orders in such Auction, and any Broker - Dealers identified to it by the Auction Agent
• following such Auction pursuant to paragraph (a)(v) or (a)(vi) above.
(d) On each Auction Date:
•
•
(i) each Potential Holder and Existing Holder with an Order in
the Auction on such Auction Date shall instruct its Participant as provided
in (b)(ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker - Dealer that is not a Participant of the
Securities Depository shall instruct its Participant to (A) pay through the
Securities Depository to the Participant of the Existing Holder delivering
Series ARS to such Broker - Dealer following such Auction pursuant to
(b)(iii) above the amount necessary to purchase such Series ARS against
receipt of such Series ARS, and (B) deliver such Series ARS through the
Securities Depository to a Buyer's Broker - Dealer (or its Participant)
identified to such Seller's Broker - Dealer pursuant to (a)(v) above against
payment therefor; and
(iii) each Buyer's Broker - Dealer that is not an Participant in the
Securities Depository shall instruct its Participant to (A) pay through the
Securities Depository to Seller's Broker - Dealer (or its Participant)
identified following such Auction pursuant to (a)(vi) above the amount
necessary to purchase the Series ARS to be purchased pursuant to (b)(ii)
above against receipt of such Series ARS; and (B) deliver such Series
ARS through the Securities Depository to the Participant of the purchaser
thereof against payment therefor.
(e) On the Business Day following each Auction Date:
. (i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d)(i) above shall instruct the Securities Depository to execute the
transactions described under (b)(ii) or (b)(iii) above for such Auction, and the
Securities Depository shall execute such transactions;
(ii) each Seller's Broker - Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in (d)(ii) above for
such Auction, and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker - Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in (d)(iii) above for
such Auction, and the Securities Depository shall execute such transactions.
(f) If an Existing Holder selling Series ARS in an Auction fails to deliver
such Series ARS (by authorized book - entry), a Broker - Dealer may deliver to the Potential
Holder on behalf of which it submitted a Bid that was accepted a principal amount of Series ARS
that is less than the principal amount of Series ARS that otherwise was to be purchased by such
Potential Holder. In such event, the principal amount of Series ARS to be so delivered shall be
determined solely by such Broker - Dealer. Delivery of such lesser principal amount of Series
ARS shall constitute good delivery. Notwithstanding the foregoing terms of this paragraph (f),
DOCSSC1:357329.2
A -3
•
0
any delivery or nondelivery of Series ARS which shall represent any departure from the results
of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or nondelivery in accordance with the
provisions of the Auction Agent Agreement and the Broker - Dealer Agreements.
A-4
DOCSSC13573292
•
•
•
Exhibit B
Broker -Dealer
Agreement
NOTICE OF TRANSFER
(To be used only for transfers made other than pursuant to an Auction)
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series
We are (check one)
the Existing Holder named below; or
the Broker- Dealer for such Existing Holder; or
the Participant for such Existing Holder.
We hereby notify you that such Existing Holder has transferred $ (must be in
units of $25,000) of Series ARS to
DOCSSC13573292
(Name of Existing Holder)
(Name of Broker - Dealer)
(Name of Participant)
By:
Name:
Title:
Exhibit C
Broker - Dealer
Agreement
NOTICE OF FAILURE TO DELIVER
(To be used only for failure to deliver Series ARS sold pursuant to an Auction)
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005A, Series 2005B and
Series 2005C
We are (check one)
a Broker- Dealer for (the "Purchaser "), which
purchased $ (must be in units of $25,000) of the
Series ARS in the Auction held on from the sale of such Series
ARS.
a Broker - Dealer for (the "Seller"), which sold
• $ (must be in units of $25,000) of the Series ARS in
the Auction held on
•
We hereby notify you that (check one)
the Seller failed to deliver such Series ARS to the Purchaser.
the Purchaser failed to make payment to the Seller upon delivery of such Series
ARS.
(Name of Broker- Dealer)
By:
Name:
Title:
C -1
DOCSSC1:3573292
EXHIBIT NO.7
Auction Agent
Agreement
(executed by the Bond Trustee
and the Auction Agent)
(BC)
•
U
•
DOCSSCI'357328.3
EXECUTION COPY
AUCTION AGENT AGREEMENT
between
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Bond Trustee
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Auction Agent
Dated as of August 1, 2005
Relating to
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B and Series 2005C
Table of Contents
•
Section 1.
Definitions and Rules of Construction .................................... ...............................
1
1.1.
Terms Defined by Reference ................................................... ...........:..........:.......1
1.2.
Terms Defined Herein ............................................................. ...............................
l
1.3.
Rules of Construction ............................................................. .............:.................
2
Section2.
The Auction ....................:....................................................... ...............................
3
2.1.
Auction Procedures and Settlement Procedures ..................... ...............................
3
2.2.
Preparation of Each Auction ................................................... ...............................
3
2.3.
All -Hold Rate .......................................................................... ...............................
5
2.4.
Auction Schedule ..................................................................... ..............................5
2.5.
Reserved .................................................................................. ........:.. :..................6
2.6.
Notices to Existing Holders ....................................................... :...........................
6
2.7.
ARS Payment Default ............................................................. ...............................
6
2.8.
Broker - Dealers ...................................................:..................... ..............................7
2.9.
Access to and Maintenance of Auction Records .................... ...............................
7
Section 3.
Bond Trustee's Disclaimer ..................................................... ...............................
8
•
Section 4.
The Auction Agent ................................................................. ....`..........................
8
4.1.
Duties and Responsibilities ..................................................... ...............................
8
4.2.
Rights of the Auction Agent ................................................... ...............................
9
4.3.
Auction Agent's Disclaimer ................................................... ...............................
9
4.4.
Compensation, Remedies and Indemnification ...................... ...............................
9
4.5.
Compensation of the Broker - Dealers ...................................... .............................10
4.6.
Resignation and Removal ..........:............................................ .............................10
Section 5.
Miscellaneous ......................................................................... .............................11
5.1.
Term of Agreement ......................................................:.......... .............................11
5.2.
Communications ..................................................................... .............................11
5.3.
Amendment; Waiver ..................................................:............ .............................12
5.4.
Successor and Assigns ............................................................ :............................13
5.5.
Severability ............................................................................. .............................13
5.6.
Execution in Counterparts ....................................................... .............................13
5.7.
Governing Law ....................................... ............................... ..........................x..13
•
5.8.
Bond Trustee ........................................................................... .............................13
i
DocssCI:357328.3
Table of Contents
(continued)
• Page
5.9. Benefits ............................:...................................................... .............................13
5.10. Effective Date ....................................................................... ............................... 14
•
•
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DOCSSCI:3573283
AUCTION AGENT AGREEMENT
• This AUCTION AGENT AGREEMENT, dated as of August 1, 2005 (the "Agreement'),
between WELLS FARGO BANK, NATIONAL ASSOCIATION, as bond trustee (the "Bond
Trustee ") under a Bond Indenture, dated as of August 1, 2005 (as from time to time in effect, the
"Bond Indenture'), between the City of Newport Beach (the "City") and the Bond Trustee, and
WELLS FARGO BANK, NATIONAL ASSOCIATION, as auction agent (together, with its
successors and assigns, the "Auction Agent").
L�
WHEREAS, the City proposes to cause or has caused the Bond Trustee to authenticate
and deliver $200,000,000 aggregate principal amount of the City's Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) Series 2005A, Series 2005B and Series 2005C
(collectively, referred to herein as the "Series ARS ").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the adequacy and sufficiency of which are hereby acknowledged; and intending
to be legally bound, the Bond Trustee and the Auction Agent agree as follows:
Section 1. Definitions and Rules of Construction.
1.1. Terns Defined by Reference.
Capitalized terms used herein and not otherwise defined shall have the meanings
given such terms in the Bond Indenture.
1.2. Terms Defined Herein.
As used herein and in each Exhibit hereto, the following terms shall have the
following meanings, unless the context otherwise requires:
"ARS Beneficial Owner" shall mean with respect to the Auction Agent, such Person who
is a Broker - Dealer, and with respect to the Broker - Dealers, such Person who is a beneficial
owner of the Bonds.
"Auction" shall have the meaning specified in Section 2.1 hereof.
"Auction Agent Fee " shall have the meaning specified in Section 4.4(a) hereof.
"Auction and Settlement Procedures" shall mean those procedures set forth in Exhibit B
hereto.
.'Auction Procedures" shall mean the provisions that are set forth in Section 2 of the
Auction and Settlement Procedures.
"Authorized Officer" shall mean each Senior Vice President, Vice President and
Assistant Vice President and authorized representative of the Auction Agent's Corporate Trust
DOCSSC1:357328.3
Services Department and every other officer or employee of the Auction Agent designated as an
• "Authorized Officer" for purposes hereof in a communication to the Bond Trustee.
"Authorized Bond Trustee Representative" shall mean each [Senior Vice President, Vice
President, Assistant Vice President, Assistant Secretary and Trust Officer of the Bond Trustee
and every other officer or employee of the Bond Trustee designated as an "Authorized Bond
Trustee Representative "] for purposes hereof in a communication to the Auction Agent.
"Broker- Dealer Agreement" shall mean each agreement between the Auction Agent and
a Broker - Dealer relating to the Series ARS substantially in the form attached hereto as. Exhibit A.
"Broker- Dealer Fee" shall have the meaning specified in Section 4.5(a) hereof.
"Existing Holder Registry" shall mean the register maintained by the Auction Agent
pursuant to Section 2.2(a)(i) hereof. .
"Notice of ARS Payment Default" shall mean a notice substantially -in the form of
Exhibit C hereto. ...
"Notice of Transfer" shall mean a notice substantially in the form of Exhibit B to the
Broker - Dealer Agreement.
"Participant" shall mean a member of, or participant in, a Securities Depository.
• "Regular Record Date" shall mean the second Business Day next preceding each ARS
Interest Payment Date.
•
"Settlement Procedures" shall mean the procedures that are set forth in Section 3 of the
Auction and Settlement Procedures.
1.3. Rules of Construction.
Unless the context or use indicates another or different meaning or intent, the
following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and
vice versa.
(b) The captions and headings herein are solely for convenience of reference
and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or
effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import
refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City
time.
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Section 2. The Auction.
• 2.1. Auction Procedures and Settlement Procedures.
(a) The Bond Indenture provides that the Applicable ARS Rate for each
Auction Period after the first Auction Period, except as provided otherwise thereof, shall equal
the rate per annum that the Auction Agent advises results from implementation of the Auction
and Settlement Procedures set forth herein. As directed in Section 2.08(E) 'of the Bond
Indenture, the Bond Trustee hereby appoints Wells Fargo Bank, National Association as Auction
Agent for purposes of the Auction and Settlement Procedures and to perform such other
obligations and duties as are herein set forth. Wells Fargo Bank, National Association hereby
accepts such appointment and agrees that it shall follow the procedures set forth in this Section
and the Auction and Settlement Procedures for the purpose of, among other things, determining
the Applicable ARS Rate for each Auction Period after the first Auction Period. Each periodic
operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction and Settlement Procedures
set forth in Exhibit B hereto are incorporated herein by reference in their entirety and shall be
deemed to be a part hereof to the same extent as if such provisions were fully set forth herein. In
the case of any conflict between the terms of any document incorporated herein by reference and
the terms hereof, the Auction Agent is, subject to its obligations as set forth in Section 4.1,
authorized to perform its duties according to the terms hereof, and shall have no liability for so
doing.
• 2.2. Preparation of Each Auction.
(a) (i) The Auction Agent shall maintain a current registry of Existing
Holders (such registry being herein called the "Existing Holder Registry"). Such Persons shall
constitute the Existing Holders for purposes of each Auction. The Auction Agent may consider a
Broker- Dealer which has .submitted an Order as the Existing Owner for the purpose of the
Existing Holder Registry; provided that the Auction Agent may request the Broker- Dealer to
provide a list of its customers if in its sole discretion it determines to do so. The Auction Agent
shall indicate in the Existing Holder Registry the identity of the Broker - Dealer who submitted
the most recent Order in any Auction which resulted in such Existing Holder continuing to hold
or purchasing the Series ARS. Citigroup Global Markets Inc., initially as the Broker - Dealer,
shall provide or cause to be provided, if requested, to the Auction Agent on the Closing Date a
list of the number of its own initial Existing Holders of Series ARS. The Auction Agent may
conclusively rely upon, as evidence of the number of the Broker Dealer's own Existing Holders,
(A) such list, (B) the results of each Auction and (C) notices from any Broker - Dealer.
(ii) The Bond Trustee shall notify the Auction Agent when any notice
of redemption or mandatory tender of Series ARS is sent to the Securities Depository with
respect to Series ARS not later than 11:00 a.m., New York City time, on the date such notice is
sent. In the event the Auction Agent receives from the Bond Trustee written notice of any partial
redemption or any mandatory tender of any Series ARS, the Trustee shall, at least two Business
Days prior to such redemption date or Tender Date, or as promptly as practicable after it sent
• such notice, request the Securities Depository to notify the Auction Agent of the identities of the
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Docssc1:357328.3
Participants (and the respective principal amounts) from the accounts of which Series ARS have
• been called for redemption or mandatory tender and the person or department at such Participant
to contact regarding such redemption or mandatory tender and, at least two Business Days prior
to such redemption date or Tender Date with respect to Series ARS being partially redeemed or
tendered, or as promptly as practicable after its receipt of such notice, the Auction Agent may,
but shall not be obligated to, request each Participant so identified to disclose to the Auction
Agent (upon selection by such Participant of the Existing Holders whose Series ARS are to be
redeemed or tendered) the aggregate principal amount of such Series ARS of each such-Existing
Holder, if any, which are to be redeemed or tendered; provided the Auction Agent has been
furnished with the name and telephone number of a person or department at such Participant
from which it is to request such information. In the absence of receiving any such information
with respect to any Existing Holder from such Existing Holder's Participant or otherwise, the
Auction Agent may continue to treat such Existing Holder as the ARS Beneficial Owner of the
principal amount of Series ARS shown in the Existing Holder Registry.
(iii) The Auction Agent shall register in the Existing Holder Registry a
transfer of Series ARS only if (A) such transfer is pursuant to an Auction or (B) if such transfer
is made other than pursuant to an Auction, the Auction Agent has been notified in writing by a
Notice of Transfer by the Broker - Dealer. The Auction Agent is not required to accept any notice
of transfer delivered prior to an Auction unless it is received by the Auction Agent by 3:00 p.m.,
New York City time, on the Business Day next preceding the applicable Auction Date. The
Auction Agent shall rescind a transfer made on the Existing Holder Registry if the Auction
Agent has been notified in writing by a Notice of a Failure to Deliver by the Broker - Dealer of
any Person that (i) purchased any Series ARS or (ii) sold any Series ARS and the purchaser
• failed to make payment to such Person upon delivery to the purchaser of such Series ARS. The
Auction Agent is not required to accept any notice of rescission to transfer delivered prior to an
Auction unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the
Business Day next preceding the applicable Auction Date.
•
(b) The Auction Agent may, but shall have no duty to, request that the
Broker - Dealers, as set forth in the Broker - Dealer Agreements, provide the Auction Agent with a
list of the number of respective customers that such Broker - Dealers believe are Existing Holders
of Series ARS and the aggregate amount held by such Broker - Dealer. The Auction Agent shall
keep confidential any such information and shall not disclose any such information so provided
to any person other than the relevant Broker - Dealer, the City and the Bond Trustee, provided that
the Auction Agent reserves the right to disclose any such information if (i) it is ordered to do so
by a court or regulatory judicial or quasi-judicial agency or authority, or (ii) it is advised by its
counsel that its failure to do so would be unlawful or would expose it to any actual or potential
loss, claim, damage liability, or expense for which it has not received indemnity satisfactory to it.
(c) In the event that any day that is scheduled to be an Auction Date shall be
changed after the Auction Agent shall have given the notice referred to in Section 3(a)(vii) of the
Auction and Settlement Procedures, the Auction Agent, by such means as the Auction Agent
deems practicable, shall give notice of such change to the Broker - Dealers not later than 9:15
a.m., New York City time, on the earlier of the new Auction Date or the original Auction Date.
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2.3. All -Hold Rate.
• (a) Reserved.
(b) (i) On each Auction. Date, the Auction Agent shall determine the
Index and the All -Hold Rate. Not later than 9:30 a.m., New York City time, on each Auction
Date, the Auction Agent shall notify the Bond Trustee and the Broker - Dealers of the All -Hold
Rate and the Index.
Reserved.
(iii) Upon the occurrence of an ARS Payment Default, Auctions will be
suspended and the Applicable ARS Rate for each Auction Period commencing after the
occurrence of such ARS Payment Default to and including the Auction Period, if any, during
which, or commencing less than two Business Days after, such ARS Payment Default is cured or
waived in accordance with the Bond Indenture will equal the Non - Payment Rate as determined
by the Bond Trustee in accordance with the provisions of the Bond Indenture on the first day of
such Auction Period as provided in the Bond Indenture; provided, however, that if an Auction
occurred on the Business Day immediately preceding any such Auction Period (notwithstanding
that a weekend may have passed between such Auction and such Auction Period), the Applicable
ARS Rate for such Auction Period shall be the Non - Payment Rate. The Applicable ARS Rate
for each Auction Period commencing at least two Business Days after any cure or waiver of an
ARS Payment Default shall be determined through implementation of the Auction Procedures.
(iv) If the ownership of the Series ARS is no longer maintained in
• book -entry form by a Securities Depository, no further Auctions will be held and the Applicable
ARS Rate for each Auction Period commencing after the delivery of Bond certificates pursuant
to Section 2.08(A)(3)(x) of the Bond Indenture will equal the ARS Maximum Rate on the
Business Day immediately preceding the first day of such Auction Period as provided in the
Bond Indenture.
2.4. Auction Schedule.
The Auction Agent shall conduct Auctions in accordance with the schedule set
forth below. Such schedule may be changed by the Auction Agent with the consent of the Bond
Trustee and each Broker - Dealer, which consent shall not be unreasonably withheld or delayed.
The Auction Agent shall give notice pursuant to Section 5.2 hereof of any such change to each
Broker - Dealer. Such notice shall be given prior to the first Auction Date on which any such
change shall be effective. The Auction Agent will follow the Bond Market Association's Market
Practice U.S. Holiday Recommendations for shortened trading days for the bond markets (the
"BMA Recommendation'D unless the Auction Agent is instructed otherwise. In the event of a
BMA Recommendation on an Auction Date, the Submission Deadline will be 11:30 a.m., instead
of 1:00 p.m., and as a result the notice sent forth in Section 3(a) will occur earlier.
By 9:00 a.m. The Auction Agent determines the All Hold Rate and the Index.
By 9:30 a.m. The Auction Agent advises the Bond Trustee and the
Broker- Dealers of the All -Hold Rate and the Index as set forth in
• Section 23(b)(i) hereof.
DOCSSC1:357328.3
9:30 a.m. -1:00 p.m. The Auction Agent assembles information (the "Bid Information ")
communicated. to it by Broker Dealers as provided in Section
• 2(b)(i) of the Auction and Settlement Procedures. The submission
deadline (the "Submission Deadline ") is 1:00 p.m., New York City
time; provid however, that the Auction Agent shall be entitled
'to accept Orders from any Broker - Dealer following the Submission
Deadline (but in any event prior to the communication of Auction
results as provided below), so long as the Orders from such
Broker - Dealer is accompanied by a certification to the Auction
Agent from such Broker - Dealer to the effect that (i) such Order
shall have been communicated to, and time - stamped by, such
Broker - Dealer prior to the Submission Deadline; and (ii) a force
majeure event (including, without limitation, a technological
failure or malfunction) impeded the Broker - Dealer's ability to
submit the Order prior to the Submission Deadline.
As soon as practical after
1:00 P.M. The Auction Agent makes the determination pursuant to Section
2(c)(i) of the Auction and Settlement Procedures.
By approximately
3:00 p.m., but not later than close of business
The Auction Agent advises the Bond Trustee and the Broker-
Dealers of the Auction Rate for the next Auction Period and the
results of the Auction as provided in Section 2(c)(ii) of the Auction
and Settlement Procedures. Submitted Bids and Submitted Sell
Orders are accepted and rejected in whole or in part and principal
amount of Series ARS is allocated as provided in Section 2(d) of
the Auction and Settlement Procedures.
The Auction Agent shall follow the notification procedures set forth in Section 3(a) of the
Auction and Settlement Procedures.
2.5. Reserved.
2.6. Notices to Existing Holders.
The Auction Agent shall be entitled to conclusively rely upon the address of each
Existing Holder as provided in writing by'such Existing Holder in connection with any notice to
Existing Holders required to be given by the Auction Agent.
2.7. ARS Payment Default.
•(a) After delivery by the Bond Trustee to the Auction Agent of a notice
pursuant to Section 2.08(A)(6)(a) of the Bond Indenture that an ARS Payment Default shall have
occurred, the Auction Agent shall deliver a Notice of ARS Payment Default to the
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DOCSSC1:357323.3
Broker - Dealers on the Business Day following its receipt of the same by telecopy or other
• similaz.means.
(b) The Auction Agent shall deliver a copy of any notice received by it from
the Bond Trustee to the effect that an ARS Payment Default has been cured to the
Broker - Dealers on the Business Day following its receipt of the same by telecopy or other
similar means.
2.8. Broker - Dealers.
(a) If the Auction Agent is provided with a copy of a Broker- Dealer
Agreement, which has been manually signed, it shall enter into such Broker - Dealer Agreement
with such person.
(b) At the direction of Hoag Memorial Hospital Presbyterian (the
"Corporation "), the Auction Agent shall enter into a Broker - Dealer Agreement with any other
Person who requests to be selected to act as a Broker - Dealer. The Auction Agent shall, with the
written consent of the Corporation, enter into a Broker - Dealer Agreement with each
Broker - Dealer prior to the participation of any such Broker - Dealer in any Auction; provided,
however, that such Broker- Dealer Agreement may be effective with respect to an Auction only if
the Auction Agent shall have received a manually signed copy of such Broker- Dealer Agreement
at least seven days prior to such Auction.
(c) The Auction Agent shall terminate any Broker - Dealer Agreement as 'set
forth therein if so directed by the Corporation.
•
2.9. Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Bond Trustee, the City and the Corporation,
and their respective agents, independent public accountants and counsel, access at reasonable
times during normal business hours to review and make extracts or copies (at no cost to the
Auction Agent) of all books, records, documents and other information concerning the conduct
and results of Auctions, provided that any such agent, accountant, or counsel shall furnish the
Auction Agent with a letter from the Bond Trustee, the City, or the Corporation, as the case may
be, requesting that the Auction Agent afford such Person access. The Auction Agent shall not be
responsible or liable for any actions of the Bond Trustee, City, Corporation or their respective
agents, accountants and counsel for passing on confidential information as a result of access to
such records and information. The Auction Agent shall maintain records relating to any Auction
for a period of two years after such Auction (unless requested by the Bond Trustee at the written
direction of the City or the Corporation to maintain such records for such longer period not in
excess of four years, then for such longer period), and such records shall, in reasonable detail,
accurately and fairly reflect the actions taken by the Auction Agent hereunder. To the fullest
extent permitted by applicable law, the Bond Trustee agrees to keep any information regarding
the customers of any Broker - Dealer received from the Auction Agent in connection with this
Agreement or any Auction confidential and shall not disclose such information or permit the
disclosure of such information without the prior written consent of the applicable Broker - Dealer
• to anyone except such agent, accountant or counsel engaged to audit or review the results of
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DOCSSCl:3573283
Auctions as permitted by this Section. Any such agent, accountant or counsel, before having
• access to such information, shall agree to keep such information confidential and not to disclose
such information or permit disclosure of such information without the prior written consent of
the applicable Broker- Dealer, except as may otherwise be required by law. The Auction Agent
shall have no liability in connection with, or responsibility for, the actions of any party or of any
employee or agent of any party with regard to the such party's treatment of information provided
to it under this Section 2.9.
Section 3. Bond Trustee's Disclaimer.
The Bond Trustee makes no representation as to the validity or adequacy of this
Agreement, the Broker - Dealer Agreements or any other paper or document related to the sale of
the Series ARS. The Bond Trustee shall have no responsibility for the Auction Agent or the
Auction Agent's performance or conduct under this Agreement.
Section 4. The Auction Agent.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Bond Trustee
hereunder (provided, however, that the Bond Trustee shall have no responsibility for the Auction
Agent or the Auction Agent's performance or conduct under this Agreement) and owes no
fiduciary duties or otherwise to any person by reason of this Agreement.
• (b) The Auction Agent undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement by means of the provisions of the Bond Indenture or otherwise against
the Auction Agent.
(c) In the absence of willful misconduct or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted or for any error of judgment
made by it in the performance of its duties under this Agreement. The Auction Agent shall not
be liable for any error of judgment made in good faith unless the Auction Agent shall have been
grossly negligent in ascertaining the pertinent facts for making such judgment. In no event shall
the Auction Agent be liable for special, indirect or consequential loss or damages of any kind
whatsoever (including but not limited to lost profits) even if the Auction Agent has been advised
of the likelihood of such loss or damage and regardless of the form of action.
(d) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control, including without
limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage;
acts of terrorism; epidemics; riots; interruptions, loss or malfunctions or utilities; computer
(hardware or software) or communications. services; accidents; labor disputes; acts of civil or
military authority or governmental actions; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking industry to resume
• performance as soon as practicable under the circumstances.
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DOCSSC1:357328.3
4.2. Rights of the Auction Agent.
• (a) The Auction Agent may conclusively rely on and shall be fully protected
in acting or refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate, form or bond certificate
or other instrument, paper or document or other electronic communication acceptable to the
parties reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting
upon any telephone communication authorized hereby which the Auction Agent believes in good
faith to have been given by the Bond Trustee or by a Broker - Dealer or by their designated or
appointed agents or representatives. The Auction Agent may record telephone communications
with the Bond Trustee or with the Broker - Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the advice
of such counsel shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) "The Auction Agent shall not be required to advance, ef1pend or risk its
own funds or otherwise incur or become exposed to financial liability in the performance of its
duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by it with due care
hereunder.
• (e) The Auction Agent shall have no obligation to monitor or liability in
respect of the registration or exemption therefrom of the Series ARS (or any beneficial
ownership interest therein) under any federal or state securities laws or in respect any transfer of
the ARS (or any beneficial ownership interest therein) pursuant to the terms of the Auction
Agent Agreement, any Broker - Dealer Agreement and any other document contemplated by any
thereof, or otherwise, including, but not limited to compliance with any such laws in regards to
any such registration exemption or transfer or in respect of any of the Securities Depository's
procedures applicable to transactions between itself and its Agent Members or others.
4.3. Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or adequacy of this
Agreement, the Broker - Dealer Agreements or the Series ARS. The Auction Agent shall have no
obligation or liability in respect of the registration or exemption therefrom of the Series ARS
under federal or state securities laws in respect of the sufficiency or the conformity of any
transfer of the Series ARS pursuant to the terms of the Auction Agent Agreement, any Broker -
Dealer Agreement or any other document contemplated hereby or thereby.
4.4. Compensation, Remedies and Indemnification.
(a) The Auction Agent shall be compensated on an annual basis for its
acceptance and performance of its duties hereunder according to that certain Fee Letter between
• the Auction Agent and the City.
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(b) The Corporation shall indemnify and hold harmless the Auction Agent'for
• and against any loss, liability or expense incurred without gross negligence or willful misconduct
on the Auction Agent's part, arising out of or in connection with its agency under this Agreement
and the Broker- Dealer Agreements, including the reasonable costs and expenses (including the
reasonable fees and expenses of its counsel) of defending itself and its directors, officers, agents,
and employees against any such loss, liability, or expense in connection with its exercise or
performance of any of its duties hereunder and thereunder and of enforcing this indemnification
provision; provided that the Corporation shall not indemnify the Auction Agent pursuant to this
subsection (b) for any fees and expenses incurred by the Auction Agent in the normal course of
performing its duties hereunder and under the Broker - Dealer Agreements.
(c) The Corporation shall provide the Auction Agent with the Maximum
Lawful Rate on the Closing Date and shall promptly notify the Auction Agent of any subsequent
changes to the Maximum Lawful Rate.
4.5. Compensation of the Broker - Dealers.
(a) On the first ARS Interest Payment Date and each ARS Interest Payment
Date immediately following an Auction Date, the Broker - Dealers shall be entitled to receive a
-fee for all services rendered by them under the Broker - Dealer Agreements with respect to the
Auction held on such Auction Date in an amount equal to the product of (i) 0.25 of 1% per
annum, multiplied by (ii) (A) in the case of the first ARS Interest Payment Date, the aggregate
principal amount of outstanding Series ARS on the Closing Date or (B) in the case of each ARS
Interest Payment Date immediately following an Auction Date, for the period just elapsed the
• aggregate principal amount of outstanding Series ARS at the close of business on the Regular
Record Date immediately preceding such Auction Date, multiplied by (iii) the number of days in
such ARS Interest Period, divided by (iv) 360 (the "Broker- Dealer Fee "). The Broker - Dealer
Fee shall be payable solely out of amounts paid by the Corporation as Additional Payments
under the Loan Agreement for the account of the Broker - Dealers, in accordance with Section
4.5(b) hereof.
•
(b) The Broker - Dealer Fee shall be calculated by the Auction Agent which
shall be conclusive absent manifest error. Such amounts shall be communicated by the Auction
Agent to the Corporation by on the Business Day immediately preceding each Interest Payment
Date. In accordance with the Loan Agreement provisions regarding Additional Payments
thereunder, on the first ARS Interest Payment Date and each ARS Interest Payment Date
immediately following an Auction Date, the Corporation shall pay to the Auction Agent an
amount in cash equal to the Broker - Dealer Fee payable pursuant to Section 4.5(a) hereof. The
Auction Agent shall pay such moneys to the Broker - Dealers in payment of the Broker - Dealer
Fee as set forth in Section 2.5(b) of each Broker - Dealer Agreement pursuant to the written
instructions of the Broker - Dealer.
4.6. Resignation and Removal.
The Auction Agent may resign and shall be subject to removal, in each case as
provided in Section 2.08(E) of the Bond Indenture.
DocssCi:357328.3
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Section 5. Miscellaneous.
5.1. Term of Agreement.
(a) This Agreement shall terminate on the earlier of (i) the satisfaction and
discharge of the Bond Indenture or this Agreement and (ii) the date on which this Agreement is
terminated in accordance with this Section. The Auction Agent may terminate this Agreement
upon written notice to the Bond Trustee, the City, the Corporation, and each Broker - Dealer on
the date specified in such notice, which date shall be no earlier than 45 days after the date of
delivery of such notice. Notwithstanding the foregoing, the provisions of Section 2 hereof shall
terminate upon the delivery of Bond certificates representing the Series ARS pursuant to Section
2.08(A)(3)(x) of the Bond Indenture. Notwithstanding the foregoing, the Auction Agent can
terminate this Agreement accordance with Section 2.08(E)(1) of the Bond Indenture. Any
resignation or termination of the Auction Agent, other than as described in the immediately
preceding sentence, shall not become effective until a successor auction agent has been
appointed and such successor auction agent has accepted such position; provided, however, that
in the event that a Successor Auction Agent has not been appointed within 45 days after the date
specified in its notice of resignation, then the Auction Agent may petition a -court of competent
jurisdiction for a replacement.
(b) Except as otherwise provided in this subsection (b), the respective rights
and duties of the Bond Trustee and the Auction Agent under this Agreement shall cease upon
termination of this Agreement. The Bond Trustee's and the Corporation's representations,
warranties, covenants and obligations to the Auction Agent under Section 4.4 hereof and to the
Broker - Dealer under Section 4.2 and 4.5 hereof shall survive the termination of this Agreement.
Upon termination of this Agreement, the Auction Agent upon request shall promptly deliver to
the Bond Trustee copies of all books and records maintained by it with respect to the Series ARS
in connection with its duties hereunder.
5.2. Communications.
Except for (i) communications authorized to be made by telephone pursuant to
this Agreement or the Auction Procedures or Settlement Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing), all notices,
requests and other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party addressed to it at its address, or
facsimile number set below:
If to the Bond Trustee,
DOCSSCI:357328.3
Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Dep4rhment
Telephone: (213) 614 -3350
Facsimile: (213) 614 -3355
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If to the City, City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
Attention: Treasurer
Telephone: (949) 644 -3123
Facsimile: (949) 644 -3339
If to the Corporation, Hoag Memorial Hospital Presbyterian
One Hoag Drive, P.O. Box 6100
Newport Beach, California 92658 -6100
Attention: Chief Financial Officer
Telephone (949) 764 -4411
Facsimile: (949) 764 -4416
If to the Auction Agent,
addressed: Wells Fargo Bank, National Association
45 Broadway, 12th Floor
New York, NY 10006
Telephone: 212 - 515 -5270
Facsimile: 212 -509 -1716
Email: wfauctions@wellsfargo.com
If to the Insurer, Financial Guaranty Insurance Company
addressed: 125 Park Avenue
New York, NY 10017
Attn: Risk Management
Telephone: (212) 312 -3000
Facsimile: (212) 312 -3093
or such other address, telephone or facsimile number as such party may hereafter specify
for such purpose by notice in writing to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Bond Trustee by an Authorized Bond
Trustee Representative and on behalf of the Auction Agent by an Authorized Officer.
5.3. Amendment: Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written instrument
signed by a. duly authorized representative of each of the parties hereto and consented to in
writing by the Corporation, the Insurer and the City. Unless required by the Terms of the Bond
Indenture, the Bond Trustee shall not enter into or approve any amendment or supplement to the
Bond Indenture which materially affects the Auction Agent's rights, duties or obligations
nocssCi:357329.3
12
without obtaining the prior written consent of the Auction Agent, which consent shall not be
unreasonably withheld. The Bond Trustee shall furnish the Auction Agent with a copy of any
amendments or supplement to the Bond Indenture promptly after the execution and delivery
thereof. The Bond Trustee shall notify the Auction Agent whenever an amendment or
modification of the Auction Procedures, Settlement Procedures, or any other provision of the
Bond Indenture or any other agreement that the Auction Agent is not a party to affects, the
rights, duties or obligation of the Auction Agent.
(b) Failure of either party hereto to exercise any right or remedy hereunder in
the event of a breach hereof by the other party shall. not constitute a waiver of any such right or
remedy with respect to any subsequent breach.
5.4. Successor and Assims.
This Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the respective successors and assigns of each of the Bond Trustee and the Auction Agent.
This Agreement may not be assigned by either party hereto absent the prior written consent of
the other party and the Insurer, which consents shall not be unreasonably withheld.
5.5. Severability.
If any clause, provision or section hereof shall be ruled invalid or unenforceable
by any court of competent jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any of the remaining clauses, provisions or sections hereof.
• 5.6. Execution in Counterparts.
•
This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same instrument.
5.7. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to principles of conflicts of law thereof. The
parties agree that all actions and proceedings arising out of this Agreement or any of the
transactions contemplated hereby shall be brought in the County of New York and, in connection
with any such action or proceeding, submit to the jurisdiction of, and venue in, such County. To
the extent permitted by law, each of the parties hereto also irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions
contemplated hereby.
5.8. Bond Trustee.
All privileges, rights,and immunities given to the Bond Trustee in the Bond
Indenture are hereby extended to and applicable to the Bond Trustee's obligations hereunder.
5.9. Benefits.
13
Docssci:357329s
This Agreement inures to the benefit of the Insurer.
• 5.10. Effective Date.
•
•
This Agreement shall become effective on the date of initial delivery of the Series
ARS.
14
DOCSSC1:357328.3
n
U
1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered under seal by their proper and duly authorized officers as of the date
first above written.
DOCSSC1:357328.2
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
as Bond Trustee
By:
Authorized Officer
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Auction Agent
LM
Authorized Officer
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered under seal by their proper and duly authorized officers as of the date
first above written.
•
•
DOCSSCI:357328.2
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
as Bond Trustee
MA
Authorized Officer
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Auction Agent
By:
Authorized Officer
0
CORPORATION DIRECTION AND ACKNOWLEDGEMENT
The Bond Trustee is hereby directed to appoint Wells Fargo Bank, National Association as the
Auction Agent, pursuant to this Auction Agent Agreement. The Corporation hereby
acknowledges its obligations under Section 4.4 hereof.
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
0
• DOCSSC1:357326.3
C�
•
•
FORM OF BROKER - DEALER AGREEMENT
See Tab #6
DOCSSCI:357328.3 A -1
Exhibit A
Auction Agent
Agreement
•
Exhibit B
Auction Agent
Agreement
AUCTION AND SETTLEbot! PROCEDURES
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Bond Indenture.
"Available Series ARS" has the meaning set forth in Section 2(c)(i)(A) hereof.
"Bid" has the meaning set forth in Section 2(a)(i) hereof.
"Bidder" has the meaning set forth in Section 2(a)(i) hereof.
"Buyer's Broker- Dealer" has the meaning set forth in Section 3(a)(iv) hereof.
"Hold Order" has the meaning set forth in Section 2(a)(i) hereof -
"Order" has the meaning set forth in Section 2(a)(i) hereof.
"Sell Order" has the meaning set forth in Section 2(a)(i) hereof.
"Seller's Broker- Dealer" has the meaning set forth in Section 3(a)(iii) hereof.
"Submission Deadline" has the meaning set forth in Section 2.4 of the Auction
• Agreement.
"Submitted Bid" has the meaning set forth in Section 2(c)(i) hereof.
1
"Submitted Hold Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Sell Order" has the meaning set forth in Section 2(c)(i) hereof.
"Sufficient Clearing Bids" has the meaning set forth in Section 2(c)(i)(B) hereof.
"Winning Bid Rate " has the meaning set forth in Section 2(c)(i)(C) hereof.
Section 2. Auction Procedures. So long as the ownership of the Series ARS
is maintained in book -entry form by the Securities Depository, an Existing Holder may sell,
transfer or otherwise dispose of Series ARS only pursuant to a Bid or Sell Order placed in an
Auction or through a Broker- Dealer. Subject to the provisions of Article 3A of the Bond
Indenture, Auctions shall be conducted on each Auction Date, if there is an Auction Agent on
such Auction Date, in the following manner:
(a) (i) Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder of Series ARS may submit to a
Broker - Dealer by telephone or otherwise any information as to:
B -1
DOCSSCI:357328.3
(1) the principal amount of outstanding Series ARS, if any,
• held by such Existing Holder which such Existing Holder desires to continue to
hold without regard to the Auction Rate for the next succeeding Auction Period;
(II) the principal amount of outstanding Series ARS, if any,
which such Existing Holder offers to sell if the Auction Rate for the next
succeeding Auction Period shall be less than the rate per annum specified by such
Existing Holder; and/or
(III) the principal amount of outstanding Series ARS, if any,
held by such Existing Holder which such Existing Holder offers to sell without
regard to the Auction Rate for the next succeeding Auction Period; and
(B) one or more Broker - Dealers may contact Potential Holders to
determine the principal amount of Series ARS which each Potential Holder offers to
purchase, if the Auction Rate for the next succeeding Auction Period shall not be less
than the rate per annum specified by such Potential Holder.
The statement of an Existing Holder or a Potential Holder referred to in (A) or (B) of this
paragraph (i) is hereinafter referred to as an "Order," and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder"; an Order described in
clause (A)(I)'is hereinafter referred to as a "Hold Order'; an Order described in clause (A)(II) or
(B) is hereinafter referred to as a "Bid'; and an Order described in clause (A)(III) is hereinafter
referred to as a "Sell Order."
• (ii) (A) Subject to the provisions of Section 2(b) hereof, a Bid by an
Existing Holder shall constitute an irrevocable offer to sell (in each case for settlement in
same day funds on the next ARS Interest Payment Date therefor at a price equal to 100%
of the principal amount thereof):
(I) the principal amount of outstanding Series ARS specified
in such Bid if the Auction Rate determined as provided herein shall be less than
the rate specified in such Bid; or
(In such principal amount or a lesser principal amount of
outstanding Series ARS to be determined as set forth in Section 2(d)(i)(D), if the
Auction Rate determined as provided herein shall be equal to the rate specified in
such Bid; or
(III) such principal amount or a lesser principal amount of
outstanding Series ARS to be determined as set forth in Section 2(d)(ii)(C) if the
rate specified therein shall be higher than the ARS Maximum Rate and Sufficient
Clearing Bids have not been made.
(B) Subject to the provisions of Section 2(b) hereof, a Sell Order by an
Existing Holder shall constitute an irrevocable of er to sell (in each case for settlement in
AR
same day funds on the next S Interest Payment Date therefor at a price equal to 100%
of the principal amount thereof):
•
DOCSSC13573283
B -2
(I) the principal amount of outstanding Series ARS specified
• in such Sell Order if Sufficient Clearing Bids exist; or
(II) such principal amount or a lesser principal amount of
outstanding Series ARS set forth in Section 2(d)(ii)(C), if Sufficient Clearing Bids
have not been made.
(C) Subject to the provisions of Section 2(b) hereof,. a Bid by a
Potential Holder shall constitute an irrevocable offer to purchase (in each 'ease for
settlement in same day funds on the next ARS Interest Payment Date therefor at a price
equal to 100% of the principal amount thereof):
(I) the principal amount of outstanding Series ARS specified
in such Bid if the Auction Rate determined as provided herein shall be higher than
the rate specified in such Bid; or
(II) such principal amount or a lesser principal amount of
outstanding Series ARS set forth in Section 2(d)(i)(E), if the Auction Rate
determined as provided herein shall be equal to the rate specified in such Bid.
(b) (i) Each Broker - Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders obtained by such
Broker - Dealer and shall specify with respect to each such Order, if so requested by the Auction
Agent:
(A) the name of the Bidder placing such Order;
• (B) the aggregate principal amount of Series ARS that are the subject
of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the principal amount of Series ARS; if any, subject to any
Hold Order placed by such Existing Holder;
(II) the principal amount of Series ARS, if any, subject to any
Bid placed by such Existing Holder and the rate specified in such Bid; and
(III) the principal amount of Series ARS, if any, subject to any
Sell Order placed by such Existing Holder; and
(D) to the extentsuch Bidder is a Potential Holder, the rate specified in
such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Auction Agent shall round such rate up to the next higher one
thousandth (.001) of 1 %.
•(iii) If an Order or Orden; covering all outstanding Series ARS held by an
Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the
Auction Agent shall deem a Hold Order to have been submitted on behalf of such Existing
• Holder covering the principal amount of outstanding Series ARS held by such Existing Holder
B -3
DOCSSC1:357328.3
and not subject to an Order submitted to the Auction Agent; provided, however, if such Auction
• is the first Auction on which there is a change in the length or the day of commencement of an
Auction Period, each Existing Holder shall be deemed to have submitted a Sell Order covering
the principal amount of outstanding Series ARS held by.such Existing Holder and not subject to
an Order submitted to the Auction Agent.
(iv) Neither the Corporation, the City, the Bond Trustee nor the Auction Agent
shall be responsible for any failure of a Broker - Dealer to submit an Order to the Auction Agent
on behalf of any Existing Holder or Potential Holder, nor.shall any such party be responsible for
failure by any Securities Depository to effect any transfer or to provide the Auction Agent with
current information regarding registration of transfers.
(v) If any Existing Holder submits through a Broker - Dealer to the Auction
Agent one or more Orders covering in the aggregate more than the principal amount of
outstanding Series ARS held by such Existing Holder, such Orders shall be considered valid as
follows and in the following order of priority:
(A) All Hold Orders shall be considered valid, but -only up to and
including in the aggregate the principal amount of outstanding Series ARS held by such
Existing Holder, and if the aggregate principal amount of Series ARS subject to such
Hold Orders exceeds the aggregate principal amount of Series ARS held by such Existing
Holder, the aggregate principal amount of Series ARS subject to each such Hold Order
shall be reduced so that the aggregate principal amount of Series ARS subject to such
Hold Orders equals the aggregate principal amount of outstanding Series ARS held by
• such Existing Holder.
(B) (1) any Bid shall be considered valid up to and including the
excess of the principal amount of outstanding Series ARS held by such Existing
Holder over the aggregate principal amount of Series ARS subject to any Hold
Order referred to in subsection (v)(A) above;
(II) subject to subsection (v)(B)(I) above, if more than one Bid
with the same rate is submitted on behalf of such Existing Holder and the
aggregate principal amount of outstanding Series ARS subject to such Bids is
greater than such excess, such Bids shall be considered valid up to and including
the amount of such excess;
(III) subject to subsections (v)(B)(I) and (v)(B)(II) above, if
more than one Bid with different rates is submitted on behalf of such Existing
Holder, such Bids shall be considered valid first in the ascending order of their
respective rates until the highest rate is reached at which such excess exists and
then at such rate up to and including the amount of such excess; and
(IV) in any such event, the amount of outstanding Series ARS, if
any, subject to Bids not valid under this subsection (B) shall be treated as the
Subject of a Bid by a Potential Holder at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to and including the
excess of the principal amount of outstanding Series ARS held by such Existing Holder
•
M
DOCSSCI'3573283
over the aggregate principal amount of Series ARS subject to Hold Orders referred to in
• subsection (v)(A) and valid Bids referred to in subsection (v)(B).
(vi) If more than one Bid for Series ARS is submitted on behalf of any
Potential Holder, each Bid submitted shall be a separate Bid with the rate and principal amount
therein specified.
(vii) Any Bid or Sell Order submitted by an Existing Holder, covering an
aggregate principal amount of Series ARS not equal to an Authorized Denomination shall be
rounded down to the next lower Authorized Denomination and the balance shall be rejected and
shall be deemed a Hold Order. Any Bid submitted by a Potential Holder covering an aggregate
principal amount of Series ARS not equal to an Authorized Denomination shall be rounded down
to the next lower Authorized Denomination and the balance shall be rejected.
(viii) Any Bid specifying a rate higher than the ARS Maximum Rate will be
treated as a Sell Order if submitted by an Existing Holder and will not be accepted if submitted
by a Potential Holder. Any Bid submitted by an Existing Holder or on behalf of a Potential
Holder specifying a rate lower than the All -Hold Rate shall be considered as valid and shall be
selected in the ascending order of their respective rates contained in the Submitted Bids.
(ix) Reserved.
(c) (i) Not earlier than the Submission Deadline on each Auction Date,
the Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the
Broker - Dealers (each such Order as submitted or deemed submitted by a Broker - Dealer being
hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a
•
"Submitted Sell Order," as the case may be, or as a "Submitted Order" and collectively as)
"Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or
as "Submitted Orders ") and shall determine:
(A) the excess of the total principal amount of outstanding Series ARS
over the sum of the aggregate principal amount of outstanding Series ARS subject to
Submitted Hold Orders (such excess being hereinafter referred to as the "Available Series.
ARS "), and
(B) from the Submitted Orders whether:
(n the aggregate principal amount of outstanding Series ARS
subject to Submitted Bids by Potential Holders specifying one or more rates equal
to or lower than the ARS Maximum Rate exceeds or is equal to the sum of:
(Il) the aggregate principal amount of outstanding Series AM
subject to Submitted Bids by Existing Holders specifying one or more rates higher
than the ARS Maximum Rate, and
(III) the aggregate principal amount of outstanding Series ARS
subject to Submitted Sell Orders
(in the event such excess or such equality exists, other than because all of the outstanding
Series ARS are subject to Submitted Hold Orders, such Submitted Bids described in
• subclause (I) above shall be referred to collectively as "Sufficient Clearing Bids "); and
r-W
DOCSSCI:3573283
(C) if Sufficient Clearing Bids exist, the lowest rate specified in such
• Submitted Bids (the "Winning Bid Rate ") such that if
(I) (aa) each such Submitted Bid from Existing Holders
specifying such lowest rate and (bb) all other Submitted Bids from Existing
Holders specifying lower rates were rejected, thus requiring such Existing
Holders to continue to hold the principal amount of Series ARS subject to such
Submitted Bids, and
(II) (aa) each such Submitted Bid from Potential Holders
specifying such lowest rate and (bb) all other Submitted Bids from Potential
Holders specifying lower rates were accepted,
the result would be that such Existing Holders described in subsection (C)(I) above
would continue to hold an aggregate principal amount of outstanding Series ARS which,
when added to the aggregate principal amount of outstanding Series ARS to be purchased
by such Potential Holders described in subsection (C)(II) above, would equal not less
than the Available Series ARS.
(ii) Promptly after the Auction Agent has made the determinations pursuant to
Section 2(c)(i) hereof; the Auction Agent shall advise the Broker - Dealer and the Bond Trustee,
based on such determinations, of the Auction Rate for the next succeeding Auction Period as
follows:
(A) if Sufficient Clearing Bids exist, that the Auction Rate for the next
• succeeding Auction Period shall be equal to the Winning Bid Rate so determined;
(B) if Sufficient Clearing Bids do not exist (other than because all of
the outstanding Series ARS are subject to Submitted Hold Orders), that the Auction Rate
for the next succeeding Auction Period shall be equal to the ARS Maximum Rate; or
(C) if all outstanding Series ARS. are subject to Submitted Hold
Orders, that the Auction Rate for the next succeeding Auction Period shall be equal to the
All -Hold Rate.
(d) Existing Holders shall continue to hold the principal amount of Series
ARS that are subject to Submitted Hold Orders, and, based on the determinations made pursuant
to Section 2(c)(i) hereof, Submitted Bids and Submitted Sell Orders shall be accepted or rejected
and the Auction Agent shall. take such other action as set forth below:
(i) if ,Sufficient Clearing Bids have been made, all Submitted Sell
Orders shall be accepted and, subject to the provisions of Sections 2(d)(iv) and
2(d)(v), Submitted Bids shall be accepted or rejected as follows in the following
order of priority and all other Submitted Bids shall be rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is higher
than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to
sell the aggregate principal amount of Series ARS subject to such Submitted Bids;
(B) Existing Holders' Submitted Bids specifying any rate that is lower
• than the Winning Bid Rate shall be rejected, thus requiring each such Existing Holder to
B -6
DOCSSC1357328.3
continue to hold the aggregate principal. amount of Series ARS subject to such Submitted
• Bids;
(C) Potential Holders' Submitted Bids specifying any rate that is lower
than the Winning Bid Rate shall be accepted;
(D) each Existing Holder's Submitted Bid specifying a rate that is
equal to the Winning'Bid Rate shall be rejected, thus requiring such Existing Holder to
continue to hold the aggregate principal amount of Series ARS subject to such Submitted
Bid, unless the aggregate principal amount of outstanding Series ARS subject to all such
Submitted Bids shall be greater than the principal amount of Series ARS (the "remaining
principal amount ") equal to the excess of the Available Series ARS over the aggregate
principal amount of Series ARS subject to Submitted Bids described in subsections (B)
and (C) of this Section 2(d)(i), in which event such Submitted Bid of such Existing
Holder shall be rejected in part, and such Existing Holder shall be required to continue to
hold the principal amount of Series ARS subject to such Submitted Bid, but only in an
amount equal to the aggregate principal amount of Series ARS obtained by multiplying
the remaining principal amount by a fraction, the numerator of which shall be the
principal amount of outstanding Series ARS held by such Existing Holder subject to such
Submitted Bid and the denominator of which shall be the sum of the principal amount of
outstanding Series ARS subject to such Submitted Bids made by all such Existing
Holders that specified a rate equal to the Winning Bid Rate; and
(E) Each Potential Holder's Submitted Bid specifying a rate that is
equal to the Winning Bid Rate shall be accepted, but only in an amount equal to the
principal amount of Series ARS obtained by multiplying the excess of the aggregate
principal amount of Available Series ARS over the aggregate principal amount of Series
ARS subject to Submitted Bids described in subsections (B); (C) and (D) of this Section
2(d)(i) by a fraction the numerator of which shall be the aggregate principal amount of
outstanding Series ARS subject to such Submitted Bid and the denominator of which
shall be the sum of the principal amount of outstanding Series ARS subject to Submitted
Bids made by all such Potential Holders that specified a rate equal to the Winning Bid
Rate.
(ii) if Sufficient Clearing Bids have not been made (other than. because
all of the outstanding Series ARS are subject to submitted Hold Orders), subject
to the provisions of Sections 2(d)(iv) and (v), Submitted Orders shall be accepted
or rejected as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is equal
to or lower than the ARS Maximum Rate shall be rejected, thus requiring such Existing
Holders to continue to hold the aggregate principal amount of Series ARS subject to such
Submitted Bids;
(B) Potential Holders' Submitted Bids specifying any rate that is equal
to or lower than the ARS Maximum Rate shall be accepted, and specifying any rate that
is higher than the ARS Maximum Rate shall be rejected; and
oocssCI:357328.3
ME
(C) each Existing Holder's Submitted Bid specifying any rate that is
higher than the ARS Maximum Rate and the Submitted Sell Order of each Existing
Holder shall be accepted, thus requiring. each Existing Holder that submitted. any such
Submitted Bid or Submitted Sell Order to sell the Series ARS subject to such Submitted
Bid or Submitted Sell Order, but in both cases only in an amount equal to the aggregate
principal amount of Series ARS obtained by multiplying the aggregate principal amount
of Series ARS subject to Submitted Bids described in subsection (B) of this Section
2(d)(ii) which are accepted by a fraction the numerator of which shall be the aggregate
principal amount of outstanding Series ARS held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and the denominator of which shall be the
aggregate principal amount of outstanding Series ARS subject to all such Submitted Bids
and Submitted Sell Orders.
(iii) If all outstanding Series ARS are subject to Submitted Hold
Orders, all Submitted Bids shall be rejected.
.(iv) If, as a result of the procedures described in Section 2(d)(i) or
2(d)(ii), any Existing Holder would be required to sell, or any Potential Holder
would be required to purchase, a principal amount of Series ARS that is not equal
to an Authorized Denomination the Auction Agent shall, in such manner as in its
sole discretion it shall determine, round up or down the principal amount of Series
ARS to be purchased or sold by any Existing Holder or Potential Holder so that
the principal amount of Series ARS purchased or sold by each Existing Holder or
Potential Holder shall be equal to an Authorized Denomination.
• (v) If, as a result of the procedures described in Section 2(d)(ii), any
Potential Holder would be required to purchase less than an Authorized
Denomination of Series ARS, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, allocate Series ARS for purchase among
Potential Holders so that only Series ARS in Authorized Denominations are
purchased by any Potential Holder, even if such allocation results in one or more
of such Potential Holders not purchasing any Series ARS.
(vi) The City, the Bond Trustee, the Broker - Dealers and the Auction
Agent shall have no liability in the event that there are not Sufficient Clearing
Bids from time to time pursuant to the Auction Procedures.
(e) Based on the result of each Auction, the Auction Agent shall determine
the aggregate principal. amount of Series ARS to be purchased and the aggregate principal
amount of Series ARS to be sold by Potential Holders and Existing Holders on whose behalf
each Broker- Dealer Submitted Bids or Sell Orders and, with respect to each Broker - Dealer, to
the extent that such aggregate principal amount of Series ARS to be sold differs from such
aggregate principal amount of Series ARS to be purchased, determine to which other
Broker - Dealer or Broker Dealers acting for one or more purchasers such Broker - Dealer shall
deliver, or from which other Broker - Dealer or Broker - Dealers acting for one or more sellers such
Broker - Dealer shall receive, as the case may be, Series ARS.
DOCSSCI:357328.3
Im
(f) Any calculation by the Auction Agent (or the Bond Trustee, if applicable)
•of the Applicable ARS Rate, the All -Hold Rate and the Non - Payment Rate shall, in the absence
of manifest error, be binding on all ARS Beneficial Owners and all other parties.
Section 3. Settlement Procedures.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the
Auction Agent shall notify by telephone (or by other means acceptable to the,parties) each
Broker- Dealer that participated in the Auction held on such Auction Date and submitted an
Order on behalf of an Existing Holder or Potential Holder of:
(i) the Auction Rate fixed for the next Auction Period;
(ii) whether there were Sufficient Clearing Bids in such Auction;
(iii) if such Broker - Dealer (a "Seller's Broker - Dealer ") submitted a Bid
or a Sell Order on behalf of an Existing Holder, whether such Bid or Sell Order
was accepted or rejected, in whole or in part, and the principal amount of Series
ARS, if any, to be sold by such Existing Holder;
(iv) if such Broker - Dealer (a "Buyer's Broker - Dealer") submitted a Bid
on behalf of a Potential Holder, whether such Bid was accepted or rejected, in
whole or in part, and the principal amount of Series ARS, if any, to be purchased
by such Potential Holder;
(v) if the aggregate principal amount of Series ARS to be sold by all
• Existing Holders on whose behalf such Broker- Dealer submitted a Bid or a Sell
Order exceeds the aggregate principal amount of Series ARS to be purchased by
all Potential Holders on whose behalf such Broker- Dealer.submitted a Bid, the
name or names of one or more Buyer's Broker - Dealers (and the name of the
Participant, if any, of each such Buyer's Broker - Dealer) ' acting for one or more
purchasers of such excess principal amount of Series ARS and the principal
amount of Series ARS to be purchased from one or more Existing Holders on
whose behalf such Broker- Dealer acted by one or more Potential Holders on
whose behalf each of such Buyer's Broker - Dealers acted;
(vi) if the principal amount of Series ARS to be purchased by all
Potential Holders on whose behalf such Broker - Dealer submitted a Bid exceeds
the aggregate principal amount of Series ARS to be sold by all Existing Holders
on whose behalf such Broker - Dealer submitted a Bid or a Sell Order, the name or
names of one or more Seller's Broker - Dealers (and the name of the Participant, if
any, of each such Seller's Broker - Dealer) acting for one or more sellers of such .
excess principal amount of Series ARS and the principal amount of Series ARS to
be sold to one or more Potential Holders on whose behalf such Broker - Dealer
acted by one or more Existing Holders on whose behalf each of such Seller's
Broker - Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
• (b) On each Auction Date, each Broker - Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
DOCSSC1:3573283
(i) advise each Existing Holder and Potential Holder on whose behalf
• such Broker - Dealer submitted a Bid or Sell Order in the Auction on such Auction
Date whether such Bid or Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker - Dealer that is a Buyer's Broker - Dealer,
advise each Potential Holder on whose behalf such Broker - Dealer submitted a Bid
that was accepted, in whole or in part, to instruct such Potential Holder's
Participant to pay to such Broker - Dealer (or its Participant) through the Securities
Depository the amount necessary to purchase the principal amount of Series ARS
to be purchased pursuant to such Bid against receipt of such Series ARS;
(iii) in the case of a Broker - Dealer that is a Seller's Broker - Dealer,
instruct each Existing Holder on whose behalf such Broker- Dealer submitted a
Sell Order that was accepted, in whole or in part, or a Bid that was accepted, in
whole or in part, to instruct such Existing Holder's Participant to deliver to such
Broker - Dealer (or its Participant) through the Securities Depository the principal
amount of Series ARS to be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Holder on whose behalf such Broker - Dealer
submitted an Order and each Potential Holder on whose behalf such
Broker - Dealer submitted a Bid of the Auction Rate for the next Auction Period;
(v) advise each Existing Holder on whose behalf such Broker- Dealer
submitted an Order of the next Auction Date; and
• (vi) advise each Potential Holder on whose behalf such Broker - Dealer
submitted a Bid that was accepted, in whole or in part, of the next Auction Date.
•
(c) On the basis of the information provided to it pursuant to Section 3(a),
each Broker - Dealer that submitted'a Bid or Sell Order in an Auction is required to allocate any
funds received by it in connection with such Auction pursuant to Section 3(b)(ii), and any Series
ARS received by it in connection with such Auction pursuant to Section 3(b)(iii) among the
Potential Holders, if any, on whose behalf such Broker - Dealer Submitted Bids, the Existing
Holders, if any on whose behalf such Broker - Dealer Submitted Bids or Sell Orders in such
Auction, and any Broker - Dealers identified to it by the Auction Agent following such Auction
pursuant to Section 3(a)(v) or 3(a)(vi).
DOCSSC1:357328.3
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder with an Order in the
Auction on such Auction Date shall instruct its Participant as provided in Section
3(b)(ii) or 3(b)(iii), as the case may be;
(ii) each Seller's Broker - Dealer that is not a Participant of the
Securities Depository shall instruct its Participant to (A) pay through the
Securities Depository to the Participant of the Existing Holder delivering Series
ARS to such Broker - Dealer following such Auction pursuant to Section 3(b)(iii)
the amount necessary to purchase such Series ARS against receipt of such Series
ARS, and (B) deliver such Series ARS through the Securities Depository to a
'®t
Buyer's Broker - Dealer (or its Participant) identified to such Seller's
• Broker - Dealer pursuant to Section 3(a)(v) against payment therefor; and
(iii) each Buyer's Broker - Dealer that is not a Participant in the
Securities Depository shall instruct its Participant to (A) pay through the
Securities Depository to Seller's Broker - Dealer (or its Participant) identified
following such Auction pursuant to Section 3(a)(vi) the amount necessary to
purchase the Series ARS to be purchased pursuant to Section 3(b)(ii) against
receipt of such Series ARS, and (B) deliver such Series ARS through the
Securities Depository to the Participant of the purchaser thereof against payment
therefor.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in Section 3(d)(i) shall instruct the Securities Depository to execute the
transactions described under Section 3(b)(ii) or 3(b)(iii) for such Auction, and the
Securities Depository shall execute such transactions;
(ii) each Seller's Broker - Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in Section 3(d)(ii) for
such Auction, and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker - Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in Section 3(d)(iii) for
• such Auction, and the Securities Depository shall execute such transactions.
(f) If an Existing Holder selling Series ARS in an Auction fails to deliver
such Series ARS (by authorized book - entry), a Broker - Dealer may deliver to the Potential
Holder on behalf of which it submitted a Bid that was accepted a principal amount of Series ARS
that is less than the principal amount of Series ARS that otherwise was to be purchased by such
Potential Holder. In such event, the principal amount of Series ARS to be so delivered shall be
determined solely by such Broker - Dealer. Delivery of such lesser principal amount of Series
ARS shall constitute good delivery. Notwithstanding the foregoing terms of this subsection, any
delivery or nondelivery of Series ARS which shall represent any departure from the results of an
Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction
Agent shall have been notified of such delivery or nondelivery in accordance with the provisions
of the Auction Agent Agreement and the Broker - Dealer Agreements.
•
B -11
DOCSSC1:3573283
•
•
CJ
Exhibit C
Auction Agent
Agreement
NOTICE OF ARS PAYMENT DEFAULT
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series
NOTICE IS HEREBY GIVEN that an ARS Payment Default has occurred and not been
cured. Determination of the interest rate on the Series ARS pursuant to the Auction Procedures
will be suspended. The interest rate on the Series ARS for each Auction Period commencing
after will equal the Non - Payment Rate as it is determined by the
Bond Trustee on the first day of such Auction Period. All terms used herein and not otherwise
defined shall have the meanings given such terms in the Bond Indenture, dated as of August 1,
2005 (the `Bond Indenture"), by and between the City of Newport Beach and Wells Fargo Bank,
National Association.
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Auction Agent
By: _
Title:
Date:
C -1
DocssCi:357328.3
EXHIBIT NO.8
Tax Certificate and
Agreement
(executed by the City and
the Corporation), together with
. the following exhibits (BC):
(a) the Certificate of the Underwriter
(b) the Certificate of the Issuer and the
Borrower Concerning Rebate;
(c) the Weighted Average Expected Life
of the Project;
(d) the Certificate of the Bond Insurer
U
•
0
DOCSSFl:832757.3
TAX CERTIFICATE AND AGREEMENT
By and Between
City of Newport Beach
and
Hoag Memorial Hospital Presbyterian
Dated August 24, 2005
Relating to
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian),
2005 Series A, B and C
EXECUTION COPY
Tax Certificate and Agreement
The City of Newport Beach (the "Issuer") and Hoag Memorial Hospital Presbyterian (the
"Borrower") hereby enter into this Tax Certificate and Agreement (together with the Exhibits
attached hereto, the "Tax Certificate and Agreemene) in connection with the issuance of
Issuer's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) 2005 Series A, B and
C, in the initial aggregate principal amount of $200,000,000 (the "Bond's "). The representations
of facts and circumstances and covenants of the Issuer made herein are in furtherance of the
covenants of the Issuer set forth in Section 6.06 of the Bond Indenture, dated as of August 1,
2005 (the "Indenture "), between the Issuer and Wells Fargo Bank, National Association (as
"Trustee"), and are in part made pursuant to Treasury Regulations § 1.148- 2(b)(2)(i). The
representations of facts and circumstances and covenants of the Borrower made herein are in
furtherance of the covenants of the Borrower set forth in Section 5.5 of the Loan Agreement,
dated as of August 1, 2005 (the "Loan AgreemenP'), between the Issuer and the Borrower.
ARTICLE I
In General
1.1 Purpose of Tax Certificate and Agreement. The Issuer and the Borrower are
delivering this Tax Certificate and Agreement to Orrick, Herrington & Sutcliffe LLP ( "Bond
Counser'), with the understanding and acknowledgment that Bond Counsel will rely upon this
• Tax Certificate and Agreement in rendering its opinion that interest on the Bonds is excluded
from gross income for federal income tax purposes under Section 103 of the Internal Revenue
Code of 1986 (the "Code ").
1.2 Delivery of the Bonds. The Issuer is delivering the Bonds to Citigroup Global
Markets Inc. (the "Underwriter") on the date hereof in exchange for good funds.
1.3 Authorization; Status of Issuer. The Issuer is issuing the Bonds pursuant to the
Indenture and Ordinance No. 84 -4 adopted by the City Council of the Issuer on. February 13,
1984 under. Sections 3, 5 and 7 of Article XI of the Constitution of the State of California and
Section 200 of Article 11 of the Charter of the Issuer. The Issuer is a charter city authorized to
incur indebtedness for the purpose of financing various health facilities.
1.4 Purpose for Bonds. The Bonds are being issued for the purpose of providing
funds: (a) to pay for the acquisition, construction, improvement, renovation, and equipping (the
"Project") of certain healthcare facilities (the "Facilities"), and (b) to'pay certain costs of
issuance in connection with the Bonds, including the premium of a policy of municipal bond
insurance (the "Insurance's issued concurrently with the delivery of the Bonds by Financial
Guaranty Insurance Company (the `Insurer').
1.5 Reissuance. The Issuer and Borrower covenant with respect to the Bonds to
make no change in the terms without an opinion of Bond Counsel. For purposes of this section,
• the term "change" means, with respect to the terms of the Bonds (including, but not limited to,
the terms of the tender dates, the interest rates, the maturity dates, the payment dates of principal
DOCSSFl:8327573
or interest, the optional or mandatory redemption dates or prices, and the security for the Bonds)
• any discretionary alteration in the legal rights or remedies of the holders of any of the Bonds that
occurs after the Closing Date, but not including any such alteration for which all elements of
which are entirely outside of the control of the Borrower, any holder of any of the Bonds or any
related person (as defined in Section 147(a)(2) of the Code), anyone acting on behalf of any such
person or persons, or any combination of the foregoing. For purposes of this Section. an
alteration in the terms of the Bonds which occurs automatically as a result of a nondiscretionary
alteration is not a "change." I
1.6 Definitions. Capitalized terms used herein which are not otherwise defined
herein shall have the respective meanings set forth in the Indenture. Unless the context
otherwise requires, the following capitalized terms have the following meanings for purposes of
this Tax Certificate and Agreement:
Available Construction Proceeds means all Sale Proceeds of the Bonds, less the amount
of such proceeds used to pay costs of issuing the Bonds, plus all Investment Proceeds received,
accrued, or reasonably expected to be earned thereon.
Bona Fide Debt Service Funds means, to the extent the requirements of Section 3.4.4(c)
hereof are satisfied, the Revenue Fund (including the Interest Account and the Principal
Account), the Redemption Fund (including the Optional Redemption Account and the Special
Redemption Account) and the general funds of the Borrower (to the extent used to make
transfers to the foregoing Funds).
• Bond Year means the period beginning on the Closing Date and ending on the first
anniversary of the Closing Date (unless the Issuer upon the written direction of the Borrower
selects otherwise), and each succeeding one -year period (with the last Bond Year ending on the first
date that none of the 2005 Bonds remain outstanding for federal tax purposes). The Issuer may
and upon the written direction of the Borrower shall (prior to the fifth anniversary of the Closing
Date) select any date prior to the first anniversary of the Closing Date in lieu of the first
anniversary of the Closing Date as the end of each Bond Year.
Closing Date means August 24, 2005, the date of the physical delivery of the Bonds.
Expenditure Exception Cross Proceeds means any Gross Proceeds, except for amounts
(i) held in the Bona Fide Debt Service Funds; (ii) that, as of the Closing Date, are not reasonably
expected to become Gross Proceeds but that become Gross Proceeds after the date six months
after the Closing Date (in the case of the Six -Month Expenditure Exception; see Section 5.4.2
hereof), after the date eighteen months after the Closing Date (in the case of the Eighteen -Month
Expenditure Exception; see Section 5.4.3 hereof), or two years after the Closing Date (in the case
of the Two -Year Expenditure Exception; see Section 5.4.4 hereof); (iii) representing Sale
Proceeds or Investment Proceeds derived from payments under any purpose investment of the
issue; or (iv) representing repayments of grants (as defined in Treasury Regulations § 1.14&
6(d)(4)) financed by the Bonds.
Facilities means certain healthcare facilities owned and operated by the Borrower and
• financed directly with the proceeds of the Bonds.
DOCSSF1:832757.3
Gross Proceeds has the meaning used in Treasury Regulations § 1.148 -1(b), and
• generally means all proceeds derived from or relating to the Bonds, including Investment
Proceeds, amounts pledged to pay debt service on the Bonds, and amounts expected to be used to
pay debt service on the Bonds.
Investment Proceeds means investment earnings on (i) Sale Proceeds and (ii) Investment
Proceeds.
Investment Property means any security or obligation (other than a Tax- Exempt
Obligation), any annuity contract or any other investment -type property.
Minor Portion means any amount of Gross Proceeds not greater than $100,000 invested
at an unrestricted yield pursuant to Code Section 148(e).
Net Sale Proceeds means the amount of Sale Proceeds less any portion of the Sale
Proceeds invested as the Minor Portion.
Nonpurpose Investment shall mean any Investment Property in which Gross Proceeds
are invested other than the Loan Agreement.
Opinion of Counsel means an opinion of counsel nationally recognized in the area of
municipal finance to the effect that interest on the Bonds will not be included in gross income for
federal income tax purposes.
• Preliminary Expenditures means architectural, engineering, surveying, soil testing, costs
of issuing the Bonds, and similar costs paid with respect to the Facilities in an aggregate amount
not exceeding 20% of the issue price of the Bonds. However, Preliminary Expenditures do not
include land acquisition, site preparation or similar costs incident to the commencement of
construction.
Rebate Requirement means the amount of rebatable arbitrage earned with respect to
Gross Proceeds which do not qualify for an exception from the requirements of Section 148(f)(2)
of the Code as described in Section 5.4 of this Tax Certificate and Agreement, computed as of
the last day of any Bond Year pursuant to § 1.148 -3 of the Treasury Regulations.
Related Person means:
(i) Any organization having common management and control with an organization
described in Section 501(c)(3) of the Code. This would include any other 501(c)(3) organization
if both organizations have (a) significant common purposes and substantial common
membership, or (b) directly or indirectly, substantial common direction.
(ii) In the case of a corporation, (A) an individual who owns directly or indirectly
more than 50% in value of the outstanding stock of the corporation; (B) a partnership, if any
partner owning more than 50% of the capital or profit interest in the partnership owns more than
50% in value of the outstanding stock . of the corporation; (C) another corporation, if that
corporation owns more than 50% of the voting power or value of the corporation; (D) another
• corporation, if more than 50% of the voting power or value of its stock is owned by the
DOCSSF1:832757.3
corporation; (E) another corporation, if five or fewer individuals own stock possessing more than
• 50% of the voting power or value of both that corporation and the corporation; or (F) a trust
which owns more than 50% in value of the outstanding stock of the corporation.
(iii) In the case of a partnership, (A) a partner that owns directly or indirectly more
than 50% of the capital interest or the profits interest in such partnership. or (B) another
partnership, if the same person or persons own directly or indirectly more than 50% of the capital
interest or the profits interest in both that partnership and the partnership.
(iv) In the case of an individual, (A) members of the individual's family (including the
individual's spouse; brothers, sisters, ancestors and lineal descendants) or (B) a trust as to which
the individual 'is either grantor or beneficiary, or which has the same grantor as a trust to which
the individual is beneficiary.
Sale Proceeds means the amount received from the sale of the Bonds, being the par
amount of the Bonds ($200,000,000).
Tax- Exempt Obligation means any obligation the interest on which- is excludable from
gross income under Section 103(a) of the Code, any interest in a regulated investment company
the income of which is at least 95% excludable to the holder under Section 103(a) of the Code,
and any certificate of indebtedness issued by the United States Treasury pursuant to the Demand
Deposit State and Local Government Series program, but does not include any interest in a
"specified private activity bond" within the meaning of Section 57(a)(5)(C) of the Code.
• Three -Year Temporary Period means, as set forth in Treasury Regulations § 1.148 -
2(e)(2), the three -year temporary period exception to the yield restriction requirement of Code
Section 148(a), which exception applies to the nonrefimding portion of an issue only to the
extent that the issuer reasonably expects that (i) 85 percent of the Net Sale Proceeds of such
nonrefunding portion are to be allocated to expenditures on capital projects by the end of the
three -year period following the issue date; (ii). the issuer will within six months of the issue date
incur a substantial binding obligation to a third party to expend at least 5 percent of the Net Sale
Proceeds of the issue on capital projects; and (iii) the allocation of the Net Sale Proceeds of the
issue to expenditures will proceed with due diligence.
1.7 Reliance on Other Parties. The expectations of the Issuer and the Borrower
concerning certain uses of the proceeds of the Bonds and the use and operation of the Facilities
and other matters are based in whole or in part upon representations and certifications of other
parties set forth in this Tax Certificate and Agreement. Neither the Issuer nor the Borrower is
aware of any facts or circumstances that would cause either the Issuer or the Borrower to
question the accuracy or reasonableness of any representation or certification made in this Tax
Certificate and Agreement.
1.8 Separate Issue/Single Issue. All of the Bonds were sold on August 22, 2005 (the
"Sale Date'l. The Bonds have all been sold pursuant to the same plan of financing and are
reasonably expected to be paid from substantially the same source of funds. Accordingly, the
Issuer and the Borrower have been advised by Bond Counsel that the Bonds will be treated as a
• single issue for tax purposes. No other governmental obligations expected to be paid from
DocssF1:832757.3
4
F
substantially the same source of funds have been sold within 15 days before or after the Sale Date
• pursuant to the same plan of financing as the Bonds.
ARTICLE II
General Tax Matters
2.1 Private Activity Bonds. All of the proceeds of the Bonds will be loaned to the
Borrower, which is not a State or a political subdivision of the State.
2.2 Tax - Exempt Status of the. Borrower. The Borrower 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, or corresponding provisions of prior law. The Borrower has
received a determination letter or letters confirming its status as a 501(c)(3) organization issued
by the Internal Revenue Service, and the determination letters have not been modified, limited or
revoked. The Borrower.at all times shall, until the Bonds have been paid or redeemed, maintain
its status as an organization described in Section 501(c)(3) of the Code and its exemption from
federal income tax under Section 501(a) of the Code or corresponding provisions of future
federal income tax laws. No proceedings are pending or threatened in any way affecting the
status of the Borrower as an organization described in Section 501(c)(3) of the Code, or which
would subject any income of the Borrower to federal income taxation to such extent as would
result in the loss of its tax - exempt status under Section 501(a) of the Code or the loss of the,
• exclusion from gross income of interest payable with respect to the Bonds for federal income tax
purposes under Section 103 of the Code.
•
2.3 Ownership. The only property which will be provided by the net proceeds of the
Bonds is the Project. The Borrower will own all of the Project for federal tax purposes. The
Project is not expected to be sold or otherwise disposed of, in whole or in part, except due to
normal wear, tear, and obsolescence, before payment in full of the Bonds. Absent an Opinion of
Counsel, the Borrower will not sell.or otherwise dispose of any portion of the Project before
payment in full of the Bonds.
2.4 Qualified 501(c)(3) Bonds. (a) Based on the cost of the assets which compose
the Project, not more than 5% of the Sale Proceeds of the Bonds, in the aggregate, have been or
will be used for any activity or activities which constitute a trade or business or group of trades
or businesses within the meaning of Treasury Regulations Section 1.141 -3, including any
unrelated trade or business of the Borrower (or another organization described in Section
501(c)(3) of the Code) other than any activity or activities substantially related to the exempt
purposes ofthe Borrower (or another organization described in Section 501(c)(3) of the Code) (a
"Private Use'l except to the extent that one of the exceptions to Private Use set forth in Sections
2.4(b) or 2.4(c) below is satisfied. For this purpose, less than 2% of the Sale Proceeds of the
"Bonds ($1,263,900) will be used to pay costs of issuance (including underwriter's discount) and
are treated as Privately Used.
DOCSSF1:832757.3 5
(b) For purposes of Section 2.4, the term "Private Use" means any activity or
• activities which constitute a trade or business or group of trades or businesses, including any
unrelated trade or business of a nonprofit corporation. In addition to Private Use described
elsewhere in this Section 2.4, the term "Private Use" shall include, without limitation, the. lease
or rental of the Project or any part thereof to third parties which are not organizations described
in Section 501(c)(3) of the Code using the Project in a manner substantially related to their and
the Borrower's exempt purpose, except for (i) leases of not more than 200 days (including any
renewal options) if the compensation under the lease is determined, or redetermined at the time
of any renewal, at generally applicable, fair market value rates and use pursuant to such leases is
predominantly by natural persons not engaged in a trade or business, (ii) leases of not more than
100 days (including any renewal options) if the compensation under the lease is determined, or
redetermined at the time of any renewal, at generally applicable, fair market value rates but use,
pursuant to such leases is not reasonably available to natural persons not engaged in a trade or
business, or (iii) leases of not more than 50 days (including any renewal options).
(c) The Borrower has not entered into, and will not enter into, any arrangement
with any person or organization (other than a state or local governmental unit or another 501(c)(3)
organization) which provides for such person or organization to manage, operate, or provide
services with respect to the Project (a "Service Contract') if such Service Contract gives rise to
Private Use and would cause the total amount of Private Use of the Project to exceed 5 %. The
guidelines set forth in Revenue Procedure 97 -13 (the "Guideliner'l describe situations in which
the Internal Revenue Service will rule that a Service Contract does not give rise to private use.
Service Contracts that relate to the use or operation of the Project by physicians, professional
• corporations, or other "service providers," as that term is used in the Guidelines (the "Service
Providers', will satisfy the Guidelines if the requirements of each of the following subsections is
satisfied:
(i) The compensation of the Service Provider under the contract is
reasonable for the services rendered.
(ii) The contract does not provide for any compensation for services,
based in whole or in part, on a share of net profits from the operation of the Project. Generally,
compensation is not based on a share of net profits if such compensation is based on a "capitation
fee" or a "per -unit fee." Under the Guidelines, `capitation fee ",means a fixed periodic amount for
each person for whom the Service Provider assumes the responsibility to provide all needed
services for a specified period (so long as the quantity and type of services actually provided to
covered persons varies substantially). Under the Guidelines, a "per -unit fee" means a fee based on
a unit of service provided (e.g., a stated dollar amount for each specified medical procedure
performed).
(iii) The contract provides for a . compensation arrangement for the
Service Provider that satisfies any one of the following four paragraphs:
(a) At least 50 percent of the compensation for services for each
annual period during the term of the Service Contract is based on a periodic fixed fee and
• the term of such contract does not exceed five years.
DOCSSF1:832757.3 6
• (b) All of the compensation for . services is based on a
"capitation fee" or a combination of a "capitation fee" and a periodic fixed fee and the term
of such contract does not exceed five years.
(c) If the contract has a term, including renewal options, that is
not longer than three years, all of the Service Provider's compensation may be based on
"per -unit fee" or a combination of a "per -unit fee" and a periodic fixed fee. , For this
compensation arrangement to satisfy the Guidelines, the contract must be cancelable by the
Borrower on reasonable notice, without penalty or cause, at the end of the second year of
the contract term. In addition, the amount of the "per -unit fee" must be specified in the
service contract or otherwise specifically limited by the Borrower or an independent third
party (e.g., the administrator of the Medicare program).
(d) If the contract has a term, including renewal options, that is
not longer than two years, all of the Service Provider's compensation may be based on a percentage
of fees charged. For this compensation arrangement to satisfy the Guidelines, the contract must be
cancelable by the Borrower on reasonable notice, without penalty or cause, ai the end of the first
year of the contract term. In addition, the contract must (A) require the Service Provider to provide
services primarily to third parties (e.g., radiology services); or (B) involve a facility during an
initial start -up period for which there have been insufficient. operations to establish a reasonable
estimate of the amount of the annual gross revenues and expenses (e.g., a service contract for
general management services for the fast year of operations). During the start -up period only, the
• Service Provider's compensation may be based on a percentage of either gross revenues, adjusted
gross revenues, or expenses of the Project.
(iv) The Borrower is able to cancel the Service Contract upon reasonable
notice, without penalty or cause, at the end of the third year of the contract term, or at the earlier
times provided in (iii)(c) or (iii)(d) above (if applicable). Under the Guidelines, contract
termination penalties include (1) a limitation on the Borrower's right to compete with the Service
Provider; (2) a requirement that the Borrower purchase equipment, goods, or services from the
Service Provider; and (3) a requirement that the Borrower pay liquidated damages for cancellation
of the service contract However, the Guidelines generally do not treat the following as contract
termination penalties: (1) a requirement, effective on cancellation of the contract, that the
Borrower reimburse the Service Provider for ordinary and necessary expenses; and (2) a restriction
on the Borrower against hiring key personnel of the Service Provider.
(v) The Service Provider does not have a role or relationship with the
Borrower (or the Issuer) that, in effect, substantially limits the ability of the Borrower to exercise
its rights, including cancellation rights, under the Service Contract. Accordingly, not more than
20 percent of the voting power of the governing body of the Borrower (or the Issuer) in the
aggregate may be vested in the Service Provider and its directors, officers, shareholders, and
employees. In-addition, not more than 20 percent of the voting power of the governing body of the
Service Provider in the aggregate may be vested in the Borrower (or the Issuer) and its directors,
officers, shareholders, and employees (or the Issuer's governing board members, staff, and
• employees). Furthermore, the group of persons belonging to both the governing board of the
DOCSSF1:832757.3 7
Borrower (or the Issuer) and the Service Provider may not include the chief executive officers of
• the Borrower (or the Issuer) and the Service Provider, or their respective governing bodies.
Finally, neither the Borrower nor the Issuer may be members of the same "controlled group"
(within the meaning of Treasury Regulations. 1.150-1(f)) or "related persons" (within the meaning
of Code Section 144(a)(3)) as the Service Provider.
(d) Cogeneration Facility. One of the Facilities is a cogeneration facility that
will provide energy to certain healthcare facilities of the Borrower (the "Cogeneration
Facility'). To the extent the portion of the Cogeneration Facility provides energy to any
facilities that are Privately Used, the Cogeneration Facility shall be treated as Privately Used.
While it is not expected that the energy produced by the Cogeneration Facility will exceed the
energy requirements of the hospital facilities of the Borrower, it is possible that the amount of
energy produced by the Borrower will exceed the energy requirements of the hospital facilities of
the Borrower. The amount by which the energy produced by the Project exceeds the energy
requirements of the hospital facilities of the Corporation shall be hereinafter referred to as
"Excess Energy". For purposes of this Tax Certificate, the Corporation acknowledges that the
sale or transfer of Excess Energy may not be an activity related to the exempt purpose of the
Corporation and might give rise to Private Use of the Project. Absent an Opinion of Counsel, the
Corporation will not sell or transfer any Excess Energy. .
2.5 $150,000,000 Limit. All of the Net Sale Proceeds of the Bonds will be used to
pay for capital expenditures incurred after August 5, 1997.
• 2.6 Not Residential Rental Property for Family Units. None of the Facilities
financed with proceeds of the Bonds contain any. units with complete facilities for living,
sleeping, eating, cooking, and sanitation.
•
2.7 Useful Life. As set forth in Exhibit C attached hereto, the average maturity of the
Bonds, 24.68 years, does not exceed one hundred twenty percent (120 %) of the average
reasonably expected economic life of the Facilities, 42.16 years,. determined as of the later of the
date of issue of the Bonds or.the date on which such assets are expected to be placed in service.
2.8 Prohibited Facilities.' None of the proceeds of the Bonds will be used to finance
any airplane, skybox or other private luxury box, facility primarily used for gambling, or any
store the principal business of which is the sale of alcoholic beverages for consumption off
premises.
2.9 Public Hearing and Approval. The Issuer caused to be published on
July 11, 2005 in the Newport Beach/Costa Mesa Daily Pilot, a newspaper of general circulation
within the City of Newport Beach, a notice of a public hearing regarding the Issuer's issuance of
the Bonds to finance the Project. A copy of such notice is included as part of the closing
documents relating to the issuance of the Bonds (the "Closing Documents'). Such hearing was
held on July 26, 2005. At the hearing all interested persons were invited and given a reasonable
opportunity to'comment upon the nature and location of the Facilities and the financing thereof
by the Bonds. On July 27, 2005, the City approved the issuance of the Bonds for the purpose of
financing the Project. A copy of this approval is included as part of the Closing Documents.
DOCSSF1:8327573 8
2.10 Costs of Issuance. The Borrower will not expend more than 2 percent of the Sale
• Proceeds, to pay costs of issuing the Bonds, including underwriter's discount.
2.11 Registered Form. The Bonds are being issued in registered form.
2.12 No Federal Guarantee. Neither the Issuer nor the Borrower will, directly or
indirectly, use or permit the use of or otherwise invest any proceeds of the Bonds or any other
funds of the Issuer or the Borrower or take or omit to take any action that would cause the Bonds
to be "federally guaranteed" within the meaning of Section 149(b) of the Code. In furtherance of
this representation, warranty and covenant, neither the Issuer nor the Borrower will allow the
payment of the principal or interest represented by the Bonds to be guaranteed (directly or
indirectly) in whole or in part by the United States or any agency or instrumentality thereof.
Neither the Issuer nor the Borrower will, except as provided in the next sentence, use five
percent (5 %) or more of the proceeds of the Bonds to make loans the payment of the principal or
interest with respect to which are guaranteed (directly or indirectly) in whole or in part by the
United States or any agency or instrumentality thereof, nor will the Issuer or the Borrower invest
five percent (5 %) or more of the proceeds of the Bonds in federally insured deposits or accounts.
However, proceeds of the Bonds may be invested without regard to the limitation in this
Section as follows: investments qualifying for the Three -Year Temporary Period; investments in
the Bona Fide Debt Service Funds and investments in obligations issued by the United States
Treasury or as otherwise provided by Section 149(b)(3) of the Code.
2.13 No Refunding. None of the proceeds of the Bonds will be used to pay any
• principal, interest, or call premium on any bonds or obligations of the Issuer or the Borrower,
other than the Bonds.
2.14 Information Reporting. Each of the Issuer and the Borrower certifies that it has
reviewed the Internal Revenue Service Form 8038 to be filed in connection with the issuance of
the Bonds, and believes that all of the information contained in the Form 8038 is true and
complete. Such Form 8038 will be filed at the Internal Revenue Service Center, Ogden,. Utah
84201 no later than the fifteenth day of the second calendar month following the close of the
calendar year quarter in which the Bonds are issued.
2.15 No Pooling. Neither the Issuer nor the Borrower will use the proceeds of the
Bonds directly or indirectly to make or finance loans to two or more borrowers.
2.16 No Hedge Bonds. The Issuer and the Borrower reasonably expect that more than
85% of the Net Sale Proceeds will be expended for the governmental purpose of the Bonds
before the date that is 3 years after the Closing Date. In addition, they expect that at least 10% of
such Net Sale Proceeds will be so spent within 1 year after the Closing Date and at least 30%
will be so spent within 2 years after the Closing Date. No more than 50 percent of the such Net
Sale Proceeds will be invested in investment securities with a substantially guaranteed yield for 4
years or longer.
2.17 Reimbursement for Prior. Expenditures. The Issuer and the Borrower hereby
certify with respect to costs of the Project paid prior to the Closing Date which will be allocated
• and charged against the proceeds of the Bonds (the "Reimbursement Costs ") that all of the
DOCSSF1:832757.3 9
Reimbursement Costs were paid in anticipation of reimbursement out of proceeds of a borrowing
• of the Issuer and were (i) incurred no earlier than 60 days before the Closing Date,
(ii) Preliminary Expenditures, or (iii) not Preliminary Expenditures and were incurred between
January 1, 2004 and the date 60 'days prior to the Closing Date with respect to the Facilities
described in the Reimbursement Resolution of the Borrower adopted on February 10, 2004 (the
"Reimbursement Resolution'j; provided, however, that the amount of Reimbursement Costs to
which Sale Proceeds and Investment Proceeds of the Bonds are allocated pursuant to this Section
2.17(iii) may not exceed $100 million. The Borrower represents that at the time the
Reimbursement Resolution was adopted, the Borrower intended to build the Cogeneration .
Facility approximately contemporaneously with the Women's Pavilion to provide energy to the
Women's Pavilion as well as certain other healthcare facilities of the Borrower. Accordingly,
Bond Counsel has advised the Borrower that the Cogeneration Facility may be treated as one of
the Facilities listed in the Reimbursement Resolution for purposes of this Tax Agreement. None
of the Reimbursement Costs (i) represents costs of any portion of a facility which was completed
and actually operating at substantially the level for which it was designed more than 18 months
prior to the Closing Date, (ii) were incurred more than three years before issuance of the Bonds
or (iii) were initially paid or reimbursed out of the proceeds of any borrowing other than the
Bonds. None of the proceeds of the Bonds used to pay Reimbursement Costs will be used to
pay, directly or indirectly, principal of or interest on any debt obligation of the Issuer or the
Borrower. A copy of the Reimbursement Resolution is attached hereto as Exhibit E.
. 2.18 Allocations. All allocations of Sale Proceeds to expenditures will occur not later
than 18 months after the date of the expenditure or 18 months after the date the facility to which
• the expenditure relates is completed and actually operating at substantially the level for which it
was designed, but in all events not later than 60 days after the fifth Bond Year (or 60'days after
none, of the Bonds are outstanding, if earlier). If an allocation of , Sale Proceeds to
Reimbursement Costs occurs within 30 days of the Closing Date such amounts shall be treated as
expended on the Closing Date.
ARTICLE III
Arbitrage
3.1 Reasonable Expectations. This Article III sets forth the reasonable expectations,
statements of fact and representations of the Issuer and the Borrower with respect to the amount
and use of the proceeds of the Bonds and certain other funds.
3.2 Reoffering Price; Sale Proceeds. Based upon advice of the Underwriter, as
reflected in Exhibit A hereto, the Bonds have been reoffered to the public (excluding any bond
house, broker or other intermediary) at par. Based upon the advice of the Underwriter, the initial
offering price was reasonable under customary standards in the applicable tax- exempt market as
of the Closing Date. The total Sale Proceeds to be derived from the sale of the Bonds is equal to
$200,000,000.00. Of this amount, $610,000.00 will be retained by the Underwriter as
underwriter's discount and $2,510,095.15 will be paid to the. Insurer for the Insurance. The
• remaining Sale Proceeds are expected to be needed and fully expended as follows
DOCSSF7:832757.3 10
3.2.1 Costs of Issuance Fund. Sale Proceeds in the amount of $653,900.00
• will be deposited in the Costs of Issuance Fund and used to pay the costs of issuing the Bonds.
3.2.2 Project Fund. .Sale Proceeds in the amount of $196,226,004.85 will be
deposited in the Project Fund and used to pay the costs of the Project.
•
3.3 No Overissuance. The total proceeds to be received from the sale of the Bonds,
together with other funds made available by the Borrower, and anticipated investment,eamings
thereon, do not exceed the total of the amount necessary to finance the government purposes for
which the Bonds are issued as described above.
3.4 Funds and Accounts.
3.4.1 General. The following funds and accounts relating to the Bonds have
been or may be established:
Project Fund
Costs of Issuance.Fund
Revenue Fund
Interest Account
Principal Account
Redemption Fund
Optional Redemption Account
Special Redemption Account
Bond Purchase Fund
Liquidity Facility Proceeds Account
Corporation Proceeds Account
Remarketing Proceeds Account
Rebate Fund
3.4.2 Project Fund. The amount in the Project Fund will be used to pay for
costs of the Project. At least 85% of such funds will be allocated to expenditures on capital
projects within three years after the Closing Date. The Borrower has incurred or expects to incur
within six months after the Closing Date a substantial binding. obligation to a third party
involving an.expenditure of at least 5 percent of such funds on capital projects. The Issuer and
the Borrower reasonably expect that construction of the Facilities and the allocation of such
funds to expenditures will proceed with due diligence to completion. Sale Proceeds and
Investment Proceeds held in the Project Fund may be invested at an unrestricted yield for the
three -year period following the Closing Date but will be subject. to the arbitrage rebate
requirements of Section 148(f) of the Code. Any Sale Proceeds or Investment Proceeds
remaining unspent on or after August 24, 2008 shall be invested either (i) in Investment Property
with a yield not exceeding the yield on the Bonds, (ii) in assets that are not treated as Investment
Property (e.g., Tax - Exempt Bonds), or (iii) in assets that satisfy the requirements for qualified
yield reduction payments set forth in Treasury Regulations Section 1.148 -5(c), subject to the
limitation set forth in Section 1. 148-1 0(b)(1)(ii).
DOCSSF1:832757.3 I I
3.4.3 Costs of Issuance Fund. The amount in the Costs of Issuance Fund shall
• be used solely for payment of the costs of issuance with respect to the Bonds by within 180 days
of the Closing Date, with the remaining balance therein, if any, transferred to the Project Fund
and used as described in Section 3.4.2 above. Such amounts invested may be invested at an
unrestricted yield, but will be subject to the arbitrage rebate requirements of Section 148(f) of the
Code.
3.4.4 Bona Fide Debt Service Funds.
(a) Revenues. The Bonds are payable solely from the revenues derived from
payments on the Loan Agreement, funds held by the Trustee, and interest earnings thereon. The
Borrower will make its payments from its general funds from current revenues of the Borrower.
The Trustee will deposit such payments into the Interest Account or the Principal Account within
the Revenue Fund.
(b) Redemption Fund. The Trustee is directed to deposit into the
Redemption Fund such amounts as are required or permitted to be deposited therein pursuant to
the Indenture. Such amounts shall be applied to the prepayment price with respect to the Bonds
upon optional or mandatory redemption in accordance with of the Indenture.'
(c) Bona Fide Debt Service Funds. The Revenue Fund (including the
Interest Account and the Principal Account), the Redemption Fund (including the Optional.
Redemption Account and the Special Redemption Account), and the portion of the general funds
of the Borrower used to make payments under the Loan Agreement are used primarily to achieve
• a proper matching of revenues and debt service within each Bond Year. Such funds and
accounts are depleted at least once each Bond Year except for a carryover amount not to exceed
the greater of the prior Bond Year's earnings on such funds or accounts or one - twelfth of the
prior Bond Year's debt service. Amounts contributed to such funds will be spent within thirteen
months after the date of such contribution, and any investment earnings (net of losses) received
from the investment or reinvestment of moneys held in such funds will be expended within one
year after the date of accumulation thereof in such funds. Amounts deposited into the Bona Fide
Debt Service Funds may be invested at an unrestricted yield for a period not exceeding thirteen
months from the date of the first deposit of such amounts to the Bona Fide Debt Service Funds.
Such amounts will not be subject to the arbitrage rebate requirements of Section 148(f) of the Code
for any year for which the gross earnings on all Bona Fide Debt Service Funds for the Bonds is less
than $100,000.
(d) Bond Purchase Fund. The Bond Purchase Fund is used to hold funds in
the event that the Bonds are tendered for purchase by the holders thereof pursuant to the
Indenture. In the event of such a tender, the Bonds will be remarketed. Accordingly, the Bond
Purchase Fund will not be used to hold funds used to pay principal, interest, or call premium on
the Bonds. .
•3.4.5 Rebate Fund. The Issuer and the Borrower, by entering into this Tax
Certificate and Agreement, have established certain procedures designed to insure compliance
with certain arbitrage requirements relating to the Bonds. Among these requirements is a
. requirement that moneys be rebated to the United States Government. The Rebate Fund has
DOCSSFr:832757.3 12
been established to that end. Moneys in the Rebate Fund are neither pledged to nor expected to
• be used to pay debt service with respect to the Bonds. The Rebate Fund may be invested without
regard to yield and will not be subject to the arbitrage rebate requirements of Section 148(f) of
the Code unless it is funded with Gross Proceeds of the Bonds.
3.4.6 No Other Sinking or Pledge Fund. Other than the Bona Fide Debt
Service Funds, there are no funds or accounts of the Borrower or any person who is a Related
Person to the Borrower established pursuant to the Indenture, or otherwise, which are reasonably
expected to be used to pay debt service with respect to the Bonds or which are pledged as
collateral for the Bonds and for which there is a reasonable assurance that amounts therein or the
investment income earned from such funds or accounts will be available to pay debt service with
respect to the Bonds in the event that the Borrower encounters financial difficulties.
3.5 No Replacement.
3.5.1 No portion of the proceeds of the Bonds will be used directly or indirectly
to replace funds of the Issuer or the Borrower or'any persons who are Related Persons to either
the Issuer or the Borrower that are intended to be used for the purpose for which the Bonds are
issued, and used directly or indirectly to acquire Investment Property reasonably expected to
produce a yield higher than the yield on the Bonds.
3.5.2 No Other Replacement Proceeds. The term of the Bonds is no longer
than is reasonably necessary for the governmental purposes of the Bonds. The weighted average
maturity of the Bonds does not exceed 120 percent of the average reasonably expected economic
• life of the Project.
3.6 No Abusive Arbitrage Device. The Bonds are not and will not be part of a
transaction or series of transactions that (i) attempts to circumvent the provisions of Section 148
of the Code (or any successor thereto) and related regulations, enabling the Issuer, the Borrower,
or any persons who are Related Persons to either the Issuer or the Borrower to exploit the
difference between tax- exempt and taxable interest rates to gain a material financial advantage,
and (ii) increases the burden on the market for tax - exempt obligations iu any manner, including,
without limitation, selling bonds that would not otherwise be sold, or selling more bonds, or
issuing them sooner, or allowing them to remain outstanding longer, than would otherwise be
necessary.
3.7 Acquisition of Acquired Program Obligations. The proceeds from the sale of
the Bonds will be used in accordance with the program of the Issuer created to assist
participating health care and educational institutions to obtain tax - exempt financing for their
respective projects (the "Program "). The Issuer further certifies, warrants and covenants that
the Program complies with the provisions of § 1.148 -1(b) of the Treasury Regulations in that:
3.7.1 the Program involves the acquisition of acquired program obligations;
3.7.2 at least 95% of all acquired program obligations, by amount of cost
outstanding, are evidences of loans to an organization described in Section 501(c)(3) of the Code
• and exempt from tax under Section 501(a) of the Code;
DOCSSF1:832757.3 13
3.7.3 at least 95% of all of the amounts received by the Issuer with respect to
• acquired program obligations shall be used for one or more of the following purposes: to pay the
principal of or interest on or otherwise service the debt on the Issuer's bonds and notes related to
the Program; to reimburse the Issuer, or to pay, for administrative costs of issuing such
obligations; to reimburse the Issuer, or to pay, for administrative and other costs and anticipated
future losses directly related to the Program; to make additional loans for the same general
purposes specified in the Program; or to redeem or retire such bonds and notes of the Issuer at
the next earliest possible date of redemption; and
3.7.4 pursuant to this Section, any person or any person who is a Related Person
to the Issuer from whom the Issuer may, under the Program, acquire acquired program
obligations, shall not, pursuant to an arrangement (either formal or informal), purchase the
Issuer's bonds or notes in an amount related to the amount of the acquired program obligations
from such person by the Issuer.
ARTICLE IV
Yield and Yield Restriction
4.1 Yield.With Respect to the Bonds.
4.1.1 Generally. The Bonds will bear a variable rate of interest pursuant to the
• terms of the Indenture. Accordingly, pursuant to Treasury Regulations Section 1.148-4(c), yield
on the Bonds is computed separately for. each computation period, as defined in Treasury
Regulations Section 1.148 -1(b). The yield for each computation period is the discount rate
which, when used in computing the present value as of the first day of the computation period of
all payments of principal and interest and qualified guarantee and qualified hedge fees that are
attributable to the computation period, produces an amount equal to the present value, using the
same discount rate, of the aggregate issue price (or, pursuant to Treasury Regulations Section
1.148- 4(c)(2)(iv), the deemed issue price for any computation period other than the computation
period beginning on the Closing Date) of the Bonds as of the first day of the computation period.
The payments attributable to a computation period generally include (i) any amounts actually
paid during the computation period for principal on the Bonds, (ii) any amounts actually paid
during the computation period for interest accruing during the computation period, (iii) any
amounts actually paid during the computation period for interest during the prior computation
period that was included in the deemed issue price of the Bonds as accrued but unpaid interest as
of the first day of the computation period, (iv) any amounts properly allocable to fees for a
qualified guarantee fee for the computation period and (v) any amounts properly allocable to a
qualified hedge for the computation period. For purposes of computing yield with respect to the
computation period beginning on the Closing Date, the aggregate issue price of the Bonds will be
$200,000,000 which represents the price at which the Bonds are being sold to the ultimate
purchaser(s) thereof. See Exhibit A. For purposes hereof, yield shall be calculated on a 360 -day
year basis with interest compounded semi - annually.
DOCSSFl:832757.3 14
4.1.2 Qualified Guarantee. In computing the yield on the Bonds as described
• in Section 4. 1.1 hereof, premiums paid or to be paid for the Insurance (to the extent not properly
allocable to a cost other than the cost of the Insurance) will be treated as qualified guarantee
payments with respect to the Bonds, as provided in Treasury Regulations Section 1.148 -4(f).
This is based upon: (i) representations of the Insurer (set forth in the certificate attached hereto
as Exhibit D) that the premiums paid or to be paid for the Insurance were negotiated at arms'
length and are within the normal range of charges charged by the Insurer for the transfer of credit
risk with respect to similar tax- exempt obligations and that the premiums for the Insurance are
not included in any direct or indirect payment for a cost, risk or other element that is not
customarily borne by guarantors of tax- exempt bonds in transactions in which the guarantor has
no involvement other than as guarantor; and (ii) representations of the Underwriter, (set forth in
the certificate attached hereto as Exhibit A), respectively, that the present value of interest saved
as a consequence of the Insurance exceeds the present value of the premiums for the Insurance
and that the premiums paid for the Insurance are not unreasonable.
4.1.3 No Qualified Hedges. No contract has been, and (absent an Opinion of
Counsel) no contract will be entered into such that failure to take the contract into account would
distort the yield on the Bonds or otherwise would fail clearly to reflect the economic substance of
the transaction.
4.2 Yield on Acquired Program Obligations. Payments of principal and interest by
the Borrower to the Issuer under the Loan Agreement will be made in the same amounts as the
principal and interest coming due with respect to the Bonds and will be held by the Trustee for
• the account of the Borrower until applied to its payment with respect to the Bonds. The
Borrower also is required to pay or reimburse the Issuer for certain administrative expenses,
including the costs of issuing the Bonds and the fees and expenses of the Trustee and any paying
agents, but excluding general expenses or administrative overhead of the Issuer. The present
value of these payments to the Issuer will not exceed the present value of the administrative costs
paid by the Issuer. The yield on the Loan Agreement is not expected to be greater than one and
one -half percentage point more than the yield on the Bonds.
•
ARTICLE V
Rebate
5.1 Undertakings. The Issuer and the Borrower have covenanted to comply with
certain requirements of the Code relating to the Rebate Requirement as discussed in this Article
V. The Issuer and the Borrower acknowledge that the United States Department of the Treasury
has issued regulations with respect to certain of these undertakings, including the proper method
for computing whether any rebate amount is due the federal government under Section 148(f) of
the Code. The Issuer and the Borrower covenant that they will undertake to determine precisely
what is required with respect to the rebate provisions contained in Section 148(f) of the Code and
said regulations from time to time and will comply with any requirements that may be applicable
to the Bonds. Except to the extent inconsistent with any requirements of the Code or the
DOCSSFl:832757.3 15
regulations or future regulations, the Issuer and the Borrower will undertake the methodology
• described in this Tax Certificate and Agreement.
5.2 Rebate Fund. A special fund designated the "Rebate Fund" has been established
pursuant to the Indenture. The Issuer and the Borrower have agreed to keep the Rebate Fund
separate and apart from all other funds and moneys held by any of the Issuer, the Borrower, and
the Trustee.
5.3 Recordkeeping. The Issuer and the Borrower shall maintain or cause to be
maintained detailed records with respect to each Nonpurpose Investment attributable to Gross
Proceeds of the Bonds, including: (a) purchase date; (b) purchase price; (c) information
establishing fair market value on the date such investment became a Nonpurpose Investment;
(d) any accrued interest paid; (e) face amount; (f) coupon rate; (g) periodicity of interest
payments; (h) disposition price; (i) any accrued interest received; and 6) disposition date. Such
detailed recordkeeping is required to facilitate the calculation of the Rebate Requirement.
5.4 Exceptions to the Rebate Requirement.
5.4.1 Bona Fide Debt Service Funds. Subject to the representations and
certifications made in Section 3.4.4(c) of this Tax Certificate and Agreement, no rebate
calculations will need to be made with respect to any moneys in the Bona Fide Debt Service
Funds in any Bond Year for which the gross earnings on all Bona Fide Debt Service Funds for the
Bonds is less than $100,000.
• 5.4.2 Six -Month Expenditure Exception. Except for Gross Proceeds.
deposited in the Bona Fide Debt Service Funds, if on or before the date six (6) months after the
Closing Date, all of the Expenditure Exception Gross Proceeds are expended, the Rebate
Requirement shall be treated as having been satisfied with respect to such Expenditure Exception
Gross Proceeds.
•
5.4.3 Eighteen -Month Expenditure Exception. The Issuer and the Borrower
will be treated as having satisfied the Rebate Requirement with respect to the Expenditure
Exception Gross Proceeds allocated to expenditures for a governmental purpose of the Bonds in
accordance with the following schedule (the "Eighteen -Month Expenditure Schedule "),
measured from the Closing Date:
End of first six months 15%
End of first year 60%
End of first 18 months 100%
In addition, the eighteen -month expenditure exception requires that the Rebate Requirement be
satisfied with respect to all amounts not required to be spent pursuant to the Eighteen -Month
Expenditure Schedule (other than earnings on the Bona Fide Debt Service Funds). All of the
Expenditure Exception Gross Proceeds will be treated as expended after 18 months if the
remainder is a "reasonable retainage" as required or permitted by construction contracts with the
Borrower's contractors and such remainder is spent within 30 months of the Closing Date.
DOCSSFl:832757.3 . 16
5.4.4 Two-Year Construction Exception. The Available Construction
• Proceeds of the Bonds may not be subject to the Rebate Requirement. The Issuer and the
Borrower reasonably expect that at least 75% of the Available Construction Proceeds will be
expended for construction expenditures with respect to property that will be owned by the
Borrower. For purposes of this Section 5.4.4, "construction expenditures" include costs for
construction, reconstruction and rehabilitation, but do not include costs of acquisition of interests
in land or other existing real property. All of the Available Construction Proceeds will be
deposited or are expected to be deposited in the Project Fund.
The portions of the Available Construction Proceeds required to be spent at the
end of each 6 -month period are as follows:
End of first six months 10%
End of first year 45%
End of first 18 months 75%
End of second year 100%
The requirement that 100% of the Available Construction Proceeds be expended
within two years of the Closing Date will be met if at least 95% of the Available Construction
Proceeds is spent by such time, if the remainder is a "reasonable retainage" as required or
permitted by construction contracts with the Borrowgr's contractors, and if such remainder is
spent within the three years of the Closing Date. In. determining Available Construction
Proceeds as of any date, there shall be included the amount of investment earnings reasonably
• expected after such date along with investment earnings actually received or accrued as of such
date.
5.5 Rebate Requirement Calculation and Payment.
5.5.1 Except to the extent it is rendered unnecessary because one or more of the
rebate exceptions described in Section 5.4. above are satisfied, the. Issuer and the Borrower will
prepare or cause to be prepared an annual calculation of the Rebate Requirement consistent with
the rules described in this - Section 5.5. (The interim calculations not falling at the close of the
periods referred to in Section 5.5.3 below may be made as of the close of the Bond Years
involved or as of other dates more convenient to the Issuer and the Borrower and such dates shall
be treated as the close of Bond Years for purposes of this Section 5.5.) The Issuer and the
Borrower will complete the annual calculation of the Rebate Requirement within 55 days after
the close of each Bond Year and within 55 days after the first date. on which there are no
outstanding Bonds. Concurrent with the preparation of such calculation, the Issuer and the
Borrower shall deposit in the Rebate Fund an amount which when added to amounts already on
deposit therein will equal the Rebate Requirement or, if appropriate, decrease the sum held in the
Rebate Fund to the Rebate Requirement.
5.5.2 For purposes of calculating the Rebate Requirement (i) the aggregate
amount earned with respect to a Nonpurpose Investment shall be determined by assuming that
the Nonpurpose Investment was acquired for an amount equal to its fair market value
(determined as provided in § 1.148- 5(d)(6) of the Treasury Regulations as applicable) at the time
• . it becomes a Nonpurpose Investment, and (ii) the aggregate amount earned with respect to any
DOCSSF7:8327573 17
Nonpurpose Investment shall include any unrealized gain or loss with respect to the Nonpurpose
• Investment (based on the assumed purchase price at fair market value and adjusted to take into
account amounts received with -respect to the Nonpurpose, Investment and earned original issue
discount or premium) on the first date when there are no outstanding Bonds or when the
investment ceases to be a Nonpurpose Investment. Any amounts held in the Bona Fide Debt
Service Fund shall be excluded from the Rebate Calculation.
5.5.3 The Issuer and the Borrower shall pay to the United States Department of
the Treasury from the Rebate Fund, not later than 60 days after the end of the fifth Bond Year
and each succeeding fifth Bond Year, an amount equal to 90 percent, and not later than 60 days
after the first date when there are no outstanding Bonds, an amount equal to 100 percent of the
Rebate Requirement (determined as of the first date when there are no outstanding Bonds) plus
any actual or imputed earnings on such Rebate Requirement, all as set forth in § 1.148 -3 of the
Treasury Regulations,
5.5.4 Each payment required to be made pursuant hereto shall be filed with the
Internal Revenue Service Center, Ogden, Utah, on or before the date such payinent is due, and
shall be accompanied by Form 8038 -T. The Issuer and the Borrower shall retain records of the
calculations required by this Section 5.5 until 6 years after the retirement of the last of the Bonds.
5.6 Investments and Dispositions.
5.6.1 General Rule. No Investment Property may be acquired with Gross
Proceeds for an amount (including transaction costs, except as otherwise provided in. 1.148-
• 5(e) of the Treasury Regulations) in excess of the fair market value of such Investment Property.
No Investment Property may be sold or otherwise. disposed of for an amount (including
transaction costs, except as otherwise provided in § 1.148 -5(e) of the Treasury Regulations) less
than the fair market value of the Investment Property.
•
5.6.2 Fair Market Value. In general, the fair market value of any Investment
Property is the price at which a willing buyer would pay to a willing seller to acquire the
Investment Property, with no amounts paid to artificially reduce or increase the yield on such
Investment Property. This Section 5.6 sets forth certain safe harbors for determining fair market
value. Other methods may be used to establish fair market value, provided, however, that such
methods comply with the requirements of § 1.148- 5(d)(6) of the Treasury Regulations.
5.6.3 Arm's Length Purchase and Sale. If Investment Property is acquired
pursuant to an arm's length transaction without regard.'to any amount paid to reduce the yield on
the Investment Property, the fair market value of the Investment Property shall be the amount
paid for the Investment Property (without increase for transaction costs, except as otherwise
provided in § 1.148 -5(e) of the Treasury Regulations). If Investment Property is sold or
otherwise disposed of in an arm's length transaction without regard to any reduction in the
disposition price to reduce the Rebate Requirement, the fair market value of the Investment
Property shall- be the amount realized from the sale or other disposition of the Investment
Property (without reduction for transaction costs, except as otherwise provided in § 1.148 -5(e) of
the Treasury Regulations).
DOCSSF1:832757.3 18
i
5.6.4 United States Treasury Securities - State and Local Government
• Series. If a United States Treasury obligation is acquired directly from or disposed of directly to
the United States Department of the Treasury (as in the case of the United States Treasury
Securities - State and Local Government Series ( "SLGS ") obligations), such acquisition or
disposition shall be treated as establishing a market for the obligation and as establishing the fair
market value of the obligation.
5.6.5 Investment Contracts. The purchase price of any Nonpurpo' a Investment
acquired pursuant to a guaranteed investment contract (within the meaning of Section 1.148 -1(b)
of the Treasury Regulations) shall be determined as provided in Section 1.148 -5 of the Treasury
Regulations. No investment contract shall be acquired . with Gross Proceeds unless the
requirements of Section 1.148 -5 of the Treasury Regulations and this Section 5.6.5 are satisfied.
With respect to any investment contract, the Borrower and the Issuer will obtain from the
provider of the investment contract, broker thereof or other party, such information, certification
or representation as will enable the Borrower and the Issuer to determine that these requirements
are satisfied.
The purchase price of an investment contract will be considered to be fair
market value if.
(i) the Borrower and the Issuer have made (or have had made on their behalf)
a bona fide solicitation for the investment contract; the solicitation must have specified the
material terms of the investment contract (i.e., all the terms that could directly or indirectly affect
• the yield or the cost of the investment including the collateral security requirements for the
investment contract) and, unless the moneys invested pursuant to such investment contract will
be held in a reasonably required reserve fund or the bona fide debt service funds, the Borrower's
and the Issuer's reasonably expected drawdown schedule for the moneys to be invested; the
solicitation has a legitimate business purpose (i.e., a purpose other than to increase the purchase
price or reduce the yield) for every term of the bid specification;
•
(ii) all bidders have an equal opportunity to bid so that, for example, no bidder
is given the opportunity to review other bids (a last look) before bidding;
(iii) the Borrower and the Issuer solicit bids from at least three (3) investment
contract providers with established industry reputations as competitive providers of investment
contracts;
(iv) the Borrower and the Issuer include in the bid specifications a statement to
potential bidders that by submitting a bid, the provider is making certain representations that the
bid is bona fide, and specifically that 1) the bidder did not consult with any other potential
provider about its bid, 2) the bid was determined -without regard to any other formal or informal
agreement that the potential provider had with the Borrower and the Issuer or any other person,
and 3) the bid was not submitted solely as a courtesy to the Borrower and the Issuer or any other
person for purposes of satisfying the requirements of Section 1.148 -5 of the Treasury
Regulations;
DOCSSFI:832757.3 19
(v) at least three bids meeting the qualification requirements of the bid
• solicitation (as set forth in (i) above) have been received from different providers of investment
contracts that have no material financial interest in the Bonds (the following investment contract
providers are considered to have a material financial interest in the issue: 1) a lead underwriter
in a negotiated underwriting, but only until 15 days after the issue date of the issue, 2) an entity
acting as a financial advisor with respect to the purchase of the investment contract at the time
the bid specifications were forwarded to potential providers; and 3) any related party to a
provider that is disqualified for one of the two preceding. reasons);
(vi) at least one of the bids received by the Borrower and the Issuer that meets
the requirements of the preceding paragraph is from an investment contract provider with an
established industry reputation as a competitive provider of investment contracts;
(vii) the investment contract has a yield (net of any broker's fees) at least equal
to the highest yielding of the qualifying bids received from the bidders that have no material.
financial interest in the Bonds; if the investment contract is not the. highest - yielding of the
qualifying bids, the Borrower and the Issuer must have significant non -tax ieasons, such as
creditworthiness of the bidder, for failure to purchase the highest - yielding investment contract
offered;
(viii) if an agent for the Borrower and the Issuer conducts, the bidding process,
the agent does not bid;
(ix) the provider of the investment contract certifies as to all administrative
• costs to be paid on behalf of the Borrower and the Issuer, including any fees paid as broker
commissions in connection with the investment contract.
5.6.6 Deemed Acquisition or Sale. The fair market value of any Investment
Property not directly purchased with Gross Proceeds but allocated to the Bonds for which there
is an established securities market (within the meaning of § 15A.453- 1(e)(4)(iv) of the
Temporary Treasury Regulations) shall be determined as provided in this Section 5.6.6 (Any
market especially established to provide Investment Property to an issuer of governmental
obligations shall not be treated as an established securities market.) The price at which a willing
buyer would purchase Investment Property that is traded in an established securities market
generally shall be determined as provided in § 20.2031 -2 of the Estate Tax Regulations, as
adjusted by Treasury Regulations § 1.148 -5(d).
5.6.7 Certificates of Deposit. The purchase price of a certificate of deposit
issued by a commercial bank that has a fixed interest rate, a fixed principal payment schedule, a
fixed maturity, and a substantial penalty for early withdrawal will be considered to be fair market
value if-
(i) the yield on the certificate of deposit is not less than the yield on
reasonably comparable direct obligations of the United States; and
(ii) the yield on the certificate of deposit is not less than the highest published
• yield of the provider thereof which is currently available on comparable certificates of deposit
offered to the public.
DOCSSF7:8327573 1 20
5.6.8 Broker Compensation.
• (1) Guaranteed Investment Contracts. For purposes of computing the yield on
any investment contract acquired through a broker, Bond Counsel has advised that any
compensation received by such broker, whether payable by or on behalf of the obligor or obligee
of such investment contract may be taken into account in determining the cost of the investment
contract to the extent that the amount of the fee the Borrower treats as a "qualified administrative
cost" (within the meaning of Section 1.148- 5(e)(2)(iii) of the Treasury Regulations): (i)ais, in the
Opinion of Bond Counsel, "reasonable" (within the meaning of Section 1.148- 5(e)(2)(i) of the
Treasury Regulations), or (ii) does not exceed the lesser of: (a) $31,000 and (b) 0.2% of the
amount of Gross Proceeds of the Bonds that the Borrower reasonably expects, as of date the
investment contract is acquired, to be deposited in the investment contract over the term of the
investment contract (i.e., the "computational base" within the meaning of Section 1.148 -
5(e)(2)(iii)(B)(2)(i) of the Treasury Regulations) or, if more, $3,000; and with respect to the
Bonds, the Borrower does not treat as qualified administrative costs more than $87,000 in
brokers' commissions or similar fees with respect to all investment contracts and investments for
yield restricted defeasance escrows purchased with Gross Proceeds of the Bonds. The dollar
amounts specified in this Section 5.6.8(1) are subject to the cost -of- living adjustment provided in
Section 1.148- 5(e)(2)(iii)(B) of the Treasury Regulations.
(2) Securities in a Yield Restricted Defeasance Escrow. For purposes of
computing the yield on any investment securities in an escrow fund acquired through a broker,
Bond Counsel has advised that any compensation received by such broker, whether payable by
• or on behalf of the obligor or obligee of such investment securities may be taken into account in
determining the cost of the investment securities to the extent that the amount of the fee the
Borrower treats as a "qualified administrative cost" (within the meaning of Section 1.148 -
5(e)(2)(iii) of the Treasury Regulations): (i) is, in the Opinion of Bond Counsel, "reasonable"
(within the meaning of Section 1.148- 5(e)(2)(i) of the Treasury Regulations), or (ii) does not
exceed the lesser of: (a) $31,000 and (b) 0.2% of the amount of Gross Proceeds of the Bonds
invested in the investment securities (i.e., the "computational base" within the meaning of
Section 1.148- 5(e)(2)(iii)(B)(2)(ii) of the Treasury Regulations) or, if more, $3,000; and with
respect to the Bonds, the Borrower does not treat as qualified administrative costs more than
$87,000 in brokers' commissions or similar fees with respect to all investments for yield
restricted defeasance escrows and investment contracts purchased with Gross Proceeds of the
Bonds. The dollar amounts specified in this Section 5.6.8(2) are subject to the cost -of- living
adjustment provided in Section 1.148- 5(e)(2)(iii)(B) of the Treasury Regulations.
•
5.7 Segregation of Proceeds. In order to perform the calculations required by the
Code, it is necessary to track separately all of the Gross Proceeds. To that end, the Issuer and the
Borrower shall cause to be established separate subaccounts or shall cause the Trustee to take
such other accounting measures as are necessary in order to account fully for all Gross Proceeds.
5.8 fling Requirements. The Issuer and the Borrower will file or cause to be filed
such reports or other documents with the Internal Revenue Service as is required by the Code.
DOCSSFI:832757.3 21
5.9 Retention of Firm. The Issuer and the Borrower hereby undertake to satisfy their
• obligation to perform the rebate calculations that may be required to be made from time to time
with respect to the Bonds in the manner set forth in Exhibit B hereto.
ARTICLE VI
Other Matters
6.1 The undersigned are authorized representatives of the Issuer and the Borrower,
respectively, and are acting for and on behalf of the Issuer and the Borrower, respectively, in
executing this Tax Certificate and Agreement. To the best of the knowledge and belief of.the
undersigned, there are no other facts, estimates or circumstances that would materially change
the expectations as set forth herein, and said expectations are reasonable.
6.2 Notwithstanding any provision of this Tax Certificate and Agreement, the Issuer
and the Borrower may amend this Tax Certificate and Agreement and thereby alter any actions
allowed or required by this Tax Certificate and Agreement if such amendment is based on an
Opinion of Counsel.
6.3 Retention of Records. The Issuer and the Borrower covenant to maintain all
records relating to the requirements of the Code and the representations, certifications and
covenants set forth in this Tax Agreement until the date three years after the last outstanding
• 2005 Bonds have been retired. If any of the Bonds are refunded by Tax - Exempt Obligations (the
"Refunding Obligations "), the Issuer and the Borrower covenant to maintain all records required
to be retained by this Section until the later of the date three years after the last outstanding 2005
Bonds have been retired or the date three years after the last Refunding Obligations have been
retired. The records that must be retained include, but are not limited to:
•
(i) Basic records and documents relating to the Bonds (including the Indenture, the
Loan Agreement, this Tax Agreement, the Form 8038 and the opinion of Bond Counsel);
Documentation evidencing the expenditure of proceeds of the Bonds;
(iii) Documentation pertaining to any investment of Bond proceeds (including the
purchase and sale of securities, SLGS subscriptions, yield calculations for each class of
investments, actual investment income received from the investment of proceeds, guaranteed
investment contracts, rebate calculations, and yield verification reports with respect to the
refunding escrow);
(iv) Documentation evidencing use of the Project by public and private sources (i.e.,
copies of management contracts, research agreements, leases, etc.); and
DOCSSF1:8327573 22
• (v) Documentation evidencing all sources of payment or security for the Bonds.
Dated: August 24, 2005.
0
DOCSSF1:832757. I
CITY OF NEWPORT BEACH
By 4 - �,
Mayor
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
a
Authorized Representative
• (v) Documentation evidencing all sources of payment or security for the Bonds.
•
0
Dated: August 24, 2005.
DOCSSFI :832757. 1
CITY OF NEWPORT BEACH
By
Mayor
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
By
uthor' ed Represent tive
• Exhibit A
CERTIFICATE OF THE UNDERWRITER
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
2005 Series A, B and C
Citigroup Global Markets Inc. has acted as underwriter (the "Underwriter ") in
connection with the issuance of the above- captioned obligations (the "Bonds ") and hereby
certifies and represents the following:
I. Issue Price
A. As of August 22, 2005 (the "Sale Date "), the Underwriter had offered or
reasonably expected to offer all of the Bonds to the general public (excluding bond houses,
brokers, or similar persons acting in the capacity of underwriter or wholesalers) in a bona fide
public offering at a par price.
• B. The par issue price of the Bonds does not exceed the fair market prices as
of the Sale Date.
r�
C. As of the date of this certificate, all of the Bonds have actually been
offered to the general public at par.
77. Qualified Guarantee.
The present value of the premium paid for the insurance provided by Financial
Guaranty Insurance Corporation, insuring the payment of debt service on the Bonds (the "Bond
Insurance ") are less than the present value of expected interest savings as a result of the Bond
Insurance, and such premium is not unreasonable.
Dated: August 24, 2005.
DOCSSF1:832757.3
CTnGROUP GLOBAL MARKETS INC.
By
Authorized Representative
0 Exhibit B
CERTIFICATE OF THE ISSUER AND THE BORROWER CONCERNING REBATE
On behalf of the City of Newport Beach (the "Issuer ") and Hoag Memorial Hospital
Presbyterian (the "Borrower "), the undersigned hereby certify with respect to the Issuer's
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) 2005 Series A, B and C, in the
initial aggregate principal amount of $200,000,000 (the "Bonds "), that the Borrower will
undertake itself (or engage appropriate consultants to undertake on its behalf) any rebate
calculations that may be required to be made from time to time with respect to the Bonds, and
specifically acknowledge that the firm of Orrick, Herrington & Sutcliffe LLP has not undertaken
at this time to prepare such calculations or to further notify the Issuer or the Borrower concerning
the requirement of making such calculations.
Dated: August 24, 2005.
CITY OF NEWPORT BEACH
By
a or
• HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
By
Authorized Representative
n
DOCSSF1:832757A B -1
Exhibit B
CERTIFICATE OF THE ISSUER AND THE BORROWER CONCERNING REBATE
On behalf of the City of Newport Beach (the "Issuer") and Hoag Memorial Hospital
Presbyterian (the "Borrower"), the undersigned hereby certify with respect to the Issuer's
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) 2005 Series A, B and C, in the
initial aggregate principal amount of $200,000,000 (the "Bonds "), that the Borrower will
undertake itself (or engage appropriate consultants to undertake on its behalf) any rebate
calculations that may be required to be made from time to time with respect to the Bonds, and
specifically acknowledge that the firm of Orrick, Herrington & Sutcliffe LLP has not undertaken
at this time to prepare such calculations or to further notify the Issuer or the Borrower concerning
the requirement of making such calculations.
Dated: August 24, 2005.
CITY OF NEWPORT BEACH
I�
Mayor
• HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
•
DOCSSF1:832757.1 B -1
r�
Exhibit C
0 WEIGHTED AVERAGE EXPECTED ECONOMIC LIFE
•
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DOCSSFI:832757.3 C-1
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Exhibit D
• CERTIFICATE OF INSURER
•
•
DOCSSFI:8727573 D -1
OFGIC
Fwncial Guaranty Insurance company
125 Park Avenue
New York, NY 10017
T 212.312.3000
F 212.312.3093
August 24, 2005
City of Newport Beach
Hoag Memorial Hospital Presbyterian
Orrick, Herrington & Sutcliffe LLP
Re: $200,000,000.00 in aggregate principal amount of City of Newport Beach,
California Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B, and Series 2005C
Ladies and Gentlemen:
In connection with the issuance of the above - referenced obligations (the "Bonds "),
Financial Guaranty Insurance Company, doing business in California as FGIC Insurance
Company ( "Financial Guaranty ") is issuing a municipal bond insurance policy
guaranteeing the payment of principal and interest on the Bonds when due (the
"Insurance Policy").
This letter is to advise you that:
(i) The Insurance Policy is an unconditional and recourse obligation of Financial
Guaranty (enforceable by or on behalf of the holder of the Bonds) to pay the
scheduled payments of principal and interest on the Bonds when due in the
event of a failure by the City of Newport Beach, California (the "Issuer ") to
make such payments.
(ii) The insurance premium is required to be paid as a condition to the issuance of
the Insurance Policy and is a charge for the transfer of substantially all of the
credit risk for the payment of principal and interest on the Bonds.
(iii) Financial Guaranty is not a co- obligor on the Bonds.
(iv) Except for the premium paid to Financial Guaranty for the Insurance Policy,
Financial Guaranty (and any related party within the meaning of section
1.150 -1(b) of the Income Tax Regulations) will not use any portion of the
proceeds of the Bonds.
OIGIC
August 24, 2005
(v) No portion of the premium paid to Financial Guaranty for the Insurance
Policy represents a payment for any direct or indirect services, other than the
transfer of credit risk, including costs of underwriting or remarketing the
Bonds or the cost of insurance for casualty to property financed with the
proceeds of the Bonds.
(vi) The Issuer is not entitled to a refund of any portion of the premium paid for
the Insurance Policy in the event that any of the Bonds are retired prior to
their stated maturity
Very truly yours,
Carmen Tigreros
Counsel
•, 05010567
i
Exhibit E
• REIMBURSEMENT RESOLUTION
•
DOCSSFl:8327573 E -1
RESOLUTION
• BOARD OF DIRECTORS
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
S February 2005
WHEREAS, Hoag Memorial Hospital Presbyterian (the "Corporation") is
currently obligated with respect to the City of Newport Beach Variable Rate Demand .
Revenue Bonds Series 1992, 1996. and 1999;
WHEREAS, the Corporation desires to: (a) refinance certain prior
expenditures for the costs of construction, fur ishing and equipping of improvements to
certain of the existing facilities as well as new facilities and, (b) finance certain capital
costs of construction, furnishing and equipping of certain new facilities, (collectively
referred to as the "Project').
WHEREAS, the Corporation desires to induce the City of Newport Beach
to issue and sell up to $200, 000,000 in aggregate principal amount of its variable rate
bonds- (the "Bonds') and to loan the proceeds from the sale of the bonds to the
Corporation for the purpose described above and to pay certain costs of issuing the
bonds;
NOW, THEREFORE, BE IT RESOLVED, that issuance of the Bonds is
hereby authorized and approved with the following provisions:
• A. The term of the Bonds shall be long -term, defined as 30 -year maturity,
B. The type of interest rate shall be variable based upon the studies prepared by
outside experts and provided to the Finance Committee and Investment
Management Committee of the Board of Directors,
C. The Corporation shall maintain a separate Board Designated investment in an
amount equal to the unpaid aggregate principal amount of the outstanding Bonds,
This investment shall be invested by the Investment Management Committee in a
very conservative manner as specifically directed by the Board of Directors. The
Investment Management Committee shall not consider this amount in its
allocation of hospital funds with respect to an overall allocation of investments in
applying its overall risk analysis.
D. The structure of any bond offering shall include the restriction that the Bonds
contain no `put option" by the bond holders. Any deviations from this provision'
will require approval by the Finance Committee,
E. Any amendments to the aforementioned provisions require approval by the Board
of Directors.
• 317-
RESOLUTION OF THE BOARD OF DIRECTORS OF HOAG MEMORIAL HOSPITAL
PRESBYTERIAN DECLARING ITS INTENTION TO REIMBURSE ITSELF FROM THE
PROCEEDS OF ONE OR MORE TAX - EXEMPT FINANCINGS FOR CERTAIN
EXPENDITURES MADE AND /OR TO BE MADE IN CONNECTION WITH THE
ACQUISITION, CONSTRUCTION AND /OR EQUIPPING OF CERTAIN CAPITAL
IMPROVEMENTS
WHEREAS, Hoag Memorial Hospital Presbyterian, Inc. (the "Corporation') is a tax - exempt
organization organized and existing under the laws of the state of California; and
WHEREAS, The Corporation has paid, beginning no earlier than January I, 2004, and will pay, on and
after the date hereof, certain expenditures (the "Expenditures ") in connection with the acquisition, construction
and/or equipping of the Corporation's health facilities (the "Project'), as more fully described in Exhibit A
attached hereto; and
WHEREAS, The Board of Directors of the Corporation (the `Board's has determined that those moneys
previously advanced no more than 60 days prior to the date hereof and to be advanced on and after the date
hereof to pay the Expenditures are available only for a temporary period, and it is necessary to reimburse the
Corporation for the Expenditures from the proceeds of one or more issues of tax - exempt bonds (the "Bonds ");
NOW, THEREFORE, BE IT RESOLVED AS FOLLOWS:
Section 1. The Board hereby declares the Corporation's intent to reimburse the Corporation with the
• proceeds of the Bonds for the Expenditures with respect to the Project made on and after January 1, 2004, which
date is no more than 60 days prior to the date hereof. The Corporation reasonably expects on the date hereof
that it will reimburse the Expenditures with the proceeds of the Bonds.
Section 2. Each Expenditure was and will be either (a) of a type properly chargeable to a capital
account under general federal income tax principles (determined in each case as of the date of the Expenditure),
or (b) a cost of issuance with respect to the Bonds.
Section 3. The maximum principal amount of the Bonds expected to be issued for the Project is
$ 100,000,000.
Section 4. The Corporation will make a reimbursement allocation, which Is a written allocation that
evidences the Corporation's use of proceeds of the Bonds to reimburse an Expenditure, no later than IS months
after the later of the date on which the Expenditure is paid or the Project is placed in service or abandoned, but
in no event more than three years after the date on which the Expenditure is paid. The Corporation recognizes
that exceptions are available for certain "preliminary expenditures," costs of issuance, certain de minimis
amounts and expenditures for construction projects of at least 5 years.
Section 5. This resolution shall take effect immediately upon its passage.
PASSED AND ADOPTED this ON day of / ' 2004.
a
Oai/W. Ham on, Secretary
•
11
DESCRIPTION OF PROJECT
Women's Pavilion / East Tower Project
Proposed South Tower
Proposed Outpatient Building
\I
n
LJ
EXHIBIT A
EXHIBIT NO.9
Continuing Disclosure
Certificate
(executed by the Corporation).
(Corporation Counsel)
0
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and
delivered by Hoag Memorial Hospital Presbyterian ( "Hospital "), a nonprofit public benefit
corporation duly organized and existing under the laws of the State of California in connection with
the execution and delivery of $200,000,000 City of Newport Beach Insured Revenue Bonds (Hoag
Memorial Hospital Presbyterian) Series 2005A, 2005B and 2005C (the `Bonds "). The Bonds are
being issued pursuant to a bond indenture, dated as of August 1, 2005 (the "Indenture "), between the
City of Newport Beach (the "City") and Wells Fargo Bank, National Association, as Trustee. The
proceeds of the Bonds are being loaned by the City to Hospital pursuant to a loan agreement, dated as
of August 1, 2005 (the "Loan Agreement "), between the City and the Hospital. The Hospital
covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the Hospital for the benefit of the Holders and Beneficial Owners of the
Bonds. The Hospital acknowledges that the City has not undertaken any responsibility with respect
to any reports, notices or disclosures provided or required under this Disclosure Certificate, and has
no liability to any person, including any Holder or Beneficial Owner of the Bonds, with respect to the
Rule.
• SECTION.2. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Hospital pursuant to, and as
described in, Section 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" or "Holder" shall mean any person which (a) has the power, directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including
persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as
the owner of any Bonds for federal income tax purposes.
"Dissemination Agent" shall mean any Dissemination Agent designated in writing by the
Hospital.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities
Information Repository for purpose of the Rule. The National Repositories currently approved by
the Securities and Exchange Commission are listed at http: / /www/ sec .gov /info /municipal/nrmsir.htm.
"Participating Underwriter" shall mean the original underwriter of the Bonds required to
is comply with the Rule in connection with the offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
ROCS OC/ 1 120041 v4/22936 -0004
• "Rule" shall mean Rule 15c2 12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Repository" shall mean any public or private repository or entity designated by the
State of California as a state repository for the purpose of the Rule and recognized as such by the
Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State
Repository.
SECTION 3. Provision of Annual Reports. The Hospital shall, or shall cause the
Dissemination Agent to, not later than six months following the end of its fiscal year (which fiscal
year as of the date hereof ends August 31, 2005), commencing with the report for the 2005 fiscal
year, provide to each Repository an Annual Report which is consistent with the requirements of
Section 4 of this Disclosure Certificate. In each case, the Annual Report may be submitted as a
single document or as separate documents comprising a package, and may cross - reference other
information as provided in Section 4 of this Disclosure Certificate; provided that audited financial
statements may be submitted separately from the balance of the Annual Report and later than the date
required above for the filing of the Annual Report if they are not available by that date. If the
Hospital's fiscal year changes, it shall give notice of such change in the same manner as for a Listed
Event under Section 4.
SECTION 4. Content of Annual Reports. The Hospital's Annual Report shall contain or
include by reference the following:
• (a) The audited financial statements of the Obligated Group (which may be the
audited financial statements of the Hospital consolidated with its Wholly -Owned Subsidiaries (as
defined in Appendix A of the Official Statement) and/or affiliates so long as the Hospital is the sole
Member of the Obligated Group) for the prior fiscal year, audited by a firm of nationally recognized
independent certified public accountants approved by the Hospital as having been prepared in
accordance with generally accepted accounting principles (except in the case of special purpose
financial statements, for required consolidations).
If such audited financial statements are not available by the time the Annual
Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited
financial statements in a format similar to the financial statements contained in the Official Statement
(defined below), and the audited financial statements shall be filed in the same manner as the Annual
Report when they become available.
(b) Unless a single financial statement (including a single special purpose
financial statement) is delivered pursuant to clause (a) above for the Obligated Group, an unaudited
combined balance sheet and an unaudited combined statement of operations for such fiscal year for
the Obligated Group, prepared by the Hospital; provided, if the Hospital is the only Member of the
Obligated Group during the applicable fiscal year, such unaudited statement may include operations
of the Hospital and its Wholly -Owned Subsidiaries.
(c) An update of the following information contained in Appendix A to the
Official Statement, dated August 12, 2005 (the "Official Statement "), related to the Bonds:
2
DOCS00 1120041 v4 /22936 -0004
• 1. List of Obligated Group Members;
2. Updated information provided in tabular form under the caption
"Medical Staff';
3. Updated information provided in tabular form under the heading
"Sources of Patient Service Revenue," for the most recent fiscal year;
4. Updated information provided in tabular form under the heading
"Historical Utilization;"
5. Updated information provided in tabular form under the heading
"Capitalization" presenting the actual capitalization of the Hospital and its Wholly -Owned
Subsidiaries for the most recent fiscal year;
6. Updated information provided in tabular form under the heading
"Estimated Debt Service Coverage," with no pro forma adjustments, for the Hospital and its Wholly -
Owned Subsidiaries for the most recent fiscal year; and
7. Number of employees and percentage of employees subject to
collective bargaining agreements.
• SECTION 5. Reportin"f Significant Events. The Hospital shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds, if material:
difficulties;
difficulties;
1. principal and interest payment delinquencies;
2. non - payment related defaults;
3. unscheduled draws on debt service reserves reflecting financial
4. unscheduled draws on credit enhancements reflecting financial
5. substitution of credit or liquidity providers or their failure to perform;
6. adverse tax opinions or events affecting the tax - exempt status of the
7. modifications to rights of Bondholders;
S. optional, contingent or unscheduled bond calls;
9. defeasances;
10. release, substitution or sale of property securing repayment of the
Bonds; and
11. rating changes.
3
ROCS OC/ 1120041 x4/22936-0004
• SECTION 6. Manner of Filing. Any filing under this Disclosure Certificate may be made
solely by transmitting such filing to the Texas Municipal Advisory Council (the "MAC ") as provided
at http: / /www.disclosureusa.org unless the United States Securities and Exchange Commission has
withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004.
SECTION 7. Termination of Ren_ortmg Obligation. The Hospital's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full
of all of the Bonds. If the Hospital's obligations under the Loan Agreement are assumed in full by
some other entity, such person shall be responsible for compliance with this Disclosure Certificate in
the same manner as if it were the Hospital and the Hospital shall have no further responsibility
hereunder. If such termination or substitution occurs prior to the final maturity of the Bonds, the
Hospital shall give notice of such termination or substitution in the same manner as for a Listed
Event under Section 5.
SECTION 8. Dissemination Agent. The Hospital may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor
Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the
content of any notice or report prepared by the Hospital pursuant to this Disclosure Certificate. The
Dissemination Agent may resign by providing thirty (30) days written notice to the Hospital. If at
any time there is not any other designated Dissemination Agent, the Hospital shall be the
• Dissemination Agent. The initial Dissemination Agent shall be the Hospital.
SECTION 9. Amendment: Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the Hospital may amend this Disclosure Certificate (and the Dissemination Agent shall
agree to any amendment so requested by the Hospital which does not impose any greater duties, nor
greater risk of liability, on the Dissemination Agent) and any provision of this Disclosure Certificate
may be waived, provided that the following conditions are satisfied
(a) If the amendment or waiver relates to the provisions of Sections 3, 5 or 7, it
may only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law or change in the identity, nature or status of an obligated person with
respect to the Bonds or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule
at the time of the original issuance of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) The amendment or waiver either (i) is approved by the Holders of the Bonds
in the same manner as provided in the Indenture for amendments to the Indenture with the consent of
Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the
interests of the Holders or Beneficial Owners of the Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the
. Hospital shall describe such amendment in the next Annual Report, and shall include, as applicable, a
narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the
case of a change of accounting principles, on the presentation) of financial information or operating
data being presented by the Hospital. In addition, if the amendment relates to the accounting
4
DOCSOC/ 1120041 v4/22936 -0004
• principles to be followed in preparing financial statements, (i) notice of such change shall be given in
the same manner as for a Listed Event under Section 5, and (ii) the Annual Report for the year in
which the change is made should present a comparison in narrative form and also, if feasible, in
quantitative form) between the financial statements as prepared on the basis of the new accounting
principles and those prepared on the basis of the former accounting principles.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be
deemed to prevent the Hospital from disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event, in
addition to that which is required by this Disclosure Certificate. If the Hospital chooses to include
any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that
which is specifically required by this Disclosure Certificate, the Hospital shall have no obligation
under this Disclosure Certificate to update such information or include it in any future Annual Report
or notice of occurrence of a Listed Event.
SECTION 11. Default. In the event of a failure of the Hospital or the Dissemination Agent
to comply with any provision of this Disclosure Certificate, the Trustee may (at the written request of
the Participating Underwriter or the Holders of at least twenty -five percent (25 %) aggregate principal
amount of Outstanding Bonds shall, or any Holder or Beneficial Owner of the Bonds may take such
actions as may be necessary and appropriate, including seeking mandate or specific performance by
court order, to cause the Hospital or the Dissemination Agent, as the case may be, to comply with its
• obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be
deemed an Event of Default under the Indenture or Loan Agreement, and the sole remedy under this
Disclosure Certificate in the event of any failure of the Hospital or the Dissemination Agent to
comply with this Disclosure Certificate shall be an action to compel performance.
•
SECTION 12. Notices. Any notices or communications to the Hospital may be given as
follows:
One Hoag Drive
P.O. Box 6100
Newport Beach, CA 92658 -6100
Attention: President
The Hospital may, by written notice, designate a different address to which subsequent
notices or communications should be sent.
ROCS OC/ 1120041 v4 /22936 -0004
• SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the City, the Dissemination Agent (if any), the Participating Underwriter and Holders and Beneficial
Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
0
Dated: August 24, 2005.
DOCSOC/ 1120041 v4 /22936 -0004
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
MAF
IAMI
EXHIBIT NO. 10
Bond Insurance Policy
(original to Bond Trustee;
specimens for others).
(Bond Insurer)
FGIC
Financial Guaranty Inauranee Company
• Doing business in California as FGIClnsuranee Company
125 Park Avenue
New York, NY 10017
7. 212.312.3000
7 800.352.0001
Municipal Bond
New Issue Insurance Policy
Issuer: City of Newport Beach, California Policy Number: 05010567
Control Number: 0010001
Bonds: $200,000,000.00 in aggregate principal Premium: $2,510,095.15
amount of Insured Revenue Bonds
(Hoag Memorial Hospital
Presbyterian) Series 2005A, Series
2005B, and Series 2005C
Financial Guaranty Insurance Company ("Financial Guaranty', a New York stock insurance company, in
consideration of the payment of the premium and subject to the terms of this Policy, hereby unconditionally
• and irrevocably agrees to pay U.S. Bank Trust National Association or its successor, as its agent (the
"Fiscal Agent "), for the benefit of Bondholders, that portion of the principal and interest on the above -
described debt obligations (the `Bonds'l which shall become Due for Payment but shall be unpaid by
reason of Nonpayment by the Issuer.
Financial Guaranty will make such payments to the Fiscal Agent on the date such principal or interest
becomes Due for Payment or on the Business Day next following the day on which Financial Guaranty shall
have received Notice of Nonpayment, whichever is later. The Fiscal Agent will disburse to the Bondholder
the face amount of principal and interest which is then Due for Payment but is unpaid by reason of
Nonpayment by the Issuer but only upon receipt by the Fiscal Agent, in form reasonably satisfactory to it, of
(i) evidence of the Bondholder's right to receive payment of the principal or interest Due for Payment and
(ii) evidence, including any appropriate instruments of assignment, that all of the Bondholder's rights to
payment of such principal or interest Due for Payment shall thereupon vest in Financial Guaranty. Upon
such disbursement, Financial Guaranty shall become the owner of the Bond, appurtenant coupon or right to
payment of principal or interest on such Bond and shall be frilly subrogated to all of the Bondholder's rights
thereunder, including the Bondholder's right to payment thereof.
This Policy is non - cancellable for any reason. The premium on this Policy is not refundable for any reason,
including the payment of the Bonds prior to their maturity. This Policy does not insure against loss of any
prepayment premium which may at any time be payable with respect to any Bond.
As used herein, the term 'Bondholder" means, as to a particular Bond, the person other than the Issuer who,
at the time ofNonpayment, is entitled under the terms of such Bond to payment thereof. "Due for Payment"
means, when referring to the principal of a Bond, the stated maturity date thereof or the date on which the
same.shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier
date on which payment is due by reason of call for redemption (other than by mandatory sinking fund
• redemption), acceleration or other advancement of maturity and means, when referring to interest on a
Bond, the stated dare for payment of interest. "Nonpayment" in respect of a Bond means the failure of the
Issuer to have provided sufficient funds to the paying agent for payment in full of all principal and interest
F_GIC is a registered service mark used by Financial Guaranty Insurence Company under license 1mm Ifs parent company. FGC Corwaaw.
Form 9000 (10/93) . Page 1 of 2
FGIC
Financial Guaranty Insurance Company
• Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212.312.3000
T 800.352.0001
•
•
Municipal Bond .
New Issue Insurance Policy
Due for Payment on such Bond. "Notice" means telephonic or telegraphic notice, subsequently confirmed
in writing, or written notice by registered or certified mail, from a Bondholder or a paying agent for the
Bonds to Financial Guaranty. "Business Day" means any day other than a Saturday, Sunday or a day on
which the Fiscal Agent is authorized by law to remain closed.
In Witness Whereof, Financial Guaranty has caused this Policy to be affixed with its corporate seal and to
be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative. -
President
Effective Date: August 24, 2005
Authorized Representative
U.S. Bank Trust National Association acknowledges that it has agreed to perform the duties of Fiscal Agent
under this Policy.
Authorized Officer
FGIC is a registered service mark used by Fuandel Guaranty Insurance Company under license fmm its parent oompany, FGIC Corpmfion.
Form 9000 (10193) .Page 2 of 2
FGIC
Financial Guaranty Insurance Company
• Doing business in California as FGIC insurance Company
125 Park Avenue
New York, NY 10017
T 212.312.3000
T 800352.0001
•
•
Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number: 05010567
Control Number: 0010001
It is further understood that the term "Nonpayment' in respect of a Bond includes any payment of principal
or interest made t6 a Bondholder by or on behalf of the issuer of such Bond which has been recovered from
such Bondholder pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance
with a final, nonappealable order of a court having competent jurisdiction.
NOTHING HEREIN SHALL .BE CONSTRUED TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE
POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
LANGUAGE.
In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal
and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
President
Effective Date: August 24, 2005
Acknowledged as of the Effective Date written above:
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
Authorized Representative.
FGIC is a registered service mark used W Financial Gu r4 Insurance Company under license fmm its parent comparry, FGIC Corporation.
Fan E0002 (10/03) Page 1 of t
FGIC
• Financial Guaranty Insurance Company
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212.312.3000
T 800.352.0001
•
•
Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number: 05010567
Control Number: 0010001
Notwithstanding the terms and provisions contained in this Policy, it is further understood that the term
"Bondholder" shall not include the Obligated Group (as such term is defined in the bond documentation).
NOTHING HEREIN SHALL BE CONSTRUED TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE
POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
LANGUAGE.
In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal
and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
President
Effective Date: August 24, 2005
Acknowledged as of the Effective Date written above:
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
Authorized Representative
FGIC is a nujstered s Mca mmic used by Finandal Guamnly Insurance Company under license from as parent pgmpany, FGIC Capoaaon.
Form E-OM Page 1 cl 1
FDIC
• Financial Guaranty Insurance Company
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212.312.3000
T 800.352.0001
Mandatory California State
Amendatory Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number:. 05010567
Control Number: 0010041.
The insurance provided by this Policy is not covered by the California Insurance Guaranty Association
(California Insurance Code, Article 14.2).
NOTHING HEREIN SHALL BE CONSTRUED TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE
POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
• LANGUAGE.
In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal
and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
•
President
Effective Date: .August 24, 2005
Acknowledged as of the Effective Date written above:
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
Authorized Representative
FGIC is a regisfated service mark used by Financial Guaranty Insurance Company under ricense ham its parent company. FDIC Corporation.
Form E-005g (10183) rage 1 of 1
.FGIC
• Financial Guaranty Insurance Company
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212.312.3000
T 800.352.0001
Mandatory California State
Amendatory Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number: 05010567 Control Number: 0010001
Notwithstanding the terms and conditions in this Policy, it is further understood that there shall be no
acceleration of payment due under such Policy unless such acceleration is at the sole option of Financial
Guaranty.
NOTHING HEREIN SHALL BE CONSTRUED TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE
• POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
LANGUAGE.
In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal
and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
President
Effective Date: August 24, 2005
Acknowledged as of the Effective Date written above:
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
•
Authorized Representative
FGIC is a registered service mark used by martial Guaranty Insurance C yarry under license fmm fts parent company, FGIC Cor*ation.
Form E-0075 (3194) 1 Page 1 of /
EXHIBIT NO. 11
Bond Purchase Contract
(executed by the Underwriter and
accepted and agreed to by the
City and approved by the
Corporation, with the
Letter of Representation
(executed by the Corporation and
accepted and agreed to by the
Underwriter and the City)
(UC)
EXECUTION COPY
•
BOND PURCHASE CONTRACT
$200,000,000
CITY OF NEWPORT BEACH
• INSURED REVENUE BONDS
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005A, 2005B AND 2005C
011.1277351.4
u
Section
1.
2.
3.
a.
5.
6.
7.
8.
9.
TABLE OF CONTENTS
Purchase, Sale and Delivery of the Bonds ........... ...............................
Representations; Warranties and Agreements of the City ..................
Conditions to Obligations of the Underwriter ..... ...............................
Conditions to the Obligations of the City ............ :..............................
Expenses / Fees ...................................................... ...............................
Notices................................................................. ...............................
GoverningLaw .................................................... ...............................
Miscellaneous ........................................... ...............................
C t arts
Page
..................1
..................3
.. ............................... 6
.. .............................12
.. .............................12
12
ounerp .......................................................................................... .............................12
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
u
•
)11.1277351.4
Letter of Representation
Schedule of Maturity and Initial Auction Period
Form of Agreed -Upon Procedures Letter of Ernst & Young LLP
Form of Opinion of City Counsel
Form of Opinion of Counsel to the Borrower
Form of Opinion of Underwriter's Counsel
Officer's Certificate
J
$200,000,000
• CITY OF NEWPORT BEACH
INSURED REVENUE BONDS
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005A, 2005B AND 2005C
BOND PURCHASE CONTRACT
August 22, 2005
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
Ladies and Gentlemen:
Citigroup Global Markets Inc. (the "Underwriter") offers to enter into this Bond Purchase
Contract, including the Letter of Representation attached hereto as Exhibit A (the "Letter of
Representation "), being herein called the "Bond Purchase Contract," with the City of Newport
Beach (the "City) with the approval of Hoag Memorial Hospital Presbyterian, as Borrower (the
•"Borrower'), which, upon acceptance, will be binding upon the City and the Underwriter. This
offer is made subject to the City's acceptance on or before . 11:59 p.m., Newport Beach,
California time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the
Underwriter upon written notice delivered to the City by the Underwriter at any time prior to
acceptance.
Capitalized terms used herein and not otherwise defined shall have the meanings assigned
to such terms in the Bond Indenture (described below).
1. Purchase. Sale and Delivery of the Bonds.
(a) Subject to the terms and conditions and in reliance upon the
representations, warranties and agreements set forth herein and in the Letter of Representation,
dated the date hereof, executed and delivered contemporaneously herewith by the Borrower and
attached hereto as Exhibit A, the Underwriter hereby agrees to purchase from the City, and the
City hereby agrees to sell to the Underwriter, all (but not less than all) of the (i) $65,000,000
aggregate principal amount of the City's Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian) Series 2005A (the "Series 2005A Bonds "), (ii) $65,000,000 aggregate principal
amount of the City's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series
2005B (the "Series 2005B Bonds ") and (iii) $70,000,000 aggregate principal amount of the
City's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005C (the "Series
2005C Bonds and together with the Series 2005A Bonds and the Series 2005B Bonds, the
"Bonds ") identified on Exhibit B hereto, such Bonds to be dated the date of delivery, to be issued
• in the aggregate principal amounts and bearing interest and maturing on the dates set forth in
011.1277351.4
Exhibit B hereto. The aggregate purchase price for the Bonds shall be $199,390,000, consisting
• of the par amount of the Bonds of $200,000,000 less an underwriting discount of $610,000.
The Bonds shall be substantially in the form described in, shall be issued and
secured under the provisions of, and shall be payable as provided in, that certain Bond Indenture
dated as of August 1, 2005 (the "Bond Indenture'), by and between the City and Wells Fargo
Bank, National Association, as bond trustee (the "Trustee'). The Bonds shall be limited
obligations of the City payable solely from Loan Repayments (as that term is defined in the Bond
Indenture) made by the Borrower under that certain Loan Agreement dated as of August 1, 2005
(the "Loan Agreement ") by and between the City and the Borrower, from payments, made on
Obligation No. 14 (as hereinafter defined) by the Obligated Group (as hereinafter defined) and
from amounts held in certain funds established pursuant to the Bond Indenture (including certain
proceeds of the sale of the Bonds). The Bonds will be further secured by an assignment of the
right, title and interest of the City in the Loan Agreement and in Obligation No. 14, to the extent
and as more particularly described in the Bond Indenture.
The Bonds will initially be issued as Auction Rate Securities, or ARS. While the
Bonds are ARS, the interest rates thereon will be determined by implementation of the Auction
Procedures pursuant to an Auction Agent Agreement dated as of August 1, 2005 (the "Auction
Agent Agreement ") by and between the Trustee and Wells Fargo Bank, N.A., as Auction Agent
(the "Auction Agent ") and a Broker - Dealer Agreement dated as of August 1, 2005 (the "Broker -
Dealer Agreement ") by and among the Auction Agent, Citigroup Global Markets Inc., as Broker -
Dealer (the "Broker - Dealer") and the Borrower.
•The proceeds from the sale of the Bonds will be loaned to the Borrower pursuant
to the Loan Agreement and will be used, together with other available funds, (i) to finance or
reimburse the Borrower for certain capital expenditures at facilities owned or operated by the
Borrower, (ii) to pay costs of issuance of the Bonds and (iii) to pay the premium for the financial
guaranty insurance policy for the Bonds (the "Insurance Policy ") to be issued by FGIC Insurance
Company (the "Insurer").
The Borrower will issue its Obligation No. 14 ( "Obligation No. 14 ") to evidence
the obligation of the Obligated Group to make payments sufficient to pay the principal of,
premium, if any, and interest on the Bonds pursuant to the Supplemental Master Indenture for
Obligation No. 14, dated as of August 1, 2005 (the "Supplemental Master Indenture "), by and
between the Borrower and Wells Fargo Bank, National Association, as successor Master Trustee
(the "Master Trustee "), supplementing the Master Indenture (the "Master Indenture "), dated as of
October 1, 1984, as supplemented and amended, between the Borrower and such other Members
as may join the obligated group as defined therein (the "Obligated Group ") and the Master
Trustee.
The Borrower will undertake, pursuant to a Continuing Disclosure Certificate,
dated as of the date of issuance and delivery of the Bonds (the "Continuing Disclosure
Certificate "), by and between the Borrower and the Trustee, to provide certain annual financial f
information, certain quarterly financial information and notices of the occurrence of certain
events, if material. A description of this undertaking is set forth in the Official Statement, as
hereinafter described.
-2-
011.1277351.4
(b) The Borrower will deliver or cause to be delivered to the Underwriter
•copies of the Official Statement dated August 12, 2005 (the "Official Statement "), signed on
behalf of the City by the Mayor of the City and approved by the Borrower by its Vice President
Finance and Chief Financial Officer (or such other officer as is acceptable to the Underwriter).
Such Official Statement shall be delivered in sufficient quantity as may reasonably be requested
by the Underwriter in order to comply with Rule 15c2 -12 and the rules of the Municipal
Securities Rulemaking Board ( "MSRB ") within seven business days of the date hereof and, in
the event the Closing Date is less than seven business days after the date hereof, upon request of
the Underwriter, in sufficient time to accompany any confirmation requesting payment from any
customers of the Underwriter. The City has deemed the information contained in the Official
Statement regarding the City under the captions "THE CITY" and "LITIGATION — The City" to
be final as of its date. The City hereby ratifies, confirms and approves the use and distribution
by the Underwriter prior to the date hereof of the Official Statement, and hereby authorizes the
Underwriter to use and distribute the Official Statement and drafts of the Master Indenture, the
Bond Indenture and the Loan Agreement in connection with the offer and sale of the Bonds.
(c) No later than 1:00 p.m., New York time, on August 24, 2005, or at such
earlier or later time or date as shall be agreed by the City and the Underwriter (such time and
date being herein referred to as the "Closing Date "), the City will deliver to or upon the order of
The Depository Trust Company ( "DTC ") in New York, New York, for the account of the
Underwriter (or such other location as may be designated by the Underwriter and approved by
the City), the Bonds in the form of a separate, single, fully registered Bond (which may be
typewritten) for each series of Bonds (all of the Bonds bearing CUSIP numbers), duly executed
by the City and authenticated by the Trustee, and will deliver to the Underwriter at the offices of
Orrick, Herrington & Sutcliffe LLP in Los Angeles, California, the other documents herein
mentioned. The Underwriter will accept such delivery and pay the purchase price of the Bonds
as set forth in paragraph (a) of this Section by certified or official bank check payable in, or wire
transfer of, immediately available funds (such delivery and payment being herein referred to as
the "Closing'). Notwithstanding the foregoing, neither the failure to print CUSIP numbers on
any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the
Underwriter to accept delivery of and pay for the Bonds on the Closing Date in accordance with
the terms of this Bond Purchase Contract.
(d) On or prior to the date hereof, the Underwriter shall have received (i) from
Ernst & Young LLP,-an executed copy of its letter, substantially in the form of Exhibit C hereto
(the "Procedures Letter"), and (ii) from Ernst & Young LLP, its consent to the inclusion of its
audit report on the financial statements of the Borrower that are included in the Official.
Statement and to the references to its name in the Official Statement.
2. Representations, Warranties and Agreements of the City.
The City represents and warrants to and agrees with the Underwriter and the
Borrower as follows:
•
-S-
ot 1.1277351.4
(a) The City is and will be at the Closing Date a municipal corporation and
•charter city duly organized and existing under a freeholder's charter under the Constitution and
laws of the State of California (the "State ") and pursuant to the Charter of the City with the full
power and authority to issue the Bonds and to execute this Bond Purchase Contract, the Bond
Indenture and the Loan Agreement.
(b) When delivered to and paid for by the Underwriter at the Closing in
accordance with the provisions of this Bond Purchase Contract, the Bonds will have been duly
authorized, executed, issued and delivered, and will constitute valid and binding limited
obligations of the City in conformity with, and entitled to the benefit and security of, the Bond
Indenture (subject as to enforcement to any applicable bankruptcy, reorganization, insolvency,
moratorium or other law or laws affecting the enforcement of creditors' rights generally or
against municipal corporations such as the City from time to time in effect and further subject to
the availability of equitable remedies).
(c) By official action of the City prior to or concurrently with the acceptance
hereof, the City has consented to the distribution of the Official Statement and authorized and
approved the execution and delivery of and the performance by the City of, the obligations on its
part contained in the Bonds, the Loan Agreement, the Bond Indenture and this Bond Purchase
Contract and the consummation by the City of all other transactions contemplated by the Official
Statement and this Bond Purchase Contract, including approval of the Insurance Policy.
(d) Other than as described in the Official Statement, there is no action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental
agency, public board or body, known to the City to be pending or threatened against the City
seeking to restrain or enjoin the Osuance, sale, execution or delivery of the Bonds, or in any way
contesting or affecting any proceedings of the City taken concerning the issuance or sale thereof,
the pledge or application of any moneys or security provided for the payment of the Bonds, in
any way contesting the validity or enforceability of the Bonds, the Bond Indenture, the Loan
Agreement or this Bond Purchase Contract or contesting in any way the completeness or
accuracy of the Official Statement, as amended or supplemented, or the existence or powers of
the City relating to the issuance of the Bonds or any of the transactions contemplated by the
Official Statement or this Bond Purchase Contract.
(e) As of the date thereof and both at the time of acceptance hereof by the
City and at the Closing Date, the statements and information contained in the Official Statement
relating to the City and its functions, duties and responsibilities under the captions "TIE CITY"
and "LITIGATION — The City" do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(f) The City will furnish such information, execute such instruments and take
such other action in cooperation with the Underwriter as the Underwriter may reasonably request
in order for the Underwriter (i) to qualify the Bonds for offer and sale under the Blue Sky or
other securities laws and regulations of such states and other jurisdictions of the United States as
the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment
• under the laws of such states and other jurisdictions, and to continue such qualification in effect
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011.1277351.4
so long as required for distribution of the Bonds; provided, however, that in no event shall the
•City be required to take any action which would subject it to general or unlimited service of
process in any jurisdiction in which it is not now so subject.
(g) If, between the date of this Bond Purchase Contract and up to and
including the 25th day following the end of the underwriting period (as such term is defined in
Rule 15c2 -12 of the Securities and Exchange Commission), an event occurs, of which the City
has knowledge, which might or would cause the information relating to the City and its
functions, duties and responsibilities contained in the Official Statement under the captions
"THE CITY" and "LITIGATION — The City," as then supplemented or amended, to contain an
untrue statement of a material fact or to omit to state a material fact required to be stated therein
or necessary to make such information therein not misleading in the light of the circumstances
under which it was presented or if the City is notified by the Borrower pursuant to Section 20 of
the Letter of Representation, or otherwise requested to amend, supplement or otherwise change
the Official Statement, the City will notify the Underwriter and the Borrower. If, in the opinion
of the Underwriter, such event requires the preparation and publication of a supplement or
amendment to the Official Statement, the City will amend or supplement the Official Statement
in a form and in a manner, approved by the Underwriter, provided all expenses thereby incurred
will be paid by the Borrower or the Underwriter pursuant to Section 21 . of the Letter of
Representation.
(h) The execution and delivery of the Bonds, the Loan Agreement, the Bond
Indenture and this Bond Purchase Contract, and compliance with the provisions on the City's
•part contained therein, will not conflict with or constitute a breach of or default under any
existing law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note,
resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor
Will any such execution, delivery, adoption or compliance result in the creation or imposition of
any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of
the properties or assets of the City under the terms of any such law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or. other
instrument, except as provided by the Bond Indenture and the Loan Agreement.
(i) The execution and delivery of this Bond Purchase Contract by the City
shall constitute a representation by the City to the Underwriter that the representations and
agreements contained in this Section 2 are true as of the date hereof; and as to all matters of law
the City is relying on the advice of counsel to the City; and provided further that no member of
the City shall be individually liable for the breach of any representation, warranty or agreement
contained herein.
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311.1277351.4
3. Conditions to Obligations of the Underwriter.
• The obligation of the Underwriter to accept delivery of and pay for the Bonds on
the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material
respects of the representations, warranties and agreements on the part of the City contained
herein as of the date hereof and as of the Closing Date, to the accuracy in all material respects of
the statements of the officers and other officials of the City made in any certificates or other
documents furnished pursuant to the provisions hereof, to the performance by the City of its
obligations to be performed hereunder at or prior to the Closing Date and to the following
additional conditions.
(a) Ai the Closing Date, the Master Indenture shall be in full force and effect,
and the Supplemental Master Indenture, Obligation No. 14, the Bond Indenture, the Official
Statement, the Loan Agreement, the Auction Agent Agreement, the Broker - Dealer Agreement,
the Insurance Policy and the Continuing Disclosure Certificate shall have been duly authorized,
executed and delivered by the respective parties thereto, in substantially the forms heretofore
submitted to the Underwriter, with only such changes as shall have been agreed fo in writing by
the Underwriter and the City, and said agreements shall not have been amended, modified or
supplemented, except as may have been agreed to in writing by the Underwriter, and there shall
have been taken in connection therewith, with the issuance of the Bonds and with the
transactions contemplated thereby and by this Bond Purchase Contract all such actions as, in the
opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel ( "Bond Counsel') and City of
Newport Beach City Attorney ( "City Counsel'), shall be necessary and appropriate.
•(b) At the Closing Date, the Official Statement shall not have been amended,
modified or supplemented, except as may have been agreed to by the Underwriter.
(c) At the time of Closing, there shall not have occurred any change or any
development involving a prospective change, in the condition, financial or otherwise, or in the
earnings or operations of the Borrower from that set forth in the Official Statement that in the
judgment of the Underwriter, is material and adverse and that makes it in the judgment of the
Underwriter, impracticable or inadvisable to proceed with the offer, sale or delivery of the Bonds
on the terms and in the manner contemplated in the Official Statement.
(d) Between the date hereof and the Closing Date, the market price or
marketability of the Bonds, at the initial offering prices set forth in the Official Statement, shall
not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a
written notice to the City and the Borrower terminating the obligation of the Underwriter to
accept delivery of and pay for the Bonds), by reason of any of the following:
(1) legislation shall be introduced in or enacted by the Congress of the
United States or adopted by either House thereof or introduced in or enacted by
the legislature of the State, or a decision by a federal court (including the Tax
Court of the United States of America) or State court shall be rendered, or a
Wiling, regulation (proposed, temporary or final) or official statement by or on
behalf of the Treasury Department of the United States of America, the Internal
• Revenue Service or other federal or State agency shall be made, with respect to
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D1 7.7277357.4
federal or State taxation upon revenues or other income of the general character
• expected to be derived by the City or upon interest received on bonds of the
general character of the Bonds, or which would have the effect of changing
directly or indirectly the federal or State income tax consequences of interest on
bonds of the general character of the Bonds in the hands of the holders thereof,
which legislation, ruling, regulation or official statement would, in the
Underwriter's reasonable judgment, materially adversely affect the market price
of the Bonds;
(2) legislation enacted, introduced in the Congress or recommended
for passage by the President of the United States of America, or a decision
rendered by a court established under Article III of the Constitution of the United
States of America, or an order, ruling, regulation (final, temporary or proposed) or
official statement issued or made by or on behalf of the Securities and Exchange
Commission, or any other governmental agency having jurisdiction of the subject
matter, to the effect that obligations of the general character of the Bonds, or the
Bonds, including any or all underlying arrangements, are not exempt from
registration under the Securities Act of 1933, as amended, -or that the Bond
Indenture or the Master Indenture are not exempt from qualification under the
Trust Indenture Act of 1939, as amended;
(3) the outbreak or escalation of hostilities involving the United States
of America, including, but not limited to, acts of terrorism, or the declaration by
• the United States of America of a national emergency or war or the occurrence of
any other national emergency, calamity or crisis, the effect of which on the
financial markets is such as to make it, impractical or inadvisable to proceed with
the offering or delivery of the Bonds as contemplated by the Official Statement;
(4) the declaration of a general banking moratorium by federal, New
York or California authorities, or the general suspension of trading on any
national securities exchange;
(5) the imposition by the New York Stock Exchange or other national
securities exchange, or any governmental authority, of any material restrictions
not now in force with respect to the Bonds or obligations of the general character
of the Bonds or securities generally, or the material increase of any such
restrictions now in force, including those relating to the extension of credit by, or
the charge to the net capital requirements of, underwriters;
(6) an order, decree or injunction of any court of competent
jurisdiction, or order, ruling, regulation or official statement by the Securities and
Exchange Commission, or any other governmental agency having jurisdiction of
the subject matter, issued or made to the effect that the issuance, offering or sale
of obligations of the general character of the Bonds, or the issuance, offering or
sale of the Bonds, including any or all underlying obligations, as contemplated
hereby or by the Official Statement, is or would be in violation of the federal
• securities laws as amended and then in effect;
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311.1277351.4
(7) the withdrawal or downgrading of any rating of the Bonds by a
• national rating agency; or
(8) any event occurring or information becoming known which, in the
reasonable judgment of the Underwriter, makes untrue in any material respect any
statement or information contained in the Official Statement or has the effect that
the Official Statement contains any untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, in the light of the circumstances under which
they were made.
(e) At or prior to the Closing Date, the Underwriter and the City shall have
received executed or, as noted below, conformed copies of the following documents, in each
case satisfactory in form and substance to the Underwriter and the City:
(1) The Master Indenture (conformed copy), Obligation No. 14
(specimen copy), the Supplemental Master Indenture, the Bond -Indenture, the
Loan Agreement, the Auction Agent Agreement, the Broker - Dealer Agreement,
the Insurance Policy and the Continuing Disclosure Certificate, duly executed and
delivered by the respective parties thereto, with such amendments, modifications
or supplements as may have been agreed to in writing by the Underwriter;
(2) The unqualified approving opinion of Bond Counsel, dated the
Closing Date and addressed to the City, in substantially the form attached as
• Appendix E to the Official Statement, together with a reliance letter addressed to
the Underwriter and a supplemental opinion of Bond Counsel in a form
acceptable to the Underwriter, dated the Closing Date and addressed to the
Underwriter, to the effect that:
(i) the Bonds are not subject to the registration requirements of
the Securities Act of 1933, as amended, and the Bond Indenture is exempt
from qualification pursuant to the Trust Indenture Act of 1939, as
amended;
(ii) this Bond Purchase Contract has been duly executed and
delivered by the City and, assuming due authorization, execution and
delivery by the Underwriter and approval by the Borrower, is a valid and
binding agreement of the City, subject to bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium and
other laws relating to or affecting creditors' rights, to the application of
equitable principles and to the exercise of judicial discretion in appropriate
cases; and
n
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11.1277351.4
(iii) the statements contained in the Official Statement under the
• captions "THE AUCTION RATE SECURITIES," "SECURITY FOR
THE BONDS," "TAX MATTERS," "APPENDIX C — Auction
Procedures" and "APPENDIX D — Summary of Principal Documents,"
insofar as such statements expressly summarize certain provisions of the
Bonds, the Master Indenture, Obligation No. 14, the Bond Indenture, the
Loan Agreement, the Supplemental Master Indenture, the Auction Agent
Agreement, the Broker - Dealer Agreement or the opinion of Bond Counsel
concerning certain tax matters, are accurate in all material respects;
(3) The opinion of .City Counsel, dated the Closing Date, in
substantially the form attached hereto as Exhibit D;
(4) The opinion, dated the Closing Date and addressed to the City, the
Underwriter, the Borrower, Bond Counsel and the Insurer, of Stradling Yocca
Carlson & Rauth, a Professional Corporation, counsel to the Borrower, in
substantially the form attached hereto as Exhibit E;
(5) The opinion of Foley & Lardner LLP, counsel to the Underwriter,
dated the Closing Date and addressed to the Underwriter, in substantially the form
attached hereto as Exhibit F;
(6) The opinion of counsel to the Insurer, dated the Closing Date and
addressed to the City, the Trustee, the Borrower and the Underwriter, in a form
• satisfactory to Bond Counsel and Underwriter's Counsel;
(7) A certificate, dated the Closing Date and signed by an authorized
official of the City, to the effect that (a) to the best of such official's knowledge,
no litigation is pending or threatened against the City (i) to restrain or enjoin the
issuance or delivery of any of the Bonds or the collection of the Revenues (as
defined in the Bond Indenture) pledged under the Bond Indenture; (ii) in any way
contesting or affecting the authority for the issuance of the Bonds or the validity
of the Bonds, the Bond Indenture, the Loan Agreement, the Auction Agent
Agreement, any Broker - Dealer Agreement, the Insurance Policy or this Bond
Purchase Contract; or (iii) in any way contesting the existence or powers of the
City; and (b) no event affecting the City or its functions, duties and
responsibilities has occurred since the date of the Official Statement that would
cause as of the Closing Date any. statement or information concerning the City or
its functions, duties and responsibilities contained in the Official Statement under
the captions "THE CITY" and "LITIGATION — The City" to contain any untrue
statement of a material fact or omit to state a material fact necessary in order to
make the statements made concerning the City or, its functions, duties and
responsibilities contained under such caption not misleading in the light of the
circumstances under which they were made;
(8) A certificate of the Vice President Finance and Chief Financial
• Officer of the Borrower, or such other officer as is acceptable to the Underwriter
077.7277351.4 9
and the City, dated the Closing Date, substantially in the form attached hereto as
• Exhibit G;
(9) A certificate of the Insurer, dated the Closing Date, in a form
satisfactory to Bond Counsel and Underwriter's Counsel;
(10) A certificate of the Auction - Agent, dated the Closing Date, in a
form satisfactory to Bond Counsel and Underwriter's Counsel-,
(11) Certified copies of the resolution of the City authorizing the
execution and delivery of the Bond Indenture, the Loan Agreement, the Bonds,
this Bond Purchase Contract and the Official Statement;
(12) Copies of the Borrower's articles of incorporation certified as of a
date not earlier than fifteen (15) days prior to the Closing Date by the Secretary of
State of the State of California; a good standing certificate of recent date certified
by the Franchise Tax Board of the State of California; and certified copies of the
Borrower's. bylaws;
(13) Certified copies of the resolutions of the Board of Directors of the
Borrower authorizing the execution and delivery of the Loan Agreement, the
Supplemental Master Indenture, Obligation No. 14, the Continuing Disclosure
Certificate and the Letter of Representation, and approving this Bond Purchase
Contract, the Bond Indenture, the Auction Agreement and the Official Statement
• (and distribution thereof);
(14) Evidence that the Borrower has been determined to be an
organization described in Section 501(c)(3) of the Code;
(15) A Tax Agreement inform satisfactory to Bond Counsel;
(16) Satisfactory evidence that the Bonds have been assigned the long-
term municipal bond ratings of "AAA' by Standard & Poor's Ratings Services, a
division of The McGraw -Hill Companies, Inc. and "Aaa" by Moody's Investors
Service;
(17) Two copies of the Official Statement executed as required by
Section 1(b) hereof,
(18) A properly completed and executed Form 8038 of the Internal
Revenue Service relating to the Bonds; and
(19) Such additional corporate resolutions, legal opinions, certificates,
proceedings, instruments and other documents as the Underwriter, the City or
Bond Counsel may reasonably request to evidence compliance by the City and the
Borrower with legal requirements, the truth and accuracy, as of the Closing Date,
of the representations of the City contained herein, of the Borrower contained in
• the Letter of Representation, and the due performance or satisfaction by the City
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_77.7277357.4
and the Borrower at or prior to such time of all agreements then to be performed
• and all conditions then to be satisfied by the City and the Borrower.
If the City shall be unable to satisfy the conditions to the Underwriter's
obligations contained in this Bond Purchase Contract or if the Underwriter's obligations shall be
terminated for any reason permitted herein,.this Bond Purchase Contract shall terminate and
neither the Underwriter nor the City shall have any further obligation hereunder.
4. Conditions to the Obligations of the City.
The obligations of the City to issue and deliver the Bonds on the Closing Date
shall be subject, at the option of the City, to the performance by the Underwriter of its
obligations to be performed hereunder at or prior to the Closing Date and to the following
additional conditions:
(a) The Supplemental Master Indenture, Obligation No. 14, the Bond
Indenture, the Loan Agreement, the Continuing Disclosure Certificate and this Bond Purchase
Contract shall have been executed by the parties thereto;
(b) The Insurance Policy shall have been delivered;
(c) No order, decree, injunction, ruling or regulation of any court, regulatory
agency, public board or body shall have been issued, nor shall any legislation have been enacted,
with the purpose or effect, directly or indirectly, of prohibiting the offering, sale or issuance of
• the Bonds as contemplated hereby or by the Official Statement; and
(d) The documents contemplated by Section 3(e) (other than those required to
be delivered by or on behalf of the City) shall have been delivered in substantially the forms set
forth herein or in form and substance satisfactory to Bond Counsel.
5. Exnenses/Fees.
All reasonable expenses and costs of the City incident to the performance of its
obligations in connection with the authorization, issuance and sale of the Bonds to the
Underwriter, including printing costs, fees and expenses of consultants, fees and expenses of
rating agencies, fees and expenses of Bond Counsel, City Counsel, Underwriter's Counsel
(including fees in connection with qualification of the Bonds for sale under the Blue Sky or other
securities laws and regulations of various jurisdictions and preparation and printing of a blue sky
survey and legal investment memorandum) and counsel for the Borrower shall be paid by the
Borrower. The Borrower shall pay for expenses incurred on behalf of the Borrower's employees
which are incidental to implementing this Bond Purchase Contract, including but not limited to,
meals, transportation, lodging and entertainment of those employees (some of which expenses
may have been paid for by the Underwriter and included in the expense component of the
underwriting discount). All fees and expenses to be paid by the Borrower pursuant to this Bond
Purchase Contract may be paid from Bond proceeds to the extent permitted by the Bond
Indenture and Tax Agreement.
•
)11.1277351A
6. Notices.
Any notice or other communication to be given to the City under this Bond
Purchase Contract may be given by delivering the same in writing at the City's address as set
forth above, and any such notice or other communication to be given to the Underwriter may be
given by delivering the same in writing to Citigroup Global Markets Inc., 444 South Flower
Street, 27'x' Floor, Los Angeles, California 90071. The approval of the Underwriter when
required hereunder or the determination of its satisfaction as to any document referred to herein
shall be in writing signed by the Underwriter and delivered to you.
7. Governina Law.
This Bond Purchase Contract shall be construed in accordance with and governed
by the Constitution and the laws of the State of California.
8. Miscellaneous.
This Bond, Purchase Contract is made solely for the benefit of the City, the
Borrower and the Underwriter (including the successors or assigns of each), and not other
person, partnership, association or corporation shall acquire or have any right hereunder or by
virtue hereof.
9. Counterparts.
•This Bond Purchase Contract may be executed in any number of counterparts and
all such counterparts shall together constitute one and the same instrument.
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111.127/951.4
0
CITIGRODP GLOBAL M C.
By
Director
0
• Signature Page to Bond Purchase Contract for the
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
0
Accepted and Agreed to:
CITY OF NEWPORT BEACH
By:
Ma r
•
•
Signature Page to Bond Purchase Contract for the
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
0
•
•
• U.. :.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
/�� . 2R
Signature Page to Bond Purchase Contract for the
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
EXHIBIT A TO
BOND PURCHASE CONTRACT
LETTER OF REPRESENTATION
August 22, 2005
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
Citigroup Global Markets Inc.
444 South Flower Street
27'" Floor
Los Angeles, California 90071
Ladies and Gentlemen:
The City of Newport Beach (the "City") proposes to enter into a Loan Agreement with
Hoag Memorial Hospital Presbyterian (the "Borrower") dated as of August 1, 2005 (the "Loan
•Agreement "). Pursuant to a Bond Purchase Contract, dated the date hereof (the "Bond Purchase
Contracf), between the City and Citigroup Global Markets Inc. (the `Underwriter "), which the
Borrower has approved, the City proposes to sell the $65,000,000 aggregate principal amount of
the City's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005A (the
'Series 2005A Bonds'), the $65,000,000 aggregate principal amount of the City's Insured
Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005B (the "Series 2005B
Bonds') and the $70,000,000 aggregate principal amount of the City's Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) Series 2005C (the "Series 2005C Bonds" and together
with the Series 2005A Bonds and the Series 2005B Bonds, the "Bonds ") identified on Exhibit B
hereto._ The offering of the Bonds is described in an Official Statement dated August 12, 2005
(the "Official Statement ").
The Bonds shall be issued and secured under the provisions of that certain Bond
Indenture dated as of August 1, 2005 (the `Bond Indenture"), by and between the City and Wells
Fargo Bank, National Association, as bond trustee (the "Trustee "). The Bonds shall be payable
from payments made by the Borrower under that certain Loan Agreement dated as of August 1,
2005 (the "Loan Agreement'), by and between the City and the Borrower, from payments made
on Obligation No. 14 (as hereinafter defined) by the Obligated Group (as hereinafter defined)
and from amounts held in certain funds established pursuant to the Bond Indenture (including
certain proceeds of the sale of the Bonds). The Bonds will be further secured by an assignment
of the right, title and interest of the City in the Loan Agreement and in Obligation No. 14, to the
extent and as more particularly described in the Bond Indenture. All terms not otherwise defined
herein shall have the meanings ascribed thereto in the Bond Purchase Contract.
•
A -1
011.1277351.4
The proceeds from the sale of the Bonds will be loaned to the Borrower pursuant
•to the Loan Agreement and will be used,. together with other available funds, (i) to finance or
reimburse the Borrower for certain capital expenditures at facilities owned or operated by the
Borrower, (ii) to pay costs of issuance of the Bonds and (iii) to pay the premium for the financial
guaranty insurance policy for the Bonds (the "Insurance Policy') to be issued by FGIC Insurance
Company (the "Insurer").
The Borrower is presently a party to the Master Indenture, dated as of October 1, 1984, as
supplemented and amended (the "Master Indenture'), by and among the Borrower and such
other Members as may join the obligated group defined therein (the "Obligated Group') and
Wells Fargo Bank, National Association, as successor master trustee (the "Master Trustee').
The Borrower will issue its Obligation No. 14 ( "Obligation No. 14 ") to evidence and
secure its obligation to make payments sufficient to pay the principal of, premium, if any, and
interest on the Bonds pursuant to the Supplemental Master Indenture for Obligation No. 14,
dated as of August 1, 2005 (the "Supplemental Master Indenture "), by and between the Borrower.
and the Master Trustee and supplementing the Master Indenture.
Pursuant to the terms of the Master Indenture and the Supplemental Master Indenture, the
Borrower and any future Members of the Obligated Group.will be jointly and severally obligated
to make payments on Obligation No. 14 according to the terms thereof when due. The Borrower
is presently the only Member of the Obligated Group.
The Borrower will undertake, pursuant to a Continuing Disclosure Certificate, dated as of
•the date of issuance and delivery of the Bonds (the "Continuing Disclosure Certificate'), by and
between the Borrower and the Trustee, to provide certain annual financial information, certain
quarterly financial information and notices of the occurrence of certain events, if material.
In order to induce the City and the Underwriter to enter into the Bond Purchase Contract
and to make, the sale and purchase and reoffering of the Bonds therein. contemplated, the
Borrower hereby represents, warrants and agrees with each of you as follows:
1. The Borrower is a nonprofit public benefit corporation duly organized and
existing under the laws of the State of California.
2. The Borrower has, and at the Closing Date will have, full legal right, power and
authority to enter into and perform its obligations under this Letter of Representation, the Loan
Agreement, the Supplemental Master Indenture, Obligation No. 14, the Broker - Dealer
Agreement and the Continuing Disclosure Certificate, to approve the Bond Purchase Contract,
the Bond Indenture, the Official Statement and the Auction Agent Agreement and to carry out
and consummate all transactions contemplated by the Bond Purchase Contract, the Bond
Indenture, the Loan Agreement, the Master Indenture, the Supplemental Master Indenture,
Obligation No. 14, this Letter of Representation, the Continuing Disclosure Certificate, the
Auction Agent Agreement, the Broker - Dealer Agreement and the Official Statement, and by
proper corporate action has duly authorized the execution and delivery of.this Letter of
Representation, the Loan Agreement, the Supplemental Master Indenture, Obligation No. 14, the
• Broker - Dealer Agreement and the Continuing Disclosure Certificate, the approval of the Bond
A -2
)11.1277351.4
Purchase Contract, the Bond Indenture, the Auction Agent Agreement and the Official Statement
• (including the distribution thereof) and the obtaining of the Insurance Policy.
3. The officers of the Borrower executing this Letter of Representation, the Loan
Agreement, the Supplemental Master Indenture, Obligation No. 14, the Broker - Dealer
Agreement and the Continuing Disclosure Certificate, approving the Bond Purchase Contract,
the Bond Indenture, the Auction Agent Agreement and the Official Statement (including the
distribution thereof) and obtaining the Insurance Policy are, or were when executed, fully
authorized to execute and approve the same.
. 4. The Bond Purchase Contract, the Bond Indenture, the Official Statement and the
Auction Agent Agreement have been duly approved by the Borrower; this Letter of
Representation and the Master Indenture have been duly authorized, executed and delivered by
the Borrower; the Insurance Policy has been duly obtained by the Borrower; the Loan
Agreement, the Supplemental Master Indenture, Obligation No. 14, the Broker- Dealer
Agreement and the Continuing Disclosure Certificate have been duly authorized and, at the
Closing, will have been duly executed and delivered by the Borrower.
5. The Master Indenture and this Letter of Representation constitute and the
Supplemental Master Indenture, Obligation No. 14, the Loan Agreement, the Broker - Dealer
Agreement and the Continuing Disclosure Certificate will constitute the legal, valid and binding
agreements of the Borrower, in each case enforceable against the Borrower, in accordance with
their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of
• creditors' rights generally, including without limitation self -help remedies and applicable
foreclosure procedures, and also limited by the application of equitable principles, regardless of
whether such enforceability is considered in a proceeding in equity or at law and except as
enforcement may be held to be against public policy.
6. The Borrower is not in any material way (i) in violation of any applicable law or
administrative regulation of the state in which it is incorporated or the United States of America
or any applicable judgment or decree, which violation would ,materially adversely affect the
financial position or operations of the Borrower taken as a whole, or (ii) in default under any
loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the
Borrower is a party or is otherwise subject, and no event has occurred and is continuing which,
with the passage of time or the giving of notice or both, would constitute an event of default,
under any such instrument which default would materially adversely affect the financial position
or operations of the Borrower taken as a whole.
7. The execution and delivery of this Letter of Representation, the approval of the
Bond Purchase Contract, the Bond Indenture, the Official Statement and the Auction Agent
Agreement; at the Closing, the execution and delivery of the Loan Agreement, the Supplemental
Master Indenture, Obligation No. 14, the Broker - Dealer Agreement and the Continuing
Disclosure Certificate; the consummation of the transactions contemplated herein and therein
and in the Master Indenture; and the fulfillment of or compliance with the terms and conditions
hereof and thereof will not conflict with or constitute a violation or breach of or default (with due
• notice or the passage of time or both) under the articles of incorporation of the Borrower, its
i i azna5i.a
A -3
bylaws or any applicable law or administrative rule or regulation, or any applicable court or
•administrative decree or order, or any indenture, mortgage, deed of trust, loan agreement, lease,
contract or other agreement or instrument to which the Borrower is a party or by which it or its
properties are otherwise subject or bound, or result in the creation or imposition of any
prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of the Borrower, which conflict, violation, breach, default, lien, charge or encumbrance
might have consequences that would materially and adversely affect the consummation of the
transactions contemplated by the Bond Purchase Contract, the Bond Indenture, the Loan
Agreement, the Master Indenture, the Supplemental Master Indenture, Obligation No. 14, the
Auction Agent Agreement, the Broker - Dealer Agreement, the Continuing Disclosure Certificate,
this Letter of Representation or the Official Statement or the financial condition, assets,
properties or operations of the Borrower taken as a whole.
8. No consent or approval of any trustee or holder of any indebtedness of the
Borrower, and no consent, permission, authorization, order or license of, or filing or registration
with, any governmental authority (except in connection with Blue Sky proceedings) is necessary
in connection with the execution and delivery of this Letter of Representation; at the Closing, the
execution and delivery of the Loan Agreement, the Supplemental Master Indenture, Obligation
No. 14, the Broker - Dealer Agreement or the Continuing Disclosure Certificate; the approval of
the Bond Purchase Contract, the Bond Indenture, the Official .Statement or the Auction Agent
Agreement; the obtaining of the Insurance Policy; or the consummation of any transaction
therein or herein contemplated, except as have been obtained or made and as are in full force and
effect (or, with respect to the consummation of any transaction therein or herein contemplated,
• except as are expected to be obtained in due course).
9. Except as described in the Official Statement, there is no action, suit, proceeding,
inquiry or investigation before or by any court or federal, state, municipal or other government
authority pending or, to the knowledge of the Borrower,. threatened against or affecting the
Borrower or the assets, properties or operations of the Borrower which, if determined adversely
to the Borrower or its interests, would have a material and adverse effect upon the consummation
of the transactions contemplated by or the validity of the Bond Purchase Contract, the Loan
Agreement, the Master Indenture, the Supplemental Master Indenture, Obligation No. 14, this
Letter of Representation, the Official Statement, the Broker - Dealer Agreement or the Continuing
Disclosure Certificate or upon the financial condition, assets, properties or operations of the
Borrower taken as a whole. The Borrower is not in violation of any order or decree of any court
or any order, regulation or demand of any federal, state, municipal or other governmental
authority, which violation might have consequences that would materially and adversely affect
the consummation of the transactions contemplated by the Bond Purchase Contract, the Loan
Agreement, the Master Indenture, the Supplemental Master Indenture, the Auction Agent
Agreement, the Broker - Dealer Agreement, Obligation No. 14, the Continuing Disclosure
Certificate, this Letter of Representation and the Official Statement or the financial conditions,
assets, properties or operations of the Borrower taken as a whole.
10. The Borrower is a corporation organized and operated exclusively for charitable
purposes, not for pecuniary profit, and no part of the net earnings of the Borrower inures to the
benefit of any private shareholder or individual. The Borrower is an organization described in
• Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, which is exempt from
A-4
11.1277351.4
federal income taxes under Sections 501(a) of the Internal Revenue Code of 1986, as amended,
• except for unrelated trade or business income subject to taxation under Section 511 of said Code.
11. The proceeds of the Bonds will not be used by an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, in an "unrelated trade or
business" within the meaning of Section 513(a) of the Internal Revenue Code of 1986, as
amended, or by any other person, in such manner or to such extent as would result in the loss of
exclusion from gross income for federal income tax purposes of interest on any of the. Bonds
under Section 103 of said Code.
..12. The Borrower has all necessary power and authority to conduct the business now
being conducted by it and the business contemplated by the Master Indenture, the'Supplemental
Master Indenture, Obligation No. 14, the Loan Agreement, the Continuing Disclosure Certificate
and the Broker - Dealer Agreement and has all necessary power and authority to enter into the
respective documents mentioned above (or with respect to the Master Indenture, to have entered)
and to approve the Bond Purchase Contract and the Official Statement.
13. The Borrower has good and marketable title to its Property, free -and clear from all
encumbrances other than Permitted Liens (as such terms are defined in the Master Indenture).
14. The Borrower has all permits, licenses, accreditation and certifications,
including, without limitation, licensing and certification of the Property (as defined in the Master
Indenture), necessary to conduct its business as it is presently being conducted.
•15. The Borrower is eligible under applicable statutes, regulation and administrative
practices for payment under Medicare and Medicaid.
16. The Borrower is currently participating in the programs of Medicare and
Medicaid, and there are in full force and effect agreements providing for payments to the
Borrower with respect to patients enrolled in such programs.
17. The Borrower has not incurred any material liability, direct or contingent, nor has
there been any material adverse change in the financial position, results of operation or
condition, financial or otherwise, of the Borrower since August 31, 2004, which is not described
in the Official Statement, whether or not arising from transactions in the ordinary course of .
business.
18. Between the date hereof and the date of the Closing, the Borrower will not,
without the prior written consent of the Underwriter, except as described in or contemplated by
the Official Statement, incur any material liabilities, direct or contingent, other than in the
ordinary course of business.
19. As of the date thereof and as of the date hereof and at the Closing Date, the
Official Statement, as amended or supplemented pursuant to the Bond Purchase Contract or this
Letter of Representation, if applicable, does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading; provided,
• however, that the Borrower makes no representation or warranty as to the information contained
A -5
)11.1277351A
in or omitted from the Official Statement in reliance upon and in conformity with information
•furnished in writing to the Borrower by or on behalf of the Underwriter, the City or the Insurer
specifically for inclusion therein.
20. If, between the date hereof and up to and including the 25th day following the end
of the underwriting period (as defined in Rule 15c2 -12 of the Securities and Exchange
Commission), any event relating to or affecting the Borrower or any future Members of the
Obligated. Group or their respective present or proposed facilities shall occur which might or
would cause the Official Statement, as then supplemented or amended, to contain an untrue
statement of a material fact or to omit to state a material fact required to be stated therein or
necessary to make. the statements therein not misleading, in the light of the circumstances under
which they were made, the Borrower shall notify the City and the Underwriter and if, in the
opinion of the Borrower, the City or the Underwriter such event requires the preparation and
publication of a supplement or amendment to the Official Statement, the Borrower will request
the City to cause the Official Statement to be amended or supplemented in a form and in a
manner approved by the Underwriter.
21. For twenty=five days from the date of the end of the underwriting period (as
defined in Rule 15c2 -12 of the Securities and Exchange Commission), the Borrower will (a) not
participate in the issuance of any amendment of or supplement to the Official Statement to
which, after being furnished with a copy, any of you shall reasonably object in writing or which
shall be disapproved by your respective counsel and (b) if any event relating to or affecting the
City or the Borrower or any future Members of the Obligated Group or their respective present
•or proposed facilities shall occur as a result of which it is necessary, in the opinion of counsel for
the Underwriter or the City, to amend or supplement the Official Statement in order to make the
Official Statement not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, forthwith prepare and furnish to the Underwriter and the City (at the
expense of the Borrower for 90 days from the date of Closing, and thereafter at the expense of
the. Underwriter) a reasonable number of copies of an amendment of or supplement to the
Official Statement (in form and substance satisfactory to counsel for the Underwriter and counsel
to the City) which will amend or supplement the Official Statement so that it will not contain an
untrue statement of a material fact or omit to state .a material fact necessary in order to make the
statements therein not misleading, in the light of the circumstances existing at the time the
Official Statement is delivered to the purchaser. For the purposes of this section, the Borrower
will furnish such information with respect to itself, any future Members of the Obligated Group
and their respective present and proposed facilities as any of you may from time to time
reasonably request.
22. (a) The Borrower agrees to indemnify and hold harmless the Underwriter, the
directors, officers, employees and agents of the Underwriter and each person who controls the
Underwriter within the meaning of either the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject under the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue
• statement or alleged untrue statement of a material fact contained in the Official Statement (or in
I )11.1277351.4
A-6
any supplement or amendment thereto), or arise out of or are based upon the omission or alleged
•omission to state therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the Borrower will not be
liable in any such case to the extent that any such loss, claim, damage or liability arises out of or
,is based upon any such untrue statement or alleged untrue statement or omission or alleged
omission made in the Official Statement, or in any amendment thereof or supplement thereto, in
reliance upon and in conformity with written information furnished to the Borrower by or on
behalf of the Underwriter specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Borrower and each future Member of the Obligated Group
may otherwise have.
(b) The Borrower agrees to indemnify and hold harmless the City, the directors,
officers, employees and agents of the City and each person who controls the City within the
meaning of either the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, .against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Official Statement (or in any supplement or
•amendment thereto), or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss, claim, damage,
liability.or action; provided, however, that the Borrower will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission made in the
Official Statement, or in any amendment thereof or supplement thereto, in reliance upon and in
conformity with written information furnished to the Borrower by or on behalf of the City
specifically for inclusion therein. This indemnity agreement will be in addition to any liability
which the Borrower and each future Member of the Obligated Group may otherwise have.
(c) The Underwriter agrees to indemnify and hold harmless the Borrower, each of
its officials, directors, officers and employees, and each person who controls the Borrower within
the meaning of either the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, to the same extent as the foregoing indemnity from the Borrower to the
Underwriter, but only with reference to written information relating to the Underwriter furnished.
to the Borrower by or on behalf of the Underwriter specifically for inclusion in the Official
Statement (or in any amendment or supplement thereto). This indemnity agreement will be in
addition to any liability which the Underwriter may otherwise have. The Borrower acknowledges
that the statements set forth in the section entitled, "UNDERWRITING" and the paragraph
related to stabilization on the inside cover page of the Official Statement, constitute the only
A_7
011.1277351.4
information furnished in writing by or on behalf of the Underwriter for inclusion in the Official
• Statement (or in any amendment or supplement thereto).
(d) Promptly after receipt by an indemnified party under this Section 22 of notice
of the commencement of any action, such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under this Section 22 notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will
not relieve it from liability under paragraph (a), (b) or (c) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification obligation provided
in paragraph (a), (b) or (c) above. The indemnifying party shall be entitled to appoint counsel of
the indemnifying party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election
to appoint counsel to represent the indemnified party in an. action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and the indemnifying party
shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party and the indemnified
•party shall have reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are .different from or additional to those available to the
indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a reasonable time after notice of
the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought hereunder.
(whether or not the indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or proceeding.
(e) In the event that the indemnity provided in paragraph (a) or (c) of this
Section 22 is unavailable to or insufficient to hold harmless an indemnified party for any reason,
the Borrower and the Underwriter agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses') to which the Borrower and the
Underwriter may be subject in such proportion as is appropriate to reflect the relative benefits
received by the Borrower on the one hand and by the Underwriter on the other from the offering
of the Bonds. If the allocation provided by the immediately preceding sentence is unavailable for
any reason, the Borrower and the Underwriter shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative fault of the Borrower on
• the one hand and of the Underwriter on the other in connection with the statements or omissions
A -8
)11.1277351.4
which resulted in such Losses, as well as any other relevant equitable considerations. In no case
•shall the Underwriter be responsible for any amount in excess of the purchase discount or
commission applicable to the Bonds purchased by the Underwriter hereunder. Benefits received
by the Borrower shall be deemed to be equal to the total net proceeds from the offering (before
deducting expenses) received by it, and benefits received by the Underwriter shall be deemed to
be equal to the total purchase discounts and commissions in each case set forth in the Official
Statement under the section entitled "UNDERWRITING." Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information
provided by the Borrower on the one hand or the Underwriter on the other, the intent of the
parties and their relative knowledge, information and opportunity to correct or prevent such
untrue statement or omission. The Borrower and the Underwriter agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (e), no person guilty of fraudulent
misrepresentation (within the meaning of Section I I(f) of the Securities Act of 1933, as
amended) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 22, each person who controls the Underwriter
within the meaning of either the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, and each director, officer, employee and agent of the Underwriter shall
have the same rights to contribution as the Underwriter, and each person who controls the
Borrower within the meaning of either the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, and each official, director, officer and employee of the
•Borrower shall have the same rights to contribution as the Borrower, subject in each case to the
applicable terms and conditions of this paragraph (e).
23. The Borrower has filed all annual reports when and where they are required to be
filed pursuant to any Continuing Disclosure Certificate executed and delivered by the Borrower
pursuant to Rule 15c2 -12 of the Securities and Exchange Commission that has been binding
upon the Borrower, and has filed all required notices of "listed events," as described in Rule
15c2 -12, when and where such notices are required to be filed pursuant to such Continuing
Disclosure Certificates.
24. The representations, warranties, agreements and indemnities herein shall survive
the Closing under the Bond Purchase Contract, and any investigation made by or on behalf of
any of you or any person who controls any of you of any matters described in or related to the
transactions contemplated hereby and by the Bond Purchase Contract, the Official Statement, the
Loan Agreement, the Bond Indenture, the Master Indenture, the Supplemental Master Indenture,
the Auction Agent Agreement, the Broker - Dealer Agreement, Obligation No. 14 and the
Continuing Disclosure Certificate.
25. The Borrower hereby agrees to pay the expenses described in Section 5 of the
Bond Purchase Contract (which are the responsibility of the Borrower), and to pay any expenses
incurred in amending or supplementing the Official Statement pursuant to the Bond Purchase
Contract or this Letter of Representation.
�J
A -9
m.12rr351.4
26. This Letter of Representation shall be binding upon the Borrower and inure
•solely to the benefit of each of you and, to the extent set forth herein, persons controlling any of
you, and their respective members, officers, employees, agents, successors and assigns, and no
other person or firm shall acquire or have any right under or by virtue of this Letter of
Representation. No recourse under or upon any obligation, covenant or agreement contained in
this Letter of Representation shall be had against any officer or director of the Borrower as
individuals, except as caused by their bad faith.
27. This Letter of Representation may be executed in any number of counterparts and
all such counterparts shall together constitute one and the same instrument.
•
•
A -10
»1.127'7351.4
0
6
0
Very wily yours,
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
aI 2zJ 1 I ♦ �
r.
Signature Page to Letter of Representation for the
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
i
Accepted and Agreed to:
CITIGROUP GLOBAL MARKETS INC.
By:
Director
lJ
• Signature Page to Letter of Representation for the
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
0
Accepted and Agreed to:
CITY OF NEWPORT BEACH
By:
May .
•
Signature Page to Letter of Representation for the
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
EXHIBIT B TO
• BOND PURCHASE CONTRACT
SCHEDULE OF MATURITIES AND INTEREST PERIODS
Series 2005A Bonds
Principal Maturity Initial Auction Day Initial Interest
Interest Payment Length of
Amount Date Auction Generally Payment Date
Date Generally Initial Period
$65,000,000 12/1/40 9/2/05 each Monday 9/6/05
each Tuesday 13 days
Series 2005B Bonds
Principal Maturity hdtial Auction Day Initial Interest Interest Payment Length of
Amount Date Auction Gencrally Payment Date Date Generally Initial Period
$65,000,000 1211/40 8/31/05 each Wednesday 9/1/05 each Thursday 8 days
Series 2005C Bonds
• Principal Maturity Initial Auction Day Initial Interest Interest Payment Length of
Amount Date Auction, Generally Payment Date Date Generally Initial Period
$70,000,000 1211/40 9/2/05 each Friday 916/05 each Monday 13 days
I
B-1
111.1277351.4
EXHMIT C TO
BOND PURCHASE CONTRACT
FORM OF AGREED -UPON PROCEDURES LETTER OF ERNST & YOUNG LLP
[Attached]
E
C -1
111.1277351.4 111.1277351.4
EX1=IIBIT D TO
• BOND PURCHASE CONTRACT
FORM OF OPINION OF CITY COUNSEL
August 24, 2005
City of Newport Beach, California
Newport Beach, California
Citigroup Global Markets Inc.
Los Angeles, California
Hoag Memorial Hospital Presbyterian
Newport Beach, California
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005A. 2005B and 2005C
(the "Bonds ")
• Ladies and Gentlemen:
This opinion is delivered to you pursuant to the Bond Purchase Contract dated August 22,
2005 (the "Purchase Contract"), between the City of Newport Beach, California (the "City ") and
Citigroup Global Markets Inc. (the "Purchaser'), which Hoag Memorial Hospital Presbyterian
(the `Borrower') has approved, in connection with the issuance by the City of $200,000,000
aggregate principal amount of its Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian) Series 2005A, 2005B and 2005C (the "Bonds ") pursuant to a Bond Indenture dated
as of August 1, 2005 (the `Bond Indenture'), between the City and Wells Fargo Bank, National
Association, as bond trustee (the "Bond Trustee "). The Bonds are being issued for the purpose
of making a loan of the proceeds thereof to the Borrower pursuant to a Loan Agreement dated as
of August 1, 2005 (the "Loan Agreement) between the City and the Borrower.
The opinions or conclusions expressed herein are based on an analysis of existing laws,
regulations, rulings ands court decisions and cover certain matters not directly addressed by such
authorities. Such opinions may be affected by actions taken or omitted or events occurring after
the date hereof. We have not undertaken to determine, or to inform any person, whether any
such actions or events are taken or do occur. We have assumed the genuineness of all documents
and signatures presented to us (whether as originals or as copies) and the due and legal execution
and delivery thereof by, and validity against, any parties other than the City. We have not
undertaken to verify independently, and have assumed, the accuracy of the factual matters
• represented, warranted or certified in the documents, and of the legal conclusions contained in
D -1
D11.1277351.4
the opinions, referred to in the second paragraph hereof. We have further assumed compliance
•with all covenants and agreements contained in such documents. In addition, we call attention to
the fact that the rights and obligations under the Bonds, the Bond Indenture, the Loan Agreement
and the Purchase Contract may be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws affecting creditors' rights, to the application of
equitable principles and to the exercise of judicial discretion in appropriate cases. We express no
opinion with respect to any indemnification, contribution, choice of law, choice of forum or
waiver provisions contained in the foregoing documents.
As counsel for the City in connection with the issuance of the Bonds, I have examined
certain documents, records and proceedings as I have deemed necessary and appropriate for the
purpose of this opinion and, on the basis of the foregoing and upon consideration of applicable
law, I am of the opinion that:
1. The City is a municipal corporation and charter city duly organized and validly
existing under a freeholder's charter under the Constitution and laws of the State of California
and has corporate power and authority to consummate and carry out all transactions
contemplated by the Purchase Contract.
2. The Official Statement used in connection with the issuance and-sale of the Bonds
(the "Official Statement ") has been duly authorized, executed and delivered by the City.
3. Without assuming any responsibility for the accuracy, completeness or fairness of
the information or the statements contain in the Official Statement, to my knowledge, the
•information relating to the City in its limited role as the conduit issuer of the Bonds contained in
the Official Statement under the headings "THE CITY" and "LITIGATION — The City" does not
contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. The Resolution of the City Council of the City approving and authorizing the
execution and delivery of the Bond Indenture, the Purchase Contract, the Bonds, the Loan
Agreement and the Official Statement was duly adopted at a meeting of the City Council which
was called and held pursuant to law and all public notices required by law and the procedural
rules of the City Council and at which a quorum was present and acting throughout.
5. There is no action, suit, proceeding or investigation at law or in equity before or
by any court, public board or body known to be pending or threatened against or affecting the
City to restrain or enjoin the issuance of delivery of the Bonds or the collection of revenues
pledged under the Bond Indenture or the assignment of the Loan Agreement under the Bond
Indenture, in any way contesting or affecting any authority for the issuance of the Bonds or the
validity of the Bonds, the Loan Agreement, the Bond Indenture or. the Purchase Contract or in
any way contesting the existence or powers of the City with respect to the issuance of the Bonds
or the security therefore wherein an unfavorable decision, ruling or finding would materially
adversely affect the transactions contemplated by the Official Statement, the Bond Indenture, the
Loan Agreement or the Purchase Contract or the validity of the Bonds.
•
D -2
)11.1277351.4
6. The execution and delivery of the Bonds, the Bond Indenture, the Loan
•Agreement and the Purchase Contract and compliance with the provisions thereof under the
circumstances contemplated thereby do not and will not conflict with or constitute on the part of
the City a breach or default under any agreement or other instrument to which the City is a party
or by which it is bound or any existing law, regulation, court order or consent decree to which
the City is subject, the result of which breach or default would be to materially adversely affect
the City's ability to perform its obligations under the Loan Agreement, the Bond Indenture, the
Bonds or the Purchase Contract.
7. The Loan Agreement, the Bond Indenture, the Bonds and the Purchase. Contract
have been duly executed and delivered by the City and, assuming due authorization, execution
and delivery by the other parties thereto, are valid and binding obligations of the City
enforceable in accordance with their terms subject to laws relating to bankruptcy, insolvency,
reorganization or creditors' rights generally and to the application of equitable principles if
equitable remedies are sought.
8. All right "and title to the payments due under the Loan Agreement have been duly
and legally assigned and pledged to the Bond Trustee for the payment of the principal of,
premium, if any, and interest on the Bonds.
•
•
)11.1277351.4
Respectfully Submitted,
CITY ATTORNEY
D3t1
EXHIBIT E TO
• BOND PURCHASE CONTRACT'
FORM OF OPINION OF COUNSEL TO
THE BORROWER
August 74, 2005
City of Newport Beach
Newport Beach, California
Citigroup Global Markets Inc.
Los Angeles, California
Wells Fargo Bank, National Association
as bond trustee and as master trustee
Los Angeles, California
Re: $200,000,000 City of Newport Beach Insured Revenue Bonds (Hoag Memorial
Hospital Presbyterian) Series 2005A, Series 2005B and
Series 2005C
• Ladies and Gentlemen:
We have acted as special counsel to Hoag Memorial Hospital Presbyterian, a California
nonprofit public benefit corporation (the "Corporation', in connection with the sale and delivery
of $200,000,000 City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian) Series 2005A, Series 2005B and Series 2005C (collectively, the `Bonds");
however, we are not general counsel to the Corporation.
Our opinion is based on the following general transaction structure:
The Bonds are being executed and delivered pursuant to an indenture dated as of August
1, 2005 (the "Indenture') between the City of Newport Beach (the "City") and Wells Fargo
Bank, National Association, as trustee (the "Bond Trustee "). The proceeds of the Bonds are
being loaned to the Corporation under the terms of a loan agreement dated as of August 1, 2005
(the "Loan Agreement ") between the City and the Corporation.
The Corporation is issuing its obligation number fourteen ("Obligation No. 14 ") to
evidence its obligation to make payments sufficient to pay the principal of, premium, if any,
interest on and purchase price of the Bonds pursuant to a master trust indenture dated as of
October 1, 1984, as previously amended and supplemented by supplemental master indentures
and agreements (as so amended and as amended by Supplemental Master Indenture No. 14 (as
hereinafter defined), the "Master Indenture"), by and between the Corporation and Wells Fargo
IDBank, National Association, as successor master trustee (the "Master Trustee'.
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017.1277357.4
The Bonds are being sold pursuant to a bond purchase contract dated August 22, 2005
•between the Corporation, the City and Citigroup Global Markets Inc. (the "Purchase Contract').
An official statement dated August 12, 2005 (the "Official Statement') has been prepared to
furnish information with respect to the sale and delivery of the Bonds. .
Following their issuance the Bonds will bear interest at the Auction Rate, as defined in
the Indenture, determined by Wells Fargo Bank, National Association, as the Auction Agent,
pursuant to certain Auction Procedures, as defined in the Indenture. The Auction Proeedures
require the participation of one or more broker- dealers.
. Pursuant to a broker - dealer agreement dated as of August 1, 2005 (the "Broker - Dealer
Agreement') by and among Wells Fargo' Bank, National Association, as Auction Agent,
Citigroup Global Markets Inc. and the Corporation, Citigroup Global Markets Inc agrees to act
as Broker - Dealer with respect to the Auction Procedures.
This Opinion is provided pursuant to paragraph 3(e)(4) of the Purchase Contract.
We have made such investigations of facts and law, examined such documents, obtained
such certificates from public officials and officers of the Corporation, and done such other things
as we have determined to be necessary or appropriate to render this opinion. As to questions of
fact relevant to this opinion, we have been furnished with and relied solely upon certificates of
public officials, closing certificates of and questionnaires completed by certain officers of the
Corporation, and documents submitted to us in response to our information request to the
•Corporation dated , 2005 and follow -up with officers of the Corporation where
indicated based on the information received from such sources. We have assumed and have not
verified the accuracy of the facts stated in any certificate, questionnaire or the documents
provided to us in response to our requests as described above. Whenever a statement herein is
qualified by "known to us," "to our current actual knowledge," or similar phrase, it is intended to
indicate that, during the course of our representation of the Corporation, no information that
would give us current actual knowledge of the inaccuracy of such statement has come to the
attention of those attorneys in this firm who have rendered legal services in connection with the
transaction described in the introductory paragraph hereof. However, except as otherwise
expressly indicated, we have not undertaken any independent investigation to determine the
accuracy of such statement, and any limited inquiry undertaken by us during the preparation of
this opinion letter should not be regarded as such an investigation; no inference as to our
knowledge of any matters bearing on the accuracy of any such statement should be drawn from
the fact of our representation of the Corporation.
We have assumed the legal capacity of all natural persons and that, with respect to all
parties to agreements or instruments relevant hereto (other than the Corporation), such parties
had the requisite power and authority to execute, deliver and perform such agreement or
instruments, that such agreements or instruments have been duly authorized by all requisite
action, executed and delivered by such parties, and that such agreement or instruments are the
valid binding and enforceable obligations of such parties. We have further assumed the
authenticity of all items submitted to us as originals, the conformity to originals of all items
submitted to us as certified or photostatic copies, and except for signatures on behalf of the
• Corporation, the genuineness of such signatures.. We have further assumed that the City is a duly
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011.1277351A
organized and validly existing local government entity and that the Bonds have been duly issued
• by the City.
Our opinions expressed herein are subject to and limited by the effect of Trident Center v.
Connecticut General Life Insurance Co., 847 F.2d 564 (9" Cit. 1988), in which the Ninth Circuit
Court of Appeals, applying what it said was California law, held that parole evidence was
admissible to vary the provisions of an unambiguous agreement. To the extent Trident
accurately expresses California law on the subject, our opinion assumes that no party-to any
agreement or instrument referenced herein in any action seeking to enforce it offers any parole
evidence that would expand, modify or otherwise affect the express terms of said agreement or
document or the respective rights or obligations of the parties thereunder.
Based on the foregoing, and subject to the additional assumptions, exceptions, the
qualifications and limitations set forth below, as of the date of this letter, it is our opinion that:
1. The Corporation is a nonprofit public benefit corporation duly organized and in
good standing under the laws of the State of California.
2. The Corporation has the corporate power and authority to enter into the Loan
Agreement, the Tax Certificate and Agreement (as defined in the Indenture), the Purchase
Contract (including the Letter of Representation appended thereto), the Broker - Dealer
Agreement, Supplemental Master Indenture No. 14, Obligation No. 14 and the Continuing
Disclosure Certificate (collectively, the "Borrower Documents'), to perform all of its duties
contained therein and in the Master Indenture, and to approve the Official Statement.
• 3. The execution of Supplemental Master Indenture No. 14 is authorized or
permitted by the Master Indenture.
4. All conditions precedent to the execution of Supplemental Master Indenture No.
14 have been complied with. The Borrower Documents and the Master Indenture have been
duly authorized by all necessary corporate action on the part of the Corporation and have been
duly executed and delivered by the Corporation:
5. The obligations under the Loan Agreement and Obligation No. 14 which have
been assigned to the Bond Trustee constitute the legal, valid and binding agreements of the
Corporation with the Bond Trustee enforceable against the Corporation in accordance with their
terms.
6. The Borrower Documents and the Master Indenture and any obligations of the
Corporation under the Loan Agreement and Obligation No. 14 not so assigned to the Bond
Trustee constitute the legal, valid and binding obligations of the Corporation, enforceable against
the Corporation in accordance with their terms.
7. The Corporation has the corporate power to approve and has duly approved the
Indenture and the Official Statement and duly authorized the distribution of the Official
Statement.
•
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011.1277351.4
8. The distribution of the Official Statement and the approval thereof by the
•Corporation, the approval by the Corporation of the Indenture and the execution and delivery by
the Corporation of the Master Indenture and the Borrower Documents, the performance by the
Corporation of the duties and covenants of the Corporation contained therein and the fulfillment
of or compliance by the Corporation with the terms and conditions thereof (a) do not and will not
constitute on the part of the Corporation a breach of or default (with due notice or the passage of
time or both), and do not result in the creation or imposition of any prohibited lien, charge or
encumbrance upon the property or assets of the Corporation, under the articles of incorporation
or bylaws of the Corporation, or the resolution of the Board of Directors of the Corporation duly
adopted on July 12, 2005 authorizing the transactions contemplated by the documents referred to
in this paragraph, (b) do not and will not, to our knowledge, constitute a material breach of the
terms, conditions or provisions of, or constitute a default under, any material contract,
undertaking, indenture or other agreement or instrument; and (c) neither is prohibited by, nor
subjects the Corporation to, a fine, penalty, or other similar sanction under, any statute or
regulation of the State of California, or any federal statute or regulation, of a type which are
typically applicable to transactions similar to those transactions contemplated by the documents
referred to in this paragraph, and which breach, default, lien, charge or encumbrance would
materially and adversely affect the consummation of the transactions contemplated by the
documents referred to in this paragraph, or the financial condition or operations of the
Corporation.
9. With respect to requirements imposed on the Corporation, no consent, approval,
authorization of or designation, declaration, or filing with any California or United States federal
•authority (except as may be required under any state or federal blue sky or securities laws) is
required in connection with the execution and delivery by the Corporation of the Master
Indenture and the Borrower Documents or the approval by the Corporation of the Indenture and
the Official Statement or the distribution of the Official Statement, or, in the case of the Master
Indenture and the Borrower Documents, is required in connection with the performance of the
obligations and duties of the Corporation contained therein, except as has been obtained or made
on or before the date hereof and as is in frill force and effect or which are not required to be made
or obtained until after the date hereof. All requirements and conditions to be fulfilled by the
Corporation prior to the issuance of Obligation No. 14 set forth in the Master Indenture and the
Supplemental Master Indenture have been complied with and satisfied.
10. (a) To our current actual knowledge, there is no action, suit, or pending
against the Corporation or its properties in any court or before any governmental authority or
agency, or arbitration board or tribunal, which challenges the consummation of the financing
transactions contemplated by or the validity of the Bonds, the Master Indenture or the Borrower
Documents, which, if determined adversely to the Corporation, would have a material and
adverse effect on such consummation or validity.
(b) To our current actual knowledge, there is no action, suit or proceeding,
pending against the Corporation or the assets, properties or operations of the Corporation which,
if determined adversely to the Corporation, would have a material and adverse effect on the
Corporation or its financial condition, assets or operations (taken as a whole).
•
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(c) To our current actual knowledge, the Corporation is not in violation or
•breach with respect to any specific judicial or administrative adjudicative order or decree
directed to or affecting the Corporation by any federal, state, or municipal court or other
governmental authority which violation or breach might have consequences that would
materially and adversely affect the consummation of the transactions contemplated by the
documents referred to in this paragraph 10 or the financial condition or operations of the
Corporation (taken as a whole).
11. The Corporation is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code "), and is exempt from federal income taxation
under Section 501(a) of the Code except for unrelated business income subject to taxation under
Section 511 of the Code.
12. The Corporation is an organization described in Section 3(a)(4) of the Securities
Act of 1933, as amended, and Section 12(g)(2)(D) of the Securities Act of 1934, as amended.
13. The Corporation has the corporate power and authority to own its-properties and
assets and to carry on its business as now being conducted by it. The Corporation is duly
licensed by the State of California Department of Health Services as a general acute care hospital
and is qualified to participate in the federal Medicare and state Medi -Cal programs.
14. The Master Indenture is exempt from qualification under the Trust Indenture Act
of 1939, as amended, and Obligation No. 14 is exempt from registration under the Securities Act
of 1933, as amended.
• In connection with our participation in the preparation of the Official Statement, we have
not independently verified the accuracy, completeness or fairness of the statements contained
therein, and the limitations inherent in the examination made by us and the knowledge available
to us are such that we are unable to assume, and we do not assume, any responsibility for the
accuracy, completeness or fairness of the statements contained in the Official Statement.
However, on the basis of our examination and our participation in conferences with certain
officers of the Corporation, its independent auditors and representatives of the Underwriter, its
counsel and Bond Counsel in connection with the preparation of the Official Statement, we can
advise you supplementally as a matter of fact that we have no current actual knowledge that the
Official Statement as of its date or the date hereof contained or_contains any untrue statement of
a material fact or omitted or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. However, we are not
expressing any belief as to the financial statements'and the notes thereto or any financial
statistical or economic data or forecast, or the demographic and statistical data, or any
information regarding the City, the Book -Entry Only System and The Depository Trust
Company, all as contained in the Official Statement.
Our opinion is subject to the following qualifications:
(a) We have not examined the question of what law would govern the
interpretation or enforcement of the Master Indenture, the Indenture, Obligation No. 14,
• the Loan Agreement, the Purchase Contract or the Broker - Dealer Agreement and, except
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011.1277351.4
as set forth in b, c and d below, we express no opinion with respect to the laws of any
• state or jurisdiction other than California.
(b) We express our opinion with respect to federal law only as set out in
paragraphs 8, 9, 10, 11, 12, 13 and 14 hereof and as it may apply to exception paragraphs
c, d, a and g.
(c) Except as specifically provided in paragraphs 12 and 14 and in exception
paragraph d, we express no opinion with respect to the registration or qualification
provisions of federal or state securities laws or their application to any of the documents
referred to herein or any transaction contemplated thereunder.
(d) The enforceability of the documents listed in paragraphs 5 and 6 may be
limited:
(i) by bankruptcy, insolvency, fraudulent conveyance, or other similar
laws or proceedings affecting the enforcement of creditors' rights generally as
such proceedings or laws affect the Corporation, including, without limitation,
self -help remedies, applicable foreclosure procedures and by application of
equitable principles regardless of whether such enforceability is considered in a
proceeding in equity or at law,
(ii) to the extent that enforcement may be held to be against public
policy,
• (iii) to the extent that the indemnification provisions in such documents
may be limited by applicable securities law or public policy,
(iv) by the implied covenant of good faith and fair dealing, and
(v) to the extent that enforcement may be limited by donor restrictions
on certain funds.
(e) Our opinion as expressed in paragraphs 8 (as to decrees and orders) and 10
is based solely upon a Lexis on -line search conducted on August _, 2005 of the
plaintiff and defendant indexes in the Superior Court of the State of California for the
County of Orange and certain other California counties as well as the United States
District Court for the Central District of California and a status review of the litigation
identified by such searches, an interview with the Executive Vice President of the
Corporation, a review of the minutes of the Board of Directors of the Corporation, and a
review of responses to inquiries by us of litigation counsel identified by the Corporation
regarding litigation matters pertaining to the Corporation.
(i) We express no opinion as to:
(i) The enforceability of provisions in any of the documents
mentioned herein with respect to the payment of attorneys' fees.
•
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011.lzr7351.4
(ii) The enforceability under certain circumstances of provisions
• waiving stated rights or unknown future rights, or providing that rights or
remedies are not exclusive, but every right or remedy is cumulative and may be
exercised in addition or with any other right or remedy or that the election of
some particular remedy or remedies does not preclude or waive recourse to one or
more others.
(iii) The enforceability under certain circumstances of provisions which
waive statutory rights to receive notice or to be allowed to cure, or which waive
statutes of limitations.
(iv) The enforceability under certain circumstances of provisions to the
effect that failure to exercise or delay in exercising rights or remedies will not
operate as a waiver of that right or remedy or that waivers must be in writing in
order to be effective.
(v) The enforceability under certain circumstances of provisions to the
effect that the invalidity or unenforceability of certain provisions shall not impair
the validity or enforceability of remaining provisions.
(vi) The enforceability of provisions in any of the documents relating
to the disposition of insurance proceeds or condemnation proceeds.
(vii) The enforceability of provisions in any of the documents relating
• to the execution of claims by third parties to such documents.
(viii) The enforceability of provisions increasing the interest rate payable
after a default or imposing a prepayment premium (except upon voluntary
prepayment) or late charges.
(ix) The enforceability of provisions which waive rights of set -off.
(x) The enforceability of provisions that time is of the essence.
(xi) The enforceability of any provisions that indemnify any party
against its own negligence or willful misconduct.
(xii) The effect of California Civil Code Section 1670.5 which provides
that a court may refuse to enforce, or may limit the application of, a contract or
any clause thereof which the court finds as a matter of law to have been
unconscionable at the time it was made.
(xiii) The effect of Section 1698 of the California Civil Code which
provides in part that provisions of any instrument or agreement may only be
Waived in writing will not be enforced to the extent that an oral agreement has
been executed modifying provisions of such instrument or agreement.
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)11.1277351.4
(xiv) The enforceability of provisions governing choice of law, waiving
• the right to trial by jury, consenting to jurisdiction or venue, altering the statutory
method of service of process, or appointing any party as the attorney -in -fact for
the other party.
(g) Certain provisions of the Borrower Documents and the Master Indenture
may be unenforceable under applicable California laws governing such provisions, but
neither such laws nor the possible unenforceability of the provisions referred to in
section (f) above, subject to the other exceptions, qualifications and limitations in this
Opinion, render the Borrower Documents and the Master Indenture invalid as a.whole or
substantially interfere with realization of the principal benefits provided by the Borrower
Documents and the Master Indenture. In addition, we advise you that California court
decisions invoking statutes or principles of equity have held that certain covenants and
provisions of agreements are unenforceable where (i) the breach of such covenants or
provisions imposes restrictions or burdens upon the debtor, including the acceleration of
indebtedness due under debt instruments, and it cannot be demonstrated that the
enforcement of such restrictions or burdens is reasonably necessary for the protection of
the creditor, or (ii) the creditor's enforcement of such covenants or provisions under the
circumstances would be unreasonable, violate the creditor's implied covenant of good
faith and fair dealing or would be commercially unreasonable.
(h) Our opinions as expressed in paragraphs 11 and 12 are based solely upon:
(i) The current articles of incorporation as certified by the Secretary of
• State of the State of California and bylaws of the Corporation as provided to us by
the Corporation;
(ii) A copy of a letter dated March 10, 1954 by the Internal Revenue
Service addressed to the Corporation confirming that the Corporation is exempt
from federal income taxes under Section 501(a) of the Code as an organization
described in Section 501(c)(3) and that the Corporation is not a `private
foundation" within the meaning of Section 509(a) of the Code;
(iii) A certificate from the Executive Vice President of the Corporation
stating that the Corporation has not been notified by the Internal Revenue Service
of any investigation of, or proposed or actual revocation of its status as an
organization described in section 501(c)(3) of the Code which is not a private
foundation; and
(iv) Factual information set forth in certificates from officers of the
Corporation, the Corporation's responses to our questionnaire dated
2005 and the documents and other information submitted to us in response to our
information request to the Corporation dated , 2005, and follow -up
with officers of the Corporation where indicated based on the information
received from such sources.
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111.1277351.4
(i) We understand that you will rely upon the opinion of Bond Counsel as to
• matters concerning the effect of the execution and delivery of the Indenture on the
validity and tax- exempt status of the Bonds, and we express no opinion herein on such
matters.
0) The opinions expressed herein are based on facts, laws, regulations and
case law in effect as of the date hereof, and we assume no obligation to revise or
supplement this letter should such facts, laws, regulations and case law be changed in any
respect, including any changes in organization or affairs of the Corporation.
(k) We have not rendered insurance advice to the Corporation as to any types
or classifications of coverage, including general and medical malpractice liability
coverage, and we do not represent by this opinion or otherwise that we have reviewed or
made any assessment about, nor do we express any opinion about the types or amounts of
coverage, of the ability of any insurer or. any self insurance program or organization to
meet its obligations pursuant to any policy or agreement with the Corporation, or of the
adequacy of the funding or reserves thereof.
(1) As special counsel to the Corporation in this matter, we have not rendered
financial advice to the Corporation and do not represent by this opinion, or otherwise,
that we have reviewed or made any assessment about, nor do we offer any opinion about,
the financial condition of the Corporation, past, present or future (except only as financial
condition is related to a standard of materiality as used in paragraphs 8, 10(b) and 10(c)
• hereof), and with respect to the latter we have relied entirely on the assessment of
materiality made by the Executive Vice - President of the Corporation.
(m) We express no opinion with respect to any numerical or mathematical
calculation or computation regarding the Bonds, any of the documents referred to herein
or any certificate given or issued with respect to the matters referred to herein. Without
limiting the generality of the above, we specifically express no opinion with respect to
any such calculation or computation contained in or related to the subject matter of the
"Tax Certificate and Agreement" or Internal Revenue Service Form 8038.
(n) We express no opinion as to the ownership or the condition of title of any
real or personal property of the Corporation.
(o) Our opinion is limited to the matters expressly set forth herein, and no
opinion or other statement may be inferred or implied beyond the matters expressly
stated.
We are members of the Bar of the State of California and, accordingly, do not purport to
be experts on or to be qualified to express any opinion herein concerning, nor do we express any
opinion herein concerning, any laws other than the laws of the State of California and federal
law.
This opinion is furnished by us as special counsel to the Corporation and it may be relied
• upon only by the addressees, their counsel and Orrick, Herrington & Sutcliffe LLP, as Bond
Counsel. This letter shall not be used, quoted, disseminated, circulated or relied upon by any
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011.1277351.4
other person or entity, for any purpose, without our prior written consent, except as copies may
• be included in transcripts of the proceedings relating to the issuance of the Bonds.
Respectfully submitted,
•
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EXHIBIT P TO
BOND PURCHASE CONTRACT
FORM OF OPINION OF UNDERWRITER'S COUNSEL
August 24, 2005
Citigroup Global Markets Inc.
Los Angeles, California
Re: $200,000,000 aggregate principal amount of the City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series
2005A, 2005B and 2005C (the `Bonds')
Ladies and Gentlemen:
We have acted as counsel to you as the Underwriter in connection with the purchase by
you of the $200,000,000 aggregate principal amount of the City of Newport Beach Insured
Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005A, 2005B and 2005C (the
`Bonds "), pursuant to a Bond Purchase Contract (the `Bond Purchase Contract"), by and
between the City of Newport Beach (the "City') and you, as the Underwriter, which Hoag
•Memorial Hospital Presbyterian (the `Borrower', as Borrower, has approved. The Bonds are
being issued pursuant, to a Bond Indenture dated as of August 1, 2005 (the `Bond Indenture'
between the City and Wells Fargo Bank, National Association, as bond trustee (the "Trustee'
for the purpose of making a loan to the Borrower pursuant to the Loan Agreement dated as of
August 1, 2005 (the "Loan Agreement') between the City and the Borrower.
In that connection, we have reviewed the Loan Agreement; the Bond Indenture; the
Master Indenture dated as of October 1, 1984, as supplemented by the Supplemental Master
Indenture for Obligation No. 14 (as so supplemented, the "Master Indenture'), between the
Borrower and Wells Fargo Bank, National Association, as successor Master Trustee (the "Master
Trustee "); Obligation No. 14; the Official Statement dated August 12, 2005 (the "Official
Statement') relating to the Bonds; the Continuing Disclosure Certificate dated the date of
issuance and delivery of the Bonds (the "Continuing Disclosure Certificate') between the
Borrower and Wells Fargo Bank, National Association, as Dissemination Agent; the Letter of
Representation described in the Bond Purchase Contract; the Auction Agent Agreement dated as
of August 1, 2005 between the Trustee and Wells Fargo Bank, N.A., as Auction Agent; the
Broker - Dealer Agreement, dated as of August 1, 2005, among the Auction Agent, the Borrower
and you, as Broker- Dealer;, the financial guaranty insurance policy of FGIC Insurance Company
(the "Insurer) insuring the Bonds; the opinion of Stradling Yocca Carlson & Rauth, a
Professional Corporation, counsel to the Borrower, dated the date hereof; certifications of the
City, the Borrower, the Master Trustee, the Trustee and others as to certain matters; such
opinions and such other records and documents; and we have made such investigations of law, as
• we have deemed appropriate as a basis for the opinions and statements hereinafter expressed.
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m.1rna51.4
In rendering the opinions and making the statements hereinafter expressed, we are not
expressing any opinion or view of the validity, accuracy or sufficiency of the documents,
• , certificates or opinions referred to above or on the authorization, issuance, delivery or validity of
the Bonds and we have assumed, but not independently verified, that the signatures on all
documents, certificates and opinions that we have reviewed are genuine.
Based on and subject to the foregoing, and in reliance thereon, we are of the opinion that:
1. The Bonds are not subject to the registration requirements of the Securities Act of
1933, as amended; and the Bond Indenture and the Master Indenture are exempt from
qualification pursuant to the Trust Indenture Act of 1939, as amended.
2. Because the primary purpose of our professional engagement was not to establish
factual matters and because of the wholly or. partially non -legal character of many determinations
involved in the preparation of the Official Statement, we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of any of the statements contained
in the Official Statement and make no representation that we have independently certified the
accuracy, completeness or fairness of any such statements. However, in our capacity as counsel
for the Underwriter during the course of preparation of the Official Statement, we met in
conferences or had discussions with your representatives, representatives of the Borrower and its
counsel, bond counsel, and others, during which conferences the contents of the Official
Statement and related matters were discussed. Based on our participation in the above
mentioned conferences and in reliance thereon and on the certificates, opinions and other
documents herein mentioned, we advise you that no information came to our attention which
•caused us to believe that the Official Statement as of its date and as of the date of this opinion
(except for any financial or statistical data or forecasts and the information relating to DTC and
the Insurer contained therein as to which we express no opinion or view) contained any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading.
3. The Continuing Disclosure Certificate satisfies the requirements of Section
(b)(5)(i) of Rule 15c2 -12 of the Securities and Exchange Commission (17 C.F.R., Part 240,
§420.15c2- 12)(the "Rule'), which provide for an undertaking for the benefit of the holders,
including beneficial owners, of the Bonds to provide certain annual financial information and
event notices to various information repositories at the times and in the manner required by the
Rule.
4. With respect to the Bonds, other than the Borrower, there are no "obligated
persons" within the meaning of the Rule which would be required to provide certain annual
financial information and event notices to various information repositories as required by the
Rule.
In rendering the foregoing opinions in paragraphs 3 and 4 hereof, we have assumed the
due authorization, execution and delivery of the Continuing Disclosure Certificate by the
Borrower, and that such Continuing Disclosure Certificate is a valid and binding obligation of
• the Borrower enforceable in accordance with its terms.
)1 1.1277351.4
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The opinions expressed herein are based upon existing law as of the date hereof and we
•express no opinion herein as of any subsequent date or with respect to any pending legislation.
We assume no obligation to supplement this opinion if any applicable laws change after the date
hereof or if we become aware of any facts that might change the opinions expressed herein after
the date hereof.
In rendering these opinions, we are expressing no opinion on the validity of the Bonds or
on the exclusion of interest evidenced by the Bonds from the gross income .of the holders -thereof
for federal income tax purposes or the exemption of interest on the Bonds from State of
California personal income taxes. We understand that you are relying on the opinion of Bond
Counsel in that regard.
The opinions herein are limited to the laws of the United States.
We are furnishing this letter to you pursuant to the Bond Purchase Contract solely for
your benefit as Underwriter. This letter is not to be used, circulated, quoted or otherwise referred
to for any other purpose except that reference to our opinion in the first numbered paragraph of
this letter may be made in the Official Statement or other documents and except that reference
may be made to this letter in any list of closing documents pertaining to the sale of the Bonds.
Respectfully,
• Foley & Lardner LLP
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11.1277351.4
EXHIBIT G TO
• BOND PURCHASE CONTRACT
OFFICER'S CERTIFICATE
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005A. 2005B and 2005C
(the "Bonds ")
I, Jennifer Mitzner, hereby certify that I am the Vice President Finance and Chief
Financial Officer of Hoag Memorial Hospital Presbyterian (the "Corporation'), a nonprofit
public benefit corporation duly organized and existing under the laws of the State of California
and that, as such, I am authorized to execute this certificate on behalf of the Corporation under
the Master Indenture dated as of October 1, 1984, as supplemented and amended, by and among
the Corporation and such other members as may join the obligated group as defined therein and
Wells Fargo Bank, National Association, as successor master trustee.
I hereby further state and certify, to the best of my knowledge, that:
• 1. Since August 31, 2004, no material and adverse change has occurred in the
financial position or re sults of operation of the Corporation which is not described in the Official
Statement prepared in connection with the issuance of the Bonds or which has not been
described in writing delivered by the Corporation to the City and the Underwriter.
2. The Corporation has not, since August 31, 2004, incurred any material liabilities
other than in the ordinary course of business which are not described in or contemplated by the
Official Statement or in writing delivered by the Corporation to the City and the Underwriter.
3. No proceedings are pending or threatened in any way contesting or affecting the
Corporation's status as an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986 (the "Code "), as amended, or which would subject any income of any Member of
the Obligated Group to federal income taxation.
4. No event affecting the Corporation has occurred since the date of the Official
Statement which (i) makes untrue or incorrect in any material respect as of the date hereof, or at
such earlier or later time or date as shall be agreed by the City and the Underwriter, any
statement or information contained in the Official Statement or (ii) is not reflected in the Official
Statement but should be reflected therein in order to make the statements and information therein
not misleading in any material respect.
5. The representations and warranties made by the Corporation in the Letter of
. Representation delivered by the Corporation in connection with the execution of the Bond
G -1
nr.tzrresr.a
Purchase Contract related to the Bonds, are true and correct as of the date hereof as if made on
• the date hereof.
Capitalized terms used and not defined herein have the meanings assigned to them in the
Bond Purchase Contract dated August 22, 2005, between Citigroup Global Markets Inc. and the
City of Newport Beach and approved by the Corporation.
Dated: August 24, 2005
•
•
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
LE
Vice President Finance and Chief Financial Officer
G -2
011.1277351.4
EXHIBIT NO. 12
Blue Sky Memorandum
(UC)
FOLEY
0
$65,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital
Presbyterian)
Series 2005A
•
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005
consisting of
$65,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital
Presbyterian)
Series 2005B
BLUE SKY MEMORANDUM
CITIGROUP GLOBAL MARKETS INC.
390 Greenwich Street
New York, NY 10013
Ladies and Gentlemen:
FOLEY & LARDNER LLP
ATTORNEYS AT LAW
321 NORTH CLARK STREET
SUITE 2800
CHICAGO, IL 60610 -4764
312.832.4500 TEL
312.832.4700 FAX
www.foley.com
CLIENTIMATTER NUMBER
058798 -0132
$70,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital
Presbyterian)
Series 2005C
August 15, 2005
You have under consideration the public offering of the City of Newport Beach (the
"Issuer'l Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005 consisting of
the Issuer's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005A, the
Issuer's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005B and the
Issuer's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005C (collectively,
the "Bonds "). We understand that: (i) the Bonds will be rated within one of the top two rating
categories by a national rating organization; and (ii) the scheduled payment of principal and interest
on each series of the Bonds when due will be guaranteed under a municipal new issue insurance
policy to be issued concurrently with the delivery of the Bonds by an insurance company authorized
to conduct an insurance business in all of the fifty states of the United States. The proposed offering
is contingent upon acceptance by the Issuer of the proposal to be made by you to purchase the
Bonds, and the public offering of the Bonds by you will be for your own account.
We set forth below information as to the requirements of the securities or Blue Sky
•laws of the fifty states of the United States, the District of Columbia and the Commonwealth of
Puerto Rico, subject to the limitations imposed upon such requirements under Sec. 18 of the
Securities Act of 1933, as amended (the "Act "), with respect to public offerings made on the basis
BOSTON JACKSONVILLE NEW YORK SAN DIEGOIDEL MAR TAMPA
BRUSSELS LOS ANGELES ORLANDO SAN FRANCISCO TOKYO
CHICAGO MADISON SACRAMENTO SILICON VALLEY WASHINGTON. D.C.
DETROIT MILWAUKEE SAN DIEGO TALLAHASSEE WESFPALMSEACH
:FOLEY
above described. In preparing this Memorandum we have examined the latest standard compilations
that are available to us of the securities laws of such jurisdictions and, in some cases, the regulations
issued thereunder. We have not obtained special rulings of the securities commissioners or other
state administrative bodies or officials charged with the administration of the respective Blue Sky
laws, and we have not obtained opinions of local counsel. We have assumed the accuracy of the
information provided to us with respect to the Issuer, the Bonds and the proposed distribution of the
Bonds, including the information with respect thereto in the Issuer's Official Statement. This
Memorandum is based upon the further assumption that the issuance and sale of the Bonds, when
made, will be fully authorized and will comply in all respects with the applicable federal laws
regarding the issuance and sale of such securities. This Memorandum is furnished only for your
general information and is not to be relied upon as an opinion of counsel in any specific jurisdiction.
In all instances in which we have indicated that persons registered or licensed as
dealers or brokers may sell the Bonds, we have assumed that such persons have complied with the
applicable dealer, broker and salesman requirements in connection with the sales thereof, and with
all federal and state statutes, rules and regulations with respect to registration or licensing.
The securities commissions or other authorities administering the securities or Blue
Sky laws of many jurisdictions have discretionary powers to impose additional requirements in
respect of an offering of securities or information to be filed in applying for qualification thereof,
subject to the limitations under Sec. 18 of the Act. The statements made herein are of necessity
subject to modification through the exercise of such discretionary powers.
r1
071.1286617.1 2
•
•
•
:FOLEY
Section I
Sales to the Public by Persons
Registered or Licensed as Dealers or Brokers
in the Jurisdiction of the Sale
A. No Action Necessary
In each of the following jurisdictions, the Bonds may be advertised, offered for sale
and sold to the public without registration or a notice filing by sellers registered or licensed as
dealers or brokers under the Blue Sky law of such jurisdictions:
Alabama
Alaska
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Missouri
Nebraska
Nevada
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah .
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Action Necessary and Has Not Been Completed
In each of the following jurisdictions, the Bonds may not be advertised, offered for
sale or sold to the public until certain notice filings under the Blue Sky laws of such jurisdictions
have been completed. We have not completed the notice filing required in such jurisdictions.
Accordingly, the Bonds should not be advertised, offered for sale or sold to the public in such
jurisdictions. The Bonds may be offered for sale and sold exclusively to the institutional investors
listed in Section II of this Memorandum relating to the respective jurisdictions.
Arizona
Minnesota
Montana
011.1286617.1 3
New Hampshire
:FOLEY
• Section II
Sales to Certain Institutional Investors by Persons
Not Registered or Licensed as Dealers or Brokers in the Jurisdiction of the Sale
The Bonds may be offered and sold without registration or any filings being made by
sellers who need not be registered or licensed as dealers or brokers under the applicable Blue Sky
law, but only to the classes of persons and, where so indicated, in the transactions listed below. The
status of the Bonds with respect to their eligibility for investment by the institutions listed below is
not covered in this Memorandum.
Alabama Any dealer, bank, savings institution, trust company, credit union, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or in some
fiduciary capacity.
Alaska (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Arizona (2) Any dealer, bank, savings institution, insurance company, agency or
instrumentality of the United States or of a state, or to a person a principal
• part of whose business consists of buying securities.
Arkansas (1) Any broker - dealer, bank, savings institution, savings and loan association,
trust company, insurance company, investment company as defined in the
Investment Company Act of 1940, pension or profit - sharing trust, or other
financial institution or institutional buyer, whether the purchaser is acting
for itself or as trustee.
California (3) Any broker - dealer, bank, savings and loan association, trust company,
insurance company, investment company registered under the Investment
Company Act of 1940, pension or profit - sharing trust (other than a
self - employed individual retirement plan or individual retirement account),
organization described in Section 501(c)(3) of the Internal Revenue Code,
as amended December 29, 1981, which has total assets (including
endowment, annuity and life income funds) of not less than $5,000,000
according to its most recent audited financial statement, corporation which
has a net worth on a consolidated basis according to its most recent audited
financial statement of not less than $14,000,000, wholly -owned subsidiary
of any of the foregoing; provided in each case the purchaser, whether acting
for itself or as trustee, represents that it is purchasing for its own account (or
for such trust account); Federal Government, agency or instrumentality of
the Federal Government, corporation wholly owned by the Federal
Government, state, city, city and county, county, agency or instrumentality
• of a state, city, city and county, or county, state university, state college, and
any retirement system for the benefit of employees of any of the foregoing.
Colorado (4) Any broker - dealer (except when the broker - dealer is acting as a clearing
011.1286617.1 4
:FOLEY
• broker - dealer for such other broker - dealers), "depository institution' (as
defined), insurance company, separate account of an insurance company,
investment company registered under the Investment Company Act of 1940,
business development company as defined under the Investment Company
Act of 1940, private business development company as defined under the
Investment Advisers Act of 1940, employee pension, profit - sharing or
benefit plan if the plan has total assets in excess of $5,000,000 or its
investment decisions are made by a named fiduciary as defined in the
Employee Retirement Income Security Act of 1974 (i.e., a broker - dealer
registered under the Securities Exchange Act of 1934, investment adviser
registered or exempt from registration under the Investment Advisers Act of
1940, depository institution or insurance company), entity (but not an
individual) a substantial part of whose business activities consists of
investing, purchasing, selling or trading in securities of more than one issuer
and not of its own issue and that has total assets in excess of $5,000,000 as
of the end of its latest fiscal year, small business investment company
licensed by the Small Business Administration under the Small Business
Investment Act of 1958, and any other institutional buyer.
Connecticut (5) Any broker - dealer, bank and trust company, national banking association,
savings bank, savings and loan association, federal savings and loan
association, credit union, federal credit union, trust company, insurance
company, investment company as defined in the Investment Company Act
• of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Delaware (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
District of Any broker - dealer, bank, savings institution, trust company, insurance
Columbia (1) company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether acting for itself or as trustee.
Florida (6) Any bank, trust company, savings institution, insurance company, dealer,
investment company, as defined by the Investment Company Act of 1940,
pension or profit - sharing trust, or "qualified institutional buyer" as that term
is defined under Reg. § 230.144A under the Securities Act of 1933, whether
acting in its individual or fiduciary capacity.
Georgia Any dealer, bank, savings institution, trust company, insurance company,
investment company as defined in the Investment Company Act of 1940,
real estate investment trust, small business investment corporation, pension
or profit- sharing plan or trust, or other financial institution, whether the
purchaser is acting for itself or in some fiduciary capacity.
. Hawaii (7) Any dealer, bank, savings institution, trust company, insurance company,
investment company as defined in the Investment Company Act of 1940,
pension or profit - sharing trust, or other financial institution or institutional
011.1296617.1 5
:FOLEY
• buyer, whether the purchaser is acting for itself or as trustee.
Idaho (8) Any broker - dealer, bank, savings institution, trust company, insurance
company, credit union, investment company as defined in the Investment
Company Act of 1940, pension or profit - sharing trust, or other financial
institution or institutional buyer, whether the purchaser is acting for itself or
as trustee.
Illinois Any dealer, corporation, bank, savings bank, savings institution, savings and
loan association, trust company, insurance company, building and loan
association, pension fund, pension trust, employees' profit - sharing trust,
other financial institution (including a manager of investment accounts on
behalf of other than natural persons, who, with affiliates, exercises sole
investment discretion with respect to such accounts, and provided such
accounts exceed 10 in number and have a fair market value of not less than
$10,000,000 at the end of the calendar month preceding the month during
which the purchase of the securities occurred) or institutional investor
(including any investment company, university, or other organization whose
primary purpose is to invest its own assets or those held in trust by it for
others, trust accounts and individual or group retirement accounts in which a
bank, trust company, insurance company or savings and loan institution acts
in a fiduciary capacity, and any foundation or endowment fund exempt from
taxation under the Internal Revenue Code, a principal business function of
. which is to invest funds to produce income to carry out its purposes),
government or political subdivision or instrumentality thereof, whether the
purchaser is acting for itself or in some fiduciary capacity, partnership or
other association engaged as a substantial part of its business or operations
in purchasing or holding securities, trust in respect of which a bank or trust
company is trustee or co- trustee, employee benefit plan within the meaning
of Title 1 of the Federal ERISA Act if (i) the investment decision is made
by a plan fiduciary as defined in Section 3(21) of the Federal ERISA Act
and such fiduciary is either a bank, savings and loan association, insurance
company, registered investment adviser or an investment adviser registered
under the Investment Advisers Act of 1940 or (ii) the plan has total assets in
excess of $5,000,000, or (iii) in the case of a self - directed plan, investment
decisions are made solely by persons that are certain institutional investors,
as defined; or to any plan established and maintained by, and for the benefit
of the employees of any state or political subdivision or agency or
instrumentality thereof if such plan has total assets in excess of $5,000,000,
or any organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, any Massachusetts or similar business trust, or any
partnership, if such organization, trust or partnership has total assets in
excess of $5,000,000.
Indiana (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
• of 1940 as in effect on December 31, 1990, pension or profit - sharing trust,
or other financial institution or institutional buyer, whether the purchaser is
acting for itself or as trustee.
011.1296617.1 6
:FOLEY
• Iowa (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institutions,
whether the purchaser is acting for itself or as trustee.
Kansas Any broker - dealer or underwriter, bank, savings institution, trust company,
insurance company, investment company as defined in the Investment
Company Act of 1940, pension or profit - sharing trust, or other financial
institution or institutional buyer, provided the financial institution is acting
only for its own account or as a bona fide trustee for a trust organized and
existing other than for the purpose of acquiring the securities, and not as
agent for another.
Kentucky (1) Any broker - dealer, bank, savings institution,, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Louisiana (9) Any dealer, bank, savings institution, trust company, insurance company,
investment company as defined in the Investment Company Act of 1940,
real estate investment trust, small business investment corporation, pension
or profit sharing plan or trust, or other financial institution, whether the
purchaser is acting for itself or in some fiduciary capacity.
Maine (10) Any broker - dealer licensed or exempt from licensing under the Maine Blue
. Sky law, except when the broker - dealer is acting as a clearing broker - dealer
for such other broker - dealers, a "financial and institutional investor" which
term includes, but is not limited to, a depository institution which includes a
commercial bank, savings bank, industrial bank, savings and loan
association, or credit union, whether organized under state or federal law
doing business in Maine, depository institution holding company, insurance
company, separate account of an insurance company, investment company
as defined by the United States Investment Company Act of 1940, business
development company as defined by the Investment Company Act of 1940,
an entity (other than a natural person), a substantial part of whose business
activities consists of investing, purchasing, selling or trading in securities of
more than one issuer and not of its own issue and that has gross assets in
excess of $1,000,000 at the end of its latest fiscal year, employee pension
and profit - sharing or benefit plan (other than an employee pension and
profit - sharing or benefit plan of the Issuer, self - employed individual
retirement plan or individual retirement account) if (i) the investment
decision is made by a plan fiduciary, as defined in the Employee Retirement
Income Security Act of 1974, Section 3, Subsection 21, which is either a
depository institution, an insurance company or an investment adviser
registered under the Maine Blue Sky law, or (ii) the plan has total assets in
excess of $5,000,000; small business investment company licensed by the
Small Business Administration under the Small Business Investment Act of
1958, Section 301(c) or (d), or an entity organized and operated not for
• private profit, as described in the Internal Revenue Code, Section 501(c)(3)
with total assets in excess of $5,000,000, whether the purchaser is acting for
011.12e6617.1 7
:FOLEY
• itself or others in a fiduciary capacity.
Maryland (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether acting for itself or as trustee.
Massachusetts Any broker - dealer, bank, savings institution, trust company, insurance
(1) company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, which term includes; (i) small business investment
company licensed by the U.S. Small Business Administration under the
Small Business Investment Act of 1958, as amended; (ii) private business
development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940, as amended; (iii) business development company as
defined in Section 2(a)(48) of the Investment Company Act of 1940, as
amended; (iv) entity with total assets in excess of $5,000,000 and which is
either (a) a company (whether a corporation, Massachusetts or similar
business trust or a partnership) not formed for the specific purpose of
purchasing the securities offered, a substantial part of whose business
activities consists of investing, purchasing, selling or trading in securities
issued by others and whose investment decisions are made by persons who
are reasonably believed by the seller to have such knowledge and
experience in financial and business matters as to be capable of evaluating
. the merits and risks of investment or (b) an organization described in
Section 501(c)(3) of the Internal Revenue Code and (v) a "qualified
institutional buyer" as defined under Reg. § 230.144(A) under the Securities
Act of 1933, whether the purchaser is acting for itself or as trustee.
Michigan (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Minnesota (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, which term includes but is not limited to, a corporation
with a class of equity securities registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended and a person who is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D,
whether the purchaser is acting for itself or in some fiduciary capacity.
Mississippi (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer which term includes; those persons considered to be a
"qualified institutional buyer" as that term is defined under Reg. §
• 230.144A under the Securities Act of 1933, whether the purchaser is acting
for itself or as trustee.
011.1 286617.1 8
:FOLEY
Missouri (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Montana Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer which includes a "qualified institutional buyer" as that
term is defined under Reg. § 230.144A under the Securities Act of 1933,
whether the purchaser is acting for itself or in some fiduciary capacity.
Nebraska Any broker - dealer, bank as defined in Section 3(a)(2) of the Securities Act
of 1933, whether acting in its individual or fiduciary capacity, savings
institution, trust company, insurance company as defined in Section 2(13) of
the Securities Act of 1933, investment company as defined in the
Investment Company Act of 1940, pension or profit - sharing trust which is
an "employee benefit plan" as defined in Title I of the Employee Retirement
Income Security Act of 1974 if the (i) investment decisions are made by a
"plan fiduciary" as defined in Section 3(21) of the Employee Retirement
Income Security Act of 1974, which is either a bank, insurance company or
registered investment adviser or (ii) the employee benefit plan has total
assets in excess of $5,000,000, or other financial institution or institutional
• buyer which includes but is not limited to, business development company
as defined in Section 2(a)(48) of the Investment Company Act of 1940 and
small business investment corporation licensed by the United States Small
Business Administration pursuant to Section 301(c) or (d) of the Small
Business Investment Company Act of 1958, whether the purchaser is acting
for itself or in some fiduciary capacity, or to an individual accredited
investor, as defined.
Nevada (10) Any broker - dealer or "financial and institutional investor" which includes a
depository institution as defined, insurance company, separate account of an
insurance company, investment company as defined in the Investment
Company Act of 1940, employee pension, profit - sharing or benefit plan if
the plan has total assets in excess of $5,000,000 or its investment decisions
are made by a named fiduciary, as defined in the Employee Retirement
Income Security Act of 1974, that is either a broker - dealer registered under
the Securities Exchange Act of 1934, an investment adviser registered or
exempt from registration under the Investment Advisers Act of 1940, a
depository institution or an insurance company, and any other institutional
buyer, whether acting for itself or others in a fiduciary capacity other than as
an agent.
•
011.12e6617.1 9
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• New Hampshire Any broker - dealer, bank, savings institution, trust company, insurance
(1} company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or in some
fiduciary capacity.
New Jersey (11) Any broker - dealer, bank, savings institution (which means any savings and
loan association or building and loan association operating pursuant to the
Savings and Loan Act of 1963 and any federal savings and loan association
and any organization organized under the laws of any state whose accounts
are insured by the Federal Savings and Loan Insurance Corporation and
who are subject to supervision and examination by the Federal Home Loan
Bank Board, and any credit union licensed and supervised under The Credit
Union Act of 1984 or licensed and supervised by the National Credit Union
Administration), trust company, insurance company, investment company
as defined in the Investment Company Act of 1940, pension or
profit - sharing trust, "qualified institutional buyer" as defined under Reg. §
230.144A under the Securities Act of 1933, or other financial institution or
institutional buyer, whether acting for itself or as trustee.
New Mexico (10) Any broker - dealer licensed or exempt under the New Mexico Blue Sky law
or any "financial or institutional investor," whether acting for itself or others
in a fiduciary capacity (other than as an agent), which term includes, but is
not limited to, a "depository institution," as defined, insurance company,
• separate account of an insurance company, investment company as defined
in the Investment Company Act of 1940, employee pension, profit - sharing
or benefit plan if the plan has total assets in excess of $5,000,000 or if
investment decisions are made by one or more plan fiduciaries, as defined in
the Employee Retirement Income Security Act of 1974, so long as at least
one of such plan fiduciaries is either a broker - dealer registered under the
Securities Exchange Act of 1934, an investment adviser registered or
exempt from registration under the Investment Advisers Act of 1940, a
depository institution or an insurance company; a business development
company as defined by the Investment Company Act of 1940, small
business investment company licensed by the United States Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958, an entity, other than a natural person, which is
directly engaged in the business of, and derives at least 80 percent of its
annual gross income from, investing, purchasing, selling or trading in
securities of more than one issuer and not of its own issue, and that has
gross assets in excess of $5,000,000 at the end of its latest fiscal year, an
entity organized and operated not for private profit as described in Section
501(c)(3) of the Internal Revenue Code with total assets in excess of
$5,000,000, a state, a political subdivision of a state, or an agency or
corporate or other instrumentality of a state or a political subdivision of a
state.
• New York (12) Any dealer, broker, bank, or any syndicate, corporation or group formed for
the specific purpose of acquiring the securities for resale to the public
011.128661 T.1 10
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• directly or through other syndicates or groups.
North Carolina Any dealer, bank, savings institution, trust company, insurance company,
(1} investment company as defined in the Investment Company Act of 1940,
pension or profit- sharing trust, or other financial institution or institutional
buyer, whether acting for itself or as trustee.
North Dakota Any dealer, bank, savings institution, trust company, insurance company,
investment company as defined in the Investment Company Act of 1940,
pension or profit sharing trust or other financial institution or institutional
buyer whether acting for itself or in a fiduciary capacity.
Ohio Through or with a licensed dealer.
Oklahoma (1) Any depository institution, as defined; insurance company, separate account
of an insurance company, investment company as defined in the Investment
Company Act of 1940, employee pension, profit - sharing or benefit plan if
the plan has total assets in excess of $5,000,000 or its investment decisions
are made by a named fiduciary as defined in the Employee Retirement
Income Security Act of 1974, that is either a broker - dealer registered under
the Securities Exchange Act of 1934, an investment adviser registered or
exempted from registration under the Investment Advisers Act of 1940, a
depository institution or an insurance company; a "qualified institutional
buyer" as defined under Reg. § 230 -144A under the Securities Act of 1933,
or other financial institution or institutional buyer, whether the purchaser is
acting for itself or as trustee.
Oregon Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company, pension or profit - sharing trust, or other
financial institution or institutional buyer (including but not limited to the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal Housing Administration, the United States
Veterans Administration, the Government National Mortgage Association
and a "qualified institutional buyer" as that term is defined under Reg. §
230.144A under the Securities Act of 1933), or mortgage broker or
mortgage banker, whether the purchaser is acting for itself or in a fiduciary
capacity when the purchaser has discretionary authority to make investment
decisions.
Pennsylvania Any broker - dealer, bank, insurance company, pension or profit - sharing plan
(13) or trust which has plan assets of $500,000 or more or (a) retained on an
annual basis, the services of a person knowledgeable and experienced in
financial and business matters to render professional investment
management advise; and (b) investments of $500,000 or more in securities;
investment company as defined in the Investment Company Act of 1940,
other financial institution or any person (other than an individual) which
controls any of the foregoing, the Federal Government, state or any agency
or political subdivision thereof except public school districts of
• Pennsylvania, corporation or business trust or a wholly -owned subsidiary of
the person which has been in existence for 18 months and which has a
tangible net worth on a consolidated basis, as reflected in its most recent
011.1286617.1 11
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• audited financial statements of $10,000,000 or more, a college, university or
other public or private institution which has received exempt status under
Section 501(c)(3) of the Internal Revenue Code of 1954 and which has a
total endowment or trust funds, including annuity and life income funds, of
$5,000,000 or more according to its most recent audited financial
statements, provided that the aggregate dollar amount of securities being
sold to the person may not exceed 5.0% of the endowment or trust funds, a
wholly -owned subsidiary of a bank as defined, a small business investment
company as that term is defined in Section 103 of the Small Business
Investment Act of 1958, which either (i) has a total capital of $1,000,000 or
more or (ii) is controlled by institutional investors, as defined, a seed capital
fund, as defined in Section 2 and authorized in Section 6 of the Small
Business Incubators Act, a business development credit corporation, as
authorized by the Business Development Credit Corporation Law, a person
whose security holders consist solely of institutional investors or broker -
dealers, or certain other institutional investors as defined by regulation
under the Pennsylvania Blue Sky law, whether the purchaser is acting for
itself or in some fiduciary capacity.
Puerto Rico (1)
Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Companies Act
of Puerto Rico, pension or profit - sharing trust, or other financial institution
or institutional buyer, whether the purchaser is acting for itself or as trustee.
• Rhode Island
Any broker - dealer licensed or exempt from licensing under the Rhode
(14)
Island Blue Sky law or financial or institutional investor which term
includes a depository institution as defined, insurance company, separate
account of an insurance company, investment company as defined in the
Investment Company Act of 1940, employee pension, profit - sharing or
benefit plan if the plan has total assets in excess of $5,000,000 or its
investment decisions are made by a plan fiduciary, as defined in the
Employee Retirement Income Security Act of 1974, which is either a
broker - dealer registered under the Securities Exchange Act of 1934, an
investment adviser registered or exempt from registration under the
Investment Advisers Act of 1940, a depository institution, or an insurance
company; "qualified institutional buyer" as that term is defined under Reg. §
230.144A under the Securities Act of 1933 or any other institutional buyer.
South Carolina
Any broker - dealer licensed or exempt from licensing under the South
(15)
Carolina Blue Sky law, or other financial institution or institutional buyer.
South Dakota
Any broker - dealer, bank, savings institution, trust company, insurance
(16)
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer (which term includes the following; an endowment or
trust fund of a charitable organization specified in Section 170(b)(1)(A) of
the Internal Revenue Code (as amended through April 1, 1990), an issuer
is which has any class of securities registered under Section 12 of the
Securities Exchange Act of 1934 and any wholly -owned subsidiary of such
an issuer, and any other corporation, partnership or association which has
of 1.1286617.1 12
FOLEY
been in existence for 10 years or whose net assets exceed $500,000 and
whose principal purpose as stated in its articles, bylaws, or other
organizational instrument is investing in securities), whether such person is
acting for itself or as trustee.
Tennessee (17) Any bank, trust company, insurance company, investment company
registered under the Investment Company Act of 1940, as amended, a
holding company which controls any of the foregoing, a trust or fund over
which any of the foregoing has or shares investment discretion, pension or
profit sharing plan, or any other person engaged as a substantial part of its
business in investing in securities unless such person is a broker - dealer, in
each case having a net worth in excess of $1,000,000.
Texas Any dealer registered under the Texas Blue Sky law actually engaged in
buying and selling securities, bank, trust company, building and loan
association, insurance company, surety or guaranty company, savings
institution (including any federally or state chartered credit union or savings
and loan association or federal savings bank), investment company as
defined in the Investment Company Act of 1940, or small business
investment company as defined in the Small Business Investment Act of
1958, as amended, whether such purchaser is acting for its own account or
as a bona fide trustee of a trust organized and existing other than for the
purpose of the investment and not merely as the agent for another,
"accredited investor" (as that term is defined in Rule 501(a)(1) -(4), (7) and
•
(8) of Regulation D under the Securities Act of 1933), excluding, however,
any self - directed employee benefit plan with investment decisions made
solely by persons that are "accredited investors" as defined in Rule
501(a)(5) -(6), "qualified institutional buyer" as that term is defined under
Reg. §230.144A(a)(1) under the Securities Act of 1933, a corporation,
partnership, trust, estate or other entity (excluding individuals) having net
worth of not less than $5,000,000 or a wholly -owned subsidiary of such
entity, as long as the entity was not formed for the purpose of acquiring the
specific securities.
Utah (1)
Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Vermont (18)
Any person if it is part of an "isolated" transaction.
Virginia
Any broker - dealer, investment company, pension or profit - sharing trust or
corporation.
Washington (1)
Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer which term includes a corporation, business trust or
• partnership or wholly -owned subsidiary of such an entity which has been
operating for at least 12 months and which has a net worth on a consolidated
basis of at least $10,000,000 as determined by the entity's most recent
011.128661 T.1 13
:FOLEY
audited financial statements (dated within 16 months of the securities
• transaction), entity which has been granted exempt status under Section
501(c)(3) of the Internal Revenue Code of 1986 and which has a total
endowment or trust funds of $5,000,000 or more according to its most
recent audited financial statements (dated within 16 months of the securities
transaction), any wholly -owned subsidiary of a bank, savings institution,
insurance company, or investment company as defined in the Investment
Company Act of 1940, whether the purchaser is acting for itself or in some
fiduciary capacity.
West Virginia (1) Any broker - dealer, bank, savings institution, trust company, insurance
company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
Wisconsin (19) Any broker - dealer, bank, savings institution, trust company, insurer, credit
union, investment adviser, federal covered adviser, savings and loan
association, if the purchaser is acting for itself or as trustee with investment
control, investment company as defined under 15 USC 80a -3, pension or
profit - sharing trust or to an individual retirement plan including a
self - employed individual retirement plan provided the trust or plan is
administered by a bank, savings institution, credit union, trust company,
insurer, broker - dealer, investment adviser, federal covered adviser or
savings and loan association that has investment control, the State of
• Wisconsin or any of its agencies or political subdivisions or the Federal
Government or any of its agencies or instrumentalities, endowment or trust
fund of a charitable organization specified in Section 170(b)(1)(A) of the
Internal Revenue Code, issuer which has any class of securities registered
under Section 12 of the Securities Exchange Act of 1934 and any
wholly -owned subsidiary thereof, venture capital company which (i)
operates a small business investment company licensed under the Small
Business Investment Act of 1958, as amended 15 USC sec. 631; or (ii) is a
corporation, partnership or association whose net assets exceed $1,000,000
and either (a) whose principal purpose as stated in its articles, bylaws or
other organizational instrument is investing in securities or (b) whose
primary business is investing in developmental stage companies or eligible
small business companies as defined in the regulations of the Small
Business Administration at 13 CFR 108.2; any "qualified institutional
buyer" as defined and listed under Reg. § 230.144A under the Securities Act
of 1933, as amended, inclusive to October 22, 1992, whether acting for its
own account or the accounts of other qualified institutional buyers that in
the aggregate owns and invests on a discretionary basis at least
$100,000,000 in securities of issuers that are not affiliated with the qualified
institutional buyer, any "accredited investor" as defined and listed in Rule
501(a)(1), (2), (3) or (7) under Regulation D under the Securities Act of
1933, or any other financial institution or institutional investor designated
• by rule or order of the Administrator of Securities.
Wyoming (1) Any broker - dealer, bank, savings institution, trust company, insurance
011.1266617.1 14
:FOLEY
• company, investment company as defined in the Investment Company Act
of 1940, pension or profit - sharing trust, or other financial institution or
institutional buyer, whether the purchaser is acting for itself or as trustee.
FOLEY & LARDNER LLP
Broker - dealer registration is not required if the person has no place of business in this
jurisdiction and effects transactions in this jurisdiction exclusively with the listed institutions
or if the person is a bank, savings institution or trust company.
2. Dealer registration is not required in Arizona unless the person has no place of business
within Arizona and sells exclusively to registered dealers or is a person who sells exclusively
to other dealers or the listed institutions or is a bank or savings institution the business of
which is supervised and regulated by an agency of the State of Arizona or the United States.
3. Broker - dealer registration is not required in California if the person is a broker - dealer
registered under the Securities Exchange Act of 1934, has not previously had any certificate
denied or revoked under the California Corporate Securities Law of 1969 or any predecessor
statute, has no place of business in California and offers or sells securities in California
exclusively to other broker - dealers and the listed institutions, or is a bank, trust company or
savings and loan association.
4. Broker - dealer registration is not required in Colorado if the person is a broker - dealer
registered under the Securities Exchange Act of 1934, has no place of business in Colorado
and effects transactions in Colorado exclusively to other broker - dealers registered or exempt
from registration under the Colorado Securities Act and the listed institutions, or is a bank.
S. Broker - dealer registration is not required in Connecticut if the person has no place of
business in Connecticut and effects transactions in Connecticut exclusively with the listed
institutions or is a state bank and trust company, national banking association, savings bank,
savings and loan association, federal savings and loan association, credit union, federal credit
union, or trust company.
6. Dealer registration is also not required in Florida for a person who is a bank authorized to do
business in Florida, except non -bank subsidiaries of a bank, a trust company having trust
powers which it is authorized to exercise in Florida, which renders or performs services in a
fiduciary capacity incidental to the exercise of its trust provisions, or any wholesaler selling
exclusively to dealers.
7. Broker - dealer registration is not required in this jurisdiction if the person has no place of
business in this jurisdiction and effects transactions in this jurisdiction exclusively with the
listed institutions.
• 8. Broker - dealer registration is not required in Idaho if the person has no place of business in
Idaho and effects transactions in Idaho exclusively with the listed institutions or is a bank,
savings institution, trust company, credit union or insurance company.
011.1286617.1 15
:FOLEY
• 9. Broker- dealer registration is not required in Louisiana if the person is a bank chartered and
issued a certificate by the State of Louisiana and under the supervision of the commissioner
of financial institutions, a national bank chartered by the government of the United States and
under the supervision of the Comptroller of the Currency of the United States, a bank holding
company organized under the laws of the State of Louisiana and under the supervision of the
Board of Governors of the Federal Reserve, or the employees of such banks or bank holding
companies acting in their official capacity, or is a person who effects transactions exclusively
with the listed institutions.
10. Broker- dealer registration is not required in this jurisdiction if the person is a "depository
institution" as defined or is a broker- dealer registered, or is not required to be registered,
under the Securities Exchange Act of 1934, has no place of business in the state and offers
and sells securities exclusively to other broker - dealers or to the listed "financial and
institutional investors."
11. Broker- dealer registration is not required in New Jersey if the person is a bank, savings
institution, or trust company or is a person who effects transactions in New Jersey
exclusively with other broker - dealers or the listed financial institutions or institutional
buyers.
12. Broker- dealer registration is not required in New York if the person is a state or national
bank, trust company or savings institution or is a person who offers or sells exclusively to the
listed persons.
• 13. Broker- dealer registration is not required in Pennsylvania if the person is a bank or a
broker- dealer who has no place of business in Pennsylvania and effects transactions
exclusively with other broker - dealers or institutional investors, or is a broker - dealer
registered under the Securities Exchange Act of 1934 who (a) has not had any certificate
denied or revoked under the Pennsylvania Securities Act or any predecessor statute, (b) has
no place of business in Pennsylvania and (c) during any period of twelve consecutive months
does not direct offers to sell or buy into Pennsylvania in any manner to persons other than
broker- dealers, to institutional investors, governmental agencies and other instrumentalities
designated by regulation, and to not more than five other customers in Pennsylvania.
14. Broker - dealer registration is not required in Rhode Island if the person is a broker - dealer who
is registered or exempt from registration (except for broker- dealers exempt because they deal
exclusively in government securities) under the Securities Exchange Act of 1934, has no
place of business in Rhode Island and deals exclusively in Rhode Island with the listed
persons.
15. Broker- dealer registration is not required in South Carolina if the broker - dealer is registered,
or is not required to be registered (except for broker - dealers exempt because they deal solely
in government securities unless it is subject to supervision by the Federal Reserve Board)
under the Securities Exchange Act of 1934 and who has no place of business in South
Carolina if it effects transactions in South Carolina exclusively with the listed accounts.
16. Broker- dealer registration is not required in South Dakota if the person has no place of
•
business in South Dakota and effects transactions exclusively with the listed persons.
011.1286617.1 16
FOLEY
• 17. Broker - dealer registration is not required in Tennessee if the person is an institutional
investor (including a bank or trust company) or is a broker - dealer with no place of business
in Tennessee and is registered as a broker - dealer with the Securities and Exchange
Commission or the National Association of Securities Dealers, Inc. and effects transactions
in Tennessee exclusively with or through other broker - dealers or the institutional investors.
18. The term "isolated" has not been defined by statute or rule under the Vermont Securities Act.
19. Broker - dealer registration is not required in Wisconsin if the person is a bank, savings
institution or trust company when effecting transactions for its own account or as agent in
accordance with the rules adopted by the Administrator or if the person effects transactions in
Wisconsin exclusively for the account of the listed persons.
•
011.1286617.1 17
EXHIBIT NO, 13
Official Statement
(Disclosure Counsel)
NEW ISSUE—BOOK-ENTRY ONLY BatinEe t
In the opinion of Orrick, Herrington & Sutcliffe 1.LP Bond Counsel, based upon an analysis of existing taws, regulations,
rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance
with certain covenants, interest on the Bonds a excluded from gross income for federal income tax purposes under
section 103 of the Internal Revenue Code of 1986 and w exempt from State of California personal income taxes. In the
further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal
individual or corporate alternative minimum taxes, although Bond Counsel obwruw that such interest is
included in a4justed current earnings in calculating federal corporate alternative minimum taxable income -
Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership
or disposition of or the accrual or receipt of interest on, the Bonds. Sw "TAX MATTERS" herein.
$200,000,000
CITY OF NEWPORT BEACH
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
(Auction Rate Securities)
$05,000,000 Series 2005A $65,000,000 Series 2005B $70,000,000 Series 20050
Price: 100%
Dated: Date of Delivery Due: As shown on the inside cover
The Series A Bonds, the Series B Bonds and the Series C Bonds (collectively, the "Honda" and each a "Series" of Bonds) win be issued
initially as auction rate securities in denominations of $25,000 or any integral multiple thereof The Bonds will initially bear interest
at Auction Rates (as defined in the Indenture) for generally successive seven-day, Auction Periods (as defined in the Indenture). Each
Auction Rate far a Series of Bonds will, except in certain cases, be equal to the annual interest rate that results from the implementation
of the Auction Procedures for each Series described in Appendix C hereto. At the election of Hoag Memorial Hospital Preebyterien ( "Hoeg
Hospital"), a Series of Bonds may he converted, in whole, to bear interest at Auction Rates determined on the basis of a 35-day Auction
Period or to other Interest Rate Periods as described herein. The Bonds will be issued in frilly registered form in the name of Cede & Co., as
nominee of The Depository Trust Company, New York, New York ( "DTC "), under the book entry only system maintained by DTC. So long as
Cede & Co. is the registered owner of the Bonds, (i) principal and tender price 4 premium, if any, and interest on the Bonds will be payable
by Wells Fargo Bank, National Association, as trustee, to DTC, which in turn will remit such payments to its participants for subsequent
disbursement to beneficial owners of the Bands, as more fully deem -bed herein, and M all notices, including any notice of redemption or
notice of conversion to another Interest Rate Period, shall be mailed only to Cede & Co. See "THE AUCTION RATE SECURITIES—Book-
Entry-Only System" herein.
This Official Statement describes certain terms of each Series of Bonds applicable while such Series bears fntereet at
Auction Rates. There ace significant changes in the terms of the Bonds while such Bonds accrue interest in other Interest
Rate Periods. This Official Statement is not intended to provide information with respect to any Series of Bands other then
Bonds that beer interest at Auction Rates.
The Bonds are limited obligations of the City of Newport Beach (the "City "), secured under the provisions of the Indenture and the
Loan Agreement, as described herein, and will be payable from Loan Repayments made by Hoag Hospital ender the Loan Agreement
and from certain funds held under the Indenture. The obligation of Hoag Hospital to make such payments a evidenced and secured by
Obligation No. 14 issued under the Master Indenture, described herein, whemunder the members of the obligated group (the "Obligated
Group'), in which currently only Hoag Hospital is a member, is obligated to make payments on Obligation No. 14 in amounts si f icient to
pay principal of and premium, if any, and interest on the Bonds when due.
THE BONDS ARE LIMITED OBLIGATIONS OF THE CITY PAYABLE SOLELY FROM PAYMENTS REQUIRED TO BE MADE BY
HOAG HOSPITAL PURSUANT TO THE LOAN AGREEMENT AND OBLIGATION NO. 14 ISSUED PURSUANT TO THE MASTER
INDENTURE. NEITHER THE STATE OF CALIFORNIA NOR THE CITY SHALL BE OBLIGATED 'PO PAY THE PRINCIPAL OR
TENDER PRICE OF THE BONDS, OR THE PREMIUM OR INTEREST THEREON, EXCEPT FROM THE FUNDS PROVIDED UNDER
THE LOAN AGREEMENT, OBLIGATION NO. 14 AND THE INDENTURE, AND NEITHER THE FAITH AND CREDIT NOR THE
TARING POWER OF THE CITY, THE STATE OF CALIFORNIA OR OF ANY P01MCAL SUBDIVISION THEREOF, IS PLEDGED
TO THE PAYMENT OF THE PRINCIPAL OR TENDER PRICE OF OR THE PREMIUM OR INTEREST ON THE BONDS. THE
ISSUANCE OF THE BONDS SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE CITY, THE STATE OF
CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR TO PLEDGE ANY FORM OF TAXATION OR TO MARE
ANY APPROPRIATION FOR THEIR PAYMENT:
The scheduled payment of the principal of and interest on the Bonds when due will be guaranteed under a municipal bond new issue
insurance policy (the " Policy") to be issued concurrently with the delivery of the Bonds by Financial Guaranty Insurance Company (the
"Insurer ").
FGIC =
This cover page contains certain information far quick reference only It ie not intended to be a summary of the security or terms of
the Bonds Investors should read the entire Official Statement to obtain information essential to the melting of an informed investment
decision.
The Bonds are offered when, as and if received by the Underwriter, subject to prior sale and to the approval of the validity of the Bonds
and certain legal matters by Orrick, Harrington & Satcliffe LLP, Bond Counsel, the approval of certain matters for the City by the City
Attorney, for Hoag Hospital by StradlingYocm Carlson & Reath, a Professional Corporation, and for the Underwriter by its counsel, Foley
& Lardner LLP, Chicago, Illinois. It is szpected that the Bonds in book entry form will be available for delivery to DTC in New York, New
York, on or about August 24, 2005.
Ciitlg coup
Date: August 12, 2005'
t For an explanation of the ratmgq see "RATINGS" het.
MATURITY SCHEDULE
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
(Auction Rate Securities)
$65,0004000 Series 2005A
Initial Interest
Length of Interest Auction Date Payment Date Final
Ini ial.&Cthm huball.Berl2d Payment Maw Date
September 2 13 days September 6 each Monday each Tuesday December 1, 2040
$65,000,000 Series 2005E
Each Series of Bonds will bear interest from the date of original delivery for the applicable initial period
set forth above at the applicable rate for that Series established prior to the date of delivery by the Underwriter.
Thereafter, each Series of Bonds will bear interest at the applicable Auction Rate for its respective Auction
Periods, until a conversion to another Interest Rate Period as described herein. Interest will be payable on
the first interest payment date set forth above and, thereafter, on the Business Day following the end of each
Auction Period for the applicable Series of Bonds.
Wells Fargo Bank, National Association well act as the Auction Agent for each Series of Bonds, and
Citigroup Global Markets Inc. will serve as the initial Broker- Dealer with respect to the Bonds.
_....1 to
Initial
Interest
Length of
Initial Auction Initial Period
Internet
nkyment DAte_
Auction Date
` �gj
Payment Date Final
fimleroft MBtMft Date
August 31 8 days
September 1
each Wednesday
each Thursday December 1, 2040
$70,000,000
Series 2005C
Initial
lnterert
Length of
Initial Auction lnihaLEkxiQd
Interest
Payment Date
Auction Date
Generally
Payment Date Final
Matm3ty Date
September 2 13 days
September 6
each Friday
each Monday December 1, 2040
Each Series of Bonds will bear interest from the date of original delivery for the applicable initial period
set forth above at the applicable rate for that Series established prior to the date of delivery by the Underwriter.
Thereafter, each Series of Bonds will bear interest at the applicable Auction Rate for its respective Auction
Periods, until a conversion to another Interest Rate Period as described herein. Interest will be payable on
the first interest payment date set forth above and, thereafter, on the Business Day following the end of each
Auction Period for the applicable Series of Bonds.
Wells Fargo Bank, National Association well act as the Auction Agent for each Series of Bonds, and
Citigroup Global Markets Inc. will serve as the initial Broker- Dealer with respect to the Bonds.
_....1 to
The information relating to the City contained herein under the headings "THE CITY" and
"LITIGATION —The City" has been furnished by the City. The information relating to the Insurer and the Policy
set forth heroin under the caption `BOND INSURANCE" and in APPENDIX G has been furnished by the Insurer.
Such information is believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be
construed as a representation by the City or the Underwriter. All other information contained herein has been
obtained from Hoag Hospital, DTC, the Insurer and other sources (other than the City) that are believed to be
reliable. Such other information is not guaranteed as to accuracy or completeness and is not to be relied upon or
construed as a promise or representation by the City or the Underwriter. The Underwriter has provided the
following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this
Official Statement in accordance with and as part of its responsibilities to investors under the federal securities laws
as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or
completeness of such information.
No dealer, broker, salesperson or other person has been authorized by the City, Hoag Hospital or the
Underwriter to give any information or to make any representations, other than those contained in this Official
Statement, and, if given or made, such information or representation 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 Bonds by any person in any jurisdiction in which it is unlawful for
such person to make such offer, solicitation or sale. The information and expressions of opinion herein arc subject
to change without notice, and neither the delivery of this Official Statement nor any statement nor any sale made
hereunder shall create under any circumstances any implication that there has been no change in the affairs of the
i City, Hoag Hospital, DTC or the Insurer since the date hereof. This Official Statement is submitted in connection
with the issuance of securities referred to herein and may not be used, in whole or in part, for any other purpose.
Other than with respect to information concerning the Insurer contained under the caption "BOND
INSURANCE" and APPENDIX G— "SPECIMEN OF BOND INSURANCE POLICY," none of the information in
this Official Statement has been supplied or verified by the Insurer and the Insurer makes no representation or
warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the
Bonds; or (iii) the tax- exempt status of the interest on the Bonds.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVER
ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CAUTIONARY STATEivffiNTS REGARDING
FORWARD - LOOKING STATEMENTS IN
THIS OFFICIAL STATEMENT
Certain statements included or incorporated by reference in this Official Statement constitute onward-
looking statements." Such statements generally are identifiable by the terminology used such as "plan," "expect,"
"estimate," "budget' or other similar words. Such forward - looking statements include but are not limited to certain
statements contained in the information under the captions " BONDHOLDERS' RISKS," and APPENDIX A—
"INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL PRESBYTERIAN AND AFFILIATES —
FACILITIES DESIGN AND CONSTRUCTION" and "— SELECTED UTILIZATION AND FINANCIAL
INFORMATION — Management's Discussion and Analysis of Financial Information" in this Official Statement. The
achievement of certain results or other expectations contained in such forward - looking statements involve known
and unknown, risks, uncertainties and other factors that may cause actual results, performance or achievements
described to be materially different from any future results, performance or achievements expressed or implied by
such forward - looking statements. Hoag Hospital does not plan to issue any updates or revisions to those forward -
looking statements if or when its expectations or events, conditions or circumstances on which such statements are
I based occur.
THIS PAGE IlV =ONALLY LEFT BLANK]
i
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5
4
0
i
•
I
TABLE OF CONTENTS
INTRODUCTORY STATEMENT .............................. ...............................
Purpose of the Official Statement .................... ...............................
Hoag Memorial Hospital Presbyterian and the Master Indenture ....
AuctionRate ................................................... ...............................
Security for the Bonds .................................... ...............................
Bond Insurance .......:.....:............................:.... ....:..........................
Plan of Financing ..................................:......... ...............................
THECITY ............................................ :....................................................
THE AUCTION RATE SECURITIES ........................ ...............................
Auction Rate Securities .....................:............. ...............................
Concerning the Auction Rate Securities .......... ...............................
Book - Entry-Only System .................... ........................... :...............
No Assurance Resazdins DTC Practices ......... ..................:............
Page
12
................ ............................... 12
.................. .............................13
.................. .............................14
.................. .............................16
DISCLAIMER....................................................................... ...............................
PLANOF FINANCE ............................................................. ...............................
General................................................. ...............................
TheProject ............................................ ...............................
ESTIMATED SOURCES AND USES OF FUNDS ...........................
CONTINUING DISCLOSURE .......................... ...............................
BONDHOLDERS' RISKS ................................. ...............................
General................................................. ...............................
Significant Risk Areas Summarized ....... ...............................
Nonprofit Health Care Environment ....... ...............................
Patient Service Revenues ....................... ...............................
Regulatory Environment ........................ ...............................
Business Relationships and Other Business Matters ..............
Tax - Exempt Status and Other Tax Matters ............................
Other Risk Factors ................................. ...............................
TAXMATTERS ................................................ ...............................
APPROVAL OF LEGALITY ............................. ...............................
INDEPENDENT AUDITORS ............................ ...............................
LITIGATION..................................................... ...............................
-i-
..................16
..................16
..................17
..................19
..................19
..................19
.................. 20
TABLE OF CONTENTS
(continued)
4i-
A I
Page
HoagHospital ........................................................................................... ...:...................:.......
41
TheCity ................................................................................................... ...............................
41
RATINGS............................................................................................................. .................:.............
41
UNDERWRITING................................................................................................ ...............................
42
MISCELLANEOUS.............................................................................................. ...............................
42
APPENDIX A — INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES .................................. ...............................
A -1
APPENDIX B — FINANCIAL STATEMENTS OF HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES .................................. ...............................
B -1
APPENDIX C — AUCTION PROCEDURES ................................................... ...............................
C -1
APPENDIX D — SUMMARY OF PRINCIPAL DOCUMENTS ....................... ...............................
D -1
APPENDIX E — FORM OF OPINION OF BOND COUNSEL....... ................... ...............................
E -1
APPENDIX F — FORM OF CONTINUING DISCLOSURE CERTIFICATE ... ...............................
F -1
APPENDIX G — SPECIMEN OF BOND INSURANCE POLICY .................... .........:.....................
G -1
4i-
A I
OFFICIAL STATEMENT-
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
(Auction Rate Securities)
$65,000,000 Series 2005A $65,000,000 Series 2005B $70,000,000 Series 2065C
INTRODUCTORY STATEMENT
The following introductory statement is subject in all respects to the more complete information
set forth in this Official Statement. All descriptions and summaries of documents referred to herein do
not purport to be comprehensive or definitive and are qualified in their entirety by reference to each such
document Terms used in this Official Statement and not otherwise. defined have the same meanings as in
the Indenture (as defined below). See APPENDIX D – "SUMMARY OF PRINCIPAL DOCUMENTS —
Definitions of Certain Terms."
Purpose of the Official Statement
This Official Statement, including the cover page, the inside cover page and the appendices
hereto, is provided to famish information in connection with the sale and delivery of the following Series
of Bonds issued by the City of Newport Beach,(the "City D: $65,000,000 aggregate principal amount of
the Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005A (the `Series A
Bonds', $65,000,000 aggregate principal amount of the Insured Revenue Bonds (Hoag Memorial
Hospital Presbyterian), Series 2005B (the "Series B Bonds'D and $70,000,000 aggregate principal amount
of the Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005C (the "Series C
Bonds'D. The Series A Bonds, the Series B Bonds and the Series C Bonds, collectively, are referred to
herein as the `Bonds" and each series as a "Series" of Bonds.
The Bonds will be issued pursuant to and secured by a bond indenture (the "Indenture'), dated as
of August 1, 2005, between the City and Wells Fargo Bank, National Association, as trustee (the
"Trustee "). The City will lend the proceeds of the Bonds to Hoag Hospital, which roan will be evidenced
by a Loan Agreement, dated as of August 1, 2005 (the "Loan Agreement', between the City and Hoag
Hospital.
Hoag Memorial Hospital Presbyterian and the Master Indenture
Hoag Memorial Hospital Presbyterian is a California nonprofit public benefit corporation which
owns and operates a general acute care hospital in Newport Beach, California (both the corporation and
the facility are referred to as "Hoag Hospital'). Hoag Hospital is licensed to operate a total of 409 general
j acute care beds. For a description of Hoag Hospital, its facilities and financial performance, see
APPENDIX A– "INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES."
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As of the date of the issuance -of the Bonds, Hoag Hospital is the only member of an Obligated
Group (the "Obligated Group'D established under the Master Indenture dated as of October 1, 1984,
between Hoag Hospital and Wells Fargo Bank, National Association, as successor master trustee
(the Master Trustee"). Other entities may become members of the Obligated Group (each, a "Member ")
in accordance with the procedures set forth in the Master Indenture. Each Member of the Obligated
Group is jointly and severally obligated to pay when due the principal of, premium, if any, and interest on
each Obligation issued under the Master Indenture, including Obligation No. 14 (as hereinafter defined),
which will evidence and secure the loan of the proceeds of the Bonds from the City to Hoag Hospital.
For more information about Hoag Hospital and its affiliates, see APPENDIX A —"INFORMATION
CONCERNING HOAG MEMORIAL HOSPITAL PRESBYTERIAN AND AFFILIATES —
GENERAL."
Auction Rate
Each Series of Bonds initially will bear interest at Auction Rates for successive seven -day
Auction Periods. Interest on the Bonds will be payable on the Business Day immediately following the
applicable Auction Period. While a Series of Bonds bears interest at an Auction Rate, such Bonds are
referred.to in this Official Statement as "Auction Rate Securities." The applicable Auction Rate for each
Series of Auction Rate Securities will generally be established from time to time pursuant to the Auction
Procedures described in an Auction Agent Agreement, dated as of August 1, 2005 (the "Auction Agent
Agreement'D, between the Trustee and Wells Fargo Bank, National Association, as auction agent (the
"Auction Agent' D, and in Appendix C hereto. Subject to the provisions of the Indenture, the Auction
Period for any Series of Auction Rate Securities may be changed to 35 days, and the Auction Date for any
Series of Auction Rate Securities may be changed to another day of the week. In addition, any Series of
Bonds may be converted to other Interest Rate Periods. See "THE AUCTION RATE SECURITIES"
herein. See also APPENDIX C - "AUCTION PROCEDURES" and APPENDIX D - "SUMMARY OF
PRINCIPAL DOCUMENTS- BOND INDENTURE."
Auction Rate Securities will not be subject to optional tender for purchase by the Holders thereof
(although they will be subject to mandatory tender upon conversion to a different Interest Rate Period,
provided certain conditions to conversion are satisfied as described herein). See `THE AUCTION RATE
SECURITIES — Auction Rate Securities —Converting Interest Rate Periods and Mandatory Tender for
Purchase" herein.
Citigroup Global Markets Inc. will serve as the initial Broker - Dealer for the Auction Rate
I Securities.
Security for the Bonds
Each Series of Bonds will be payable from payments made by Hoag Hospital under the Loan
Agreement (the "Loan Repayments', from payments made by Hoag Hospital on Obligation No. 14
(described below) and from certain funds held under the Indenture.
In order to secure the obligation of Hoag Hospital to make payments under the Loan Agreement,
' Hoag Hospital will deliver-to the Trustee its Obligation No. 14 ( "Obligation No. 14') issued pursuant to
the Master Indenture, as supplemented and amended by the Supplemental Master Indenture for Obligation
No. 14, dated as of August 1, 2005, between Hoag Hospital and the Master Trustee ( "Supplement No.
14 "). Pursuant to the Master Indenture, Hoag Hospital and any future Members of the Obligated Group
agree to make payments on Obligation No. 14 in amounts sufficient to pay, when due, the principal of and
premium, if any, and interest on each Series of Bonds. Each Member of the Obligated Group is jointly
and severally obligated to make payments on all Obligations issued under the Master Indenture, including
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Obligation No. 14. Obligation No. 14 will entitle the Trustee, as the holder thereof, to the benefit of the
covenants, restrictions and other obligations imposed upon the Obligated Group under the Master
Indenture. Currently, Hoag Hospital is the only Member of the Obligated Group.
Bond Insurance
.. The scheduled payment of the principal of and interest on the Bonds when due will be guaranteed
{ under a municipal new issue insurance policy (the "Policy'D to be issued concurrently with the delivery of
the Bonds by Financial Guaranty Insurance Company (the "Insurer").
Plan of Financing
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Hoag Hospital will use the proceeds of the Bonds to (a) finance or reimburse Hoag Hospital for
certain capital expenditures at facilities owned or operated by Hoag Hospital (the "Project "); and (b) pay
certain of the costs of issuing the Bonds, including the premium for the Policy. For a description of the
2005 Financing Plan, see "PLAN OF FINANCE" herein.
THE CITY
The City of Newport Beach, California was incorporated in 1906. Ile operates under a
freeholder's charter providing for a Council- Manager form of government with a Council- member City
Council. Councilpersons are elected by district for four -year terms, and .the Mayor is elected by the
Council from among its members. On February 13, 1994, the City Council adopted the "Health Care
Facility Revenue Bond Ordinance" (the 'law") establishing a method and powers and procedures
whereby revenue bonds may be issued for the purpose of providing financing to participating health
institutions for specified purposes.
THE AUCTION RATE SECURITIES
The following is a summary of certain provisions of the Bonds. Reference is made to the Bonds
for the complete text thereof and to the Indenture for all of the provisions relating to each Series of Bonds.
The discussion herein is qualified by such reference.
This Official Statement describes certain terms of each Series of Bonds applicable while
such Series are Auction Rate Securities. There are significant changes in the terms of the Bonds
while such Bonds accrue interest in another Interest Rate Period. This Official Statement is not
intended to provide information with respect to any Series of Bonds other than Bonds that are
Auction Rate Securities.
Auction Rate Securities
General. The Series A Bonds, the Series B Bonds and the Series C Bonds initially will be issued
as Auction Rate Securities in the aggregate principal amount of $65,000,000, $65,000,000 and
$70,000,000, respectively. The Bonds will be dated the date of their initial authentication and delivery
(the "Closing Date') and will mature on the maturity date set forth on the inside cover page of this
Official Statement The Auction Rates for the Auction Periods beginning on the Closing Date shall be
determined by the Underwriter for the Auction Rate Securities. Thereafter, the Auction Rate for the
Auction Rate Securities will be determined for generally successive seven -day Auction Periods through
the implementation of the Auction Procedures summarized under APPENDIX C — "AUCTION
PROCEDURES," unless the Auction Periods for the Auction Rate Securities of any Series is changed to a
35 -day Auction Period or a Series of Auction Rate Securities is converted to another Interest Rate Period,
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as provided in the Indenture. Auction Rate Securities will be issued in fully registered form without
coupons in denominations of $25,000, subject to the book -entry procedures described herein.
While the Auction Rate Securities are book -entry bonds, as described below, payment of the
principal and tender price of, premium, if any, and interest on any Auction Rate Securities will be made
by wire transfer to The Depository Trust Company, New York New York ( "DTC ), to the account of
Cede & Co. The interest on the Auction Rate Securities will be payable on the Business Day immediately
following each Auction Period for such Auction Rate Securities (an "ARS Interest Payment Date'). In
the event the Auction Rate Securities are no longer book -entry bonds, principal and tender price of and
premium, if any, on the Auction Rate Securities will be payable at the designated corporate trust office of
the Trustee, and interest payments on the Auction Rate Securities are to be made by check mailed on the
date due by the Trustee to the registered owners of such Auction Rate Securities as of the ARS Record
Date (as defined below herein); provided, however, that, if a Holder of $1,000,000 or more aggregate
outstanding principal amount of the Auction Rate Securities gives the Trustee written notice of such
holding accompanied by sufficient wire transfer instructions, the payments of interest on the Auction Rate
Securities (other than the final payment of principal thereof) will be payable by wire transfer of
immediately available funds on the date due. The "ARS Record Date" with respect to the Auction Rate
Securities will be the second business day next preceding each ARS Interest Payment Date.
Transfer and Payment. In the event the book -entry system is discontinued, the following
provisions will apply. The Auction Rate Securities may be transferred by the registered owner thereof or
such owner's attomey or legal representative duly authorized in writing, upon presentation thereof
accompanied by a written instrument or instruments of transfer or authorization for exchange, in form and
with guaranty of signature satisfactory to the Trustee, duly executed by the registered owner or by such
owner's duly authorized attorney or legal representative. Any Auction Rate Security may be exchanged
at the designated corporate trust office of the Trustee for a like aggregate principal amount of Bonds of
the same Series and maturity and of other authorized denominations. The Trustee and the City may
charge a fee covering taxes, fees or other governmental charges required to be paid in connection with
any exchange or registration of transfer of any Auction Rate Security, except in the case of issuance of an
Auction Rate Security for the unredeemed portion of an Auction Rate Security surrendered for
redemption. Neither the City nor the Trustee will be required to register the transfer of or exchange of
any Auction Rate Security (i) after notice calling such Auction Rate Security or portion thereof for
redemption has been mailed or (ii) during the 15 -day period next preceding the mailing of a notice of
redemption of Auction Rate Securities. For a description of the registration of transfer procedures while
the Auction Rate Securities are in the book - entry-only system, see "THE AUCTION RATE
SECURITIES —Book -Entry-Only System" herein.
Applicable ARS Rate. Except for the Auction Period beginning on the Closing Date and except
as otherwise described herein, each Series of Auction Rate Securities will bear interest at rates (the
"Applicable ARS Rate') established pursuant to the Auction Procedures described in APPENDIX C —
"AUCTION PROCEDURES." An "ARS Interest Period" begins on and includes an ARS Interest
Payment Date and ends on but excludes the next succeeding ARS Interest Payment Date; the fast ARS
Interest Period commences on the Closing Date. The Applicable ARS Rate will not exceed the Maximum
Lawful Rate. Interest on the Auction Rate Securities will be computed on the basis of a 360 -day year for
the actual number of days elapsed during the applicable ARS Interest Period. In certain circumstances,
however, the Auction Procedures may be canceled or suspended For example, the Auction Agent will
suspend the Auction Procedures upon the occurrence of a default by the City and the Insurer in the
payment of the principal of or interest on the Auction Rate Securities. The Applicable ARS Rate for each
Auction Period for the Auction Rate Securities commencing after the occurrence of such default, unless
such default is cured or waived at least two, Business Days prior to commencement of any subsequent
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Auction Period, will be 15% per annum; provided, that in no event shall it exceed the Maximum Lawful
Rate.
The Auction Agent Agreement also requires that no further Auctions be held if the ownership of
the Auction Rate Securities is no longer maintained in the book -entry system. See "THE AUCTION
RATE SECURITIES—Auction Rate Securities" herein and APPENDIX C — "AUCTION
PROCEDURES."
Converting Interest Rate Periods and Mandatory Tender for Purchase. With the consent of the
Insurer, Hoag Hospital may elect to convert any Series of Auction Rate Securities to other Interest Rate
Periods effective as of an ARS Interest Payment Date immediately following an Auction Period. Upon
isuch conversion, the Bonds of such Series may accrue interest in a different Interest Rate Period (as such
Interest Rate Periods are defined in the Indenture). In order to effect such conversion, Hoag Hospital
I shall provide a written direction to the City, the Trustee; the Auction Agent and the Broker - Dealer for
such Series of its election to convert the Auction Rate Securities of such Series to another Interest Rate
Period. The Trustee shall provide notice of such conversion to the Holders of such Auction Rate
Securities not less than 30 days prior to the proposed effective date of such conversion. The Auction Rate
Securities of such Series will be subject to mandatory tender for purchase on the first day of each Interest
J Rate Period subject to the terms of the Indenture; provided, however, in the case of a failed conversion of
Auction Rate Securities there will be no mandatory purchase and the Auction Rate Securities shall bear
interest.at 15% (but in no event shall it exceed the Maximum Lawful Rate) until the next succeeding
Auction Period, then at the Applicable ARS Rate. The tender price shall be equal to the principal amount
i thereof tendered for purchase, without premium, plus accrued interest from the immediately preceding
Interest Accrual Date to the date of such tender. See APPENDIX D — "SUMMARY OF PRINCIPAL
DOCUMENTS."
Concerning the Auction Rate Securities
The beneficial owner of an Auction Rate Security may sell, transfer or dispose of its Auction Rate
Security only pursuant to a Bid or Sell Order in accordance with the Auction Procedures or through a
Broker- Dealer for the applicable Series of Auction Rate Securities. See APPENDIX C — "AUCTION
PROCEDURES." The ability to sell an Auction Rate Security in an Auction may be adversely
affected if there are not sufficient buyers wilting to purchase all of the Auction Rate Securities at an
interest rate equal to or less than the ARS Maximum Rate. The Broker - Dealer has advised the City
and Hoag Hospital that they intend to make a market in the Auction Rate Securities between Auctions;
however, the Broker - Dealer is not obligated to make such market, and no assurance can be given that
secondary markets therefor will develop.
The Auction Rate Securities will not be supported by a liquidity facility. If, for example, an
Existing Holder were to submit a Sell Order or a Bid Order subject to an interest rate that is determined to
be greater than the ARS Maximum Rate for such Auction Date and Sufficient Clearing Bids are not
obtained on such Auction Date, such Existing Holder may not have its Auction Rate Securities purchased
through the Auction Procedures on such Auction Date. In such event, no assurance can be given that the
Broker - Dealer will purchase or will otherwise be able to locate a purchaser or that Sufficient Clearing
Bids will be obtained on any succeeding Auction Date.
A beneficial owner of Auction Rate Securities may not be able to sell some or all of its Auction
Rate Securities at an Auction if the Auction fails; that is, if there are more Auction Rate Securities offered
for sale than there are buyers for those Auction Rate Securities. Also, if a beneficial owner of Auction
Rate Securities places Hold Orders (orders to retain Auction Rate Securities) at an Auction only at a
specified rate and that specified rate exceeds the rate set at the Auction, the beneficial owner will not
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retain its Auction Rate Securities. If a beneficial owner of Auction Rate Securities submits a Hold Order
for Auction Rate Securities without specifying a minimum rate and the Auction sets a below - market rate,
the beneficial owner may receive a below - market rate of return on its Auction Rate Securities. See "THE
AUCTION RATE SECURITIES -- Auction Rate Securities."
As noted above, if there are more Auction Rate Securities offered for sale than there are buyers
for those Auction Rate Securities in any Auction, the Auction will fail and a beneficial owner of Auction
Rate Securities may not be able to sell some or all of its Auction Rate Securities at that time. The relative
buying and selling interest of market participants in Auction Rate Securities and in the auction rate
securities market, as a whole, will vary over time, and such variations may be affected by, among other
things, news relating to the City, the Insurer or Hoag Hospital; the attractiveness of alternative
investments, the perceived risk of owning the security (whether related to credit, liquidity or any other
risk), the tax treatment accorded the instruments, the accounting treatment accorded auction rate
securities, including recent clarifications of generally accepted accounting principles in the United States
of America relating to the treatment of auction rate securities, reactions to regulatory actions or press
reports, financial reporting cycles and market sentiment generally. Shifts of demand in response to any
one or simultaneous particular events cannot be predicted and may be short -lived or exist for longer
- periods.
A Broker - Dealer may submit orders in Auctions for its own account. Any Broker - Dealer
submitting an order for its own account in any Auction will have an advantage over other bidders in that it
would have knowledge of other orders placed through it in that Auction (but it would not have knowledge
of orders submitted by other Broker - Dealers, if any). As a result of the Broker - Dealer bidding, the
Auction clearing rate may be higher or lower than the rate that would have prevailed if the Broker - Dealer
had not bid. A Broker - Dealer may also bid in order to prevent what would otherwise be a failed Auction,
an "all hold" Auction (if the Broker - Dealer owns securities in its own account) or an Auction clearing at a
rate that the Broker - Dealer believes does not reflect the market for such securities at the time of the
Auction. Broker - Dealers may, but are not obligated to, advise Holders of the Auction Rate Securities that
the rate that will apply in an "all hold" Auction is often a lower rate than would apply if Holders submit
bids, and such advice, if given, may facilitate the submission of bids by existing Holders that would avoid
the occurrence of an "all hold" Auction. A Broker - Dealer may, but is not obligated to, encourage
additional or revised investor bidding in order to prevent an "all-hold" Auction.
The Underwriter has advised the City and Hoag Hospital that the Underwriter and various other
broker - dealers and other firms that participate in the auction rate securities mar ket received letters from
the staff of the Securities and Exchange Commission (the "SEC's in the spring of 2004. The letters
requested that each of these firms voluntarily conduct an investigation regarding its respective practices
and procedures in that market. Pursuant to these requests, the Underwriter conducted its own voluntary
review and reported its findings to the SEC staff. At the SEC staff s request, the Underwriter is engaging
in discussions with the SEC staff concerning its inquiry. None of the Underwriter, the City or Hoag
Hospital can predict the ultimate outcome of the inquiry or how that outcome will affect the market for
the Auction Rate Securities or the Auctions.
Book- Entry-Only System
The Bonds, when issued, will be registered in the name of Cede & Co., DTC's partnership
nominee. When the Bonds are issued, ownership interests will be available to purchasers only through a
book -entry system maintained by DTC (the "Book- Entry-Only System"). One fully- registered bond
certificate will be issued for the entire aggregate principal amount of each Series of Bonds and will be
deposited with DTC.
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DTC and its Parli*ants. DTC is a limited- purpose trust company organized under the New
York Bank 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 securities that its
participants (the "Direct Participants') deposit with DTC. DTC also facilitates the settlement among
Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through
electronic computerized book- entry-only changes in DTC Participants' accounts, thereby eliminating 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, in turn, is owned by a number of its Direct Participants and Members of the National
Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, (the "NSCC," .. GSCC," "MBSCC," and
"EMCC," also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc. (the `NYSE "),
the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others, such as both U.S. and non -U.S. securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial relationship with a Direct DTC
Participant, either directly or indirectly (the "Indirect Participants" and, together with the Direct
Participants, the `Participants'). DTC has S &P's highest rating: AAA. The rules applicable to DTC and
its Participants are on file with the Securities and Exchange Commission. More information about DTC
can be found at www.dtcc.com.
Purchase of Ownership Interests.. Purchases of the Bonds under the DTC system must be made
by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The
ownership interest of each actual purchaser of each Bond (a "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, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through whom such beneficial owners entered into the transaction. Transfers of
ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and
Indirect Participants acting on behalf of beneficial owners. Beneficial owners will not receive certificates
representing their ownership interests in the Bonds, except as specifically provided in the Indenture in the
event that use of the book - entry -only system is discontinued.
. Payments of Principal; Tender Price, Premiwn, if any, and Interest. Redemption proceeds,
principal, tender price and interest payments on the Bonds will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts, upon DTC's receipt of fiords and corresponding detail information from the
Trustee on the payable date in accordance with their respective holdings shown on DTC's records, unless
DTC has reason to believe it will not receive payment on such date. Payments by Direct and Indirect
Participants to beneficial owners will be governed by standing instructions and customary practices, as is
the case with municipal securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of DTC, the Trustee, Hoag
Hospital or the City, subject to any statutory or regulatory requirements as may be in effect from time to
time. Payment of redemption proceeds, principal, tender price and interest payments to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility of
the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the beneficial owners shall be the responsibility of Direct and Indirect
Participants.
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Notices. Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial owners of Bonds may wish to take certain
steps to augment transmission to them of notices of significant events with respect to the Bonds, such as
redemptions, tenders, defaults, and proposed amendments to the bond documents. Beneficial owners of
the Bonds may wish to ascertain that the nominee bolding the Bonds for their benefit has agreed to obtain
and transmit notices to beneficial owners, or in the alternative, beneficial owners may wish to provide
their names and addresses to the Trustee and request that copies of the notices be provided directly to
them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
the Bonds unless authorized by a Direct Participant in accordance with DTC's procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the City as soon as practicable after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
NONE OF THE CITY, THE TRUSTEE OR HOAG HOSPITAL WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO SUCH PARTICIPANTS OR THE PERSONS FOR WHOM
THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENT TO, OR THE PROVIDING OF
NOTICE FOR, SUCH PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS
NOMINEES.
Transfers of Bonds. To facilitate subsequent transfers, all Bonds deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such
other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with
DTC and their registration in the name. of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of the Bonds; DTC's
records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,
which may or may not be the beneficial owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
i None of the City, Hoag Hospital, the Underwriter or the Trustee will have any responsibility or
obligation, legal or otherwise, to any party other than to the registered owners of any Bond on the
j registration books of the Trustee.
Discontinuance of Book Entry -0nly System In the event (i) DTC determines not to continue to
act as securities depository for the Bonds or (ii) Hoag Hospital, with the consent of the City and the
Trustee, determines in accordance with the terms of the Indenture that (a) DTC is incapable of
discharging its duties or (b) it is in the best interests of the Holders of the Bonds not to continue the Book-
Entry-Only System or that interests of the beneficial owners of the Bonds might be adversely affected if
the Book - Entry-Only System is continued, then the City will discontinue the Book- Entry-Only system
with DTC. Upon the occurrence of the event described in (i) or (ii)(a) above, Hoag Hospital will attempt
to. locate another qualified securities depository. If Hoag Hospital fails to identify another qualified
securities depository to replace DTC or makes the determination noted in (ii)(b) above, the Auction Rate
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Securities will be converted to accrue interest in a different Interest Rate Period, and the Trustee will
authenticate and deliver the Bonds in accordance with the Indenture.
No Assurance Regarding DTC Practices
The foregoing information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that Hoag Hospital believes to be reliable, but Hoag Hospital, the City, the
Underwriter and the Trustee do not take any responsibility for the accuracy thereof.
So long as Cede & Co. is the registered owner of the Bonds as nominee of DTC, references
herein to the Holders or registered owners of the Bonds will mean Cede & Co. and will not mean the
beneficial owners of the Bonds.
None of the City, Hoag Hospital, the Trustee, the Auction Agent or the Underwriter will have any
responsibility or obligation to the Participants, DTC or the persons for whom they act with respect to
(i) the accuracy of any records maintained by DTC or by any Direct or Indirect Participant of DTC,
(ii) payments or the providing of notice to Direct Participants, the Indirect Participants or the beneficial
owners, (iii) the selection by DTC or by any Direct or Indirect Participant of any beneficial owner to
receive payment in the event of a partial redemption of the Bonds or (iv) any other action taken by DTC
or its partnership nominee as owner of the Bonds.
Redemption
Optional Redemption. The Auction Rate Securities are subject to redemption prior to their stated
maturity, at the option of the City (which option shall be exercised upon request of Hoag Hospital), in
whole or in part, on any ARS Interest Payment Date for such Series at a redemption price equal to the
principal amount of Auction Rate Securities called for redemption, plus accrued interest to the date fixed
for redemption, without premium.
Extraordinary Optional Redemption. The Bonds are subject to extraordinary optional
redemption prior to their stated maturity in whole or in part at any time in the event of any damage to or
destruction or condemnation of any part of Hoag Hospital's facilities (or .the facilities of any future
additional Members) to the extent that the proceeds of any hazard insurance or condemnation award
relating thereto are not applied to the repair, reconstruction or restoration of such facilities and Hoag
Hospital elects to use such unapplied proceeds for an optional redemption. If called for redemption prior
to maturity as described in this paragraph, the Bonds may be redeemed at a redemption price equal to the
principal amount of each such Bond to be redeemed, without premium plus accrued interest thereon to
the redemption date. -
Optional Redemption in the Event of a Change in Law. The Bonds are subject to optional
redemption in whole at any time at a redemption price equal to the principal amount thereof, without
premium, plus accrued interest to the redemption date, if as a result of any change in the Constitution of
the United States of America or any state, or legislative or administrative action or inaction by the United
States of America or any state, or any agency or political subdivision thereof, or by reason of any judicial
decisions there is a good faith determination by any Member that (a) the Master Indenture has become
void or unenforceable or impossible to perform, or (b) unreasonable burdens or excessive liabilities have
been imposed on such Member, including without limitation, federal, state or other ad valorem property,
income or other taxes being then imposed which were not being imposed on the date of issuance of the
Bonds.
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Mandatory Redemptiom The Series A Bonds are also subject to redemption prior to their stated
maturity in part, by lot, from Sinking Account Payments, on any December 1, on or after December 1,
2016, at the principal amount thereof and interest accrued thereon to the date fixed for redemption,
without premium, as follows:
Redemption Date
Sinking Account
Redemption Date
Sinking Account
(December 1)
Payment
(December 1)
Payment
2016
$1,850,000
2028
$2,550,000
2017
1,900,000
2029
2,625,000
2018
1,950,000
2030
2,700,000
2019
2,000,000
2031
2,750,000
2020
2,025,000
2032
2,850,000
2021
2,125,000
2033
2,925,000
2022
2,175,000
2034
3,000,000
2023
2,225,000
2035
3,075,000
2024
2,300,000
2036
3,175,000
2025
2,325,000
2037
3,250,000
2026
2,425,000
2038
3 ,350,000
2027
2,475,000
2039
3,450,000
2040*
3,525,000
* Final Maturity
The Series B Bonds are also subject to redemption prior to their stated maturity in part, by lot,
from Sinking Account Payments, on any December 1, on or after December 1, 2016, at the principal
amount thereof and interest accrued thereon to the date fixed for redemption, without premium, as
follows:
Redemption Date
Sinking Account
Redemption Date
Sinking Account
(December 1)
i
Payment
(December 1)
Payment
2016
$1,850,000
2028
$2,550,000
2017
1,900,000
2029
2,625,000
2018
1,950,000
2030
2,700,000
2019
2,000,000
2031
2,750,000
2020
2,025,000
2032
2,850,000
2021
2,125,000
2033
2,925,000
2022
2,175,000
2034
3,000,000
2023
2,225,000
2035
3,075,000
2024
2,300,000
2036
3,175,000
I 2025
2,325,000
2037
3,250,000
2026
2,425,000
2038
3,350,000
2027
2,475,000
2039
3,450,000
2040*
3,525,000
* Final Maturity
10
to
The Series C Bonds are also subject to redemption prior to their stated maturity in part, by lot,
from Sinking Account Payments, on any December 1, on or after December 1, 2016, at the principal
amount thereof and interest accrued thereon to the date fixed for redemption, without premium, as
follows:
Redemption Date
Sinking Account
Redemption Date
Sinking Account
(December 1)
Payment
(December 1)
Payment
2016
$1,975,000
2028
2,750,000
2017
2,025,000
2029
2,825,000
2018
2,100,000
2030
2,900,000
2019
2,150,000
2031
2,975,000
2020
2,200,000
2032
3,050,000
2021
2,250,000
2033
3,150,ODO
2022
2,325,000
2034
3,250,000
2023
2,425,000
2035
3,350,000
2024
2,450,000
2036
3,375,000
2025
2,525,000
2037
3,525,000
2026
2,600,000
2038
3,600,000
2027
2,700,000
2039
3,700,000
2040'
3,825,000
" Final Maturity
Notwithstanding the foregoing, if the scheduled redemption date for any Auction Rate Security is
not an ARS Interest Payment Date (other than the final maturity), redemption of Auction Rate Securities
will occur on the ARS Interest Payment Date immediately following.such scheduled redemption date.
Notice of Redemption of the Auction Rote Securities. Notice of redemption will be mailed by
the Trustee not less than 25 nor more than 60 days prior to the redemption date, to the respective Holders
of any Auction Rate Securities designated for redemption at their addresses appearing on the bond
registration books of the Trustee, to the Insurer, the Auction Agent, the Broker - Dealer and to one or more
securities information services specified by Hoag Hospital.
Failure by the Trustee to give notice to the Insurer, the Auction Agent, the Broker - Dealer or any
one or more of the securities information services or securities depositories or the insufficiency of any
such notice shall not affect the sufficiency of the proceedings for redemption. Failure by the Trustee to
mail notice of redemption as described to any one or more of the respective Holders of any Auction Rate
Securities designated for redemption shall not affect the sufficiency of the proceedings for redemption
with respect to the Holders to whom such notice was mailed
In the event any of the Bonds are called for redemption, the Trustee will give notice of the
redemption of such Bonds, which notice must Q) specify the Bonds to be redeemed, the Series
designation, the redemption date, the redemption price, and the place or places of redemption, the
maturity, CUSIP numbers, if any, and, if less than all of the Bonds are to be redeemed, the portions of the
principal amount thereof to be redeemed, and (ii) state that, on said date, there will become due and
payable on each of said Bonds the redemption price thereof or of said specified portion of the principal
amount thereof in the case of a Bond to be redeemed in part ouly, together with interest accrued thereon
to the redemption date, and that from and after such redemption date interest thereon shall cease to
accrue, and shall require that such Bonds be then surrendered. Such notice may set forth any additional
information relating to such redemption, including the fact that redemption is conditional upon receipt by
the Trustee of sufficient funds.
11
5
i
Any redemption notice may be rescinded by written notice from Hoag Hospital to the Trustee at
least five Business Days prior to the date specified for such redemption. The Trustee shall give notice of
such rescission in the same manner as for the notice of redemption.
As of the date of redemption, interest on the Auction Rate Securities so called for redemption
shall cease to accrue from and after the date fixed for redemption thereof, if, on the date fixed-for
redemption, sufficient moneys for the redemption of such Auction Rate Securities, together with interest
to the date fixed for redemption, are held by the Trustee for such purposes. Said Auction Rate Securities
shall cease to be entitled to any benefit or security under the Indenture after the date of redemption, and
Holders of said Auction Rate Securities shall have no rights in respect thereof except to receive payment
of the Redemption Price plus accrued interest to the date fixed for redemption from funds held by the
Trustee for such payment.
Redwy;don of Portion of Bonds The Bonds will be redeemed only in Authorized
Denominations. If less than all of the Bonds of a Series are called for redemption, the Trustee will select
the Bonds of such Series or portions thereof by lot, and the remaining Bonds of a Series that have not
been so called for redemption will be in Authorized Denominations.
SO LONG AS THE ONLY OWNER OF THE BONDS IS DTC, SUCH SELECTION WILL,
HOWEVER, BE MADE BY DTC. If a portion of a Bond is called for redemption, a new Bond in the
principal amount equal to the unredeemed portion thereof will be issued to the Holder upon surrender
thereof. .
SECURITY FOR THE BONDS
General
In the Loan Agreement, Hoag Hospital agrees to make the Loan Repayments to the Trustee,
which payments, in the aggregate, will be in amounts sufficient for the payment in full of all amounts
payable with respect to each Series of Bonds, including the total interest payable on each Series of Bonds
to the date of maturity of such Bonds or earlier redemption, the principal amount of such Bonds, any
redemption premiums, and certain other fees and expenses (the "Additional Payments'), less any amounts
available for such payment as provided in the Indenture. Each Series of Bonds is also payable from
payments made on Obligation No. 14, proceeds of such Series of Bonds, investment earnings on proceeds
of the Bonds, amounts on deposit under the Indenture and proceeds of insurance or condemnation awards,
each in the manner and to the extent set forth in the Indenture.
As security for its obligation to make the Loan Repayments, Hoag Hospital, concurrently with the
issuance of the Bonds will issue its Obligation No. 14 to the Trustee pursuant to which Hoag Hospital and
any future Members of the Obligated Group agree to make payments to the Trustee in amounts sufficient
to pay, when due, the principal of and premium, if any, and interest on the Bonds. As of the date of
issuance and delivery of the Bonds, Hoag Hospital is the only Member of the Obligated Group under the
Master Indenture. Each Member, if any, additional Members are added, is jointly and severally liable for
payment of the Obligations issued under the Master Indenture, including Obligation No. 14. See
"SECURITY FOR THE BONDS —The Master Indenture" below.
There is no debt service reserve fundfor the Bonds.
12
The Master Indenture
The Master Indenture includes covenants that require Members of the Obligated Group to restrict
i certain actions, including incurring Additional Indebtedness: In determining whether Hoag Hospital and
future Members of the Obligated Group have satisfied such covenants and tests, the Master Indenture
requires the Obligated Group to combine all Members' income and assets at any point of calculation,
j including any other future Members of the Obligated Group, in determining whether such covenants and
tests are satisfied under the Master Indenture. See APPENDIX D — "SUMMARY OF PRINCIPAL
DOCUMENTS— MASTER INDENTURE — Membership in the Obligated Group."
Unsecured Debt Obligations issued under the Master Indenture are not secured by a lien on real
or personal property (including revenues) of any Member, including Hoag Hospital. Accordingly, holders
of Obligations would be unsecured creditors in any bankruptcy or insolvency proceeding involving Hoag
Hospital or any other future Member of the Obligated Group.
CovenantAgainstLiens. Pursuant to the Master Indenture, each Member of the Obligated Group
agrees that it will not create, assume or suffer to be created or permit the existence of any Lien upon any
j of its Property, except for Permitted Liens.
Permitted Liens include Liens on Property, Plant and Equipment of the Obligated Group,
including Liens which may be granted to secure additional Obligations and other Indebtedness, provided
that the Current Value of the Property, Plant and Equipment that is encumbered is not more than 25% of
the Current Value of all Property, Plant and Equipment. See the definition of "Permitted Liens" in
APPENDIX D — "SUMMARY OF PRINCIPAL DOCUMENTS — Definitions of Certain Terms" and"-- MASTER INDENTURE— Particular Covenants of Each Member of the Obligated Group — Limitation on
Creation of Liens — Restrictions on Encumbering Revenues."
Additional Indebtedness. Additional Indebtedness on a parity with Obligations issued under the
Master Indenture may be issued by Hoag Hospital or any other Member for the purposes, upon the terms
and subject to the conditions provided in the Master Indenture. Each Obligation will be the full and
i unlimited obligation of the issuing Member and each Member will jointly and severally guarantee the
payment of any and all amounts payable under the Obligation. Subject to the conditions therein, the
Master Indenture also permits Hoag Hospital and any other Member to incur secured and unsecured
indebtedness in addition to Obligations and to enter into Guarantees. See APPENDIX D — "SUMMARY
OF PRINCIPAL DOCUMENTS" and "— MASTER INDENTURE — Particular Covenants of Each
Member of the Obligated Group."
j
As of May 33, 2005, the aggregate principal amount of Obligations previously issued and
outstanding under the Master Indenture was $316 million (with the Master Indenture obligation securing a
standby liquidity facility relating to existing bonds secured by a separate Master Indenture obligation only
counted one .time). See APPENDIX A — "INFORMATION CONCERNING HOAG MEMORIAL
HOSPITAL PRESBYTERIAN AND AFFILIATES — SELECTED UTILIZATION AND FINANCIAL
INFORMATION -- Capitalization."
Additional Covenants. Hoag Hospital has agreed in Supplement No. 14 to comply with certain
financial covenants in addition to the financial covenants contained in the Master Indenture described
above. These additional financial covenants are for the sole benefit of the Insurer and may be enforced,
waived or modified at any time at the Insurer's sole discretion, so long as the Insurer is not in default of
its payment obligations under the Policy (as defined below) without the approval of the Master_ Trustee or
the bolder of any Obligation. See APPENDIX D — "SUMMARY OF PRINCIPAL DOCUMENTS- -
SUPPLEMENT NO. 14 —Bond Insurer Covenants."
13
Release of Obligation Na IA Under the circumstances described in the Indenture, the Trustee is
required to exchange Obligation No. 14 for a note or similar obligation (the "Replacement Obligation ") of
a credit group that could be financially and operationally different from the Obligated Group, and the new
credit group could have substantial debt outstanding that would rank on a parity with the Replacement
Obligation. Such exchange could adversely affect the market price for and marketability of the Bonds.
For a summary of the conditions that must be satisfied before a Replacement Obligation could be
exchanged for Obligation No. 14, see APPENDIX D — "SUMMARY OF PRINCIPAL DOCUMENTS —
BOND INDENTURE—Replacement of Obligation No. 14."
Security and Enforceability
Enforceability of the Master Indenture, the Loan Agreement and Obligation Na I4 The state
of the insolvency, fraudulent conveyance and bankruptcy laws relating to the enforceability of guaranties
or obligations issued by one corporation in favor of the creditors of another or the obligations of an
Obligated Group Member to make debt service payments on behalf of an Obligated Group Member is
unsettled, and the ability to enforce the Master Indenture and the Obligations against any Obligated Group
Member that would be rendered insolvent thereby could be subject to challenge. In particular, such
obligations may be voidable under the Federal Bankruptcy Code or applicable state fraudulent
conveyance laws if the obligation is incurred without "fair" and/or "fairly equivalent' ' consideration to the
obligor and if the incurrence of the obligation thereby renders the Obligated Group Member insolvent.
The standards for determining the fairness of consideration and the manner of determining insolvency are
not clear and may vary under the Federal Bankruptcy Code, state fraudulent conveyance statutes and
applicable cases.
The joint and several obligation described herein of each Member of the Obligated Group to pay
debt service on Obligation No. 14 may not be enforceable under any of the following circumstances:
(i) to the extent payments on Obligation No. 14 are requested to be made from
assets of a Member (if any is added in the future) other than Hoag Hospital which are donor-
restricted or which are subject to a direct, express or charitable trust that does not permit the use
of such assets for such payments;
(ii) if the purpose of the debt created and evidenced by Obligation No. 14 is not
consistent with the charitable purposes of the Member (other am Hoag Hospital) from which
such payment is requested or required, or if the debt was incurred or issued for the benefit of an
entity other than a nonprofit corporation that is exempt from federal income taxes under sections
501(a) and 501 (c)(3) of the Internal Revenue Code of 1986, as amended (the "Code ") and is not a
"private foundation" as defined in section 509(a) of the Code;
(iii) to the extent payments on Obligation No. 14 would result in the cessation or
discontinuation of any material portion of the health care or related services previously provided
by such Member (other than Hoag Hospital); or
(iv) if and to the extent payments are requested to be made pursuant to any loan
violating applicable usury laws.
These limitations on the enforceability of the joint and several obligations of the Members of the
Obligated Group on Obligation No. 14 also apply to their obligations on all Obligations. if the obligation
of a particular Member of the Obligated Group to make payment on an Obligation is not enforceable and
payment is not made on such Obligation when due in full, then Events of Default will arise under the
Master Indenture.
14
t.....I. ... .. of
In addition, common law authority and authority under state statutes exists for the ability of
courts in such states to terminate the existence of a nonprofit corporation or undertake supervision of its
affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its
stated charitable purposes. Such court action may arise on the court's own motion or pursuant to a
petition of the attorney general of such states 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 legal right and practical ability of the Trustee to enforce its rights and remedies against Hoag
Hospital under the Loan Agreement and related documents and of the Master Trustee to enforce its rights
and remedies against Obligated Group Members under Obligation No. 14 may be limited by laws relating
to banlavptcy, insolvency, reorganization, fraudulent conveyance or moratorium and by other similar
laws affecting creditors' rights. In addition, the Trustee's and the Master Trustee's ability to enforce such
terms will depend upon the exercise of various remedies specified by such documents which may in many
instances require judicial actions that are often subject to discretion and delay or that otherwise may not
be readily available or may be limited.
The various legal opinions delivered concurrently with the issuance of the Bonds are qualified as
to the enforceability of the various legal instruments by limitations imposed by state and federal laws,
rulings, policy and decisions affecting remedies and by bankruptcy, reorganization or other laws of
general application affecting the enforcement of creditors' rights or the enforceability of certain remedies
or document provisions.
For a further description of the provisions of the Indenture, the Loan Agreement and the Master
Indenture, including covenants that secure the Bonds, events of default, acceleration and remedies under
the Master Indenture, see APPENDDC D — "SUMMARY OF PRINCIPAL DOCUMENTS."
Bankruptcy. In the event of bankruptcy of an Obligated Group Member, the rights and remedies
of the Bondholders are subject to various provisions of the federal Bankruptcy Code. If an Obligated
Group Member were to file a petition in bankruptcy, payments made by that Obligated Group Member
during the 90 day (or perhaps one-year) period immediately preceding the filing of such petition may be
avoidable as preferential transfers to the extent such payments allow the recipients thereof to receive more
than they would have received in the event of such Obligated Group Member's liquidation. Security
interests and other liens granted to a Trustee or the Master Trustee and perfected during such preference
period also may be avoided as preferential transfers to the extent such security interest or other lien
secures obligations that arose prior to the date of such perfection. Such a bankruptcy filing would operate
as an automatic stay of the commencement or continuation of any judicial or other proceeding against the
Obligated Group Member and its property and as an automatic stay of any act or proceeding to enforce a
lien upon or to otherwise exercise control over its property, as well as various other actions to enforce,
maintain or enhance the rights of the Trustee and the Master Trustee. If the bankruptcy court so ordered,
the property of the Obligated Group Member, including accounts receivable and proceeds thereof, could
be used for the financial rehabilitation of such Obligated Group Member despite any security interest of
the Trustee therein. The rights of the Trustee and the Master Trustee to enforce their respective security
interests and other liens could be delayed during the pendency of the rehabilitation proceeding.
Such Obligated Group Member could file a plan for the adjustment of its debts in any such
proceeding, which plan could include provisions modifying or altering the rights of creditors generally or
any class of them, secured or unsecured. The plan, when'confirmed by a court, binds all creditors who
had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor
to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met,
among which are conditions that the plan be feasible and that it shall have been accepted by each class of
15
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 class cast votes 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 creditor, impaired thereunder and does not discriminate unfairly.
In addition, the obligations of Hoag Hospital under the Loan Agreement and of Hoag Hospital
and any future Members under the Master Indenture are not secured by a lien on or security interest in
any assets or revenues of the Members. In the event of a bankruptcy of Hoag Hospital or any other future
Members, Bondholders would be unsecured creditors and would be in an inferior position to any secured
creditors and on a parity with all other unsecured creditors.
In the event of bankruptcy of any Member, there is no assurance that certain covenants, including
tax covenants, contained in the Loan Agreement and certain other documents would survive.
Accordingly, a bankruptcy trustee could take action that would adversely affect the exclusion of interest
on the Bonds from gross income of the Bondholders for federal income tax purposes.
Other
THE BONDS ARE LIMITED OBLIGATIONS OF THE CITY PAYA13LE SOLELY FROM
PAYMENTS REQUIRED TO BE MADE BY HOAG HOSPITAL PURSUANT TO THE LOAN
AGREEMENT AND OBLIGATION NO. 14 ISSUED PURSUANT TO THE MASTER INDENTURE.
NEITHER THE STATE OF CALIFORNIA NOR THE CITY SHALL BE OBLIGATED TO PAY THE
PRINCIPAL OR TENDER PRICE OF THE BONDS, OR THE PREMIUM OR INTEREST THEREON,
EXCEPT FROM THE FUNDS PROVIDED UNDER THE LOAN AGREEMENT, OBLIGATION
NO. 14 AND THE INDENTURE, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING
POWER OF THE CITY, THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION
THEREOF, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR TENDER PRICE OF OR
THE PREMIUM OR INTEREST ON THE BONDS. THE ISSUANCE OF THE BONDS SHALL NOT
DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE CITY, THE STATE OF
CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR TO PLEDGE ANY
FORM OF TAXATION OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT.
BOND INSURANCE
Payment Under the Policy
Concurrently with the issuance of the Bonds, Financial Guaranty Insurance Company, doing
business in California as-FGIC Insurance Company (the "Insurer") will issue its Municipal Bond New
Issue Insurance Policy for the Bonds (the "Policy"). The Policy unconditionally guarantees the payment
of that portion of the principal or accreted value (if applicable) of and interest on the Bonds which has
become due for payment, but shall be unpaid by reason of nonpayment by the City. The Insurer will
make such payments to U.S. Bank Trust National Association, or its successor as its agent (the "Fiscal
Agent"), on the later of the date on which such principal, accreted value or interest (as applicable) is due
or on the business day next following the day on which the Insurer shall have received -notice (in
accordance with the terms of the Policy) from an owner of Bonds or the trustee or paying agent (if any) of
the nonpayment of such amount by the City. The Fiscal Agent will disburse such amount due on any
Bonds to its owner upon receipt by the Fiscal Agent of evidence satisfactory to the Fiscal Agent of the
owner's right to receive payment of the principal, accreted value or interest (as applicable) due for
payment and evidence, including any appropriate instruments of assignment, that all of such- owner's
rights to payment of such principal, accreted value or interest (as applicable) shall be vested in the
Insurer. The term "nonpayment" in respect of a Bond includes any payment of principal, accreted value
16
A
or interest (as applicable) made to an owner of.a Bond which has been recovered from such owner
pursuant to the United States Bankruptcy. Code by a trustee in bankruptcy in accordance with a final,
nonappealable order of a court having competent jurisdiction.
Once issued, the Policy is non - cancelable by the Insurer. The Policy covers failure to pay
principal (or accreted value, if applicable) of the Bonds on their stated maturity dates and their mandatory
sinking fund redemption dates, and not on any other date on which the Bonds may have been otherwise
called for redemption, accelerated or advanced in maturity. The Policy also covers the failure to pay
interest on the stated date for its payment. In the event that payment of the Bonds is accelerated, the
Insurer will only be obligated to pay principal (or accreted value, if applicable) and interest in the
originally scheduled amounts on the originally scheduled payment dates. Upon such payment, the Insurer
will become the owner of the Bond, appurtenant coupon or right to payment of principal or interest on
such Bonds and will be fully subrogated to all of the Bondholder's rights thereunder.
The Policy does not insure any risk other than Nonpayment by the City, as defined in the Policy.
Specifically, the Policy does not cover: (i) payment on acceleration, as a result of a call for redemption
(other than mandatory sinking fund redemption) or as a result of any other advancement of maturity; (ii)
payment of any redemption, prepayment or acceleration premium; or (iii) nonpayment of principal (or
accreted value, if applicable) or interest caused by the insolvency or negligence or any other act or
omission of the trustee or paying agent, if any.
As a condition of its commitment to insure the Bonds,.the Insurer may be granted certain rights
under the Bond documentation. The specific rights, if any, granted to the Insurer in connection with its
insurance of the Bonds may be set forth in the description of the principal legal documents appearing
elsewhere in this Official Statement, and reference should be made thereto.
The Policy is not covered by the Property /Casualty Insurance Security Fund specified in Article
76 of the New York Insurance Law.
The Policy is not covered by the California Insurance Guaranty Association (California Insurance
Code, Article 14.2).
Financial Guaranty Insurance Company
The Insurer, a New York stock insurance corporation, is a direct, wholly -owned subsidiary of
FGIC Corporation, a Delaware corporation, and provides financial guaranty insurance for public finance
and structured finance obligations. The Insurer is licensed to engage in financial guaranty insurance in all
50 states, the District of Columbia and the Commonwealth of Puerto Rico and, through a branch, in the
United Kingdom.
I On December 18, 2003, an investor group consisting of The PW Group, Inc. ('TNT'), affiliates
of The Blackstone Group L.P. (`Blackstone'), affiliates of The Cypress Group L.L.C. ( "Cypress') and
affiliates of CIVC Partners L.P. ( "CIVC') acquired FGIC Corporation (the "FGIC Acquisition ") from a
subsidiary of General Electric Capital Corporation ( "GE Capital'D. PMI, Blackstone, Cypress and CIVC
acquired approximately 42 %, 23 %, 23% and 7 %, respectively, of FGIC Coiporation's:common stock.
FGIC Corporation paid GE Capital approximately $284.3 million in pre-closing dividends from the
proceeds of dividends it, in turn, had received from the Insurer, and GE Capital retained approximately
$234.6 million in liquidation preference of FGIC Corporation's convertible participating preferred stock
and approximately 5% of FGIC Corporation's common stock. Neither FGIC Corporation nor -any of its
shareholders is obligated to pay any debts of the Insurer or any claims under any insurance policy,
including the Policy, issued by the Insurer.
17
A
The Insurer is subject to the insurance laws and regulations of the State of New York, where it is
domiciled, including Article 69 of the New York Insurance Law ("Article 69'x, a comprehensive financial
guaranty insurance statute. The Insurer is also subject to the insurance laws and regulations of all other
jurisdictions in which it is licensed to transact insurance business. The insurance laws and regulations, as
well as the level of supervisory authority that may be exercised by the various insurance regulators, vary
by jurisdiction, but generally require insurance companies to maintain minimum standards of business
conduct and solvency, to meet certain financial tests, to comply with requirements concerning permitted
investments and the use of policy forms and premium rates and to file quarterly and annual financial
statements on the basis of statutory accounting principles ("SAFJ and other reports. In addition, Article
69, among other things, limits the business of each financial guaranty insurer, including the Insurer, to
financial guaranty insurance and certain related lines.
For the three months ended March 31, 2005, and the years ended December 31, 2004, and
December 31, 2003, the Insurer had written directly or assumed through reinsurance, guaranties of
approximately $14.8 billion, $59.5 billion and $42.4 billion par value of securities, respectively (of which
approximately 71 %, 56% and 791/6, respectively, constituted guaranties of municipal bonds), for which it
had collected gross premiums of approximately $84.4 million, $323.6 million and $260.3 million,
respectively. For the three months ended March 31, 2005, the Insurer had reinsured, through facultative
and excess of loss arrangements, approximately 0.5% of the risks it had written.
As of March 31, 2005, the Insurer had net admitted assets of approximately $3.215 billion, total
liabilities of approximately $2.040 billion, and total capital and policyholders' surplus of approximately
$1.175 billion, determined in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities.
The unaudited financial statements of the Insurer as of March 31, 2005, the audited financial
statements of the Insurer as of December 31, 2004, and the audited financial statements of the Insurer as
of December 31, 2003, which have been filed with the Nationally Recognized Municipal Securities
Information Repositories ("NRMSIRs "), are hereby included by specific reference in this Official
Statement. Any statement contained herein under the heading "BOND INSURANCE," or in any
documents included by specific reference herein, shall be modified or superseded to the extent required
by any statement in any document subsequently filed by the Insurer with such NRMSIRs, and shall not be
deemed, except as so modified or superseded, to constitute a part of this Official Statement. All financial
statements of the Insurer (if any) included in documents filed by the Insurer with the NRMSIRs
subsequent to the date of this Official Statement and prior to the termination of the offering of the Bonds
shall be deemed to be included by specific reference into this Official Statement and to be a part hereof
from the respective dates of filing of such documents.
The Insurer also prepares quarterly and annual financial statements on the basis of generally
accepted accounting principles. Copies of the Insurer's most recent GAAP and SAP financial statements
are available upon request to: Financial Guaranty Insurance Company, 125 Park Avenue, New York, NY
10017, Attention: Corporate Communications Department. The Insurer's telephone number is (212) 312-
3000.
The financial strength of the Insurer is rated "AAA" by Standard & Poor's, a Division of The
McGraw -Hill Companies, Inc., "Aaa" by Moody's Investors Service, and "AAA" by Fitch Ratings. Each
rating of the Insurer should be evaluated independently. The ratings reflect the respective ratings
agencies' current assessments of the insurance financial strength of the Insurer. Any further explanation
of any rating may be obtained only from the applicable rating agency. These ratings are not
recommendations to buy, sell or hold the Bonds, and are subject to revision or withdrawal at any time by
the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an
l
18
adverse effect on the market price of the Bonds. The Insurer does not guarantee the market price or
investment value of the Bonds nor does it guarantee that the ratings on the Bonds will not be revised or
withdrawn.
iNeither the Insurer nor any of its affiliates accepts any responsibility for the accuracy or
completeness of the Official Statement or any information or disclosure that is provided to potential
purchasers of the Bonds, or omitted from such disclosure, other than with respect to the accuracy of
information with respect to the Insurer or the Policy under the heading `BOND INSURANCE" In
addition, the Insurer makes no representation regarding the Bonds or the advisability of investing in the
Bonds.
The information relating to the Insurer and the Policy contained herein has been furnished by the
Insurer. No representation is made by the City, Hoag Hospital or the Underwriter as to the accuracy,
completeness or adequacy of such information or as to the absence of material adverse changes in the
condition of the Insurer subsequent to the date of this Official Statement. Reference is made to
APPENDDC G for a specimen of the Policy.
No assurance can be given that the Insurer will be financially able to meet its contractual
obligations under the Policy.
So long as the Insurer performs its obligations under the Policy, the Bonds cannot be accelerated
without the prior written consent of the Insurer, including, without limitation, if the tax- exempt status of
the interest on the Bonds is not maintained.
In the event that the Insurer is unable to make payments of principal of or interest on the Bonds as
such payments become due, the Bonds are payable solely from moneys received by the Trustee as set
forth in the Indenture.
In the event that the Insurer is required to pay principal of or interest on the Bonds, no
representation or assurance is given or can be made that such event will not adversely affect the market
price for or marketability of the Bonds.
Owners of the Bonds should note that, although the Policy will insure payment of the principal
amount (but not any premium) that is paid to any owner of the Bonds in connection with the optional or
extraordinary redemption of any Bond and that is recovered from such owner as a voidable preference
under applicable bankruptcy laws, such amounts will be repaid by the Insurer to such owner only at such
times and in such amounts as would have applied in the absence of such redemption.
PLAN OF FINANCE
General
The issuance of the Bonds is and the loan of the proceeds thereof is for the benefit of Hoag
Hospital in order to (i) finance capital improvements at the facilities owned and operated by Hoag
Hospital, and (ii) pay for costs of issuing the Bonds.
19
to
The Project
The greatest portion of the proceeds from the sale of the Bonds will be used by Hoag Hospital.to
finance the Project, consisting of certain capital improvements and equipment acquisitions at its acute
care health facilities in Newport Beach. See APPENDIX A — "INFORMATION CONCERNING HOAG
MEMORIAL .HOSPITAL PRESBYTERIAN AND AFFILIATES — SERVICE AREA AND
COMPETITION— FACILITIES DESIGN AND CONSTRUCTION."
below:
ESTIMATED SOURCES AND USES OF FUNDS
The proceeds to be received from the sale of the Bonds will be applied approximately as set forth
Sources of Funds:
Bond Proceeds $200,000,000
Total Sources of Funds $200,000,000
Uses of Funds:
Project Costs $196,330,910
Costs of Issuance01 3,669,090
Total Uses of Funds $200,000,000
Includes legal, printing, rating agency, accounting, Trustee and City fees, underwriting discount, Policy premium and other
miscellaneous costs of issuance.
CONTINUING DISCLOSURE
Since the Bonds are limited obligations of the City, payable solely from amounts received from
Hoag Hospital, financial or operating data concerning the City is not material to an evaluation of the
offering of the Bonds or to any decision to purchase, hold or sell the Bonds, and the City is not providing
any such information. Hoag Hospital has undertaken all responsibilities for any Zontinuing disclosure to
Holders of the Bonds, as described below, and the City shall have no liability to the Holders of the Bonds
or any other person with respect to Rule 15c2 -12 promulgated by the Securities and Exchange
Commission (the "Rule").
Hoag Hospital has covenanted for the benefit of holders and beneficial owners of the Bonds to
provide certain financial information and operating data relating to Hoag Hospital by not later than six
months following the end of Hoag Hospital's fiscal year (which currently is August 31, 2005) (the
"Annual Report'), commencing with the report for the fiscal year ending August 31, 2005 (due on or
before February 28, 2006) and to provide notices of the occurrence of certain enumerated events, if
material. The Annual Report will be filed by Hoag Hospital with each Nationally Recognized Municipal
Securities Information Repository and with a repository designated by the State of California, if any, as
the state depository for the purpose of the Rule and recognized as such by the Securities and Exchange
Commission (the "State Repository"). As of the date of this Official Statement, there is no State
Repository. The notices of material events will be filed by Hoag Hospital with the State Repository, if
any, and with the Municipal Securities Rulemaking Board or each Nationally Recognized Municipal
Securities Information Repository. See APPENDIX F — "FORM OF CONTINUING DISCLOSURE
20
to
CERTIFICATE." These covenants have been made in order to assist the Underwriter in complying with
the Rule. Hoag Hospital has never failed to comply in all material respects with any previous undertaking
with regard to said Rule to provide annual reports or notices of material events.
BONDHOLDERS' RISKS
The purchase of the Bonds involves investment risks that are discussed throughout this Official
Statement. Prospective purchasers of the Bonds should evaluate all of the information presented in this
Official Statement. This section on Bondholders' Risks focuses primarily on the general risks associated
with hospital or health system operations; whereas APPENDIX A describes Hoag Hospital specifically.
These should be read together. For risks related to the auction rate securities market, see "THE
AUCTION RATE SECURITIES" herein.
General
Except as noted under "SECURITY FOR THE BONDS," the Bonds are payable from Loan
Repayments made pursuant to the Loan Agreement and funds provided under Obligation No. 14 and the
Indenture. No representation or assurance can be made that revenues will be realized by Hoag Hospital in
amounts sufficient to pay principal of and interest on the Bonds.
Hoag Hospital is subject to a wide variety of federal and state regulatory actions and legislative
and policy changes by those governmental and private agencies that administer Medicare, Medicaid and
other payors and are subject to actions by, among others, the National Labor Relations Board, the Joint
Commission on Accreditation of Healthcare Organizations ( "JCAHO "), the Centers for Medicare and
Medicaid Services ( "CMS') of the U.S. Department of Health and Human Services ("DHHS "), and other
federal, state and local government agencies. The future financial condition of Hoag Hospital could be
adversely affected by, among other things, changes in the method and amount of payments to Hoag
Hospital by nongovernmental payors, the financial viability of these payors, increased competition from
other health care entities, demand for health care, other forms of care or treatment, changes in the
methods by which employers purchase health care for employees, capability of management, future
changes in the economy, demographic changes, availability of physicians and nurses, and malpractice
claims and other litigation. These factors and others may adversely affect payment by Hoag Hospital
under the Loan Agreement and, consequently, on the Bonds.
Significant Risk Areas Summarized
Certain of the primary risks associated with the operations of Hoag Hospital are briefly
summarized in general terms below and are explained in greater detail in subsequent sections.
NonproJU Healthcare Environment Recently, an increasing number of the operations or
practices of healthcare providers have been challenged or questioned to determine if they are consistent
with the regulatory requirements for nonprofit tax- exempt organizations. Areas which have come under
examination have included pricing practices, billing and collection practices, charitable care, executive
compensation, exemption of property from real property taxation, private use of tax- exempt bond
financed assets and others. These challenges and questions have come from a variety of sources,
including the California Attorney General, the Internal Revenue Service, labor unions, Congress, state
legislatures and other state attorneys general and patients; these issues have been raised in a variety of
forums, including hearings, audits and litigation. The challenges and examinations, and any resulting
legislation, regulations, judgments or penalties, could have a material adverse effect on Hoag Hospital.
21
Reliance on Medicare Inpatient hospitals rely to a high degree.on .payment from the federal
Medicare program. Future changes in the underlying law and regulations, as melt as in payment policy
and timing, create uncertainty and could have a material adverse impact on hospitals' payment stream
from Medicare. With health care and hospital spending reported to be increasing faster than the rate of
general inflation, Congress and/or CMS may take action in the future to decrease or restrain Medicare
outlays for hospitals.
Managed Care Exposure and Rau Pressure from Major Purchasers Certain hospital markets,
including many communities in California, are strongly impacted by managed care and major purchasers
of health services. In those areas, managed care companies have significant influence over hospital rates,
utilization and competition. Rate pressure imposed by managed care payors or other major purchasers
may have a material adverse impact on hospitals, particularly if major purchasers put increasing pressure
on payors to restrain rate increases. Business failures by managed care companies also could have a
material adverse impact on contracted hospitals in the form of payment shortfalls or delay, and/or
continuing obligations to care for managed care patients without receiving payment.
Capital Needs vs Capital Capacity. Hospital operations are capital intensive. Regulation,
technology and physiciantpatient expectations require constant and often significant capital investment
In California, seismic requirements mandated by the State of California may require that many hospital
facilities be substantially modified, replaced or closed. Nearly all hospitals in California are affected.
Estimated construction costs are substantial and actual costs of compliance may exceed estimates. Total
capital needs may outstrip capital capacity.
Government "Fraud" Enforcement "Fraud" in government funded health .care programs is a
significant concern of DHHS, CMS and many states and is one of the federal government's prime law
enforcement priorities. The federal government and, to a lesser degree, state governments impose a wide
variety of extraordinarily complex and technical requirements intended to prevent over - utilization based
on economic inducements, misallocation of expenses, overcharging and other forms of `fraud" in the.
Medicare and Medicaid programs, as well as other state and federally - funded health care programs. This
body of regulation impacts a broad spectrum of hospital commercial activity, including billing,
accounting, recordkeeping, medical staff oversight, physician contracting and recruiting, cost allocation,
clinical trials, discounts and other.functions and transactions.
Violations and alleged violations may be deliberate, but also frequently occur in circumstances
where management is unaware of the conduct in question, as a result of mistake, or where the individual
participants do not know that their conduct is in violation of law. Violations may occur and be prosecuted
in circumstances that do not have the traditional elements of fraud, and enforcement actions may extend
to conduct that occurred in the past The government periodically conducts widespread investigations
icovering categories of services or certain accounting or billing practices.
Violations and Sanctions The government and/or private "whistieblowers" often pursue
aggressive investigative and enforcement actions. The government has a wide array of civil, criminal and
monetary penalties, including withholding essential hospital payments from the Medicare or Medicaid
programs, or exclusion from those programs. Aggressive investigation tactics, negative publicity and
threatened penalties can be, and often are, used to force settlements, payment of fines and prospective
restrictions that may have a materially adverse impact on hospital operations, financial condition and
reputation. Multi- million dollar fines and settlements are common. These risks are generally uninsured.
Government enforcement and private wbistleblower suits may increase in the hospital sector. Most large
hospital systems are likely to be adversely impacted.
i
22
i �
Nursing and Other Shortages. Currently, a nursing shortage exists which may have its primary
impact on hospitals. Various studies have predicted that this nursing shortage will become more acute
over time and grow to significant proportions. In California, new state regnlation of nurse staff ratios will
likely intensify the nursing shortage. In addition, shortages of other professional and technical staff such
as pharmacists, therapists, laboratory technicians and others may occur or worsen. Hospital operations,
patient and physician satisfaction, financial condition and future growth could be negatively affected by
these shortages, resulting in material adverse impact to hospitals.
Technical and Clinical Developments. New clinical techniques and technology, as well as new
pharmaceutical and genetic developments and products, may alter the course of medical diagnosis and
treatment in ways that are currently unanticipated, and that may dramatically change medical and hospital
care. These could result in higher hospital costs, reductions in patient populations and/or new sources of
competition for hospitals.
i
Costs and Restrictions from Governmental Regulation. Nearly every aspect of hospital
j operations is regulated, in some cases by multiple agencies of government. The level and complexity of
regulation appears to be increasing, bringing with it operational limitations, enforcement and liability
1 risks, and significant and sometimes unanticipated cost impacts.
Proliferation of Competition. Hospitals increasingly face competition from specialty providers
of care. This may cause hospitals to lose essential inpatient or outpatient market share. Competition may
be focused on services or payor classifications where hospitals realize their highest margins, thus
negatively affecting programs that are economically important to hospitals. Specialty hospitals or special
use surgery and imaging centers may attract specialists as investors and may seek to treat only profitable
classifications of patients, leaving full- service hospitals with higher acuity and/or lower paying patient
populations. These new sources of competition may have material adverse impact on hospitals,
particularly where a group of a hospital's principal physician admitters may curtail their use of a hospital
service in favor of competing facilities.
Labor Costs and Disruption. Hospitals are labor intensive. Labor costs, including salary,
benefits and other liabilities associated with the workforce, have significant impact on hospital operations
and financial condition. Hospital employees are increasingly organized in collective bargaining units and
may be involved in work actions of various kinds, including work stoppages and strikes. Overall costs of
the hospital workforce are high, and turnover is high. Pressure to recruit, train-and retain qualified
employees is expected to accelerate. These factors may materially increase hospital costs of operation.
Workforce dismption may negatively impact hospital revenues and reputation. See APPENDIX A-
'T4FORMATION CONCERNING HOAG MEMORIAL HOSPITAL PRESBYTERIAN AND
AFFILIATES— EMPLOYEES."
State Medicaid Programs While state Medicaid programs are rarely as important to hospital
financial results as Medicare, they nevertheless constitute an important payor source to many hospitals.
These programs often pay hospitals at levels that may be below the actual cost of the care provided. As
Medicaid is partially funded by states, the significantly deteriorated financial condition of states is likely
to result in lower funding levels and/or payment delays. These could have a'material adverse impact on
hospitals.
General Economic Conditions; Bad Debt and Indigent Care. Hospitals are economically
influenced by the environment in which they are located. To the'extent that the State of California or
surrounding county governments are unable to provide a safety net of medical services, pressure is
applied to local hospitals to increase free care. Economic downtums and lower funding of state Medicaid
programs may increase the number of patients treated by hospitals who are uninsured or otherwise unable
23
to pay for some or all of their care. These conditions may give rise to increased bad debt and higher
indigent care utilization. At the same time, nonoperating revenue from investments may be reduced or
eliminated - These factors may have a material adverse impact on hospitals.
Medical Liability Litigation and Insurance Medical liability litigation is subject to public
policy determinations and legal and procedural rules that may be altered from time to rime, with the result
that the frequency and cost of such litigation, and resultant liabilities, may increase in the future.
Hospitals may be affected by negative financial and liability impacts on physicians. Costs of insurance,
including self - insurance, may increase dramatically.
Facility Damage Hospitals are highly dependent on the condition and functionality of their
physical facilities. Damage from earthquake, other natural causes, fire, deliberate acts of destruction, or
various facilities system failures may have a material adverse impact on hospital operations and financial
status.
Nonprofit Health Care Environment
As a nonprofit tax- exempt organization, Hoag Hospital is subject to federal, state and local laws,
regulations, rulings and court decisions relating to its organization and operation, including its operation
I for charitable purposes. There can be a tension between the rules designed to regulate a wide range of
1 charitable organizations and the day -to-day operations of a complex healthcare organization.
Recently, an increasing number of the operations or practices of health care providers have been
challenged or questioned to determine if they are consistent with the regulatory requirements for nonprofit
tax- exempt organizations. These challenges are broader than concerns about compliance with federal and
state statutes and regulations, such as Medicare and Medicaid compliance, and instead in many cases are
examinations of core business practices of the health care organizations. Areas that have come under
examination have included pricing practices, billing and collection practices, charitable care, executive
i compensation, exemption of property from real property taxation, private use of tax - exempt bond
financed assets and others. These challenges and questions have come from a variety a sources, including
state attorneys general, the Internal Revenue Service (the "IRS "), labor unions, Congress, state
legislatures, and patients, and in a variety of forums, including hearings, audits and litigation. These
challenges or examinations include the following, among others:
Congressional Hearings. The House Committee on Energy and-Commerce (the "House
Committee ") has launched a nationwide investigation of hospital billing and collection practices and
prices charged to uninsured patients. Twenty large hospital and healthcare systems were requested by
the House Committee to provide detailed historical charge and billing practice information for acute care
services. The Subcommittee on Oversight and Investigations of the House Committee conducted
hearings in the summer of 2004 at which a number of representatives of the health care industry and
others testified In April 2005, the House Committee requested additional information from ten large
hospital systems and indicated the House Committee was extending its inquiry into the forms of hospital
bills and the impact of hospital "charge masters" on patients. It is uncertain if the House Committee will
recommend legislative changes as a result of its investigation.
In addition, the Senate Finance Committee (the "Senate Committee") conducted hearings on
required reforms to the nonprofit sector in the summer of 2004. At the hearing, the.Senate Committee
released a staff discussion draft on proposals for reform in the area of tax- exempt organizations, including
a proposal for a five -year review of tax- exempt status by the Internal Revenue Service. -The Finance
Committee is currently co nducting additional hearings ngs rel
sting to nonprofit corporations. It is uncertain if
any of the staff proposals will be adopted by the entire Senate Committee or if the Senate Committee will
24
�- d
recommend legislative changes as a result of the hearing, although the Senate Committee chair recently
expressed his intention to move legislative reforms in this area.
Complementary to the Senate Committee hearings, the House Committee on Ways and Means
("Ways and Means Committee') held a hearing on April 20, 2005 to examine the tax- exempt sector. On
i May 26, 2005, the Ways and Means Committee conducted a hearing that focused more specifically on
hospital tax - exemption. The Ways and Means Committee will be continuing this series of hearings
throughout the year, reviewing both broad categories of tax - exempt organizations and specific abusive
practices involving tax- exempt organizations.
IRS Examination of Compensation Practices In August 2004, the IRS announced a new
enforcement effort to identify and halt abuses by tax - exempt organizations that pay excessive
4 compensation and benefits to their officers and other insiders. The IRS announced that it would contact
nearly 2,000 charities and foundations to seek more information about their compensation practices and
procedures. The IRS began its enforcement project at the end of July and has continued it into 2005. As
of the date hereof, Hoag Hospital has not been contacted by the IRS in connection with this enforcement
effort.
Class Action Litigation Regarding Billing and Collection Practices. Lawsuits have been filed in
2004 in both federal and state courts alleging, among other things, that hospitals have failed to fulfill their
obligations to provide charity care to uninsured patients and have overcharged uninsured patients. In
October 2004, the U.S. Judicial Panel. on Multidistrict Litigation denied plaintiff attorneys' request to
consolidate 28 class - action lawsuits brought against the American Hospital Association and certain
nonprofit health systems. The cases are now proceeding separately to federal district courts. A number
of those suits have been dismissed Nonetheless, given the preliminary nature of the litigation, it is not
possible to predict the outcome of the cases. Hoag Hospital has not been named in any of these suits.
Action by Purchasers of Hospital Services and Consumers Major purchasers of hospital
i services also could take action to restrain hospital charges or charge increases. In California, the
California Public Employees' Retirement System, the nation's third largest purchaser of employee health
benefits, has pledged to take action to restrain the rate of growth of hospital charges and has excluded
certain California hospitals from serving its covered members. Hoag Hospital was temporarily excluded
by the California Public Employees' Retirement System as a hospital provider for calendar year 2005 but
management expects to be included as a participating facility as of January 1, 2006. _
As a result of increased public scrutiny, it is also possible that the pricing strategies of hospitals
may be perceived negatively by consumers, and hospitals may be forced to reduce fees for their service's.
Decreased utilization could result, and hospitals' revenues may be negatively impacted.
Challenges to Real Property Tax Exemptions Recently, the real property tax exemptions
afforded to certain nonprofit health care providers by state and local taxing authorities have been
challenged on the grounds that the health care providers were not engaged in charitable activities. These
challenges have been based on a variety of grounds, including allegations of aggressive billing and
collection practices and excessive financial margins. While Hoag Hospital is not aware of any current
challenge to the tax exemption afforded to any of its real property, there can be no assurance that these
types of challenges will not occur in the future.
The foregoing are some examples of the challenges and examinations facing nonprofit health care
organizations. They are indicative of a greater scrutiny of the billing, collection and other. business
practices of these organizations and may indicate an increasingly more difficult operating environment for
25
health care organizations, including Hoag Hospital. The challenges and examinations, and any resulting
legislation, regulations, judgments, or penalties, could have a material adverse effect on hospitals.
Patient Service Revenues
The Medicare Program Medicare is the federal health insurance system under which hospitals
are paid for services provided to eligible elderly and disabled persons. Medicare is administered by CMS,
i which delegates to the states the process for certifying hospitals to which CMS will make payment. In
order to achieve and maintain Medicare certification, hospitals must meet CMS's "Conditions of
Participation" on an ongoing basis, as determined by the state and/or the JCAHO. The requirements for
Medicare certification are subject to change, and, therefore, it may be necessary for hospitals to effect
changes from time to time in their facilities, equipment, personnel, billing, policies and services.
For the fiscal years ended August 31, 2002, August 31, 2003 and August 31, 2004, Medicare
charges (excluding capitation) represented approximately 33.4 %, 33.9% and 33.9 %, respectively, of Hoag
Hospital's gross patient service revenue. See APPENDIX A – "INFORMATION CONCERNING
HOAG MEMORIAL HOSPITAL PRESBYTERIAN AND AFFILIATES -- SELECTED UTILIZATION
AND FINANCIAL INFORMATION— Sources of Patient Services Revenue."
Hospitallnpatient Reimbursement Hospitals are generally paid for inpatient services provided
to Medicare beneficiaries based on established categories of treatments or conditions known as diagnosis
related groups ( "DRGs'). The actual cost of care, including capital costs, may be more or less than the
DRG rate. DRG rates are subject to adjustment by CMS and are subject to federal budget considerations.
There is no guarantee that DRG rates, as they change from time to time, will cover actual costs of
providing services to Medicare patients.
Other Medicare Service Payments. Medicare payment for general outpatient services are based
on regulatory formulas or pre - determined rates. There is no guarantee that these rates, as they may
change from time to time, will be adequate to cover the actual cost of providing these services to
Medicare patients.
Reimbursement of Hospital Capital Costs. Hospital capital costs apportioned to Medicare
patient use (including depreciation and interest) are paid by Medicare exclusively on the basis of a
standard federal rate (based upon average national costs of capital), subject to limited adjustments specific
to the hospital. There can be no assurance that future capital - related payments will be sufficient to cover
the actual capital- related costs of Hoag Hospital's facilities applicable to Medicare patient stays or will
provide flexibility for hospitals to meet changing capital needs.
• Medicaid Program Medicaid is a program of medical assistance, funded jointly by the federal
government and the states, for certain needy individuals and their dependants. Under Medicaid, the
federal government provides limited funding to states that have medical assistance programs that meet
j federal standards. Attempts to balance or reduce federal and state budgets will likely negatively impact
j Medicaid spending.
For the fiscal years ended August 31, 2002, August 31, 2003 and August 31, 2004, Hoag Hospital
received approximately 3.0%, 4.1% and 3.6 %, respectively, of gross patient service revenues from state
Medicaid programs. See APPENDIX A – "INFORMATION CONCERNING HOAG MEMORIAL
HOSPITAL PRESBYTERIAN AND AFFILIATES —SELECTED UTILIZATION AND FINANCIAL
INFORMATION —Sources of Patient Services Revenue."
26
A
California Medi -Cal. Medi -Cal is the California Medicaid program. The State of California
selectively contracts with general acute care hospitals to provide inpatient services to Medi -Cal patients.
The state is obligated to make contractual payments only to the extent the Legislature appropriates
adequate funding. Except in areas of the state that have been excluded from contracting, a general acute
care hospital generally will not qualify for payment for non - emergency acute inpatient services rendered
to a Medi -Cal beneficiary unless it is a contracting hospital. Typically, either party may terminate such
contracts on 120 days' notice and the state may terminate without notice under certain circumstances. No
assurances can be made that hospitals will be awarded Medi -Cal contracts or that any such contracts will
reimburse hospitals for the cost of delivering services. As of the date hereof, Hoag Hospital does not
have a Medi -Cal contract.
State Badgeft Many states, including California, face severe financial challenges, including
erosion of general fund tax revenues. These factors have resulted in a shortfall between revenue and
spending demands. California may face a continuing gap between the expected level of tax revenues and
projected expenditures for the fiscal year 2005 -06. Cuts in state Medi -Cal spending, which were
i scheduled to become effective January 1, 2004, were enjoined by a state district court, although the State
is seeking an appeal of the decision. It continues to be a question whether and when the cuts in Medi -Cal
spending will be effective. California's 2004 -05 budget provided for an additional 5% cut in provider
i reimbursement rates under Medi -Cal. California's 2005 -06 budget makes a number of adjustments and
policy changes that include requiring certain beneficiaries whose annual income exceeds the federal
poverty level to pay monthly premiums for their care. There is a risk that such beneficiaries may be
i unable to pay the required monthly premiums. In that event, such individuals would fall out of the
jl Medi -Cal program altogether and become uninsured patients who may be unable to pay for their care.
The financial challenges facing states may negatively affect hospitals in a number of ways,
including, but not limited to, a greater number of indigent patients who are unable to pay for their care
and a greater number of individuals who qualify for Medicaid and/or reductions in Medicaid
reimbursement rates.
Health Plans and Managed Care. Most private health insurance coverage is provided by various
types of "managed care" plans, including health maintenance organizations ( "HMOs ") and preferred
provider organizations ("PPOs"), that generally use discounts and other economic incentives to reduce or
limit the cost and utilization of health care services. Medicare and Medicaid also purchase hospital care
using managed care options. _
In California, managed care plans have replaced indemnity insurance as the prime source of non-
governmental payment for hospital services, and hospitals must be capable of attracting and maintaining
managed care business, often on a regional basis. Regional coverage and aggressive pricing may be
required. However, it is also essential that contracting hospitals be able to provide the contracted services
without significant operating losses, which may require multiple forms of cost containment.
Defined broadly, for the fiscal years ended August 31, 2002, August 31, 2003 and August 31,
2004, managed care payments (including capitated Medicare contracts and all capitated and non- capitated
managed care) constituted approximately 59.1%, 58.2% and 58.8 %, respectively, of gross patient service
revenues of Hoag Hospital. See APPENDIX A— "INFORMATION CONCERNING HOAG
MEMORIAL HOSPITAL PRESBYTERIAN AND AFFILIATES— SELECTED UTILIZATION AND
FINANCIAL INFORMATION— Sources of Patient Services Revenue."
Many HMOs and PPOs currently pay providers on a negotiated fee - for - service basis- or, for
institutional care, on a fixed rate per day of care, which, in each case, usually is discounted from the
typical charges for the care provided. As a result, the discounts offered to HMOs and PPOs may result in
to
27
payment to a provider that is less than its actual cost. Additionally, the volume of patients directed to a
provider may vary significantly from projections, and/or changes in the utilization may be dramatic and
unexpected, thus jeopardizing the provider's ability to manage this component of revenue and cost
Some HMOs employ a "capitation" payment method under which hospitals are paid a
predetermined periodic rate for each enrollee in the HMO who is "assigned" or otherwise directed to
receive care at a particular hospital. The hospital may assume financial risk for the cost and scope of
institutional care given. If payment is insufficient to meet the hospital's actual costs of care, or if
utilization by such enrollees materially exceeds projections, the financial condition of the hospital could
erode rapidly and significantly.
Often, HMO contracts are enforceable for a stated term, regardless of hospital losses and may
require hospitals to care for enrollees for a certain time period, regardless of whether the HMO is able to
pay the hospital. Hospitals from time to time have disputes with managed care payors concerning
payment and contract interpretation issues.
+ Failure to maintain contracts could have the effect of reducing Hoag.Hospital's market share and
net patient services revenues. Conversely, participation may result in lower net income if participating
i hospitals are unable to adequately contain their costs. Thus, managed care poses one of the most
significant business risks (and opportunities) the hospitals face.
Regulatory Environment
"Fraud" and "False Claims" Health care "fraud and abuse" laws have been enacted at the
federal and state levels to broadly regulate the provision of services to government program beneficiaries
and the methods and requirements for submitting claims for services rendered to the beneficiaries. Under
these laws, hospitals and others can be penalized for a wide variety of conduct, including submitting
claims for services that are not provided, billing in a manner that does not comply with government.
requirements or including inaccurate billing information, billing for services deemed to be medically
unnecessary, or billings accompanied by an illegal inducement to utilize or refrain from utilizing a service
or product.
Federal and state governments have a broad range of criminal, civil and administrative sanctions
available to penalize and remediate health care fraud, including the exclusion of a hospital from
participation in the Medicare/Medicaid programs, civil monetary penalties, and suspension of
Medicare/Medicaid payments. Fraud and abuse cases.may be prosecuted by one or more government
i entities and/or private individuals, and more than one of the available sanctions may be, and often are,
imposed for each violation.
Laws governing fraud and abuse may apply to a hospital and to nearly all individuals and entities
with which a hospital does business. Fraud investigations, settlements, prosecutions and related publicity
can have a catastrophic effect on hospitals. See "Enforcement Activity," below. Major elements of these
often highly technical laws and regulations are generally summarized below.
False Claims Act The False Claims Act ( 'FCA' makes it illegal to submit or present a false,
fictitious or fraudulent claim to the federal government, and may include claims that are simply
erroneous. FCA investigations and cases have become common in the health care field and may cover a
range of activity from intentionally inflated billings, to highly technical billing infractions, to allegations
of inadequate care. Violation or alleged violation of the FCA most often results in settlements that
require multi-million dollar payments and compliance agreements. The FCA also permits individuals to
initiate civil actions on behalf of the government in lawsuits called "qui tam" actions. Qui tam plaintiffs,
d
28
or "whistleblowers," can share in the damages recovered by the government or recover independently if
the government does not participate. The FCA has become one of the government's primary weapons
against health care fraud. FCA violations or alleged violations could lead to settlements, fines, exclusion
or reputation damage that could have a material adverse impact on a hospital.
Anti - Kickback Law. The federal "Anti- Kickback Law" is a criminal statute that prohibits anyone
from soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly,
in cash or in kind, in return for a referral (or to induce a referral) for any item or service that is paid by
any federal or state health care program. The Anti - Kickback Law applies to many common health care
transactions between persons and entities with which a hospital does business, including hospital -
physician joint ventures, medical director agreements, physician recruitment agreements, physician office
leases and other transactions.
Violation or alleged violation of the Anti - Kickback Law most often results in settlements that
require multi - million dollar payments and compliance agreements. The Anti - Kickback Law can be
prosecuted either criminally or civilly. Violation is a felony, subject to a fine of up to $250,000 for each
act (which may be each item or each bill sent to a federal program), imprisonment and/or exclusion from
the Medicare and Medicaid programs. In addition, civil monetary penalties of $10,000 per item or service
in noncompliance (which may be each item or each bill sent to a federal program), or an "assessment" of
three times the amount claimed may be imposed.
Stark Referral Law. The federal "Stark" statute prohibits the referral of Medicare and Medicaid
patients for certain designated health services (including inpatient and outpatient hospital services,
clinical laboratory services, and radiation and other imaging services) to entities with which the referring
physician has a financial relationship. It also prohibits a hospital firrnisbing the designated services from
billing Medicare, or any other payor or individual, for services performed pursuant to a prohibited
referral. The government does not need to prove that the entity knew that the referral was prohibited to
establish a Stark violation. If certain technical requirements are met, many ordinary business practices
and economically desirable arrangements between hospitals and physicians arguably constitute "financial
relationsbips" within the meaning of the Stark statute, thus triggering the prohibition on referrals and
billing. Most providers of the designated health services with physician relationships have some exposure
to liability under the Stark statute.
Medicare may deny payment for all services related to a prohibited referral and a hospital that has
billed for prohibited services may be obligated to refund the amounts collected from the Medicare
program. For example, if an office lease between a hospital and a large group of heart surgeons is found
to violate Stark, the hospital could be obligated to repay CMS for the payments received from Medicare
for all of the heart surgeries performed by all of the physicians in the group for the duration of the lease; a
! potentially significant amount. The government may also seek substantial civil monetary penalties, and in.
some cases, a hospital may be liable for fines up to three times the amount of any monetary penalty,
and/or be excluded from the Medicare and Medicaid programs. Although Stark does not have an
extensive enforcement history, potential repayments to CMS, settlements, fines or exclusion for a Stark
violation or alleged violation could have a material adverse impact on a hospital.
HIPAA. The Health Insurance Portability and Accountability Act of 1996 ( "HIPAA ") adds
additional criminal sanctions for health care fraud and applies to all health care benefit programs, whether
public or private. HIPAA also provides for punishment of a health care. provider for knowingly and
willfully embezzling, stealing, converting or intentionally misapplying any money, funds, or other assets
of a health care benefit program. A health care provider convicted of health care fraud could be subject to
mandatory exclusion from Medicare.
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Exclusions from Medicare or Medicaid Participation. The government may exclude a hospital
from Medicare/Medicaid program participation that is convicted of a criminal offense relating to the
delivery of any item or service reimbursed under Medicare or a state health care program, any criminal
offense relating to patient neglect or abuse in connection with the delivery of health care, fraud against
any federal, state or locally financed health care program or an offense relating to the illegal manufacture,
distribution, prescription, or dispensing of a controlled substance. The government also may exclude
individuals or entities under certain other circumstances, such as an unrelated conviction of fraud, or other
financial misconduct relating either to the delivery of health care in general or to participation in a federal,
state or local government program. Exclusion from the Medicare/Medicaid program means that a
hospital would be decertified and no program payments can be made. Any hospital exclusion could be .a
materially adverse event.
Administrative Enforcement Administrative regulations may require less proof of a violation
than do criminal laws, and, thus, health care providers may have a higher risk of imposition of monetary
penalties as a result of administrative enforcement actions.
Compliance wide Conditions of Participation. CMS, in its role of monitoring participating
providers' compliance with conditions of participation in the Medicare program, may determine that a
provider is not in compliance with its conditions of participation. In that event, a notice of termination of
participation may be issued or other sanctions potentially could be imposed.
Enforcement Activity. Enforcement activity against health care providers has increased, and
enforcement authorities have adopted aggressive approaches. In the current regulatory climate, it is
anticipated that many hospitals and physician groups will be subject to an audit, investigation,. or other
enforcement action regarding the health care fraud laws mentioned above.
Enforcement authorities are often in a position to compel settlements by providers charged with
or being investigated for false claims violations by withholding or threatening to withhold Medicare,
Medicaid and/or similar payments and/or by instituting criminal action. In addition, the cost of defending
such an action, the time and management attention consumed, and the facts of a case may dictate
settlement. Therefore, regardless of the merits of a particular case, a hospital could experience materially
adverse settlement costs, as well as materially adverse costs associated with implementation of any
settlement agreement. Prolonged and publicized investigations could be damaging to the reputation and
business of a hospital, regardless of outcome.
Certain acts or transactions may result in violation or alleged violation of a number of the federal
health care fraud laws described above, and therefore penalties or settlement amounts often are
compounded. Generally these risks are not covered by insurance. Enforcement actions may involve
multiple hospitals in a health system, as the government often extends enforcement actions regarding
health care fraud to other hospitals in the same organization. Therefore, Medicare fraud related risks
identified as being materially adverse as to a hospital could have materially adverse consequences to a
health system taken as a whole.
Liability Under State "Fraud" and "False Claims "Laws. Hospital providers in California also
are subject to a variety of state laws, related to false claims (similar to the FCA or that are generally
applicable false claims laws), anti - kickback (similar to the federal Anti - Kickback Law or that are
generally applicable anti - kickback or fraud laws), and physician referral (similar to Stark). These
prohibitions while similar in public policy and scope to the federal laws have not in all instances been
avidly enforced to date. However, in the future they could pose the possibility of material Adverse impact
for the same reasons as the federal statutes.
30
HIPAA Privacy Requirements. HIPAA addresses the confidentiality 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. 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 add costs and create potentially
unanticipated sources of legal liability.
jHIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly
obtaining or using individually identifiable health information. The penalties range from $50,000 to
$250,000 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
EMTALA. The Emergency Medical Treatment and Active Labor Act ( "EMTALA') is a federal
civil statute that requires hospitals to treat or conduct a medical screening for emergency conditions and
to stabilize a patient's emergency medical condition before releasing, discharging or transferring the
patient. A hospital that violates EMTALA is subject to civil penalties of up to $50,000 per offense and
exclusion from the Medicare and Medicaid programs. In addition, the hospital may be liable for any
j claim by an individual who has suffered harm as a result of a violation.
Licensing, Surveys, Investigations and Audits. Health facilities are subject to numerous legal,
regulatory, professional and private licensing, certification and accreditation requirements. These
include, but are not limited to, requirements of state licensing agencies and the JCAHO. Renewal and
continuation of certain of these licenses, certifications and accreditations are based on inspections or other
reviews generally conducted in the normal course of business of health facilities. Loss of, or limitations
imposed on, hospital licenses could reduce hospital utilization or revenues, or a hospital's ability to
operate all or a portion of its facilities.
Environmental Laws and Regulations. Hospitals are subject to a wide variety of federal, state
and local environmental and occupational health and safety laws and regulations. These include but are
not limited to: air and water quality control requirements; waste management requirements; specific
regulatory requirements applicable to asbestos and radioactive substances; requirements for providing
notice to employees and members of the public about hazardous materials handled by or located at the
hospital; and requirements for training employees in the proper handling and management of hazardous
materials and wastes.
Hospitals may be subject to requirements related to investigating and remedying hazardous
substances located on their property, including such substances that may have migrated off the property.
Typical hospital operations include the handling, use, storage, transportation, disposal and/or discharge of
hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants and
contaminants. As such, hospital operations are particularly susceptible to the practical, financial and legal
risks associated with the environmental laws and regulations. Such risks may result in damage to
individuals, property or the environment; may interrupt operations and/or increase their cost; may result
in legal liability, damages, injunctions or fines; and may result in investigations, administrative
proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions; and
may not be covered by insurance. See "Other Risk Factors —Natural Gas" below.
Business Relationships and Other Business Matters
Integrated Physician Groups. Hospitals often own, control or have affiliations with relatively
large physician groups. For a description of Hoag Hospital's affiliations, see APPENDIX A-
31
pr
"INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL PRESBYTERIAN AND
AFFILIATES — GENERAL — Organizational Structure." Generally, the sponsoring hospital or health
system will be the capital and funding source for such alliances and may have an ongoing financial .
commitment to provide growth capital and support operating deficits.
These types of alliances are generally designed to respond to trends in the delivery of medicine to
better integrate hospital and physician care, to increase physician availability to the community and/or to
enhance the managed care capability of the affiliated hospitals and physicians. However, these goals may
not be achieved, and an unsuccessful alliance may be costly and counterproductive to all of the above -
stated goals.
Integrated delivery systems carry with them the potential for legal or regulatory risks in varying
degrees. The ability of hospitals or health systems to conduct integrated physician operations may be
altered or eliminated in the future by legal or regulatory interpretation or changes, or by health care fraud
enforcement
Indigent Care. Tax - exempt hospitals often treat large numbers of indigent patients who are
unable to pay in full.for their medical care. Typically, urban, inner -city hospitals may treat. significant
numbers of indigents. These hospitals may be susceptible to economic and political changes that could
increase the number of indigents or their responsibility for caring for this population. General economic
conditions that affect the number of employed individuals who have health coverage affects the ability of
patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage
exclusions under local, state and federal health care programs (including Medicare and Medicaid) may
increase the frequency and severity of indigent treatment by such hospitals and otherproviders. It also is
possible that future legislation could require that tax- exempt hospitals and other providers maintain
minimum levels of indigent care as a condition to federal income tax exemption or exemption from
certain state or local taxes.
Physician Medical Staf . The primary relationship between a hospital and physicians who
practice in it is through the hospital's organized medical staff. Medical staff bylaws, rules and policies
establish the criteria and procedures by which a physician may have hispr her privileges or membership
curtailed, denied or revoked. Physicians who are denied medical staff membership or certain clinical
privileges or who have such membership or privileges curtailed or revoked often file legal actions against
hospitals and medical staffs. Such actions may include a wide variety of claims, some of which could
result in substantial uninsured damages to a hospital. In addition, failure of the hospital governing body
to adequately oversee the conduct of its medical staff may result in hospital liability to third parties.
Competition Among Health Care Providers. Increased competition from a wide variety of
sources, including specialty hospitals, other hospitals and health care systems, inpatient and outpatient
health care facilities including surgery centers and imaging centers, long -term care and skilled nursing
services facilities, clinics, physicians and others, may adversely affect the utilization and/or revenues of
hospitals. Existing and potential competitors may not be subject to various restrictions applicable to
hospitals, and competition, in the future, may arise from new sources not currently anticipated or
prevalent
Specialty hospital developments that attract away an important segment of an existing hospital's
admitting specialists may be particularly damaging For example, some large hospitals may have
significant dependence on heart surgery programs, as revenue streams from those programs may cover
significant fixed overhead costs. If a significant component of such a hospital's heart surgeons develop
their own specialty heart hospital (alone or in conjunction with a growing number of specialty hospital
operators and promoters) taking with them their patient base, the hospital could experience a rapid and
32
i
dramatic decline in net revenues that is not proportionate to the number of patient admissions or patient
j days lost. It is also possible that the competing specialty hospital, as a for -profit venture, would not
accept indigent patients or other payors and government programs, leaving low -pay patient populations in
the full- service hospital. In certain cases, such an event could be materially adverse to the hospital. A
moratorium under Stark on physician investment in new specialty hospitals recently expired. A variety of
proposals have been advanced recently to permanently prohibit such investments. Nonetheless, specialty
i hospitals and other outpatient surgery and imaging facilities continue to represent a significant
competitive challenge for full - service hospitals.
Additionally, scientific and technological advances, new procedures, drugs and appliances,
preventive medicine and outpatient health care delivery may reduce utilization and revenues of the
hospitals in the future or otherwise lead the way to new avenues of competition. In some cases, hospital
investment in facilities and equipment for capital- intensive services may be lost as a result of rapid
changes in diagnosis, treatment or clinical practice brought about by new technology or new
pharmacology.
Antitrust While enforcement of the antitrust laws against hospitals has been less intense in
recent years, antitrust liability may arise in a wide variety of circumstances, including medical staff
privilege disputes, payor contiacting, physician relations, joint ventures, merger, affiliation and
acquisition activities, certain pricing or salary setting activities, as well as other areas of activity. The
application of the federal and state antitrust laws to health care is evolving, and therefore not always clear.
Currently, the most common areas of potential liability are joint action among providers with respect to
payor contracting and medical staff credentialing disputes.
Violation of the antitrust laws could result in criminal and/or civil enforcement proceedings by
federal and state agencies, as well as actions by private litigants. In certain actions, private litigants may
be entitled to treble damages, and in others, governmental entities may be able to assess substantial
monetary fines.
Labor Relations and Collective Bargaining. Hospitals are large employers with a wide diversity
of employees. Increasingly, employees of hospitals are becoming unionized, and many hospitals have
collective bargaining agreements with one or more labor organizations. Employees subject to collective
bargaining agreements may include essential nursing and technical personnel, as well as food service,
maintenance and other trade personnel. Renegotiation of such agreements upon expiration may result in
significant cost increases to hospitals. Employee strikes or other adverse labor actions may have an
adverse impact on operations, revenue and hospital reputation.
Hoag Hospital's employees currently are not covered by collective bargaining agreements. See
APPENDIX A –"INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES— EMPLOYEES "
Health Care Worker Classification. Health care providers, like all businesses, are required to
withhold income taxes from amounts paid to employees. If the employer fails to withhold the tax, the
employer becomes liable for payment of the tax imposed on the employee. On the other hand, businesses
are not required to withhold federal taxes from amounts paid to a worker classified as an independent
contractor. The IRS has established criteria for determining whether a worker is an employee or an
independent contractor for tax purposes. If the IRS were to reclassify a significant number of hospital
independent contractors (e.g., physician medical directors) as employees, back taxes and penalties could
be material.
33
i. 0
Staffing. In recent years, the health care industry has suffered from a scarcity of nursing
personnel, respiratory therapists, pharmacists and other trained health care technicians. A significant
factor underlying this trend includes a decrease in the number of persons entering such professions. This
is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of
hospital- specific shortages. Competition for employees, coupled with increased recruiting and retention
costs will increase hospital operating costs, possibly significantly, and growth may be constrained This
trend could have a material adverse impact on hospitals.
Effective January 1, 2004, California implemented nurse staffing ratios for all patient care areas
which requirements are under review in the courts. The impact on California hospitals will vary by
facility. The required staffing, in aggregate, is more costly than prevalent, current staffing patterns. See
APPENDIX A – "INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES— EMPLOYEES."
Professional Liability Claims and General Liability Insurance. In recent years, the number of
professional and general liability suits and the dollar amounts of damage recoveries have increased in
health care nationwide, resulting in substantial increases in malpractice insurance premiums, higher
deductibles and generally less coverage. Professional liability and other actions alleging wrongful
conduct and seeking punitive damages are often filed against health care providers. Insurance does not
provide coverage for judgments for punitive damages.
Litigation also arises from the corporate and business activities of hospitals, from a hospital's
status as an employer or as a result of medical staff or provider network peer review or the denial of
medical staff or provider network privileges. As with professional liability, many of these risks are
covered by insurance, but some are not. For example, some antitrust claims or business disputes are not
covered by insurance or other sources and may, in whole or in part, be a liability of Hoag Hospital if
determined or settled adversely.
There is no assurance that hospitals will be able to maintain coverage amounts currently in place
in the future, that the coverage will be sufficient to cover malpractice judgments rendered against a
hospital or that such coverage will be available at a reasonable cost in the future.
Tax- Exempt Status and Other Tax Matters
Maintenance of the Tax - Exempt Status of Hoag Hospital The tax- exempt status of the Bonds
presently depends upon maintenance by Hoag Hospital of its status as an organization described in
section 501(c)(3) of the Code. The maintenance of such status is contingent on compliance with general
rules promulgated in the Code and related regulations regarding the organization and operation of tax -
exempt entities, including their operation for charitable and other permissible purposes and their
avoidance of transactions that may cause their earnings or assets to inure to the benefit of private
individuals. As these general principles were developed primarily for public charities that do not conduct
large -scale technical operations and business activities, they often do not adequately address the myriad
of operations and transactions entered into by a modem health care organization. Although traditional
activities of health care providers, such as medical office building leases, have been the subject of
interpretations by the IRS in the form of Private Letter Rulings, many activities or categories of activities
have not been fully addressed in any official opinion, interpretation or policy of the IRS.
Hoag Hospital participates in a variety of transactions with physicians either directly or indirectly.
Management believes that the transactions to which Hoag Hospital is a party are consistent with the
requirements of the Code as to tax - exempt status, but, as noted above, there is uncertainty as to the state
of the law.
34
The IRS has periodically conducted audit and other enforcement activity regarding tax- exempt
health care organizations. The IRS conducts special audits of large tax- exempt health care organizations
with at least $500 million in assets or $1 billion in gross receipts. Such audits are conducted by teams of
revenue agents, often take years to complete and require the expenditure of significant staff time by both
the IRS and taxpayers. These audits examine a wide range of possible issues, including tax- exempt bond
financing of partnerships and joint ventures, retirement plans and employee benefits, employment taxes,
political contributions and other matters.
If the IRS were to find that Hoag Hospital has participated in activities in violation of certain
regulations or rulings, the tax- exempt status of such entity could be in jeopardy. Although the IRS has
not frequently revoked the 501(c)(3) tax- exempt status of nonprofit health care corporations, it could do
so in the future. Loss of tax - exempt status by Hoag Hospital potentially could result in loss of tax
exemption of the Bonds and of other tax- exempt debt of Hoag Hospital and defaults in covenants
j regarding the Bonds and other related tax- exempt debt and obligations likely would be triggered. ,Loss of
tax - exempt status also could result in substantial tax liabilities on income of Hoag Hospital. For these
reasons, loss of tax- exempt status of Hoag Hospital could have a material adverse effect on the financial
condition of Hoag Hospital.
In some cases, the IRS has imposed substantial monetary penalties on tax - exempt hospitals in lieu
of revoking their tax- exempt status. In those cases, the IRS and tax- exempt hospitals entered into
settlement agreements requiring the hospital to make substantial payments to the IRS. Given the size of
Hoag Hospital, the wide range of complex transactions entered into by it, and potential exemption risks,
Hoag Hospital could be at risk for incurring monetary and other liabilities imposed by the IRS.
In lieu of revocation of exempt status, the IRS may impose penalty excise taxes on certain
"excess benefit transactions" involving 501(c)(3) organizations and "disqualified persons." An excess
l benefit transaction is one in which a disqualified person or entity receives more than fair market value
from the exempt organization or pays the exempt organization less than fair market value for property or
services, or shares the net revenues of the tax- exempt entity. A disqualified person is a person (or an
entity) who is in a position to exercise substantial influence over the affairs of the exempt organization
during the five years preceding an excess benefit transaction. The statute imposes excise taxes on the
disqualified person and any "organization manager" who knowingly participates in an excess benefit
transaction. These Hiles do not penalize the exempt organization itself, so there would be no direct
impact on Hoag Hospital or the tax status of the Bonds if an excess benefit transaction were subject to
IRS enforcement, pursuant to these "intermediate sanctions" rules.
State and Local Tax Exemption. Until recently, the state of California has not been as active as
the IRS in scrutinizing the income tax exemption of health care organizations. In California it is possible
that legislation may be proposed to strengthen the role of the California Franchise Tax Board and the
Attorney General in supervising nonprofit health systems. It is likely that the loss by Hoag Hospital of
federal tax exemption would also trigger a challenge to its state tax- exemption. Depending on the
circumstances, such event could be material and adverse.
:I
State, county and local taxing authorities undertake audits and reviews of the operations of tax-
exempt health care providers with respect to their real property tax exemptions. In some cases,
particularly where authorities are dissatisfied with the amount of services provided to indigents, the real
property tax- exempt status of the health care providers has been questioned The majority of the real
property of Hoag Hospital is currently treated as exempt from real property taxation. Although the real
i property tax exemption of Hoag Hospital with respect to their core hospital facilities has not; to the
knowledge of management, been under challenge or investigation, an audit could lead to a challenge that
could adversely affect the real property tax exemption of Hoag Hospital.
I 35
It is not possible to predict the scope or effect of future legislative or regulatory actions with
respect to taxation of nonprofit corporations. There can be no assurance that future changes in the. laws
and regulations of state or local governments will not materially adversely affect the financial condition
of Hoag Hospital by requiring payment of income, local property or other taxes.
Maintenance of Tax-Exempt Status of Interest on the Bonds. The Code imposes a number of
requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be
1 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
Treasury, and a requirement that the City file an information report with the IRS. Hoag Hospital has
covenanted in the Loan Agreement that it will comply with such requirements. Future failure by Hoag
Hospital to comply with the requirements stated in the Code and related regulations, rulings and policies
may result in the treatment of interest on the Bonds as taxable, retroactively to the date of issuance. The
City has covenanted in the Indenture that it will not take any action or refrain from taking any action that
would cause interest on the Bonds to be included in gross income for federal income tax purposes.
IRS officials have recently indicated that more resources will be invested in audits of tax- exempt
bonds in the charitable organization sector. The Bonds may be, from time to time, subject to audits by the
IRS. Hoag Hospital believes that the Bonds properly comply with the tax laws. In addition, Bond
Counsel will render an opinion with respect to the tax - exempt status of the Bonds, as described under the
caption "TAX MATTERS." Hoag Hospital has not sought to obtain a private letter ruling from the IRS
with respect to the Bonds, and the opinion of Bond Counsel is not binding on.the IRS. There is no
assurance that an IRS examination of the Bonds will not adversely affect the market value of the Bonds.
See "TAX MATTERS" herein.
Limitations on Contractual and Other Arrangements Imposed by the Internal Revenue Code.
As a tax- exempt organization, Hoag Hospital is limited with respect to their use of practice income
guarantees, reduced rent on medical office space, low interest loans, joint venture programs and other
means of recruiting and retaining physicians. Uncertainty in this area has been reduced somewhat by the
issuance by the IRS of guidelines on permissible physician recruitment practices. The IRS scrutinizes a
broad variety of contractual relationships commonly entered into by hospitals and has issued a detailed
audit guide suggesting that field agents scrutinize numerous activities of the hospitals in an effort to
determine whether any action should be taken with respect to limitations on or revocation of their tax -
exempt status or assessment of additional tax. Any suspension, limitation or revocation of Hoag
Hospital's tax - exempt status or assessment of significant tax liability would have a materially adverse
effect on Hoag Hospital and might lead to loss of tax exemption of interest on the Bonds.
Other Risk Factors
Earthquakes. Many hospitals in California are inclose proximity to active earthquake faults. A
significant earthquake in California could destroy or disable the hospital facility of Hoag Hospital.
California requires each acute care hospital in the state to either comply with new hospital
seismic safety standards or cease acute care operations by January 1, 2008. The January 1, 2008 deadline
will be extended to January 1, 2013 if a hospital shows that capacity lost in the closure of a facility cannot
be provided by another facility in the area or if a hospital agrees that, on or before January 1, 2013,
designated services will be provided by moving into an existing conforming building, relocating to a
newly built building or continuing in the building as retrofitted to comply with the standards.
36
r'
Legislation has been proposed that would extend the January 1, 2008 deadline to January 1,
2020, if the governing body of the hospital submits to the California Department of Health Services by
July 1, 2006, a resolution that the governing body commits to comply with the seismic safety standards by
January 1, 2020. It cannot be predicted whether this legislation will be enacted.
Natural Gas. Hoag Hospital is located in an area subject to the natural gas seepage of methane
and hydrogen sulfide. Methane is a malodorous asphyxiate as well as being highly explosive at certain
concentrations in the air. The gas seepage is the result of geological conditions that permit the vertical
migration of gas from the West Newport Oil Field. This geological condition is in close proximity to the
surface underneath the Lower Campus. To address the potential hazards associated with this gas seepage
Hoag Hospital has designed and constructed a gas extraction and treatment facility capable of extracting
the gas from the underlying strata before it is able to reach the surface. Each year the Hoag Hospital plant
removes approximately 42 million cubic feet of gases from the underlying strata Hoag Hospital utilizes a
portion of the extracted gas to assist in the heating and cooling of its facilities. In 2002, the extraction and
treatment facility was awarded recognition from the Orange County Chapter of the American Society of
Civil Engineers as the `Best Environmental Project of the Year." In addition, the structures on the Lower
Campus, including structures encompassed by the Project, were and will be constructed with gas
mitigation measures including subslab gas impermeable membrane, interior ventilation and interior gas
detection systems. See APPENDIX A – INFORMATION CONCERNING HOAG MEMORIAL
HOSPITAL PRESBYTERIAN AND AFFILIATES— FACILITIES DESIGN AND CONSTRUCTION –
The Project."
Risks Related to Outstanding Variable Rate Obligations. The Bonds will be variable rate
obligations, the interest rates on which could rise significantly. Such interest rates vary on a periodic
basis and may be converted to a fixed interest rate. This protection against rising interest rates is limited,
however, because Hoag Hospital would be required to continue to pay interest at the variable rate until it
is permitted to convert the obligations to a fired rate pursuant to the terms of the applicable transaction
documents.
Hoag Hospital has entered into an interest rate swap agreement which will be subject to periodic
"mark -to- market" valuations and at any time may have a negative value to Hoag Hospital. The Swap
coumterparty may terminate the Swap upon the occurrence of certain "termination events" or "events of
default" Hoag Hospital may terminate the Swap at any time. If either the counterparty to the Swap. or
Hoag Hospital terminates any of the Swap during a negative value situation, Hoag Hospital may be
required to make a termination payment to such Swap countemparty, and such payment could be material.
See APPENDIX A– "INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES — SELECTED UTILIZATION AND FINANCIAL
INFORMATION – Indebtedness and Certain Liabilities."
Liquidity. The obligation of Hoag Hospital to purchase certain of its prior obligations upon
optional or mandatory tender is not supported by a liquidity facility or a covenant of Hoag Hospital to
maintain levels of liquid assets (although Hoag Hospital may elect to provide such a liquidity facility in
the future). The Bonds are not subject to optional tender while bearing interest at Auction Rates, but if
any Series of Bonds is converted to another Interest Rate Period subject to optional and/or mandatory
tender, Hoag Hospital is obliged to transfer to the Tender Agent sufficient funds to pay the purchase price
of such Bonds, whether or not such Bonds are successfully remarketed. Any proceeds derived from the
remarketing of such Bonds would be transferred to Hoag Hospital.
There is no such assurance that Hoag Hospital will have sufficient available funds to provide for
the purchase of any such tendered Bonds or prior bonds. Such funds may not be available for various
reasons, including a depletion of Hoag Hospital's reserves or the necessity of liquidating investments in
37
unfavorable market conditions. See APPENDI
MEMORIAL HOSPITAL PRESBYTERIAN AND
FINANCIAL INFORMATION – Self - Liquidity."
A– "INFORMATION CONCERNING HOAG
AFFILIATES - SELECTED UTILIZATION AND
Contributions. Hoag Hospital regularly receives substantial contributions from the Hoag
Hospital Foundation and members of the local community. While Hoag Hospital has an active
contribution development program, there can be no assurances that Hoag Hospital will be the recipient of
substantial contributions in the future. A significant portion of the total cost of the Project (up to $1.00
million) is to be paid from such contributions. Failure to raise this amount would require Hoag Hospital
to modify the Project or provide additional funds from other reserves or sources. Any reduction in
projected philanthropic support, whether in connection with the Project or otherwise, would have a
material adverse impact on the financial condition of Hoag Hospital.
Investments Hoag Hospital has significant holdings in a broad range of investments. Market
fluctuations may affect the value of those investments and those fluctuations may be and historically have
been at times material. For a discussion of Hoag Hospital's investments, see APPENDIX A–
"INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL PRESBYTERIAN AND
AFFILIATES — SELECTED UTILIZATION AND FINANCIAL INFORMATION — Liquidity and
Investment Policy."
Construction Risks. Construction projects are subject to a variety of risks, including but not
limited to delays in issuance of required building permits or other necessary approvals or permits,
including environmental approvals, strikes, shortages of materials and adverse weather conditions. Such
events could delay occupancy. Cost overruns may occur due to change orders, delays in the construction
schedule, changes in scope of development, scarcity of building materials and other factors. Cost
overruns could cause the costs to exceed available funds.
In particular, substantial portions of the Project involve rehabilitation and retrofitting of existing
facilities of Hoag Hospital. In such circumstances, the possibility of cost overruns, scope of work
revisions or inadequate initial estimates of cost of completion of the Project is particularly acute. Also,
substantial components of the Project are in early stages of development where costs have been estimated
based on architects' and engineers' estimates, but plans, specifications and construction drawings have
not been developed and have not been bid to contractors or resulted in construction contracts. See
APPENDIXA– "INFORMATION CONCERNING HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES – FACILITIES DESIGN AND -CONSTRUCTION – The
Project."
Other Future Risks. In the future, the following factors, among others, may adversely affect the
operations of health care providers, including Hoag Hospital, or the market value of the Bonds, to an
extent that cannot be determined at this time.
(a) Adoption of legislation that would establish a national or statewide single -payor health
program or that would establish national, statewide or otherwise regulated rates applicable to hospitals
and other health care providers.
(b) Reduced demand for the services of Hoag Hospital that might result from decreases in
population.
(c) Bankruptcy of an indemnity /commercial insurer, managed care plan or other payor.
A
38
(d) Efforts by insurers and governmental agencies to limit the cost of hospital services, to
reduce the number of beds and to reduce the utilization of hospital facilities by such means as preventive
medicine, improved occupational health and safety and outpatient care, or comparable regulations or
attempts by third -party payors to control or restrict the operations of certain health care facilities.
(e) The occurrence of a natural or man -made disaster that could damage Hoag Hospital's
facilities, interrupt utility service to the facilities, result in an abnormally high demand for health care
services or otherwise impair Hoag Hospital's operations and the generation of revenues from the
i
facilities.
(i) Limitations on the availability of, and increased compensation necessary to secure and
retain, nursing, technical and other professional personnel.
j: TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP (`Bond Counsel "), based upon an analysis
of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the
accuracy of certain representations and compliance with certain covenants, interest on the Bonds is
excluded from gross income for federal income tax purposes under section 103 of the Code and is exempt
from state of California personal income taxes. Bond Counsel is of the further opinion that interest on the
Bonds is not a specific preference item for purposes of the federal individual or corporate alternative
minimum taxes, although Bond Counsel observes that such interest is included in adjusted current
earnings in calculating corporate alternative minimum taxable income. Bond Counsel expects to deliver
an opinion at the time of issuance of the Bonds substantially in the form set forth in APPENDIX E hereto.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from
gross income for federal income tax purposes of interest on obligations such as the Bonds. The City and
Hoag Hospital have made certain representations and have covenanted to comply with certain restrictions,
conditions and requirements designed to ensure that interest on the Bonds will not be included in federal
gross income. Inaccuracy of these representations or failure to comply with these covenants may result in
interest on the Bonds being included in gross income for federal income tax purposes, possibly from the
date of original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these
representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or
to inform any person) whether any actions taken (or not taken) or events occurring (or_ not occurring), or
any other matters coming to Bond Counsel's attention after the date of issuance of the Bonds may
adversely affect the value of, or the tax status of interest on, the Bonds.
In addition, Bond- Counsel has relied, among other things, on the opinion of Stradling Yocca
Carlson & Rauth, a Professional Corporation, counsel to Hoag Hospital, regarding the current
qualification of Hoag Hospital as an organization described in Section 501(c)(3) of the Code. Such
opinion is subject to a number of qualifications and limitations. Bond Counsel has also relied upon
Jrepresentations of Hoag Hospital concerning Hoag Hospital's "unrelated trade or business" activities as
1 defined in Section 513(a) of the Code. Neither Bond Counsel nor counsel to Hoag Hospital has given any
opinion or assurance concerning Section 513(a) of the Code and neither Bond Counsel nor counsel to
Hoag Hospital can give or has given any opinion or assurance about the future activities of Hoag
Hospital, or about the effect of future changes in the Code, the applicable regulations, the interpretation
thereof or the resulting changes in enforcement thereof by the IRS. Failure of Hoag Hospital to be
organized and operated in accordance with the IRS's requirements for the maintenance of their status as
organizations described in section 501(c)(3) of the Code, or to operate the facilities financed by the -Bonds
in a manner that is substantially related to Hoag Hospital's charitable purposes under Section 513(a) of
'
39
,.
• : .
the Code, may result in interest payable with respect to the Bonds being included in federal gross income,
possibly from the date of the_original issuance of the Bonds:
The Interest Rate Period and certain requirements and procedures contained or referred to in the
Indenture, the Loan Agreement, the Tax Agreement, and other relevant documents may be changed and
certain actions (including, without.limitation, defeasance of the Bonds) may be taken or omitted under the
circumstances and subject to the terms and. conditions set. forth in such documents. Bond Counsel
expresses no opinion as to any Bond or the interest thereon if any such change occurs or action is taken or
omitted upon the advice or approval of counsel other than Orrick, Herrington & Sutcliffe LLP.
Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross
income for federal income tax purposes and is exempt from state of California personal income taxes, the
ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a
Beneficial Owner's federal, state or local tax liability. The nature and extent of these other tax
consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner's
other items of income or deduction Bond Counsel expresses no opinion regarding any such other tax
consequences.
Future legislation, if enacted into law, or clarification. of the Code may cause interest on the
Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent the Beneficial
Owner from realizing the full current benefit of the.tax status. of such interest. The introduction or
enactment of any such future legislation or clarification of the Code may also affect the market price for
or marketability of the Bonds. Prospective purchasers of the Bonds should consult their own tax advisers
regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no
opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not
directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment
of the Bonds for federal income tax purposes. It is not binding on the IRS or the courts. Furthermore,
Bond Counsel cannot give and has not given any opinion or .assurance about the future activities of the
City or Hoag Hospital, or about the effect of future changes in the Code, the applicable regulations, the
interpretation thereof or the enforcement thereof by the IRS. The .City and Hoag Hospital have
covenanted, however, to comply with the requirements of the Code.
Bond Counsel's engagement with respect to the Bonds ends with the issuance of the Bonds, and,
unless separately engaged, Bond Counsel is not obligated, to defend the City, Hoag Hospital or the
Beneficial Owners regarding the tax- exempt status of the Bonds in the event of an audit examination by
the IRS. Under current procedures, parties other than the City, Hoag Hospital and their appointed
counsel, including the Beneficial Owners, would have little, if any, right. to participate in, the audit
examination process. Moreover; because achieving judicial review in connection with an audit
examination of tax- exempt bonds is difficult, obtaining an independent review of IRS positions with
which the City or Hoag Hospital legitimately disagree, may not be practicable. Any action of the IRS,
including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an
audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the
Bonds, and may cause the City, Hoag Hospital or the Beneficial Owners to incur significant expense.
APPROVAL OF LEGALITY
Legal matters incident to the issuance of the Bonds are subject to the approving opinion of
Orrick, Herrington & Sutcliffe LLP, as Bond Counsel. Bond Counsel undertakes no responsibility for the
accuracy, completeness or fairness of this Official Statement. Certain other legal matters will be passed
0
Y
upon for the City by the City Attorney, for Hoag Hospital by Stradling Yocca Carlson & Rauth, a
Professional Corporation, and for the Underwriter by its counsel, Foley & Lardner LLP, Chicago, Illinois,
which also undertakes no responsibility for the accuracy, completeness or fairness of this Official
Statement. From time to time Stradling Yocca Carlson & Rauth, a Professional Corporation, represents
the Underwriter and the City in matters unrelated to the Bonds.
INDEPENDENT AUDITORS
The consolidated financial statements of Hoag Memorial Hospital Presbyterian as of August
31, 2004 and 2003 and for the years then ended, included in Appendix B, have been audited by Ernst &
Young LLP, independent auditors, as stated in their report included in Appendix B.
LITIGATION
Hoag Hospital
There is no controversy or litigation of any nature now pending against Hoag Hospital or, to the
knowledge of its officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery
of the Bonds, or in any way contesting or affecting the validity of the Bonds, any proceedings of Hoag
Hospital taken concerning the issuance or sale thereof; the pledge or application of any moneys or
security provided for the payment of the Bonds. There can be no assurance, however, that future
litigation will not have a material adverse effect on Hoag Hospital
As with most health care providers, Hoag Hospital is subject to certain legal actions that, in whole
or in part, are not or may not be covered by insurance (or reinsurance as to certain self-insured risks)
because of the type of action or amount or types of damages requested (e.g., punitive damages), because
of a reservation of rights by an insurance carrier, or because the action has not proceeded to a stage that
permits full evaluation. There are certain legal actions currently pending against Hoag Hospital known to
management for which insurance coverage is uncertain or inapplicable for the above reasons.
Management does not anticipate that any such suits will ultimately result in punitive damage awards or
judgments in excess of applicable insurance limits, or if such awards or judgments were to be entered,
that they would have a material adverse impact on the financial condition of Hoag Hospital.
Other than as described above, there is no litigation of any nature now pending against Hoag
Hospital or, to the knowledge of each Member's respective officers, threatened, which, if successful,
would materially adversely affect the operations or financial condition of Hoag Hospital.
The City
To the knowledge of the officers of the City, there is no litigation of any nature now pending or
threatened against the City, restraining or enjoining the issuance, sale, execution or delivery of the Bonds,
or in any way contesting or affecting the validity of the Bonds, any proceedings of the City taken
concerning the issuance or sale thereof, the pledge or application of any moneys or security provided for
the payment of the Bonds, or the existence or powers of the City relating to the issuance of the Bonds.
RATINGS
Hoag Hospital expects to receive ratings of "AAA" and "Aaa" from Standard & Poor's Ratings
Services, a Division of The McGraw -Hill Companies ("Standard & Poor's') and Moody's Investors
Service ( "Moody's), respectively, for the Bonds, with the understanding that, upon the issuance of the
Bonds, the Policy guaranteeing the scheduled payment of the principal of and interest on the Bonds when
41
to
due will be issued by the Insurer. Standard & Poor's and Moody's assigned underlying ratings on the
Bonds of "AA" and "AO," respectively, without regard to the Policy. Hoag Hospital has furnished to
Standard & Poor's and Moody's certain information and materials concerning the Bonds and itself. No
application was made to any other rating agency for the purpose of obtaining additional ratings on the
Bonds. Any explanation of the significance of such ratings may only be obtained from the rating agency
furnishing the same. Generally, rating agencies base their ratings on such information and materials and
on investigations, studies and assumptions made by the rating agencies themselves. There is no assurance
that the ratings mentioned above will remain in effect for any given period of time or that they might not
be lowered or withdrawn entirely by the rating agencies, if in their judgment circumstances so warrant.
Any such downward change in _or withdrawal of the ratings might have an adverse effect on the market
price or marketability of the Bonds. .
UNDERWRITING
The Bonds are being purchased by Citigroup Global Markets Inc. (the "Underwriter"). Pursuant
to the Purchase Contract for the Bonds, the Underwriter has agreed to purchase the Bonds at a purchase
price of $199,39.0,000 (consisting: of the aggregate principal amount of the Bonds of $200,000,000, less
an underwriter's discount of $610,000). The Purchase Contract for the Bonds provides that the
Underwriter will purchase all of the Bonds, if any are purchased, and contains the agreements of Hoag
Hospital to indemnify the Underwriter and the City. against certain liabilities.
The initial public offering price of the Bonds set forth on -the inside cover page may be changed
without notice by the Underwriter.
MISCELLANEOUS
The foregoing and subsequent summaries or descriptions of provisions of the Bonds, the
Indenture, the Loan Agreement, the Master Indenture, Supplement No. 14 and Obligation No. 14 and all
references to other materials not purporting 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, and reference
is made to said documents for full and complete statements of their provisions. The appendices attached
hereto are a part of this Official Statement. Copies, in reasonable quantity, of the Indenture, the Loan
Agreement, the Master Indenture, Supplement No. 14 and Obligation No. 14 may be obtained during the
offering period upon request directed to the Underwriter and, thereafter, upon request directed to the
corporate bust office of the Trustee.
The information contained in this Official Statement has been compiled or prepared from
information obtained from Hoag Hospital and official and other sources deemed to be reliable and, while
not guaranteed as to completeness or accuracy, is believed to be correct as of the date of this Official
Statement. The City furnished only the information contained under the headings '.THE CITY" and
"LITIGATION —The City" and, except for such information, makes no representation as to the adequacy,
I completeness or accuracy of this Official Statement or the information contained herein. Any statements
i involving matters of opinion, whether or not expressly .so stated, are intended as such and not as
representations of fact
42
This Official Statement has been delivered by the City and approved by Hoag Hospital. The
Trustee has not participated in the preparation of this Official Statement This Official Statement is not to
be construed as a contract or agreement among any of the City, Hoag Hospital and the purchasers or
Holders of the Bonds.
Approved:
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
By: /s/ Jennifer C. Mitaner
Vice President Finance and
Chief Financial Officer
CITY OF NEWPORT BEA
taCH c By: Heffernan
Mayor
This Official Statement has been delivered by the City and approved by Hoag Hospital. The
Trustee has not participated in the preparation of this Official Statement. This Official Statement is not to
be construed as a contract or agreement among any of the City, Hoag Hospital and the purchasers or
Holders of the Bonds.
Approved:
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
�'yy�;
By: /s/ Jennifer C. Mitzner
Vice President Finance and
Chief Financial Officer
A
CITY OF NEWPORT BEACH
By: /s/ John Heffernan
Mayor
This Official Statement has been delivered by the City and approved by Hoag Hospital. The
Trustee has not participated in the preparation of this Official Statement This Official Statement is not to
be construed as a contract or agreement among any of the City, Hoag Hospital and the purchasers or
Holders of the Bonds.
CITY OF NEWPORT BEACH
By: /s/ John Heffernan
Mayor
Approved:
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
i
1
By: /s/ Jennifer C. Mitzner
Vice President Finance and
Chief Financial Officer
i
j
I
I
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R'IHS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX A
INFORMATION CONCERNING
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
AND AFFILIATES
The information contained in this Appendix A has been obtained from Hoag Memorial Hospital Presbyterian.
TABLE OF CONTENTS
Page
�
GENERAL.............................................................................. .........................................................
.................. l
� History ....................................................................................................................................................
l
HospitalFacilities ............................................... . ...................................................................................
l
Organizational Structure .------------.------..-------------'----.,.%
� ' ��
'
'Me Hoag Hospital Foundation ................................................................................................................
}
iOther Joint Ventures ...............................................................................................................................
}
! Integrated Physician Grvny Relationship ................................................................................................
4
�HOSPITAL SERVICES .......................................................................................................................................
4
� �Description of Services ...........................................................................................................................
4
| Centers o[Excellence .---.—.--------.'...—.---..-----------'----'''5
Other Services .................................... i-: ................ : ......... .......................................................................
7
! Bed Distribution ......................................................................................................................................
9
'
MEDICAL STAFF ........... : ...................................................................................................................................
9
SERVICE AREA AND ------.—_—`--.—.------_--....—..,.----ll
ServiceArea .........................................................................................................................................
ll
Market Share and Competition ...............................................................................................................
l%
Demographics.......................................................................................................................................
l%
FACILITIES DESIGN AND CONSTRUCTION .................................................................................................
l}
� � The Master Plan ....................................................................................................................................
lJ
�The Project ...........................................................................................................................................
l4
SELECTED UTILIZATION AND FINANCIAL INFORMATION .....................................................................
l7
Sources o[ Patient Services Revenue .....................................................................................................
l7
HistoricalUtilization ..................................... : .......................................................................................
l8
Summary o[ Financial information ........................................................................................................
ls
Management's Discussion and Analysis of Financial Information ..........................................................
%l
Liquidity and Investment Policy ............................................................................................................
%3
Indebtedness and Certain Liabilities ......................................................................................................
%5
ExistingLiquidity Facility ....... : .............................................................................................................
%0
Self Lkluidity—.-----.--.--.^—..------.--..-----'. .--........---.%0
Capitalization........................................................................................................................................
%0
�
Estimated Debt Service Coverage .................................................................. ......... .
............................. %7
��D ..--.-------..—.------� ..---...—.—'..%7
| ----�������� ---��'---_— �' � —�'
�
� Corporate Structure ...............................................................................................................................
%7
Management -------.---..—,.—..-----'.'.------.—.—_--..---...%8
8&{p[011B63 ....................................................................................................................................................
JU
�
LEGAL & REGULATORY MATTERS .............................................................................................................
J8
|
�
x
� ' ��
GENERAL
History
Hoag Memorial Hospital Presbyterian (the "Corporation') was incorporated as a nonprofit corporation
under the laws of the State of California on May 22, 1944. The Corporation is currently operating as a nonprofit
public benefit corporation under the laws of the State of California. The Corporation is an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code'), and is not a private foundation
under Section 509 of the Code. The initial finding for the Corporation was provided in half by the George Hoag
Family Foundation and in half by fiords raised from the community through the Presbyterian Church.
Hospital Facilities
The Corporation established a nonprofit acute care hospital (the "Hospital") licensed for 75 beds in the City
{ of Newport Beach, California (the "City') in 1952. The Hospital underwent major expansions in 1969, 1974 and
1990 and is currently licensed for 409 general acute care beds. Further major improvement projects have been
undertaken in recent years and are ongoing. See "The Project" below. As of January 1, 2005, there were over 1,000
members on the Hospital's medical staff. The Hospital is licensed by the Department of Health Services of the State
Iof California as a general acute care hospital and is accredited by the Joint Commission on Accreditation of
Healthcare Organizations ( "JCAHO'I.
The primary Hospital facility is on a 38-acre parcel in Newport Beach in a campus -like setting of 35
buildings which total approximately 883,000 square feet and approximately 2,517 parking spaces. The Corporation
has funded previous improvements from its own resources and the proceeds of loans from prior revenue bond issues
of the City, outstanding as of May 31, 2005, in the aggregate principal amount of $316,000,000. Most recently, the
Corporation utilized the proceeds of the City's $125,000,000 Variable Rate Demand Revenue Bonds (Hoag
Memorial Hospital Presbyterian) 1999 Series A, B and C (the "1999 Bonds'), and additional monies to find
construction of the Sue and Bill Gross Women's Pavilion, replacement of certain Hospital infrastructure and other
general capital expenditures. Proceeds of the 1999 Bonds are fully expended. The expansion project being financed
with proceeds of the Bonds is a continuation of the project financed in part with proceeds of the 1999 Bonds and
includes other new improvements to the Hospital campus. See "The Project" below.
The Corporation provides a wide range of medical, surgical, diagnostic and therapeutic services, and has
established specialty centers referred to as Centers of Excellence in Heart and Vascular, Cancer, Orthopedics and
Women's Health The Corporation operates two free- standing facilities for outpatient surgery, The fast was opened
on the Hospital site in 1972 and contains three operating rooms. The second opened in 1983, is located four miles
from the Hospital in one of four major medical office buildings in Newport Center and contains four operating
rooms. The Corporation also operates six medical office buildings ( "Health Centers') in the adjacent cities of Irvine
(approximately 33,000 square feet), Huntington Beach (approximately 53,000 square feet), Huntington Harbor
(approximately 6,500 square feet), Costa Mesa (approximately 20,000 square feet), Aliso Viejo (approximately
� 33,000 square feet), and Fountain Valley (approximately 8,263 square feet). In January of 1991, the Corporation
opened the Patty and George Hoag Cancer Center (approximately 60,000 square feet) located on the Hospital's
campus in Newport Beach (the "Cancer Center'). The Cancer Center houses three linear accelerators, a day hospital
for chemotherapy, a biotherapeutics laboratory and physician offices for medical oncologists. The Corporation
owns the facilities and land in the Newport Beach, Huntington Beach, Irvine and Aliso Viejo Health Centers, owns
the facility in Huntington Harbor, and leases space in the Newport Center and Costa Mesa facilities.
A -1
Organizational Structure
As defined in the Master Indenture, the Corporation is the sole Member of the Obligated Group. However,
the Corporation is the sole shareholder or is otherwise affiliated with several entities consisting of two wholly -
owned subsidiaries and other affiliates. References herein to the "Obligated Group" or "Members" mean the
Corporation alone as of this date, although other entities may become Members of the Obligated Group in the future
in accordance with the terms of the Master Indenture.
The Corporation is the sole shareholder and appoints one -half of the board members of Coastal Physician
Purchasing Group Inc. (CPPG'), a for -profit corporation which provides shared purchasing services for physicians.
The Corporation is also the sole shareholder and appoints all the board members for Hoag Practice Management Inc.
( "HPMI'), a for -profit corporation which provides physician practice management and billing services to
physicians. The Corporation originally capitalized HPMI with $5 million. This investment has grown to $10
million; however, the Corporation does not plan to expand or grow this line of business. CPPG and HPMI are
collectively referred to herein as "Wholly -Owned Subsidiaries" but are not Members of the Obligated Group and are
not obligated with respect to the Bonds.
The Corporation is also affiliated with the Hoag Hospital Foundation, Newport Imaging Center and
Orthopedic Surgery Center of Orange County, and these entities, together with CPPG and HPMI, are included in the
consolidated financial statements of the Corporation and are referred to herein as "Affiliates." The Affiliates are not
Members of the Obligated Group and are not obligated with respect to the Bonds.
The following chart depicts the organizational structure of the Corporation, the Corporation's Wholly -
Owned Subsidiaries and other Affiliates.
0
A -2
.I
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN AND AFFILIATES
(AS CONSOLIDATED)
FH7(aahtem oriam::. Hoag Othe r
pitam`, Hospital Joint
terian Foundation Ventures
(the ( "Other
atign ")`., "Foundation ") Entities ")
Newport
Imaging
Center
CoastaL
Physicians .
'i Purchasing
Group,
Hoag
Practice
Management,
Inc.
Inc.
Orthopedic
( "CPPG ")
Surgery
Center of
Orange
County
( "OSCOC ")
*The Corporation is the only Member of the Obligated Group.
The Hoag Hospital Foundation
The Hospital receives support through the Hoag Hospital Foundation (the "Foundation') which is a
separate nonprofit 501(c)(3) corporation. The Board of Directors of the Foundation is elected by the Board of
Directors of the Corporation. Under the direction of the Foundation, there are four support groups with a total
membership of over 3,000 men and women. The audited financial statements of the Foundation ate consolidated
with those of the Corporation. The assets and liabilities of the Foundation are primarily included in the temporarily
and permanently restricted net assets in the consolidated financial statements. As of August 31, 2004; the
Foundation's total assets and total net assets were $83.9 million and $78.6 million, respectively. In the fiscal years
2003 and 2004, the Foundation distributed funds to the Corporation for property and capital additions in the amount
of approximately $11.9 million and $8.6 million, respectively. The Foundation is not a Member of the Obligated
i Group and is not obligated with respect to the Bonds.
In addition to the Foundation, there is also an independent 1,250- member Auxiliary that supports the
Hospital with volunteers and contributions.
Other Joint Ventures
The Corporation is a co- general partner in a two-location imaging center, Newport Imaging Center
( "NIC'). One of the imaging centers is located in one of four major medical office buildings in the Newport Center
facility, and the other within one mile from the main Hospital campus. The Corporation has a controlling interest in
the partnership. Additionally, the Corporation is a member of a limited liability company which operates an
outpatient orthopedic specialty surgery center, The Orthopedic Surgery Center of Orange County, LLC (`.'OSCOC').
In connection with a plan to relocate and expand the existing surgery center, the Corporation entered into a
A -3
f
restructuring agreement in June, 2005 with several unrelated parties. In connection with this restructuring, an
unrelated party contributed additional capital to OSCOC for expansion and relocation of the surgery center.
The financial statements of OSCOC and NIC are currently consolidated with those of the.Corporation. The
assets and liabilities of OSCOC and NIC are primarily included in unrestricted net assets in the consolidated
financial statements. As a result of the OSCOC restructuring described above, the. Corporation's ownership interest
in the surgery center decreased from 50% to 20 %; and results of operations of OSCOC will no longer be
consolidated with the results of operations of the Corporation in its financial statements. OSCOC and NIC are not
Members of the Obligated Group and are not obligated with respect to the Bonds.
From time to time the Corporation may modify its level of participation in its existing ventures or consider
additional investments in other joint ventures. All such activities are expected to further the Corporation's strategic
interests.
Integrated Physician Group Relationship
Approximately 29% of the Corporation's and its Wholly -Owned Subsidiaries' Operating Revenue is
"capitation" revenue derived through Greater Newport Physicians Medical Group, hic. ("Greater Newport').
Greater Newport is an Independent Physicians Association ("IPA') with approximately 560 physicians contracted to
treat approximately 101,500 capitated lives. "Capitation" refers to a financing arrangement where an amount is paid
periodically to a health care provider for specified health services, regardless of quantity of services rendered;
amounts paid are based on a fixed "per member per month" payment The Hospital is the primary acute care facility
utilized by Greater Newport physicians. The Corporation has a two-year risk sharing agreement with Greater
Newport, which commenced on January 1, 2003. This risk sharing agreement provides for two additional two-year
extensions. Because both the Corporation and Greater Newport have agreements with managed care organizations
requiring them to provided services to members on a capitated payment basis, the risk sharing agreement allows for
an allocation and reimbursement of costs and expenses between the Corporation and Greater Newport. The
Corporation also contracts to provide outpatient radiology services to Greater Newport's capitated patients.
The Corporation has entered into its own capitated risk sharing agreements covering approximately 39,600
capitated lives. Management of the Corporation expects the number of covered lives to decrease to approximately
30,000 by Fall 2005 due to increases in compensation arrangements other than capitation.
The Corporation also has a five -year agreement, with approximately three and one-half years remaining, to
provide .all management services for Greater Newport Although the Corporation has provided the management
services for Greater Newport since it was established in 1985, there can be no assurance this relationship will be
i continued For more information regarding integrated delivery generally, see `BONDHOLDERS' RISKS —
Business Relationships and Other Business Matters — Integrated Physician Groups" in this Official Statement
HOSPITAL SERVICES
Description of Services
The Hospital is an acute care, not -for -profit hospital located on California's Orange County coastline
between Los Angeles and San Diego. Since opening on September 15, 1952, the Hospital has grown from 75 beds
to 409; from 68 doctors to over 1,000 and from 60 employees to more than 3,000. In fiscal year 2004, the
Corporation treated approximately 25,000 inpatients and over 280,000 outpatients.
The Hospital was recognized in the fill of 2004 as Southern California's highest rated full- servicc acute
care hospital in the first Patients' Evaluation of Performance in California (PER-Q, a large statewide hospital survey.
The Corporation has also eamed several regional and national VHA Awards for operational and clinical performance.
The Corporation provides a full spectrum of health rare services including, but not limited to. -
A4
ro
• cardiology /cardiac surgery • gamma knife
• comprehensive' cancer services • community medicine
• women's services * chemical dependency
• orthopedics and joint replacement • critical care
• radiology (e.g., MRIs and X -rays) • specialty programs such as sleep
• neurological and neurosurgical services ' disorders and pain management
• general acute medical and surgical services • other scientific and technical services
needed to treat patients
Approximately 42% of all inpatients, excluding newborns, come through the emergency care unit (ECU).
Within the last year, the ECU has seen in excess of 56,000 patients, approximately 153 per day, which reflects
continued high census levels. In response to the added demands on the unit, the Corporation plans to expand the
ECU from 30 beds to 52 beds in 2008. See "Me Project" below.
Centers of Excellence
The Corporation supports four specialty centers referred to as "Centers of Excellence" — Hoag Cancer
Center, Hoag Heart and Vascular Institute, Hoag Orthopedic Services and Hoag Women's Health Services — through
which the Corporation provides a wide range of specialized medical, surgical, diagnostic and therapeutic services.
Hoag Cancer Center
Designated by the American College. of Surgeons as a comprehensive community cancer program in late
1990, Hoag Cancer Center is the largest cancer program in Southern California outside of Los Angeles County, as
measured by number of cases reported to the California State Tumor Registry Board As Orange County's leading
provider of radiation therapy and cancer care, the center treats more than 2,200 new patients annually.
Hoag Cancer Center provides:
• Chemotherapy • Biotherapy and immunotherapy
• Radiation therapy • Phemsis
• Sentinel node/lymphatic mapping • Clinical trials
• Gamma knife treatment of brain tumors • Hereditary screening
• Radioactive seed implantation for prostate • Cancer data services
cancer • Cell biology research laboratory
• Stereotactic radiotherapy • Patient and family support programs
• High dose rate brachythyerapy (HDR) • Complementary Care Program - Creative
• Intensity Modulated Radiation Therapy Expressions Art Program, Yoga, T'ai Chi,
(IMRT) Aerobics, Relaxationtmeditation, Brighter
• • TomoTherapy Image, and more
• Site specific programs for cancers of the • Robotics
breast, prostate, gastrointestinal, hng and • Outpatient Treatment Clinic
brain cancers
Hoag Cancer Center has attained five -year survival rates. that exceed national rates as reported by the
National Cancer Institute's Surveillance, Epidemiology and End Results (SEER) program in January 2005.
Hoag Heart and Vascular Institute
Hoag Heart and Vascular Institute delivers comprehensive care for the cardiovascular patient, from
emergency care to complex cardiovascular surgery. The Institute is recognized as a leader in emergency-heart care,
in part, because angioplasty and cardiac stmt placement services are available around the clock, and response times
from the ECU to the cardiac lab are nearly 20% faster than the national average.
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The Institute's cardiac surgeons have recognized expertise in complex valve surgery and mitral valve
repair, in addition to other advanced surgical techniques, including minimally invasive heart surgery, intraoperative
ablation for treatment of anrhythmia and beating heart surgery.
The Hospital was. selected as one of the first hospitals in the United States to provide drug - eluting stents.
The Institute has also been involved in a series of clinical trials for carotid stents to evaluate the potential for these
devices to prevent stroke. The Institute is now one of only three Regional Education Centers in California authorized
to educate other physicians in this new technology.
.Hoag Heart and Vascular Institute specialties include:
• anticoagulation clinic
• cardiac rehabilitation
• cardiac surgery (CABG, complex valve
surgery)
• diagnostic & interventional cardiology
• electrophysiology services
• emergency treatment
Hoag Orthopedic Services
• endovascular diagnosis and therapy
• interventional radiology
• pacemaker & arrhythmia center
• patient & community education .
• research
• vascular surgery
Hoag Orthopedic Services has the largest medical staff in the area, including more than 40 physicians
specializing. in advanced orthopedic and spine procedures, including minimally invasive techniques and total joint
replacement. Based on State of California Office of Statewide Health Planning and Development ( "OSHPD') data,
the Corporation's physicians perform more orthopedic procedures than any other hospital in Orange County, helping
to pioneer new treatments that offer promising alternatives to traditional surgeries.
Hoag Orthopedic Services offers:
• state-of-the,-an diagnostic services
• advanced surgical treatments
• arthroscopic surgery
• partial and total joint replacement
• complex spine/back surgery
• minimally invasive procedures
• . non- surgical treatments
• emergency treatment of injuries
• sports medicine
• clinical research
• rehabilitation services
• community education
• pain management
The Corporation provides an integrative approach to patient care. For example, the Institute for Spine
implements a collaborative effort between the neurosurgeons and orthopedic surgeons. The close partnership
between the medical specialties creates a synergy and has helped distinguish the Corporation among the top spine
surgery centers in California. Patients are provided access to advanced medical techniques and the opportunity to
participate in a variety of clinical trials.
Also, through its total joint program, )ointWorks®, the Corporation combines joint replacement surgery
with patient education and rehabilitation processes to help motivate, encourage and support patients and their
families before, during and after surgery.
Hoag Women's health Services
Recognizing the special healthcare needs of women throughout their lifetime, Hoag Women's Health
Services. delivers care to women of all ages. _
In October 2005, the Corporation expects to open a leading -edge medical facility that will bring a
revolutionary integrated approach to women's health care. The Sue and Bill Gross Women's Pavilion will contain a
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i spectrum of women's health services, such as the Womm's Wellness Center, Hoag Breast Care Center, Hoag Center
for Urinary Continence, osteoporosis screening, menopause counseling and three floors dedicated to maternity
iservices. .
Maternity services will be provided. in 18 state -of- the -art labor, delivery and recovery suites, three
operating rooms for Caesarean sections and a seven-bed antepartum unit for women with pre - delivery risk The new
facility will house an expanded neonatal intensive care unit and mother/baby unit, as.well as expanded areas for fetal
diagnostics, neonatology services and staff support functions.
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The Corporation's OB Education Department offers comprehensive educational programs to prepare the
entire family for their new baby. New parents can access the Corporation's Tender Care Doula Service, which
provides extra help during the first days at home and advice on pregnancy, infant care and breast - feeding from
trained nurses by calling its baby hotline.
Hoag Breast Care Center provides access to screening and diagnostic mammograms, stereotactic biopsies
and surgery by highly trained technologists and physicians who specialize in breast care.
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i Hoag Center for Urinary Continence offers an array of the diagnostic and treatment options for all types of
incontinence and pelvic floor dysfunction.
Hoag Women's Health Services include:
• pregnancy & prepared childbirth • osteoporosis screening & treatment
• neonatal intensive care • women's resource line
• menopause treatment • patient & family education
• minimally invasive surgery • community education
i• breast care & mammography • gynecologic oncology
Other Services
Hoag Hospital Nearoseiences
The Corporation's neurosciences department provides a multidisciplinary approach to treating neurological
diseases and disorders. The Corporation's team includes medical specialists in the fields of neurology, epileptology,
neurosurgery, neuroradiology, neuro oncology, vascular surgery, rehabilitation and psychosocial support.
One of the unique treatment options the Corporation offer; is the Gamma Knife. A premiere facility dedicated
j to noninvasive brain surgery, the Hospital's Gamma Knife is the only one in Orange. County and one of a limited
number of Gamma Knife centers in the United States. Working in coordination with the Hoag Cancer Center, the
Corporation offers cancer care with a high level of specialized patient care for the treatment of brain tumors.
As part of.its neurosciences multidisciplinary approach, the Corporation offers a number of specialized
j programs including the Institute for Spine, Parkinson's and Movement Disorders program, Neurovascular Telemetry
Unit, The Epilepsy Center, Sleep Disorders Center as well as rehabilitation and several specialized support groups.
The Corporation also offers neuroradiology services that enable physicians to identify and treat
neurological disorders. In addition, the Hospital's medical specialists are involved in research to discover new
therapies, drugs and other medical advancements.
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Specialized treatment for neurological diseases and disorders at Hoag Hospital Neurosciences include:
• adult hydrocephalus
• arteriovenous malformations
• brain tumors
• epilepsy
• movement disorders
Community Medicine
• Parkinson's disease
• sleep disorders
• spinal disorders
• stroke
• trlgeminal neuralgia
The Corporation provides charitable community benefit programs that exceed those required by California
law governing community healthcare needs assessments and nonprofit hospital community benefit plans. The
Corporation's Community Benefit Plan consists of programs that are conducted primarily as collaborative
partnerships within Orange County without financial return to the Corporation or expectation of business
augmentation. The Plan is designed to improve access to health care for vulnerable populations and the overall
physical and social health status of local communities. Working with in -kind services and direct monetary
donations to support nonprofit organizations, and focusing on disproportionate unmet health needs, the Community
Benefit Plan addresses primary prevention, chronic disease management and health promotion through:
• patient & family support groups
• financially uncompensated clinical research
• health education classes
• informational programs & materials
• enhancement of access to health care
• screening & immunization programs
• general & emergency medical services for
vulnerable populations
• resource referral services
• culturally and linguistically appropriate
counseling services for at -risk families and
youth
• community partnerships, such as those with the
Share Our Selves (SOS) Free Medical and Dental
Clinic and Adult Day Services of Orange County
• culturally and linguistically appropriate
community case management for vulnerable
populations
• support and creation of public health partnership
programs targeting specific entities (i.e., domestic
violence, teen pregnancy, diabetes, obesity, and
youth gangs)
• health ministries parish rinse program
• senior transportation programs
Bed Distribution
The Corporation's Hospital is currently licensed for 409 beds, 354 of which are currently staffed and
j operating. The following table shows the existing distribution of licensed and staffed beds by bed category and the
.I proposed distribution of licensed and staffed beds following the completion of the Sue and Bill Gross Women's
Pavilion (`Post Pavilion'), as well as the completion of the Loag -Term Project ( "Post Project") (see "The Project"
Wow). The Corporation has submitted requests to change the licensed bed complement following completion of
the Pavilion; management expects the changes to be obtained in due course.
Licensed Beds Staffed Beds
Post Post Post Post
Current Pavilion Pro ect Current Pavilion Proiect
Medical/Surgical 271 353 318 226 265 282
Intensive Care 37 37 62 29 29 50 .
Matemity/LDR 59 70 70 59 74 74
Intensive Care Nursery 12 21 21 12 21 21
Pediatrics 9 9 9 9 9 9
Chemical Dependency =a =ZL —21 J2 _U -Q
Total 409 511 501 354 417 _ 455
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MEDICAL STAFF
j As of January 1, 2005,:the Hospital's Medical Staff was comprised of 1,016 physicians, dentists and
podiatrists, including 609 active category staff, 238 affiliate category staff, 146 provisional category staff, 13 consulting
icategory staff and 10 temporary category staff. Active category staff members include physicians, dentists and
podiatrists who utilize the Hospital's services and facilities and participate in the medical activities of the hospital on a
regular basis. Active category members of the Medical Staff have voting tights. All physicians, dentists and podiatrists
joining the Medical Staff must first complete a minimum of one or maximum of two years in the provisional category,
during which time their care is subject to review by designated proctors. At the end of the provisional category, a
member may proceed to active category status (minimum patient contact requirements), affiliate category status
(limited in the allowable number of patient contacts in a two-year period), or may be terminated due to failure to meet
attendance requirements. The consulting staff consists of recognized specialists who are well-known in the community
for their special medical skills but have limited or no participation in the Hospital's medical activities. Temporary
category staff are those physicians, dentists and podiatrists who have met Medical Staff membership and privilege
qualifications and are awaiting appointment by the Corporation's Board of Directors.
1
The average age of the active medical staff is approximately 48.1 years. For the fiscal year ended
August 31, 2004, the top 20 admitting physicians, whose average age was 41.2 years, accounted for approximately
29a/o of the Hospital's inpatient admissions, excluding newborns as separate admissions.
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The following chart includes all physicians on the Hospital's Medical Staff as of January 1, 2005.
Specialty Number of Physicians
Critical Care
7
Anesthesia
42
Dental/Oral Surgery
26
Dermatology
30
Family Medicine
111
General Surgery
29
Pediatric Surgery
7
Colon - Rectal Surgery
4
Thoracic Surgery
2
Cardiovascular Surgery
3
Vascular Surgery .
10
Allergy & Immunology
12
Cardiology
46
Endocrinology
10
Gastroenterology
26
Infectious Diseases
12
General Internists
103
Nephrology
13
Oncology
25
Pulmonologists
23
Rheumatologists
7
Neurologists
13
Neurosurgeons
14
Obstetncs/Gynecology
63
Ophthalmology
48
Orthopedic Surgery
32
Otolaryngology
25
Pathology
8
Pediatrics
73
Perinatology/Neonatology
19
Physical Medicine/Rehab
8
Plastic Surgery
59
Podiatry
14
Psychiatry
18 -
Radiology
31
Radiation Oncology
8
Urology
14
-Emergency Medicine
21
TOTAL
1,016
Note: Pediatric Allergists, Pediatric Gastroenterologists, and Pediatric Cardiologists have been included in the totals for Allergy,
Gastroenterology, and Cardiology.
Source: Corporation
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SERVICE AREA AND COMPETITION
Service Area
The Hospital is located in Newport Be" California, approximately 50 miles south of Los Angeles and 90
miles north of San Diego, on the coast of the Pacific Ocean. The Corporation defines the Hospital's service area by
patient origin, geographic accessibility.to the Hospital and location of a majority of the physician offices of its
Medical Staff. The Hospital's Primary . Service Area includes Newport Beach/Corona Del Mar, Costa Mesa,
Huntington Beach, Irvine, Fountain Valley and Laguna Beach The Hospital's patient discharges from its Primary
Service Area averaged 67% of its total inpatient discharges for fiscal years 2002 -2004;
Hoag Hospital Service Areas
Hoag Hospital Service Areas
■ Hoag Health Centers
Primary Q.eomizen
South . North
Primary Service Area includes Newport Beach/Corona Del Mar, Costa Mesa, Huntington Beach, Irvine, Fountain Valley, and
Laguna Beach
South Service Area includes Alm Viejo, Capistrano Beach, Dana Point, Foothill Ranch, Ladea Ranch, Laguna Hills, Laguna
Niguel, Lake Forest, Mission Viejo, Rancho Santa Margarita, San Clemente, San Juan Capistrano, and Trabuco Canyon.
North Service Area includes Buena Park, Cypress, Garden Grove, La Palma, Los Alamitos, Wesmrinster, Seal Beach, and
Stanton.
Central Service Area includes Orange, Santa Ana, Anaheim, Brea, Fullerton, La Habra, Tustin, and Yorba Linda
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Market Share and Competition
The following illustrates. market sham data for some of the general acute ewe providers of service for the
Hospital's Primary Service Area for the calendar years 2001, 2002 and 2003. This data is based solely upon discharges
from the Hospital's Primary Service Area which am determined by zip code The 2003 data is the most recent data
available. The Hospital's market share has remained the highest in the service area over the three years shown.
Hospital
2001
2002
2003
Hoag Memorial Hospital Presbyterian
34.3%
33.0%
32.3%
Fountain Valley Regional Hospital & Medical CentWl
10.7
10.8
10.5
Irvine Regional Hospital"'
7.3
7.5
7.8
Orange Coast Memorial Medical Center123
71
7.2
7.1
Huntington Beach Hospital & Medical Centei4"
4.9
4.5
4.6
St Joseph Hospital- Orange'41
4.3
3.9
3.9
University of California - Irvine Medical Centerl'I
3.3
3.8
3.8
Kaiser AnaheimE63
2A
2.4
2.5
Western Medical Center- Santa Anarl
2.3
2.4
2.5
South Coast Medical Centertl
1.9
2.2
2.2
Saddleback Memorial Medical Center[21
1.6
1.7
1.9
Coastal Communities HospitalM
1.3
1.6
1.6
Mission Hospital Regional Medical Cente r[41
1.2
1.6
1.4
Source for Market Share Information: Office of Statewide Health Planning
mid DcvdopmeK
State of California
The following footnotes each indicate the name of the system or organization that owns or operates the referenced facility.
P] Tenet
[2] Memorial Care
[31 Vanguard Health System
[4] St. Joseph Health System
I'] University of Calif rnia
161 Kaiser Foundation Hospitals
M Integrated Healthcare Holdings Inc.
Adventist Healthcare
Demographics
The following table presents expected populatirin growth in Orange County. The Hospital's primary
Service Area is expected to experience an approximately 8.5% increase in population through 2009.
Oranm County Area 2004
20"
% Change
Primary Service Area 647,250
702,430
8,5%
North 494,617
512,645
3.6
Central 1,306,531
1,364,505
4.4
South 552282
601,945
9.0
Total Orange County 3,000,680*
3,181,425*
6.0%
•Source: Medstat Market Expert.
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The table below summarizes average income per household for the City of Newport Beach and: each of the
Hospital's Service Areas (as referenced below and defined above).
Newport Beach
'Number of Households
% Household Income > $75K.
% Household Income > $100K
Primary Service Area
Number of Households
• Household Income > $75K
• Household Income > $100K
South Service Area
Number of Households
% Household Income > $75K
% Household Income > $100K
North Service Area
Number of Households
• Household Income > $75K
• Household Income > $100K
Central Service Area
Number of Households
% Household Income > $75K
% Household Income> $100K
I'l The Hospital is located in Newport Beach.
Source: Medstat Market Expert.
The Master Plan
37,985
59.3%
46.5%
247,203
49.2%
33.9%
202,680
53.8%
37.9%
151,648
33.7%
19.6%
376,131
35.9%
22.1%
FACLUTIES DESIGN AND CONSTRUCTION
The Corporation's Board of Directors developed a Master Plan of Development (the "Master Plan") for the
Hospital in the early 1990's. The Master Plan was designed to meet the Corporation's mission and strategy to serve
its community and includes a comprehensive capital improvement program which has been refined over time as
various elements have been constructed Implementation of the Master Plan's capital improvements set forth below
also results in the Hospital complying with the State of California's seismic requirements (discussed below).
' The Master Plan capital improvements projected through 2012 include approximately $737 million of new
buildings, renovation, improvements and equipment throughout the Hospital campus (the "Project"), of which
approximately $211 million of expenditures have been incurred prior to May 31, 2005. The major elements of the
Project are described below. Proceeds of the Bonds will be used to finance a portion of the Project; management
expects to use Bond proceeds to finance expenditures on Project elements to be incurred in the upcoming 18 -24
months as well as to reimburse the Corporation for more than $100 million of previous expenditures. The majority
of the Bond proceeds will be used for the Pavilion, the Cogeneration Plant and the Outpatient Building and adjacent
parking structure (each described in greater detail below). The Corporation expects to pay for the remaining Project
expenses from existing and future operating revenues and from future charitable contributions.
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The Project
Major Project elements include
(1) Completion of the Sue and Bill Gross Women's Pavilion (the "Pavilion') including expansion of
surgical and bed capacity . In late 2005, the Corporation will open its new Women's Pavilion, an all- encompassing
center that combines progressive technology with patient education and comfort. The building is a seven -story
approximately 320,000 square-foot facility that will add 102 licensed beds and provide expanded clinical space.
The Pavilion will serve as the new main entrance for the Hospital and will house more than 15 new and existing
services, including Women's Health Services, laboratory Services, Patient Registration, Patient Education and a
hospitality center, as well as 6 new operating rooms. Additionally, the Pavilion has been designed to address
variables such as evolving technologies and healthcare delivery modalities, population growth, aging demographics
and healthcare needs specific to Orange County residents. The Pavilion is substantially constructed and is currently
being equipped and furnished. The total estimated costs of the Pavilion is approximately $212 million.
(2) Cogeneration Plant. Construction of the Cogeneration Plant, a base - loaded plant to generate
power, began in September 2003. The new two-story approximately 24,000 square -foot facility is located on the
Hospital's lower campus and houses generators capable of supplying as much as 4.5 megawatts of power (enough to
power approximately 4,000 homes). This generating capacity will not only meetShe needs of the existing Hospital
campus, but is also expected ter provide energy for the Pavilion and fume Project facilities. The Cogeneration Plant
will capture its waste heat and convert it to chilled and hot water which will be used for air conditioning and heating
systems of the Hospital to maximize energy output. Construction of the Cogeneration Plant has been completed and
all major equipment has been installed and tested. Commissioning and performance testing are scheduled to take
place in late summer of 2005. The total estimated cost of the Cogeneration Plant is approximately at $32 million.
(3) Outpatient Building and Parking. Beginning in 2006, an Outpatient Services Building and
adjacent parking structure will be built along side of the Cancer Center on the Hospital's lower campus. This
facility will expand outpatient cancer treatment facilities as well as provide needed space for growing neuroscienres
and increased outpatient imaging services. By late 2007, this new facility will allow a significant part of the
Hospital's outpatient imaging, chemotherapy, Gamma Knife, other radiation oncology and additional outpatient
treatment services to be redirected to the lower campus entrance and parking structure. The total estimated cost of
the Outpatient Building and adjacent parking structure is approximately $73 million.
(4) Heart and Vascular /Critical Care Tower (the "South Building'). Once the Gamma Knife and
other outpatient services are relocated to the new lower campus Outpatient Building, construction is expected to
begin on the South Building on the upper campus to house Hoag Heart and Vascular Institute and other critical care
facilities. The new South Building will provide space for extensive cardiovascular program enhancements including
dedicated cardiovascular.operating rooms, expanded cash labs and eudovascular suites. The South Building facility
will also provide much needed expansion in critical care beds beyond the cardiovascular area and additional
administrative offices. The South Building project will provide an additional 40 critical care and telemetry beds
resulting in a net gain of 25 critical care beds. The total estimated cost of the South Building is approximately $285
million.
(5) Seismic Upgrades.. California legislation, Senate Bill 1953 ( "SB 1953'), requires all acute care
hospitals to be upgraded to new seismic standards. SB 1953 requires hospitals to comply with the following
deadlines: by 2008, all general acute-care inpatient buildings at risk of collapsing during a strong earthquake must
be rebuilt,. retrofitted or closed; and by 2030, all hospital buildings in. the State must be operational following a
major earthquake. Five -year extensions to. 2013 are. available if certain criteria are met. In May, 2005, the
California Senate passed a new bill, SB 167, which, if approved by the California Assembly, would change the
seismic safety requirements for hospitals by exempting hospitals from..having to meet basic seismic safety
requirements by 2008, provided that they meet all state seismic requirements by 2020, instead of the current
deadline of 2030. In conjunction with the infrastructure replacements and upgrades, the Hospital will be retrofitted
to meet most of the new seismic standards. However, pending the outcome of the proposed legislation, the
Corporation plans to file for a five -year extension until 2013 to meet the new SB 1953 standards if SB 167 is not
passed into law. Estimated cost of seismic upgrades or retrofits are included in specific Project element cost
estimates.
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(6) Remodel and Expansion Projects. Several areas of the Hospital will be remodeled in concert with
the infrastructure and seismic upgrades. These areas include Radiology; Nuclear Medicine; Surgical Admitting
! Unit; Ultrasound; Pharmacy; Cardiology; Materials Management; Kitchen and Cafeteria; and Medical Records.
Additionally, the ECU will be expanded from 30 to 52 beds. A significant number of these changes relate to
facilities on the lower campus of the Hospital, including parking lot construction and relocation and expansion of the
child care center. This work will involve significant excavation and demolition. All of the lower campus projects
require permits from the California Coastal Commission which have not yet been obtained. See "Project
Approvals" below. The total estimated.cost of these assorted remodel and expansion projects is approximately $57
i million.
(7) West Building Renovation. This refers to the continuation of the program to upgrade the entire
existing West Building to meet the requirements of SB 1953. In conjunction with the required seismic upgrades, the
aging infrastructure of the West Building is being upgraded or replaced to meet the Hospital's anticipated needs. In
addition, the finishes on each of the floors are being modernized and infi snucture for new technologies is being put
in place. The renovation of the tenth through sixth floors has been completed. Renovation of the fifth floor is
currently underway. The estimated total rerna ung cost of the West Building renovation is approximately $67
million.
(8) Routine Capital Improvement Expenditures. A portion of the capital expenditures of the
Corporation during fiscal years 2005, 2006, and 2007 is expected to be funded from proceeds of the Bonds. The
estimated cost of these routine capital expenditures in total is approximately $11 million although.not all of that may
be funded with proceeds of the Bonds.
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The artist rendering below depicts the planned transformation of the Hospital Campus over the next several
years in accordance with the Master Plan.
OaArarecoxer bwldiiy.NsNiaaaWfatemal "Apatkiael
Project Approvals. Pursuant to a Development Agreement between the Corporation and the City, adopted
in 1994, the Corporation has a vested right to develop the Hospital site in accordance with its Master Plan, approved
by the City in 1992, subject to compliance with the Development Agreement, supplemental requirements of the
California Environmental Quality Act ( "CEQA ") and certain other conditions, including preparation of certain
traffic report studies for consideration by the City. The Development Agreement may be amended to relocate
allowed square feet of development from the Hospital's lower campus to the upper campus. An updated
environmental impact report is expected to be completed as part of the amendment process. The Project will be
developed in compliance with the Development Agreement and the Master Plan. However, building permits are
required prior to construction. In addition, State approval is required for the design of new inpatient and certain
other facilities. In addition, as currently planned, the size of the South Building will exceed the aggregate square
footage allowed on the upper campus of the Hospital under existing City land use approvals, including the
Development Agreement The Corporation is processing with the City a revision to these approvals which is
expected to allow a transfer of 225,1100 square feet of building from that allowed on the lower campus to the upper
campus. The City has engaged a consultant to prepare an environmental impact report in connection with these
changes, and the Corporation expects these changes to be considered by the City by early 2006. If the Corporation
does not receive this proposed modification to its land use entitlement with the City, the South Building and other
project elements will be redesigned and development will occur within the existing entitlement applicable at the
time, if at all. Buildings on the lower campus are subject to review by the California Coastal Commission.
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Moreover, significant elements of the Project will need to be licensed by the State upon completion. There can be
no assurance that the required approvals will be obtained in a timely manner or at all.
Cost Estimates. Construction of portions of the Master Plan Project is expected to occur over a ten -year
period. In addition to Bond proceeds and eamings thereon, the Corporation expects to fund certain Project costs
through charitable contributions. The Corporation expects to receive as much as $100 million in charitable
contributions, a portion of which may be used towards costs of the Project. The remainder of the Project costs is
expected to be funded from cash flow from operations and investment income during the course of construction and
from existing resources. The estimated contribution from cash flow has been derived from certain cash flow plans
prepared by the Corporation's finance staff. In the event such sources are inadequate, the Corporation would expect
to fund costs from existing reserves, or to modify elements of the Project, if feasible. For a further discussion of
certain risks relating to cost overruns on the Project, please refer to the section of this Official Statement entitled
BONDHOLDERS' RISKS — Other Risk Factors — " Contributions" and "Construction Risks."
The Corporation has estimated the costs of the improvements to be financed with the proceeds of the Bonds
and other Project elements based on architects' and engineers' estimates. It is expected that the work for that portion
of improvements to be constricted in and around the existing Corporation activities will be conducted in a manner
to minimize disruption to Corporation services. While this effort is expected to be successful, it will involve
significant increased cost and occasional disruption to construction work The degree of this disruption is hard to
predict, and may cause costs to exceed the estimates shown
The .Corporation has not let contracts for a portion of the Project, including some elements expected to be
funded with proceeds of the Bonds, primarily related to the lower campus building and remodel projects. Therefore,
the Corporation's estimates are imprecise. In addition, the scope of some Project components is subject to periodic
internal review and revision which may cause estimates to increase. Especially in light of the substantial
rehabilitation work to be conducted, it is possible the Corporation will experience significant cost ovemms with
respect to part or all of the Project, and such overruns could be in amounts which would in the aggregate be material
to the Corporation's operating results. While contingencies have been included in all Corporation cost estimates set
forth here, it is possible that the scope of some Project elements may need to be reduced if actual costs exceed
estimates.
SELECTED UTILIZATION AND FINANCIAL INFORMATION
Sources of Patient Services Revenue
The Corporation receives payment for its services from several sources with a variety of payment
arrangements. Insurance payments include preferred provider organizations (PPOs), health maintenance
organizations (HMOs) and indemnity agreements. The federal govertmient, through the Medicare program, pays for
most services for persons over 65 .years old and the State of California pays for indigent patients through the Medi-
Cal program. Orange County also funds certain indigent patients through the Medical Services for the Indigent
(MSI) program and other patients through the Cal- Optima program. The following table shows the Corporation's
distribution of gross patient revenue by payor for the past three fiscal years.
(1) Includes capitated commercial and Medicare.
For a.further discussion of Medicare, Medi -Cal and other payors, please refer to the section of this Official
Statement entitled `BONDHOLDERS' RISKS."
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Fiscal Year Ended August
31,
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2002 2003
2004
Medicare
33.4% 33.9%
33.9`/0
PPO
27.8 28.1
28.1
HMO (1)
31.3 30.1
30.7
Medi -Cal & MSI
3.0 4.1
3.6
Other
4.5 3.8
3.7
(1) Includes capitated commercial and Medicare.
For a.further discussion of Medicare, Medi -Cal and other payors, please refer to the section of this Official
Statement entitled `BONDHOLDERS' RISKS."
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Historleal UtilizAtion
The Corporation's utilization statistics for the past three fiscal years are presented below
Total Outpatient Volume
Summary of Financial Information
The following summary of revenues and expenses and balance sheets of the Corporation and its Wholly -
Owned Subsidiaries for the fiscal years ended August 31, 2003 and 2004 is derived by management from the
consolidating statements of operations and balance sheets to the consolidated financial statements of the Corporation .
and Affiliates, which is included with the unaudited "Other Financial Information" following the audited
consolidated financial statements in APPENDIX B. For purposes of analysis by the Corporation's management, the
financial information of the Corporation and its Wholly -Owned Subsidiaries is consolidated and presented in the
column named "Hospital" in the consolidating statements of operations and balance sheets to the consolidated
financial statements of the Corporation and Affiliates, which is included with the unaudited "Other Financial
Information" following the audited consolidated financial statements in APPENDIX B. At August 31, 2003, the
percentage of Income from Operations, Excess of Revenue over Expenses, Total Assets and Total Net Assets
attributable to the Corporation's Wholly -Owned Subsidiaries (which are not Members of the Obligated Group)
totaled approximately -0.4 %, -0.2 %, 0.6% and 0.7 %, respectively. At August 31, 2004, the percentage of Income
from Operations, Excess of Revenue over Expenses, Total Assets and Total Net Assets attributable to the
Corporation's Wholl Owned Subsidiaries totaled Corp Y approximately 0.3%,0.1%,0.5% and 0.6 °k, respectively.
The summary of financial information should be read in conjunction with the consolidated financial
statements and related notes contained in APPENDIX B, which have been audited by Ernst & Young, LLP,
independent auditors. At August 31, 2003, the percentage of consolidated income from Operations, Excess of
Revenue over Expenses, Total Assets and Total Net Assets attributable to Wholly -Owned Subsidiaries and other
Affiliates (which ate not Members of the Obligated Group) totaled approximately 8 %, 3 %, 7% and 10 %,
respectively. At August 31, 2004, the percentage of consolidated Income from Operations, Excess of Revenue over
Expenses, Total Assets and Total Net Assets attributable to Wholly-Owned Subsidiaries and other Affiliates totaled
approximately 12 %, 5 %, 7% and 9 %, respectively.
The financial information for the nine months ended May 31, 2004 and 2005, is derived by management
from the internal unaudited financial statements of the Corporation and its Wholly -Owned Subsidiaries for such
periods. The financial data for the nine months ended May 31, 2004 and 2005 is unaudited, but includes all
adjustments which the Corporation's management consider; necessary to fairly present such information in
A -18
Fiscal
Year Ended Aumt-H
2,�2
2003
2201
Licensed Beds — acute care
409
409
409
Inpatient Statistics
Staffed Beds — acute care
353
353
354
Admissions — acute care
24,768
24,387
24,841
Average Length of Stay (days)
4.20
4.37
4.24
Patient Days — acute care
104,235
106,742
105,057
Birtbs
4,777
4,748
4,716
Percent Occupancy (staffed bed)
80.6%
82.8%
81.0%
Avenge Daily Census — acute
285
292
288
Case Mix Index —Alf
1.25
1.36
1.38
Case Mix Index — Medicare
1.60
1.71
1.71
Outpatient Statistics
Emergency Visits
57,188
56,660
56,505
Outpatient Visits
195,615
208,499
214,269
Outpatient Surgeries
12,152
11,,775
11,409
Total Outpatient Volume
Summary of Financial Information
The following summary of revenues and expenses and balance sheets of the Corporation and its Wholly -
Owned Subsidiaries for the fiscal years ended August 31, 2003 and 2004 is derived by management from the
consolidating statements of operations and balance sheets to the consolidated financial statements of the Corporation .
and Affiliates, which is included with the unaudited "Other Financial Information" following the audited
consolidated financial statements in APPENDIX B. For purposes of analysis by the Corporation's management, the
financial information of the Corporation and its Wholly -Owned Subsidiaries is consolidated and presented in the
column named "Hospital" in the consolidating statements of operations and balance sheets to the consolidated
financial statements of the Corporation and Affiliates, which is included with the unaudited "Other Financial
Information" following the audited consolidated financial statements in APPENDIX B. At August 31, 2003, the
percentage of Income from Operations, Excess of Revenue over Expenses, Total Assets and Total Net Assets
attributable to the Corporation's Wholly -Owned Subsidiaries (which are not Members of the Obligated Group)
totaled approximately -0.4 %, -0.2 %, 0.6% and 0.7 %, respectively. At August 31, 2004, the percentage of Income
from Operations, Excess of Revenue over Expenses, Total Assets and Total Net Assets attributable to the
Corporation's Wholl Owned Subsidiaries totaled Corp Y approximately 0.3%,0.1%,0.5% and 0.6 °k, respectively.
The summary of financial information should be read in conjunction with the consolidated financial
statements and related notes contained in APPENDIX B, which have been audited by Ernst & Young, LLP,
independent auditors. At August 31, 2003, the percentage of consolidated income from Operations, Excess of
Revenue over Expenses, Total Assets and Total Net Assets attributable to Wholly -Owned Subsidiaries and other
Affiliates (which ate not Members of the Obligated Group) totaled approximately 8 %, 3 %, 7% and 10 %,
respectively. At August 31, 2004, the percentage of consolidated Income from Operations, Excess of Revenue over
Expenses, Total Assets and Total Net Assets attributable to Wholly-Owned Subsidiaries and other Affiliates totaled
approximately 12 %, 5 %, 7% and 9 %, respectively.
The financial information for the nine months ended May 31, 2004 and 2005, is derived by management
from the internal unaudited financial statements of the Corporation and its Wholly -Owned Subsidiaries for such
periods. The financial data for the nine months ended May 31, 2004 and 2005 is unaudited, but includes all
adjustments which the Corporation's management consider; necessary to fairly present such information in
A -18
accordance with accounting principles generally accepted in the United States.
Operating results for the nine
months ended May 31, 2005, are not necessarily indicative of the results which maybe expected for the entire fiscal
year ended August 31, 2005. At May 31, 2005, the percentage of Income from Operations, Excess of Revenue over
Expenses, Total Assets and. Total Net. Assets attributable to the Corporation's Wholly -Owned Subsidiaries (which
are not Members of the Obligated Group) totaled approximately -0.5 %, -0.3 %, 0.8% and 0.5 %, respectively.
Summary of Revenues and Expenses of the Corporation and its Wholly -Owned Subsidiaries lrl
(Dollars in Thousands)
Fiscal Years Ended
Nine Months Ended
Au¢ust 31,
May 31,
2003 2004
2004 2005
Net Patient Service Revenue
$336,612 $380,690
5277,007 $307,663
Revenue Earned on Prepaid Contracts
69,459 69,804
52,:120 53,129
Other Operating Revenue
37J979 43.058
32,353 32.305
TOTAL OPERATING REVENUE
444,050 493,552
361,480 393,097
Operating Expenses:
Salaries & Benefits
200,630 220,807
163,561 180,516
Supplies
78,973 86,483
63,837 67,012
Purchased Services
57,130 66,529
46,000 45,204
Professional Fees
5,422 6,243
4,603 4,885
Depreciation and Amortization
28,179 30,513
22,524 23,908
Provision for Bad Debts
9,281 14,025
9,676 10,056
Utilities
6,169 5,028
3,485 3,824
Insurance
3,987 5,449
4,574 3,060
Lease rental
6,978 7,350
5,603 5,393
Other
14,472 15,066
10,775 13,339
TOTAL OPERATING EXPENSES
411,221 457,493
334,638 357,197 .
INCOME FROM OPERATIONS
32,829 36,059
26,842 35,900
Nonoperating Revenues/Expenses:
Interest Expense
(7,758) (7,573)
(5,661) (6,857)
Investment Income, Net
27,298 54,757
35,817 28,569
Other
1.363 2.807
697 1,309
TOTAL NONOPERATING
20,903. 49,991
30,853 23,021
REVENUES/EXPENSES
EXCESS OF REVENUE OVER
EXPENSES
S57,695 $58921
ICI The information presented in this table is based on the financial information of the Corporation, CPPG and fum.
CPPG and BPM1 are not Members of the Obligated Group and are not obligated with
respect to the Bonds. See
i "Summary of Financial Information" above.
A19
Balance Sheet of the Corporation and its Wholly-Owned Subsidiaries
(Dollars
:in Thousands)
Fiscal Years
Nine Months Ended
Ended August
3l,
May 31,
2003
2004
200
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents
$35,590
$82,044
$7,653
Patient accounts receivable, net of allowance
for doubtful accounts
34,928
42,776
45,827
Investments
2,989
3,941
4,065
Other Current Assets
12,067
13,931
15,510
Due From Related Parties
3,135
3,183
1,118
TOTAL CURRENT ASSETS:
88;709
145,775
74,173
ASSETS LIMITED AS TO USE:
Board designated for Capital Improvements
705,409
690,859
776,980
Bond proceeds
5
5
5
Under indenture agreement held by trustee
319
315
308
Under malpractice claims funding arrangement
held by trustee
15,076
16,040
16,626
For health and dental insurance claims
2,684
4,580
1.689.
TOTAL ASSETS LIMITED AS TO USE
723,492
711,799
795,608
.PROPERTY AND EQUIPMENT, NET
365,570
445,194
497,592
OTHER ASSETS
13,389
14,966
15,372
TOTAL ASSETS
1 1 1 1
$1.317.724
S1.382.745
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Account payable
$16,567
$30,835
$23,949
Accrued expenses
39,464
54,919
43,770
Accrued liabilities under capitated contracts
9,665
13,715
12,575
Estimated third-party payor settlements
706
759
1,506
Due to Related Parties
366
359
356
TOTAL CURRENT LIABILITIES:
66,768
100,587
82,156
NONCURRENT LIABILITIES:
Estimated malpractice claims
10,072
13,140
14,835
Bonds payable
316,000
316,000
316,000
Other long-term liabilities
10,354
4,919
1,897
TOTAL NONCURRENT LIABILITIES
336,426
334,059
332,732
TOTAL LIABILITIES
403,194
434,646
414,898
TOTAL NET ASSETS
787,966
883,078
967,857
TOTAL LIABILITIES & NET ASSETS
1.191,1 60
1 1 7 4
3 M745
"I The information presented in this table is based on
the financial information of the Corporation, CPPG and EPMI.
CPPG and EPIv[I are not Members of the Obligated Group and are not obligated with respect to the Bonds. See
"Summary of Financial Information" above.
go
A-20
Management's Discussion and Analysis of Irmanclal Information
For the fiscal year ended August 31, 2004, the Corporation reported Net Patient Service Revenue totaling
approximately $381 million in comparison to $337 million Sox the year prior. The approximate $44 million, or 13 %,
increase is due. primarily to rate increases realized from third party payors as well as growth in outpatient services.
For the interim periods of the nine months ended May 31, 2005 and 2004, Net Patient Service Revenue totaled
approximately $308 and $277 million, respectively. Continued strength in payor mix and rates has contributed to
this increase.
For the fiscal year ended August 31, 2004, the Corporation reported Revenue Earned on Prepaid Contracts
of approximately $70 million in comparison to $69 million for the year prior. Revenue Earned on Prepaid Contracts
consists of revenue earned by the Corporation through capitated payment arrangements with payors. The 0.5%
increase is due to payment rates increases offset in pan by the decline in covered membership of 17% for the same
period For the interim periods of the nine months ended May 31, 2005 and 2004, Revenue Earned on Prepaid
Contracts totaled approximately $53 and $52 million, respectively with rate increases from health plans continuing
to offset declining membership. While capitated contracts remain an active payor category, the Corporation does
not expect to grow this business. As of May 31, 2005, the Corporation had approximately 58,894 equivalent lives
covered under prepaid contracts.
The Corporation's inpatient activity remains strong as evident in the continued high occupancy rates of
81 %, 83% and 81% for 2002, 2003 and 2004, respectively. Despite declines in outpatient surgical volume, overall
outpatient growth has continued, 6.5% for the period 2002 through 2004. Successful outreach strategies and
investment in key outpatient technologies and programs have contributed to this continued growth Other Operating
Revenue for the Corporation and its Wholly-Owned Subsidiaries of $43 million for 2004 and $38 million for 2003 is
comprised mainly of certain management agreements between the Corporation, its Wholly -Owned Subsidiaries and
physician related entities as part of the Corporation's and its Wholly -Owned Subsidiaries' physician integration
strategies.. For the nine months ended May 31, 2005 and May 31, 2004, the Corporation and its Wholly -Owned
Subsidiaries reported Other Operating Revenue of $32 million.
Salaries and benefits for the fiscal year ending August 31, 2004. totaled $221 million, a 10% increase over
2003 at $201 million During fiscal 2004, the Corporation experienced wage pressure related to the ongoing nursing
and clinical staff shortages with the majority of the 10% increase attributed to wage inflation During this same
period, however, the Corporation reduced its exposure and cost to outside agency staff, including registry and
travelers, by 33 %. Despite the strong labor shortages in California, the Corporation's overall turnover rate remains
below 16% with nursing at approximately 11 %. For the nine months ended May 31, 2005, the Corporation and its
Wholly -Owned Subsidiaries reported Salaries and Benefits of $181 million in comparison to $164 million for the
comparison period. The Corporation staffs to the current State - mandated nurse - staffing ratios. See
" BONDHOLDERS' RISKS— Significant Risk-Areas Summarized Nursing and Other Shortages" in the forepart
of this Official Statement for more information concerning staffing.
Supplies expense for the fiscal year ending August 31, 2004 totaled approximately $86 million. This
represents an approximate 9% increase over 2003 ($79 million). Advancements in certain technology and treatment
modalities, particularly in cardiac care, have contributed to increased supply expenditures. The Corporation remains
committed to supporting its Centers of Excellence, including advancements in technologies which often contain
supply related components. For the nine months ended May 31, 2005, the Corporation and its Wholly -Owned
Subsidiaries reported Supplies Expense of $67 million in comparison to $64 million for the 2004 comparison period.
Purchased Services for the fiscal year ending August 31, 2004 totaled approximately $66 million as
compared to $57 million for the year prior. The increase over 2003 was largely attributable to increases in the
Corporation's Managed Care/HMO business and relates to the cost of covered lives utilizing outside purchased
health care, including emergency and trauma, for which the Corporation is financially responsible. Other increases
occurred in the areas of maintenance (including information technology and software), marketing and
collectionhecovery costs. For the nine months ended May 31, 2005, the Corporation and its Wholly -Owned
Subsidiaries reported Purchased Services of $45 million in comparison to $46 million for the comparison period.
The decrease realized to date is largely related to a decrease in the Corporation's HMO business and relates to the
go
A -21
cost of covered lives utilizing outside purchased health care, including emergency and trauma, for which the
Corporation is financially responsible, which represents a reversing trend from 2004 (see above).
li Professional fees represent the Corporation's investment in certain physician coverage programs and
medical directorships. Examples of coverage programs include contract physician hospitalists and intensivists, as
well as OB. night call coverage, to provide needed patient care: For the fiscal year ended August 31, 2004, the
Corporation reported professional fees of $6 million as compared to $5 million the year prior. For the nine-month
interim periods ended May 31, 2005 and May 31, 2004, the Corporation reported professional fees of $5 million.
For the fiscal year ended August 31, 2004 depreciation expense totaled approximately $31 million as
compared to $28 million for the year prior. Continued progress in the capital expansion program and technology
investment has contributed to this increase. Depreciation expense for the nine months ended May 31, 2005 was $24
million as compared to approximately $23 million for the prior comparison period. The provision for bad debt for
fiscal year 2004 totaled $14 million as compared to $9 million for the year prior and $10 million for the nine months
ended May 31, 2005 and May 31, 2004. While increasing slightly, bad debt levels remain around 1% of total gross
revenues. "Other expenses for the fiscal year ended August 31, 2004 totaled $15 million as compared to $14 million
for the year prior and $13 million for the nine months ended May 31, 2005 as compared to $11 million for the 2004
icomparison period.
Interest expense totaled approximately $8 million for the fiscal years ended August 31, 2004 and 2003.
Interest expense is attributable to the Corporation's existing variable rate long -term debt totaling $316 million at
2004. Additionally, interest expense contains certain costs associated with a fixed rate swap entered into by the
Corporation in 2002, more fully described under %iquidity and Investment Policy" below. This contract expires in
first quarter. 2007. See "Indebtedness and Certain Liabilities" below. For the nine month period ended May 31,
2005, interest expense totaled $7 million as compared to $6 million for the comparison period. "
Investment income for the fiscal year ended August 31, 2004 totaled $55 million in comparison to $27
million for the year prior. - The fluctuation in periods is due to changes in market conditions as the Corporation's
investment policies and practices have remained largely consistent through August 31, 2004. Investment income for
the nine -month period ended May 31, 2005 was $29 million in comparison to $36 million for the comparison period.
The fluctuations are due largely to changes in market conditions; however, material changes to the Corporation's
investment policies were made in the latter half of calendar year 2004. Investment income reported in the Summary
of Revenue and Expenses represented the net. result of realized gains and losses on investment activity, as well as
dividend and interest income.
The Corporation's and its Wholly -Owned Subsidiaries' total net income before depreciation and interest
( "EBDr) is as follows for fiscal years 2002, 2003 and 2004:
:.I 2002 2003 2004
EBDI $66,296 $89,669 $124,136
The fluctuations during those periods in EBDI are largely due to investment performance results of $14
million, $27 million and $55 million, respectively, as well as continued strength in operating margins of 6.6 %, 7.4%
and 7.3 "/o for 2002, 2003 and 2004, respectively.
Overall, the Corporation's operations have remained financially strong. The Corporation has been able to
respond successfully in rate negotiations, implementing certain cost containment strategies, focusing on recruitment
and retention and maintaining market share in its primary and secondary service areas while seeking out creative
interim solutions to inpatient capacity constraints. It is management's expectation that competitive wage pressure
and Iabor shortages will continue to stress labor budgets and staffing plans. Additionally, management expects
pressure from payors and employers on reimbursement rates. However, management expects to maintain overall
positive operating margins and.strong cash flow margins while continuing to invest in facilities, programs and
technologies to maintain and then grow market share, particularly in support of the Corporation's Centers of
Excellence. .
A-22
00
Liquidity and Investment Policy
The Corporation and its Wholly -Owned Subsidiaries had approximately $777 million of cash, cash
equivalents and investments, including board designated funds and other investments, at August 31, 20D4. The
j following table sets forth the Corporation's and its Wholly -Owned Subsidiaries' cash and investments for fiscal
years 2003, 2004, and the nine months ended May 31, 2005.
Cash and cash equivalents consist mainly of bank deposits and short-term investments in money market
Rinds. In accordance with its investment and operating objectives, the Corporation has segregated its Board
Designated Investment Reserves into three distinct portfolios: Building Plan Portfolio, Liquidity Portfolio, and
Long -Term Portfolio.
Market Value (in 00015)
Fiscal Years Ended Niue Months Ended
August 31, 2003 August 31, 2004 May 31, 2005
Cash & Cash Equivalents $ 35,590 4.8% $ 82,044 10.6% $ 7,653 1.0%
Other Short-Term Investments"' 2,989 0,4% 3,841 0.5% 4,065 0.5%
` Building Plan Portfotiot',
Fixed Income Securities 107,180 14.4% 114,244 14.7% 118,948 15.1%
Liquidity Portfoliol21
Fixed Income Securities 102,548 13,8% 110,600 14.2% 113,740 14.4%
Long -Term Portfolioj21
Fixed Income Securities 310,804' 150,718 146,538
U.S. Large Cap Equity 39,776 22,522 25,275
Securities
U.S. Smaller & Mid Cap 72,444 57,939 66,835
Equities
Global Equity 72,656 88,253 98,684
Absolute Return 0 146,583 206.960
Total Long -Term Portfolio 495,680 66.6% 466,015 60% 544,292 69.0%
Total Cash & Investments 7$ 43.987 100.0% $ 776.744 100.0% 788.698 100.00/.
O] Comprised of investments in debt and equity mutual fads. Y
RI In 2004, the Corporation segregated its Board Designated Reserves into three distinct pools: Building Plan Portfolio,
Liquidity Portfolio, and Long -Term Portfolio.
The Corporation's funds are invested pursuant to investment policies established by the Cotporation's
Board of Directors. The investment policies provide for an .overall philosophy that is 'specific enough to
demonstrate what is expected of selected investment managers yet sufficiently flexible to allow for changing
economic conditions and securities markets. The policy seeks to identify acceptable risk levels associated with
reaching long -term rate of return objectives, which serve as criteria for evaluating investment performance. The
Corporation's Long -Term Portfolio investment policy directs such assets to be invested in a manner which:
• Preserves principal.through prudent diversification and investment in highly rated securities as well as..
certain non -rated securities such as small capitalization stocks and international equities and high yield
bonds, where permitted;
Reduces overall portfolio volatility while pursuing tatgeted.investment returns through allocation of a
portion of the portfolio's long -term investment reserves to alternative investment strategies; -
A -23
V0
• Meets the liquidity needs of the Corporation coordinated with the anticipated working capital
requirements of the Corporation; and
. Maximum return in light of these guidelines and prevailing market conditions.
The Corporation's investments are currently managed by several professional investment managers, under
the supervision. of the Investment Management Committee of the Corporation's Board of Directors and the finance
staff. Portfolio investments undergo significant turnover and are actively managed by the investment managers
retained by the Corporation.
Building Plan Portfolio
The investment policies for the Building Plan Portfolio include the goal of providing short -term liquidity
and generating cash for the Corporation's building needs and purchase of tendered bonds. The Building Plan
Portfolio is managed under a U.S. Fixed Income mandate. The investment manager is specifically directed to target
an average duration range between 95% - 105% of the Lehman Aggregate Index. In addition, the investment
manager is instructed to limit fixed income investments in any single corporate issue, other than U.S. Government
instrumentalities and agency mortgage- backed securities, to no more than 5% of the fixed income assets under
management at the time of purchase. Investments in certain derivative products, private placements and
commodities are limited. At May 31, 2005, the Building Plan Portfolio had an aggregate market value of
i approximately $1 f8.9 million.
Liquidity Portfolio
The investment policies for the Liquidity Portfolio include the goal of providing short-term liquidity and
generating cash for the Corporation's building needs and purchase of tendered bonds. The Liquidity Portfolio
represented approximately 14% of the Corporation's and its Wholly -Owned Subsidiaries' total cash and investments
at May 31, 2005. The Corporation has retained one investment manager to invest the liquidity funds by pursuing a
shat -term fixed income strategy. The investment manager is directed to invest in strictly "Aaa" quality fixed
income securities. Non-dollar denominated securities or corporate bonds may not be purchased At May 31, 2005,
the Liquidity Portfolio had an aggregate market value of approximately $113.7 trillion.
Long -Term Portfolio
The investment objectives for the Long -Term Portfolio are structured as long -term goals designed to
maximize returns without exposure to undue risk With the understanding that fluctuating rates of return are
characteristic of the securities markets, the investment managers' greatest concern is expected to be long -term
appreciation of the assets and consistency of total portfolio returns.
At May 31, 2005, the Long -Term Portfolio had an aggregate market value of approximately $544 million
and represented approximately 69% of the Corporation's and its Wholly -Owned Subsidiaries' total cash and
investments. The overall asset allocation for. the Long -Term Portfolio is currently targeted for 30% fixed income,
40% equities, and 30% absolute return investments ( +/- 10%). This target allocation may vary over time based on
economic and market conditions. Actual investments at May 31, 2005 were in substantial compliance with the
crrrent.mvestment policy.
The Corporation's Long -Term Portfolio investment policy is intended to be used as a framework to help
achieve the stated investment objectives at a level of risk deemed acceptable at the investment manager level. The
policies are designed to minimize interfering with the efforts to attar overall objectives and to minimize risk
without excluding the managers from appropriate investment opportunities.
The fixed income assets held in the Corporation's Long -Teri Portfolio are managed by an investment
manager who must maintain a minimum average portfolio quality of "A" and a minimum credit quality at purchase
for up to 10% of its portfolio of 'Bas" or equivalent rating by at least one of the major rating services. The
investment manager is specifically directed to target an average duration of three to five years and to limit its
i
i
A -24
holdings to no more than (i) 1001vin non -U.S. foreign g "oveiriment instruments, (ii)10% in high -yield securities rated
at least `BB" or equivalent, and (iii) 25% in nonleveraged derivatives (including futures): At May 31, 2005, the
fixed income portfolio had an aggregate market value of approximately $147 million with portfolio duration of 4.12
years. The average credit quality of the holdings in the fixed income portfolio was in rite "AAA" category from the
major rating services.
Four investment managers manage the Corporation's equity investments; with specific investment
restrictions among the following categories:
I
Large Capitalization
• Mid Capitalization
• Small Capitalization
• Global
Each equity manager has specific investment guidelines and defined portfolio benchmarks appropriate for
the managed asset class.
In 2003, the Corporation recognized the need to further diversify its investments to reduce overall portfolio
volatility in light of its planned capital needs. In accordance with the Corporation's investment policies and
procedures, the Corporation may invest up to 30% of its assets in absolute return investments. The Corporation's
classification of absolute return investments currently includes "fimdof- funds" hedge funds, as well as investments
under multiple asset class mandates with broad investment manager discretion. As of May 31, 2005, approximately
20% of the absolute return portfolio was invested in a mutual fiord -offunds which seeks a positive return regardless
of market direction and which is not restricted with respect to its exposure to any particular asset class. At the
investment manager's discretion, the fund may invest all or substantially all of its assets in a limited number of
underlying fiords that primarily invest in marketable equity and fixed income securities denominated in both U.S.
and foreign currencies with an exposure to both emerging markets and developed markets. As of May 31, 2005;
approximately 800/6 of the absolute return portfolio was invested in four offshore. multi- manager "fundof- funds"
hedge fiords which implement a range of alternative investment strategies including but not limited to long(short
equity, event driven, merger arbitrage, distressed and high yield, convertibles, interest -rate driven, credit driven, and
commodities. The level of risk associated with these "fundof- funds" hedge fund investments is generally greater
than the risk associated with traditional fixed income or equity investments. Risk factors associated with these
"fundof -fiords" hedge funds include the use of leverage. Such leverage involves increased risk as well as
substantial interest expense. The use of leverage by the funds can, in certain circumstances; increase the adverse
impact to which the investment portfolio may be subject. Additional risk factors include limited transferability and
liquidity. Some of the "fund-of-funds" hedge funds are subject to liquidity restrictions such as redemption
provisions which provide for specified redemption. windows with certain advance notice requirements. The
Corporation began implementation of this investment strategy in June 2004 and concluded funding of this allocation
in November 2004. There can be no assurance that the absolute return managers will achieve their
investment objectives.
The investment policies are subject to revision from time to time by the Corporation Board of
Directors.
Indebtedness and Certain Liabilities
The Corporation is currently obligated with respect to the City of Newport Beach Variable Rate Demand
Revenue Bonds (Hoag Memorial Hospital Presbyterian Project) Series 1992 (the "1992 Bonds'), the City of
Newport Beach Variable Rate Demand Revenue Bonds (Hoag Memorial Hospital Presbyterian Project) 1996 Series
A, B and C (the "1996 Bonds') and the City of Newport Beach Variable Rate Demand Revenue Bonds (Hoag
Memorial Hospital Presbyterian) 1999 Series A, B and C (collectivcly, the "1999 Bonds'). As of May 31, 2005, the
aggregate principal amount of the Corporation's outstanding tax- exempt indebtedness was $316,000,000.
A -25
Each of the 1992 Bonds, the 1996 Bonds and the 1999 Bonds provide for variable interest rates computed,
over interest periods selected by the Corpomtiom At the end of each Interest Period, bondholders have the right to
tender their bonds for repurchase by the Corporation. The Corporation manages the risk that bonds will be tendered
in the manner described below, and may address the liquidity requirement with respect to the :1999 Bonds on its
own, without third party liquidity support These bonds, like the Bonds, may also impose the, risk of significant
fluctuation of interest rates, with attendant impact on Corporation interest expense.
During 2002, the Corporation entered into an interest rate swap with respect to the 1992 Bonds and the
1999 Bonds that effectively converted a portion of its floating -rate debt to a fixed-rate basis for a term of five years,
thus reducing the impact of interest -rate changes on future interest expense. The swap agreement hedges an initial
notional amount of $150,000,000 at a 3.235% fixed interest rate against'67% of the average USD -LIBOR BBA rate
(1.089% on August 31, 2004). Settlements are made on a monthly basis with the coumterparty, Merrill Lynch Capital
Services, over the term of the agreement, which expires in February, 2007.
Existing Liquidity Facility
The Corporation's obligations with respect to the $191,000,000 aggregate outstanding principal amount of
1992 Bonds and 1996 Bonds may also require the Corporation to provide liquidity in connection with the obligation
to purchase such bonds upon mandatory or optional tender. While the Corporation currently maintains a liquidity
facility with Bank of America, National Association to provide funds for such liquidity events, this liquidity facility
expires in November, 2005 (subject to annual renewal at the option of the provider upon the Corporation's request).
The Corporation can give no assurance that this liquidity facility will be renewed by the provider or replaced with a
substitute liquidity facility from a different provider. The Corporation may also elect to provide self- liquidity in
such event, on a similar basis as exists with respect to the 1999 Bonds. Moreover, under the liquidity facility for
each of the 1992 Bonds and the 1996 Bonds, the provider can terminate its obligation to provide liquidity for the
purchase of such bonds under certain circumstances prior to the expiration date. In any of such events, the
Corporation would be required to transfer to the tender agent for such bonds sufficient funds to pay the purchase
price therefor on short notice (e.g., 7 days while such bonds bear interest at a weekly interest rate).
Self - Liquidity
The Corporation currently maintains self - liquidity in connection with the 1999 Bonds. The Corporation is
subject to an arrangement with certain of the bond rating agencies related to the 1999 Bonds whereby it must
maintain, in the aggregate, sufficient long -term assets, primarily marketable fixed income securities and other
liquidity support vehicles, to be used to repurchase the bonds in the unlikely event that tendered bonds are not resold
in the open market The total investments in securities with same day liquidity totaled about $289,792,662 and
represented about 2.3x the outstanding principal amount of the 1999 Bonds as of May 31, 2005.
Capitalization
j The following table sets forth the capitalization for the Corporation and its Wholly -Owned Subsidiaries and
its Wholly -Owned Subsidiaries at August3l, 2004. The pro forma capitalization has been adjusted to reflect the
issuance of the Bonds, as if such transaction had occurred on August 31, 2004.
A -26
'I �
Actual
Pro Forma
August 31, 2004
August 31, 2004
400010-
Outstanding Long -Term Debt
$316,000
$316,000
Plus: The Bonds
200,000
Subtotal
316,000
516,000
Total Net Assets
883,078
883,078
Total Capitalization
$1,199,078
$1,399,078
Percent Long -Term Debt to Capitalization
26.4%
36.9%
A -26
'I �
I
Estimated Debt Service Coverage
i
The following table sets forth the Corporation's and its Wholly -Owned Subsidiaries' estimated annual debt
service coverage for the fiscal years ended August 31, 2003 and 2004. The pro forma debt service coverage has
been adjusted to reflect the issuance of the Bonds, as if such transaction had occurred on September 1, 2003 in the
aggregate amount of $200 million. All debt assumes an interest rate of 2.720A per annum, the approximate 10 -year
average of the BMA Index.
1
Actual Actual Pro Forma
August 31, 2003 August 31, 2004 August 31, 2004
-(000)-
Net Income $53,732 $86,050 $ 79,588
Depreciation and Amortization 28,179 30,513 30,513
Interest 7,758 7.573 14,035
Income Available for Debt Service 89,669 124,136 124,136
Estimated Debt Service 8,595 88,595 14,035
Debt Service Coverage Ratio (times)* 10.4 14.4 8.8
* The presentation of the Debt Service Coverage Ratio does not correlate to the determination of debt service
coverage as required under the Master Indenture. Calculations of debt service coverage under the Master Indenture
require an assumption of interest rates and amortization of existing debt and may not involve the same elements of
income available for debt service. Applying these assumptions regarding interest and amortization, and including
transfers from Hoag Hospital Foundation, the debt service coverage ratio under the Master Indenture approximates
3.70x as of August 31, 2004. See "APPENDIX D — SUMMARY OF PRINCIPAL DOCUMENTS — Master
Indenture — Particular Covenants of Each Member of the Obligated Group - Limitations on Incurrence of Additional
Indebtedness."
ORGANIZATION AND MANAGEMENT
Corporate Structure
The Corporation has .fifty members, twenty -five appointed by the George Hoag Family Foundation and
twenty -five by the Association of Presbyterian Members of Orange County.. The members elect the .Board of
Directors of the Corporation. Nominations to the Board are made as follows: the George Hoag Family. Foundation -
five; the Association of Presbyterian Members - five; a nominating committee of the Board from the community at
large - five; the Medical Staff — three, and the President & CEO as an ex-officio member.
A -27
Board of Directors
jThe current members of the Board are listed below—There are currently no vacancies on.the Board.
Years on Term
Name Occupation Board Expires lal
i Richard M. Ortweily Chair Independent Real Estate Developer 5 2005
Robert W. Evans, Via Chair Retired Sales & Marketing Executive 7 2006
.. Max W. Hampton, Secretary Reused Merrill Lynda Executive 8 2007
Hank S. Adler, Treasurer Adjunct Professor, Aaountmg. 11 2006
Dick P. Allen Independent Investment Manager 15 2005
Kevin K Barnett, MD Physician, Internal Medicine 3 2005
John L Benner Retired Financial Management Consultant 1 2007
James J. Berman, MD Physician, Internal Medicine ' 4 2007
John L. Curti Independent Real Estate Investment Manager 9 2006
Jake Easton III Management consultant 2 2006
L George Elias Reared Aerospace Executive 33 2005
Joame D. Fix Retired Accountant 13 2005
Carol Mentor Hoffman Business-to-Government Agency Liaison 3 2005
Stephen Jones General Contractor, Commercial Coast 3 2007
Ronald L Merriman Management Strategy Consultant 3 2007
Melinda Hoag Smith Philanthropist 10 2005
Michael D. Stephens Hospital President & CEO 5 2005
Ricbard M. Taketa, MD Physician, Nuclear Medicine 5 2006
Virgina Ueberroth Philanthropist 2 2006
ltl' Terms ending in 2005 will expire at the Corporation's Annual Board Meeting scheduled for October 17, 2005.
Terms may be renewed indefinitely at each Annual Board Meeting.
i
Management
The management of the Corporation has been delegated by the Board of Directors to the administrative
staff. Brief resumes of members of senior management are included below.
i President and CEO. Michael D. Stephens, age 63, has been President and Chief Executive Officer of the
Corporation for 30 years. Mr. Stephens received his Masters in Hospital Administration from Columbia University,
New York City, his Masters in Business Administration from Furman University, Greenville, South Carolina and his
I Bachelor of Arts degree from Columbia University, New York City. Prior to his present position, Mr. Stephens
- served as Administrator of the Greenville General Division, Greenville HospitaFSystem in Greenville, South
Carolina from 1970 to 1975. Mr. Stephens is a former Board Member of Voluntary Hospitals of America, Inc.,
former Board Member of Joint Commission on Accreditation of Healthcare Organizations, former Board Member of
the American Hospital Association, former Chairman of the California Association of Hospitals and Health
Systems, and former Chairman of the Hospital Council of Southern California. Mr. Stephens is also the Immediate
Past Chairman of the Newport Harbor Area Chamber of Commerce. In 1990, Mr. Stephens received the George
Walker Fellowship, awarded by the California Association of Hospitals and Health Systems to enable hospital
executives to study healthcare delivery abroad Mr. Stephens currently serves on the boards of The California
Endowment, Healthcare Association of Southern California, Covenant Care, NorCal Insurance Company and
National Health Foundation. Mr. Stephens plans to rethe on August 31, 2005. i
9
The Corporation recently announced the selection of Richard Afable, MD, MPH, age 51, as its new
President and Chief Executive Officer. Dr. Afable is expected to join the organization and assume executive
responsibilities on or about August 15, 2005.
Prior to his selection as President and Chief Executive Officer of the Corporation, Dr. Mable served as
executive vice president and chief medical officer at Catholic Health East, the largest not -for -profit health care
system on the East Coast, and was part of their senior management team, which guided the strategic operation, and
i
A -28
II
management of the health system. As executive vice president, he was responsible for all aspects of clinical
performance and quality management and had corporate responsibility for information technology, managed care, Dr. Afable was
patient safety, communications; and Physician relationships. Before joining Catholic Health in emen scorn any
the founder and president/CEO of Preferred Physician Partners (PPP), a physician practice g
that supported physician groups and provider networks. Prior to hospital administration, Dr. Afable was in private
practice in Chicago, specializing in internal medicine and geriatrics. Dr. Afable received his BS degree from Loyola
University in Chicago and an MD from the Loyola Snitch School of Medicine. He obtained his MPH degree from
the University of Illinois School of Public Health and a certificate in business administration from Villanova
University in Pennsylvania. Dr. Afable will assume his executive responsibilities at Hoag on August 15, 2005
replacing current CEO Michael Stephens, who retires on August 31, 2005-
Executive Vice President — Corporate Services. Peter M. Foulke, age 59, has been with the Corporation for
28 years and currently serves as Executive Vice President. Mr. Foulke received his Bachelor of Science,
Accounting and Finance (Highest Honors) from the University of California at Berkeley, and is a Certified Public
Accountant. Mr. Foulke was previously employed as an auditor at Ernst & Ernst (1968 -1972) and as Director of
Finance and Chief Financial Officer for O'Connor Hospital, San Jose, California (1972 - 1977).
Senior Vice President — Resource Development and Community Relations. Ronald Guziak, age 59, is
responsible for direction and supervision of the Corporation's fund raising activities, which are coordinated with
Hoag Hospital Foundation. Mr. Guziak is also the Executive Director of Hoag Hospital Foundation. Mr. Guziak
graduated from West Virginia University where he received his bachelor's degree in journalism. He earned his
master's degree in social science from Wesleyan University in Middletown, Connecticut. Prior to assuming his
position with the Corporation, Mr. Guziak served as president of Little Company of Mary Hospital Foundation
(Torrance, Cahfomia) and San Pedro Peninsula Hospital Foundation (San Pedro, California); He has also
a esa
positions at St. Luke's Episcopal Hospital (Houston, Texas), California Hospital Medical Center (Los g
Calif), Memorial Hospital of Glendale (Glendale, California), Northwestern Memorial Hospital (Chicago, Illinois),
and Wesleyan University (Middletown, Connecticut). Mr. Guziak is a Fellow in the Association for Healthcare
Philanthropy (AI -IP) and a member of the Association of Fundraising Pro fessionals (AFP).
Senior Vice President — Hospital Services. Robert T. Braithwaite, age 39, has been with the Corporation
since 1999, and is responsible for daily hospital operations including all ancillary and support services as well as the
Hospital's Centers of Excellence for Cancer and Orthopedics. He also directs the Corporation's quality and
performance improvement initiatives. Mr. Braithwaite received his Masters in Health Services Administration
from Arizona State University and a Bachelor of Science in Health Promotion/Management. Mr. Braithwaite
previously served as Vice President for Service Line Development and Quality (1996 -1999) at St. Joseph Hospital in
Orange California and as Vice President of Support Services at Hoag Hospital (1992- 1996).
Senior Vice President — Physician Services. Diane W. Laird, age 44, has been with the Corporation for 22
years and is responsible for the development and implementation of business development strategies related to
physicians and outreach facilities of the Hospital. Ms. Laird received her Master of Public Health degree in Health
Care Administration from the University of California, Los Angeles, and her Bachelor of Science degree from the
University of California, Irvine. Her responsibilities include a physician practice management division, a group
purchasing organization for physicians, physician recruitment and six satellite medical office buildings. Ms: Laird is
also the Chief Executive Officer of Greater Newport Physicians Medical Group, Inc., a 560-physician with
approximately 101,500 capitated lives, which is managed by the Hospital. Prior to her current resp ons bil ties,
Laird held the position of Vice President, Planning and Marketing with the Corporation for 9 years.
Vice President — Finance and CFO. Jennifer C. Mit mer, age 37, has been with the Corporation for 11
years and is responsible for the finance, treasury, accounting, materials management, compliance , patient financial
services, admitting, and clinical research administration functions of the Corporation. Ms. Mitzner received her
Master of Public Administration degree in Health Care Administration from the University of San Francisco and her
Bachelor of Business Administration, Accounting from Texas Christian University and is a Certified Public
Accountant. Ms. Mitzner was previously employed as an auditor at KPMG Peat Marwick. _
go
A -29
EMPLOYEES .. ..
As of January 1, 2005, the Corporation and its Wholly -Owned Subsidiaries.had approximately 2,706 full-
time and 699 part -time employees or 3,185 full -time equivalents. This includes all hospital related functions as well
as support fimctions. These fimctions include the Child Care Center, six outreach medical office buildings, a
physicians billing service, management of the Foundation, management and operating staff for the Independent
Physicians Association (IPA) and several practice management sites.
Generally, the markets in which the Corporation operates are experiencing nursing shortages. To address
this shortage, the Corporation has implemented a number of initiatives to fiord nursing education programs and
expand the supply of nurses. Annually, the Corporation awards nearly $15,000 in scholarships to Hoag and non -
Hoag employees. The scholarship fiords help nursing students buy books and pay for tuition and fees. In addition, to
help local colleges and universities, the Corporation provides professorships for nursing instructors. A one-year
professorship, valued at $100,000, enables 12 nursing students to enroll from a waiting list Presently, the
Corporation partners with Golden West College California State University, Long Beach, Saddleback College,
California State University, Fullerton and Santa Ana College, The Corporation has funded approximately $800,000
in professorships. In the near future, the Corporation will debut The Marion Knott Nursing Education Center, an on-
campus Nursing Education Center featuring classroom space, and the latest technology and equipment to educate
current staff, new hires and nursing students performing clinical rotations. To maximize the learning experience, the
education center will duplicate the Hospital's patient environment. The Corporation also plans to create an
j endowment to make nursing scholarships available and establish an endowment to fiord a nursing professor.
i
Employees of the Corporation are not represented by any union and management of the Corporation has
not observed any significant union activity at the Hospital in recent years. Management considers its relations with
its employees to be good.
The Corporation does not sponsor any defined benefit plans.
LEGAL & REGULATORY MATTERS
The Corporation is involved in various liability disputes, governmental and regulatory inspections,
inquiries, investigations, proceedings and litigation matters that arise from time to time in the ordinary course of
business. The Corporation is self- insured with respect to professional liability and comprehensive general liability
risks, subject to certain limitations. Professional and comprehensive general liability risks in excess of $2,000,000
per occurrence are reinsured with major independent insurance companies. See "BONDHOLDERS' RISKS —
Business Relationships and Other Business Matters — Professional Liability Claims and General Liability Insurance"
j and "LITIGATION — Hoag Hospital" in the forepart of this Official Statement for additional information regarding
litigation and claims risks.
POTENTIAL AFFILIATIONS AND TRANSACTIONS
As with many healthcare providers, the Corporation has considered an affiliation with various healthcare
systems in the past and might in the future. There are no current affiliations either under discussion or
contemplation
The Corporation may negotiate for and enter into affiliations, joint ventures or contractual arrangements in
the future. Future acquisitions, affiliations, or joint ventures may involve substantial capital expenditures, all or a
j portion of which may be financed through debt incurred by the Corporation.
A -30
-.. - I,. —.__ - --
The Corporation is considering a significant real estate transaction involving commercial property located
several blocks north of the Hospital campus. The Corporation is considering a purchase or lease with option to
purchase of approximately 200,000 square feet of commercial space for use as additional support space for
Corporation activities and medical office space. Annual capitalized lease payments with respect to any such
transaction could be as much as $5 million per year, subject to cost of living or other annual adjustments, over a 25
year tern. The Corporation expects that any transaction would be structured to comply with existing financial
covenants of the Corporation with respect to the Bonds and any liquidity agreements, or that such covenants (with
respect to any liquidity agreement) would be amended to allow the transaction to go forward Discussions with the
property owner are in the preliminary stage and the Corporation cannot predict whether a transaction will occur or, if
so, an what terms.
i
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i i
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AMMIX B
CONSOLIDATED FINANCIAL STATEMENTS AND OTHER
FINANCIAL INFORMATION
Hoag Memorial Hospital Presbyterian and Affiliates
Years ended August 31, 2004 and 2003
with Report of Independent Auditors
r
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidated Financial Statements and
Other Financial Information
Years ended August 31, 2004 and 2003
Contents
Audited Consolidated Financial Statements
Report of Independent Auditors------------------------------------------------------------------------------------------
Consolidated Balance Sheets .................................. : ...................... :..................... ° •:......
Consolidated Statements of Operations ---------------------------
-- - -------------
Consolidated Statements of Changes in Net Assets ............................ .............:.................
Consolidated Statements of Cash Fl ows .............................................. ...............................
Notes to Consolidated Financial Statements ........................................ ...............................
2
.. ::::3
-4
5
7
Other Financial Information
Report of Independent Auditors on Other Financial Information .................... .............................26
Consolidating Balance Sheets--------------------------------------------------------------------------- -----------------------------27
Consolidating Statements of Operations ......................................•........------.--... .............................31
A
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MFRNST & YOUNG
■ Ernst & Young LLP • Phone (949) 794 -2300
Suite 1000 Fax: (949) 437 -0590
18111 Von Kaman Awnue cow .ey_wrn
Irvine, G 92612
Report of Independent Auditors
The Board of Directors
Hoag Memorial Hospital Presbyterian and Affiliates
J We have audited the accompanying consolidated balance sheets of Hoag Memorial Hospital
Presbyterian and Affiliates (the Organization) as of August 31, 2004 and 2003, and the. related
consolidated statements of operations, changes in net assets and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the Organization's
J management. 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 financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Hoag Memorial Hospital Presbyterian
and Affiliates as of August 31, 2004 and 2003, and the consolidated results of their operations
and their cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States.
ffv -t �
November 12, 2004
A Member Practice of Ernst & Young Global
i
I
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidated Balance Sheets
(in thousands)
Assets
Current assets:
Cash and equivalents
Patient accounts receivable, net of allowance for doubtful accounts of
$13,938 in 2004 and $12,248 in 2003
Investments
Other receivables
Other
Total current assets
Assets limited as to use:
Board designated for capital improvements
Bond proceeds
For endowments
Under indenture agreement held by trustee
Under malpractice claims funding arrangement held by trustee
For health and demai insurance claims
August 31
2004 2003
S 89,594 $ 44,161
43,366
35,423
16,356
16,672
9,171
7,272
7,305
5,940
165,792
109,468
690,859
705,408
5
S
42,447
37,968
315
319
16,040
15,076
4,580
2,684
754,246
761,460
Donations and bequests pledged, net of allowance for doubtful accounts and
unamortized discount 6f $996 in 2004 and $1,332 in 2003 29,987 27,194
Property and equipment, net 451,861 371,946
Other assets 3,506 2,564
Total assets S 1,405,392 $ 1,2722632
Liabilities and net assets
Current liabilities:
Accounts payable
Accrued expenses:
Payroll and payroll taxes
Employee benefits
Other
Accrued liabilities under capitated contracts
Estimated third -parry payor settlements
Total current liabilities
Estimated malpractice claims
Bonds payable
Liability to annuitants and other beneficiaries
Other long -term liabilities
Total liabilities
Net assets:
Unrestricted
Temporarily restricted
Permanently restricted
Total net assets
Total liabilities and net assets
See accompanying notes.
to
S . 32,074 $ 16,975
12,341
10,116
31,403
28,034
_. 13,878
2,834
13,715
9,665
759
706 '
104,170
68,330
13,140
10,072
316,000
316,000
2,997
2,055
6,605
11,003
442,912
407,460
901,293 803,104
50,710 51,604
10,477 10,464
962,480 865,172
S 1405,392 $ 1,272,632
7
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidated Statements of Operations
(in thousands)
Net assets released from restrictions used for purchase of property and
equipment and specific program purposes 13,065 9,873
Equity distributions (2,047) (1,017)
Unrealized gain from interest rate swap 871 92
Change in net unrealized gains and losses on investments (3,792). 32,527
Increase in unrestricted net assets S 98,189 $ 97,165
See accompanying notes.
Yearo ended August 31
11
2004
2003
Unrestricted operating revenues:
Net patient service
$ 400,286
$ 350,800
Capitation
69,804
- 69,459
Other
44,991
41,537
Total unrestricted operating revenues
515,081
461,796
Operating expenses:
Salaries and employee benefits
223,594
202,996
Supplies
89,052
81,273
Purchased services
69,194
58,895
Depreciation and amortization
32,345
29,385
Professional fees
6,243
5,422
Provision for doubtful accounts
14,072
9,286
Utilities
5,199
6,365
Insurance
5,579
4,105
Lease rental
8,111
8,282
Other
20,785
19,992
Total operating expenses
474,174
426,001
Income from operations
40,907
35,795
Other income (expense):
Investment income, net
57,774
27,870
Interest expense
(7,995)
(8,032)
Other nonoperating (losses) gains
(48)
57
Other income, net
49,731
19,895
Excess of revenues over expenses before minority interest
90,638
55,690
Minority interest
(546)
-
Excess of revenues over expenses
90,092
55,690
Net assets released from restrictions used for purchase of property and
equipment and specific program purposes 13,065 9,873
Equity distributions (2,047) (1,017)
Unrealized gain from interest rate swap 871 92
Change in net unrealized gains and losses on investments (3,792). 32,527
Increase in unrestricted net assets S 98,189 $ 97,165
See accompanying notes.
3
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidated. Statements of Changes in Net Assets
(in thousands)
Unrestricted net assets:
Excess of revenues over expenses
Net assets released from restrictions used for purchase of property
and equipment and specific program purposes
Equity distributions
Unrealized gain from interest rate swap
Change in net unrealized gains and losses on investments
Increase in unrestricted net assets
Temporarily restricted net assets:
Contributions
Income on long-term investments, net
Change in net unrealized gains and losses on investments
Change in value of split-interest agreements
Annuity payments
Net assets released from restrictions
Net assets transferred to permanently restricted net assets
(Decrease) increase in temporarily restricted net assets
Permanently restricted net assets:
Contributions
Change in value of split-interest agreements
Income on long-term investments
Annuity payments
Net assets transferred from temporarily restricted net assets
Increase in permanently restricted net assets
Increase in net assets
Net assets, beginning of the year
Net assets, end of the year
See accompanying notes.
Years ended August 31
2004 2003
$ 90'092 $ 55,690
13,065
9,873
(2,047)
(1,017)
971
92
(3,792)
32,527
98,189
97,165
10,098
5,417
3,541
859
(1,434)
6,00
139
(365)
(173)
(64)
(13,065)
(9,873)
—
(84)
(894)
2,520
6
49
8
10
2
(3)
(3)
—
84
13 140
97,308 99,825
865,172 .765,347
962,480 $ 865,172
4
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities
Increase in net assets
Adjustments to reconcile increase in net assets to net cash provided by
operating activities:. . .
Depreciation and amortization
Provision for doubtful accounts
Net loss on disposition of property and equipment
Temporarily restricted contributions
Permanently restricted contributions
.. Change in net unrealized gains and losses on investments
Unrealized gain from interest rate swap
Changes in operating assets and liabilities:
(Increase) decrease in:
Patient accounts receivable
Other receivables and other current assets
Donations and bequests pledged
(Decrease) increase in:
Accounts payable
Accrued expenses
Accrued liabilities under capitated contracts
Estimated third -party payor settlements
Estimated malpractice claims
Liability to annuitants and other beneficiaries
Net cash provided by operating activities
Cash flows from investing activities
Decrease (increase) in assets designated by the Board for capital improvements
and bond proceeds, net
Decrease in investments
Decrease in assets under indenture agreement held by trustee
Increase in assets larder malpractice claims funding arrangement
held by trustee
(Increase) decrease in health and dental insurance deposits
(Increase) decrease in other assets
Purchase of property and equipment, net
Net cash used in investing activities
Years ended August 31
2004 2003
$ 97,308, . $ 99,825
32,345
29,385
14,072
9,286
158
1,539
(10,098)
(5,417)
(4
(49)
5,226
(39,157)
(871)
(92)
(22,015)
(8,069)
(31264)
$43 .
(2,793)
3,191
15,099
(2,156)
16,638
4,226
4,050
(2,277)
53
(2,237)
3,068
1,040
942
251
149,912
90,132
4,878 (6,227)
365 3,018
4 40
(1,047)
(924)
(1,896)
529
(942)
90
(112,418)
(83,051)
(111,056)
(86,525)
5
i
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidated Statements of Cash Flows (continued)
(in thousands)
Yeas ended
August 31
2004
2003.
Cash Rows from financing activities
(Decrease) increase in other long -tern liabilities
S (3,527)
$ 3,295
Proceeds from temporarily restricted contributions
10,098
5,417
i Proceeds from permanently restricted contributions
6
49
. Net cash provided by financing activities
6,577
8,761
Net increase in cash and equivalents
45,433
12,368
Cash and equivalents, beginning of the year
44,161
31,793
Cash and equivalents, end of the year
S 89594
$ 44,161
Supplemental disclosure of cash flow Information
Cash paid during the year for interest
. $ 6,792
$ 7,223
See accompanying notes.
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements
August 31, 2004
i
1. Summary of Significant Accounting Policies
Organization
Hoag Memorial Hospital Presbyterian (the Hospital) is a not- for -profit corporation operating a
general acute care hospital in Newport Beach, California. The Hospital provides inpatient,
outpatient and emergency services for residents of Orange County.
Hoag Hospital Foundation (the Foundation) is a not- for -profit corporation which raises funds to
support the Hospital. The Hospital is the sole voting corporate member of the Foundation.
ij
Hoag Practice Management, Inc. (HPMI) is a for -profit taxable California corporation which is
wholly owned by the Hospital. HPMI provides management and billing services to medical
office locations that provide physician healthcare services to patients in the Hospital's service
area.
Coastal Physicians Purchasing Group, Inc. (Coastal Physicians) is a for - profit taxable California
corporation that is wholly owned by the Hospital and is primarily engaged to serve as a
purchasing co -op for physicians.
The Hospital has a 50% ownership in a joint venture, Orthopedic Surgery of Orange County,
LLC (OSCOC LLC), over which it exerts significant influence. OSCOC, LLC serves as the
general partner of an outpatient surgery center, Orthopedic Surgery of Orange County, LP
(OSCOC LP).
The Hospital has a 78 % ownership in a joint venture, Newport Imaging Center (AIIC), over
which it exerts significant influence.
Basis of Consolidation
The consolidated financial statements combine the accounts of the Hospital, the Foundation
HPMI, Coastal Physicians, OSCOC LLC, OSCOC LP and NIC (collectively, the Organization).
All significant intercompany accounts and transactions have been eliminated in consolidation.
7
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of the Organization's consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires management to make
estimates and assumptions that 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 revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Equivalents
All highly liquid investments with a maturity of three months or less are considered to be cash
equivalents. The carrying amount approximates fair value because of the short maturity of the
investments.
Investments
Investments in equity securities with readily determinable fair values and all investments in debt
securities are measured at fair value. Investment income or loss (including realized gains and
losses on investments, other - than- temporary impairment losses and interest and dividends) is
included in the excess of revenues over expenses unless the income or loss is restricted by donor
or law. The Organization generally considers declines in the value of.its investments that extend
over a period of time greater than six months and are in excess of a 25% decline from the
Organization's original cost of the investment to be other - than - temporary in nature. When a
determination is made that an other - than- temporary impairment has occurred the cost basis of
the individual security is written down to fair value as a new cost basis and the amount of the
write -down is accounted for as a realized loss. Management determines the appropriate
classification of all investments at the date of purchase and reevaluates such designations at each
balance sheet date. The Organization determined that all investments held at August 31, 2004
and 2003, are designated as other than trading. Unrealized gains and losses on investments are
j excluded from the excess of revenue over expenses.
i Hoag Memorial Hospital Presbyterian and Affiliates
i
i
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
I
Accounts Receivable
I
The Organization receives payment for services rendered to patients from the federal and state
governments under the Medicare and Medi -Cal programs, privately sponsored managed care
programs for which payment is made based on terms defined under formal contracts, and other
i payors. The following table summarizes the percentage of net accounts receivable from all
payors at August 31:
2004 2003
Government 13% 8%
Contracted 71% 63%
Other 16% 29%
100% 100%
Management believes there are no credit risks associated with receivables from government
programs. Receivables from managed care programs and others are from various payors who are
subject to differing economic conditions, and do not represent any concentrated risks to the
Organization. Management continually monitors and adjusts the provision for contractual
discounts and doubtful accounts associated with receivables.
Assets Limited as to Use
Assets limited as to use primarily include assets that are held by trustees under indenture
agreements, and under malpractice claims funding arrangements, or are set aside by the
Organization's Board of Directors for future capital improvements, over which the Board retains
control and may, at its discretion, subsequently use for other purposes.
Donations and Bequests
Donations and bequests of private support are recorded as revenue upon the receipt of the
unconditional promise to give. The Organization is the ultimate remainderman of certain trusts.
Assets that relate to irrevocable, unconditional promises to give are included in the consolidated
financial statements at fair, market value in temporarily or permanently restricted net assets,
depending on donor restrictions. The Organization believes that certain donations and bequests
pledged may not be collected and has provided an allowance for such amounts.
9
i
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated. Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Property and Equipment
Property and equipment acquisitions are recorded at cost or fair market value for donated items.
Depreciation is provided over the estimated useful life of each class of depreciable asset and is
computed using the straight -line method. Lives range from three to 20 years for equipment and
10 to 40 years for building and improvements. Amortization of leasehold improvements is
provided for using the straight -line method over the shorter of the estimated useful lives of the
assets or the lease term.
Gifts of long -lived assets such as land, buildings or equipment are reported as unrestricted
support, and are excluded from the excess of revenues over expenses, unless explicit donor
stipulations specify how the donated assets must be used. Gifts of long -lived assets with explicit
restrictions that specify how the assets are to be used, and 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
i restrictions are reported when the donated or acquired long -lived assets are placed in service.
Accounting for the Impairment or Disposal of Long -Lived Assets
The Organization accounts for the impairment and disposition of long -lived assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long -Lived Assets. in accordance with SFAS No. 144, long -lived
assets are reviewed for events or changes in circumstances that indicate that their carrying value
may not be recoverable.
Temporarily and Permanently Restricted Net Assets
I
Temporarily restricted net assets are those whose use by the Organization has been limited by
donors to a specific time period or purpose. Permanently restricted net assets have been restricted
by donors to be maintained by the Organization in perpetuity.
i
Deferred Financing Costs
Costs incurred in obtaining long -term financing are amortized over the term of the related
i obligations using the interest method.
- I
10
r
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Derivative and Hedging Instruments
In accordance with Financial Accounting Standards Board Statement (FAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities, and its amendments in FAS Nos. 137 and
138, the Organization is required to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through the statement of
operations. If the derivative is a hedge, depending on the nature of the -hedge, changes in the fair
values of the derivatives are offset against either the change in fair value of assets, liabilities, or
firm commitment through the statement of operations, or recognized as a change in unrestricted
net assets until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value, if any, is immediately recognized in the excess of revenues
over expenses.
In February 2002, the Hospital entered into a derivative financial instrument, specifically an
interest rate swap agreement, for the purpose of managing the Hospital's exposure to adverse
fluctuations in interest rates. The swap is designated as, and qualifies as, a cash flow hedge.
Accordingly, the effective portion of the gain or loss on the derivative instrument is reported as a
change in unrestricted net assets and reclassified into interest expense in the same period or
periods during which the hedged transaction affects earnings.
Excess of Revenues over Expenses
The consolidated statements of operations include excess of revenues over expenses. Changes in
unrestricted net assets that are excluded from excess of revenues over expenses, consistent with
industry practice, include change in unrealized gains and losses on investments and contributions
of long -lived assets (including assets acquired using contributions which by donor restriction
were to be used for the purposes of acquiring such assets). -
Net Patient Service Revenues
Net patient service revenues are reported at the net realizable amounts from patients, third -party
payors and others for services rendered, including estimated settlements under reimbursement
agreements with third -party payors. Settlements are accrued on an estimated basis in the period
the related services are rendered and adjusted in future periods as final settlements are
11
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Net Patient Service Revenues (continued)
j determined. In the opinion of management, adequate provision has been made for such
adjustments, if any, that might arise. Net patient revenues from Medicare and Medi -Cal
approximated 23% and 1% of the total net patient revenues in 2004 and 261/6 and 2% in 2003.
Net patient revenue includes $(372,000) in 2004 and $1,177,000 in 2003 relating to
(unfavorable) favorable final settlement of prior years' reimbursement from Medicare, Medi -Cal
and other programs.
The Organization is reimbursed for services provided to patients under certain programs
administered by governmental agencies. Laws and regulations governing the Medicare and
Medi -Cal programs are complex and subject to interpretation. The Organization believes that it is
in compliance with all applicable laws and regulations and it is not aware of any significant
pending or threatened investigations involving allegations of potential wrongdoing. While no
such regulatory inquiries have been made, compliance with such laws and regulations can be
subject to future government review and interpretation as well as significant regulatory action
including fines, penalties and exclusion from the Medicare and Medi -Cal programs.
Revenue Earned on Prepaid Contracts
The Hospital has agreements with various health plans to provide medical services to subscribing
participants. Under these agreements, the Hospital receives monthly capitation payments based
on the number of each plan's participants enrolled with participating medical groups that have
designated the Hospital as their provider. The Hospital is responsible for certain hospital
contracted services provided to these plan participants, including services rendered at other
health care facilities. The agreements call for risk - sharing arrangements between the Hospital
and the participating physician groups dependent primarily on utilization. The Hospital has
accrued for estimated risk- sharing payments and claims for services from outside providers.
Accrued liabilities related to these services are generally based on historical claims lag analyses
and are continually monitored and reviewed by management.
Charity Care
The Hospital provides care to patients who meet certain criteria under its charity care policy
without charge or at amounts less than established rates. Because the Hospital does not pursue
collection of amounts determined to qualify as charity care, they are not reported-as revenue.
12
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Donor - Restricted Gifts
Unconditional promises to give cash and other assets to the Hospital are received by the Hospital
and Foundation and 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 received or the conditions are met. 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 as net assets
released from restrictions. Donor - restricted . contributions whose restrictions are met within the
same year as received are reported as unrestricted contributions in the accompanying
consolidated financial statements.
Self - Insurance
The Organization provides certain benefits to its employees and others under health and other
insurance programs and is self- insured with respect to certain of the benefits under such
programs. In addition, the Organization is self - insured with respect to professional liability and
comprehensive general liability risks, subject to certain limitations. Professional liability risks in
excess of $2,000,000 per occurrence are reinsured with major independent insurance companies.
Based on actuarially determined estimates, a provision has been made in the accompanying
consolidated financial statements for estimated losses relating to all known claims and incurred
but not reported incidents as of August 31, 2004 and 2003.
The Organization is self - insured for workers' compensation claims, subject to certain limitations.
The liability risks in excess of $1,000,000 and $750,000 per occurrence at August 31, 2004 and
2003, respectively, are reinsured with major independent insurance companies. In connection
with the workers' compensation plan, the Organization has filed a letter of credit with the State
of California in the amount of $4,463,000 at August 31, 2004. In management's opinion, the
estimated accrued claims losses provide an adequate reserve for loss contingencies at August 31,
2004 and 2003.
I
13
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Income Taxes
The Hospital and the Foundation are exempt from federal and California state income and
franchise taxes under Section 501(cx3) of the Internal Revenue Code and California Revenue
and Taxation Code Section 23701(d), respectively. The Hospital and Foundation are recognized
as public charities (not private foundations) under Sections 509(a)(1) and 170(b)(1)(Axiii) and
Section 509(a)(3), respectively.
Split- Interest Agreements
Split- interest agreements represent charitable remainder trusts that are arrangements in which a
donor establishes and funds a trust with specified distributions to be made to a designated
beneficiary or beneficiaries over the trust term. The Foundation serves as trustee of these
arrangements and recognizes the contribution in the period in which the trust is established. The
assets are recorded at fair value when received and the liability to the designated beneficiary is
recorded at the present value of the estimated future payments to be distributed over the expected
life of the beneficiary using a discount rate. The fair value of charitable remainder trusts where
the Foundation serves as trustee is $5,464,000 at August 31, 2004, and $4,541,000 at August 31,
2003. The present value of the related liabilities recorded is $1,554,000 at August 31, 2004 and
$1,539,000 at August 31, 2003.
Reclassifications
Certain prior -year amounts have been reclassified to conform with current -year presentation.
2. Investments
1 Assets Limited as to Use
Assets limited as to use are recorded at fair market value and include assets which have been
designated by the Hospital's Board of Directors for major equipment purchases, the renovation
and replacement of plant facilities, payment of potential malpractice and general liability claims,
and for payment of claims under the Hospital's self - insured employee group health plan. Certain
of those assets designated for capital improvements are subject to an agreement with the
iOrganization's bond agent related to the Series 1999 bonds whereby it must maintain, in the
aggregate, sufficient long -term assets, primarily marketable fixed income securities and other
14
f
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
2. Investments (continued)
Assets Limited as to Use (continued)
liquidity support vehicles,'to be used to repurchase the bonds in the unlikely event that tendered
bonds are not resold in the open market (see Note 5).
The Foundation's Board of Directors has
designated $21,186,000 at August 31, 2004, and $18,342,000 at August 31, 2003, as Board-
designated funds functioning as an endowment to be
invested to "provide income for a long but
unspecified period of time. These assets have been classified under assets limited as to use for
endowments.
The composition of assets limited as to use at August 31 is set forth below:
2004 2003
(in thousands)
Board designated for capital improvements:
Cash and short-term investments
$ 221,306 $ 327,519
U.S. government agency and treasury notes
62,328 89,701
Debt and equity securities
407425 288,188
$ 690,859 $ 705,408
iBond proceeds — commercial paper
$ 5 $ 5
For endowments:
Cash and short-term investments
$ 8,570 $ 801
Debt and equity securities
33,877 37,167
i
$ 42,447 $ 37,968
Under indenture agreement — cash and short-term
investments
$ 315 $ 319
I Under malpractice claims funding arrangement:
Cash and short-term investments
$ 519 $ 193
U.S. government agency and treasury notes
2,420 3,877
Debt and equity securities
13,101 11,006
$ 16,040 $ 15,076
i For health insurance claims — cash and equivalents
$ 49580 $ 2;684
15
Hoag Mernoriaospital Presbyterian and Affiliates
Notes to Consolidated Financial Staternents (continued)
2. Investments (continued)
Investments
The following is a summary of investments, other than assets limited as to use, held by the
Organization at August 31, 2004 and 2003. Investments are stated at fair value.
2004 2003
Fair Market Fair Market
Value Value
(in thousands)
Investments — debt and equity securities S 162356 L_16,672
Management reviewed its investment portfolio at August 31, 2004, and considers the unrealized
losses on investments at that date to be temporary and a result of normal market fluctuation.
Factored into this evaluation were the general market conditions, the issuer's financial condition
and near -term prospects, conditions in the issuer's industry, and recommendations from advisors.
Management believes that any ultimate realized losses on these investments will not have a
material impact on the Organization's consolidated financial position or results of operations.
The following table is a summary of the gross unrealized losses and fair value of investments,
including assets limited as to use, aggregated by investment category and length of time for
individual securities that have been in a continuous unrealized loss position at August 31, 2004
(in thousands):
Less than 12 months 12 months or more
Unrealized Unrealized
Fair Value Losses Fair Value Losses
Common and preferred stock $ 36,237
$ 4,302
$ 5,714
$ 801
Marketable securities 51,170
1,054
65,021
4,039
$ 87,407
$ 5,356
$ 70,735
$ 4,840
Net realized gains (losses) on investments, included in investment income in the accompanying
consolidated statements of operations, totaled approximately $37,650,000 in. 2004 and
$(2,154,000) in_ 2003. Included in the net realized gain (loss) is an other -than- temporary
impairment loss of $.206,000 in 2004 and $612,000 in 2003 for declines in the market value of
the investment portfolio that were considered to be other - than - temporary in nature. Net
unrealized (losses) gains on assets limited as to use were $(5,177,000) and $38,760,000 for the
years ended August 31, 2004 and 2003, respectively.
16
.y
4 �
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
i3. Donations and Bequests Pledged
The Organization has been named as remainderman under various charitable gift annuities and
charitable remainder trusts. Such unconditional irrevocable agreements are reported at fair value
at the date the promise is received, which is then treated as cost. In determining the fair value of
such assets, the Organization uses the present value of estimated future cash flows using a
discount rate commensurate with the risks involved. For unconditional irrevocable agreements
where the assets, or a portion of the assets, are being held for the benefit of others, such as the
donor or third parties designated by the donor, a liability, measured at the present value of the
expected future payments to be made to other beneficiaries, has been recorded in the
accompanying consolidated financial statements.
The Organization is a beneficiary to assets contributed by donors under unconditional
irrevocable agreements which are held by independent trustees or other fiscal agents. Where
possible, assets have been included at estimated fair value in the accompanying consolidated
financial statements. In some cases, the estimated fair value of such assets cannot be determined
and, accordingly, such assets are not included in the accompanying consolidated financial
statements.
The amounts of donations pledged that are receivable at August 31, 2004 consist of the following
(in thousands):
Due in less than one year $ 5,707
Due in one to five years _ 2,519
Due in more than five years 1,200
Total $ 9,426
The Organization is also the beneficiary of various revocable trusts. The value of certain of these
trusts has not been disclosed to the Organization and cannot be reasonably estimated. Assets that
relate to revocable trusts or conditional promises to give, for which the Organization is not
i trustee, are not included in the accompanying consolidated financial statements. The fair value of
assets relating to revocable trusts or conditional promises to give, for which the Organization is
not the trustee, approximated $10,580,000 at August 31, 2004 and $13,370,000 at August 31,
2003. The Organization includes these donations as revenue when. the amounts are received or
when the promise to give becomes unconditional. The fair value of certain of these assets was
determined by calculating the net present value of the estimated future cash flows using a
discount rate at the time the pledge was made which ranges between 3% and 6 %.
FA
17
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
4. Property and Equipment
A summary of property and equipment at August 31, 2004 and 2003, follows:
Land
Buildings and improvements
Equipment
Construction -in- progress
Less accumulated depreciation
Property and equipment, net
2004 2003
(in thousands)
$ 20,213 $ 20,215
340,757
311,904
234,150
209,624
139,618
84,166
734,740
625,909
(282,879)
(253,963)
$ 451,861
$ 371,946
The Organization has outstanding commitments to complete construction -in- progress totaling
approximately $85,315,000 at August 31, 2004.
5. Bonds Payable
In October 1992, $91,000,000 of tax- exempt City of Newport Beach variable -rate demand
revenue bonds (Hoag Memorial Hospital Presbyterian) Series 1992 were issued by the
Organization through an indenture agreement with the City of Newport Beach.
In December 1996, $100,000,000 of tax- exempt City of Newport.Beach variable rate demand
revenue bonds (Hoag Memorial Hospital Presbyterian) Series 1996 were issued by the
Organization through an indenture agreement with the City of Newport Beach.
In December 1999, $125,000,000 of tax- exempt City of Newport Beach variable rate demand
revenue bonds (Hoag Memorial Hospital Presbyterian) Series 1999 were issued by the
Organization through an indenture agreement with the City of Newport Beach.
The Series 1992, Series 1996 and Series 1999 bonds are subject to, at the option of the
Organization, optional and mandatory tender for purchase. If no tender for purchase is made,
varying redemption payments on the Series 1992 bonds commence on October 1, 2013, and are
required to be made through October 1, 2022. For the Series 1996 bonds, if no tender for
purchase is made, redemption is required to be inade on October 1, 2026. For the series 1999
bonds, if no tender for purchase is made, redemption is required to be made on December 1,
2029,
0
18
Hoag Memorial-Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
5. Bonds Payable (continued)
The interest rate on the Series 1992 and 1996 bonds varies daily and weekly for the Series 1999
bonds depending upon prevailing market conditions. At the option of the Organization, the
interest rate on the Series 1992, Series 1996 and Series 1999 bonds may also bear interest at a
daily rate, weekly rate, a term rate or a fixed rate. The average interest rate was approximately
1.01 % in 2004 and 1.21% in 2003. Interest on bonds bearing a daily or weekly rate is payable
monthly. Interest on bonds bearing a'term rate is paid semiannually and interest on bonds bearing
a fixed rate is paid on the first day of April and October.
The Organization indenture agreement includes, among other things, certain financial covenants,
limitations on additional indebtedness and limitations on the disposition or transfer of assets.
Holders of the variable rate demand revenue bonds have the right to tender the bonds to the
Organization's remarketing agents on a daily basis. The Organization's remarketing agents have
the authority to remarket the bonds at daily rates of interest up to 12 %. The Organization is
subject to an agreement with its bond agent related to the Series 1999 bonds whereby it must
maintain, in the aggregate, sufficient long -term assets, primarily marketable fixed - income
securities and other liquidity support vehicles, to be used to repurchase the bonds in the unlikely
event that tendered bonds are not resold in the open market (see Note 2).
The Organization has also entered into an unsecured liquidity facility with Bank of America
dedicated to refinancing the Series 1992 and 1996 bonds in the event the bonds cannot be
remarketed. There have been no draws on the liquidity facility. The liquidity facility aggregated
$193,557,000 on August 31, 2004. Commitment fees relating to the unsecured liquidity facility
were $375,000 in 2004 and $372,000 in 2003. The liquidity facility expires on November 15,
2005, and is renewable annually. Should the Organization engage in certain actions resulting in
an event of default, the facility will immediately terminate.
Based upon the interest rate flexibility, the ability to increase the interest rate to satisfy market
i demands, the availability of the unsecured liquidity facility and the fact that certain long -term
assets would be liquidated to repurchase the bonds in the event of such tender, the bonds are
classified as long -term in the accompanying consolidated balance sheets.
19
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
5. Bonds Payable (continued)
Interest Rate Swap
During 2002, the Hospital entered into an interest rate swap on the Series 1992 and Series 1999
bonds that effectively converted a portion of its floating -rate debt to a fixed -rate basis for the
next five years, thus reducing the impact of interest -rate changes on future interest expense. The
swap agreement hedges an initial notional amount of $150,000,000 at a 3.235% fixed interest
rate against 67% of the average USD- LIBOR -BBA rate (1.089% on August 31, 2004).
f Settlements are made monthly on the 26th day of each month over the term of the. agreement,
which expires on February 26, 2007.
6. Temporarily and Permanently Restricted Net Assets
20
t
Restricted net assets are available for the following purposes or periods at August 31:
2004
2003
Temporarily
Permanently
Temporarily
Permanently
Restricted
Restricted
Restricted
Restricted
(in thousands)
Women's Pavilion
$ 9,099
$ —
$ 18,442
$ —
Heart programs
5,977
2,081
3,735
2,079
Cancer programs
6,785
6,255
5,500
6,253
Other programs
8,846
1,945
9,430
1,943
Time- restricted assets
20,003
196
14,497
189
I
i
$ 50,710
$ 10,477
$ 51,604
$ 10,464
I
20
t
I
i
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
7. Net Assets Released from Restrictions
Net assets were released from donor restrictions for the year ended. August 31, by incurring
expenses satisfying the restricted purposes or by occurrence of other events specified by donors,
as follows:
Purpose restrictions accomplished:
Women's Pavilion
Heart programs
Cancer programs
Education programs
Other projects
Total restrictions released
8. Retirement Plan
2004 2003
(in thousands)
3 11,714
S 8,350
3
33
872
.774
173
364
303
352
$ 13,065
S 9,873
The Organization has a sheltered savings plan in which substantially all full -time employees who
meet certain criteria, as defined, are eligible. The plan provides for an automatic annual
contribution by the Organization of 2.5% to 3.5% of gross wages based on years of service of
eligible employees and a matching contribution by the Organization of 500/6 (up to 5% of,gross-
wages) of eligible employee contributions.
Total expense for the plan was $6,814,000 in 2004 and $6,349,000 in 2003. It is the
Organization's policy to make contributions to the plan equal to the amounts accrued as expense.
9. Health and Welfare Benefits
The Organization maintains self - insured medical, unemployment and workers' compensation
coverage for all active, regularly scheduled, full -time and part-time employees. The cost of such
benefit plans is accrued for in the period services are rendered. Accruals for unpaid claims are
based on estimated settlements for reported claims and on experience -based estimates for
unreported claims. Claims are paid as received.
r.:
21
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
,j 10. Charity Care (Unaudited)
The Hospital provides care to patients who meet certain criteria under its charity care policy
without charge or at amounts less than its established rates. The Hospital maintains records to
identify and monitor the level of charity care it provides. The following is an estimate of the
level of direct charity care provided during the years ended August 31:
(Unaudited)
2004 2003
(in thousands)
Estimated costs and expenses incurred to provide
charity care $ 7,163 $ 7,321
In addition to the above - mentioned medical care rendered, the Hospital provides numerous other
services free of charge to the community for which charges are not generated and revenues have
not been accounted form the accompanying consolidated financial statements. These services
include referral services, health care screenings, community support groups and health education
programs. The above amounts also do not include volunteer services provided by Hospital staff
to the community on their personal tithe, nor services provided that are funded as a result of the
Hospital's fund - raising activities.
11. Disclosures About Fair Value of Financial Investments
The following methods are used to estimate the fair value of each class of fmancial instruments:
Short -Term Investments
The fair value of short-term investments, such as mutual funds, is based upon quoted market
prices.
Long -Term Investments
The fair value of investments is estimated based on quoted market prices for these investments.
22
I
Hoag Memorial; Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
11. Disclosures About Fair Value of Financial Investments (continued)
Long-Term Debt
The fair value of the Hospital's long -term debt is estimated based on the quoted market prices for
the same or similar issues or on the current rates offered to the Hospital.for debt of the same
remaining maturities. The fair value of the Hospital's debt approximated its carrying value at
August 31, 2004 and 2003.
12. Functional Expenses
The Organization provides general health care services to residents within its service areas.
Expenses relating to providing these services are as follows for the years ended August 31:
2004 2003
(in thousands)
Health care. services $ 320,520 $ 289,325
General and administrative 149,086 132,357
Fundraising 4,568 4,319
$ 474,174 $ 426,001
13. Commitments and Contingencies
Leases
The Organization leases certain equipment and office space under noncancelable operating lease
agreements which expire on various dates through the year 2020.
The leases require annual
rental payments as follows (in thousands):
Fiscal year.
2005
$ 3,641
2006
2,856
2007
1,869
2008
1,651
2009
1,083
Thereafter
11,291
$ 22,391
Total rental expense aggregated $8,080,000 in 2004 and $8,282,000 in 2003.
23
Hoag Memorial-Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies (continued}
Leases (continued)
The Organization leases certain office space to others under noncancelable operating leases
expiring on various dates. Future minimum rental revenue due the Hospital under these leases is
as follows (in thousands):
Fiscal year
2005 $
3,838
2006
3,362
2007
2,064 .
2008
1,354
2009
537
Thereafter
639
T
11,794
Total rental income aggregated $3,854,000 in 2004 and $2,816,000 in 2003, and is included in
other revenue in the accompanying consolidated statements of operations.
Medical Malpractice
The Organization maintains a self- insurance accrual for potential malpractice and general
liability claims. The Organization is self - insured for the first $2,000,000 per claim. Estimated
losses from asserted and unasserted claims are accrued based on actuarial estimates that
incorporate the Organization's past experience, as well as other considerations. Reinsurance
jpolicies have been negotiated for amounts in excess of $2,000,000. The Organization maintains
an irrevocable trust to maintain assets set aside for potential medical malpractice and general
liability claims. Liabilities of $13,140,000 at August 31, 2004 and $10,072,000 at August 31,
2003, have been accrued for claims and potential claims incurred but not reported to the
Organization.
Seismic Regulations
The state of California has passed legislation requiring hospitals to perform structural evaluations
of their buildings by 2001 and upgrade facilities to meet certain minimum seismic standards by
2008. The Organization has completed its evaluation of its seismic standards and has obtained
approval by OSHPD of this evaluation. The Organization currently estimates the costs associated
with these seismic improvements will be approximately $30,000,000 (unaudited).
24
t �
Hoag Memorial Hospital Presbyterian and Affiliates
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies (continued)
Contingencies
Certain claims, suits and complaints arising in the ordinary course of business have been filed or
are pending against the Organization. In the opinion of management, such claims, if disposed of
! unfavorably, would not have a material adverse effect on the accompanying consolidated
jfinancial statements of the Organization.
25
J-
i
i
i
Other Financial Information
-J1 ERNST & YOUNG Suite 1 Young L I - Fax: (9491 437 -0590
18111 Von Kaman Avenue v .ey.com
Irvine, CA 92612
Report of Independent Auditors
on Other Financial Information
The Board of Directors
Hoag Memorial Hospital Presbyterian and Affiliates
Our audits were conducted for the purpose of forming an opinion on the consolidated financial
statements taken as a whole. The consolidating information is presented for purposes of
additional analysis and is not a required part of the consolidated financial statements. Such
information has been subjected to the auditing procedures applied in our audits of the
consolidated financial statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
�o1Mw� 1i �o'wrtiLL�
i 11�
November 12, 2004
A Member Practice of Ernst & Young Global
26
I
i
Hoag Menlorial Hospital Presbyterian and Affiliates
Consolidating Balance Sheets
Current assets
Cash and equivalents
Patient accounts receivable, net of
allowance for doubtful accounts
Investments
Other receivables
Other
Due from Hospital
Due from Foundation
Due from other entities
Total current assets
August 31, 2004
(in thousands)
Other (A)
Hospital Entities Foundation Eliminations Consolidated
$ 82,044 'S 4,477 $ 3,073 S - $ 89,594
42,776
590
-
-
43,366
3,841
-
12,515
-
16,356
7,039
2,132
-
-
9,171
6,892
374
39
-
7,305
-
8
351
(359)
-
1,710
-
-
(1,710)
-
1,473
-
-
(1,473)
-
145,775
7,581
15,978
(3,542)
165,792
Assets limited as to use:
Board designated for capital
improvements
690,859
- - -
690,859
Bond proceeds
5
- - -
5
For endowments.
-
- 42,447 -
42,447
Under indenture agreement held by
trustee
315
- - -
315
Under malpractice claims funding
-
arrangement held by trustee
16,040
- - -
16,040
For health and dental insurance claims
4,580
- - -
4,560
Total assets limited as to use
711,799
- 42,447 -
754,246
Donations and bequests pledged, net of
allowance for doubtful accounts and
unamortized discount
4,500
- 25,487 -
29,987
Property and equipment, net
445,184
6,677 - -
451,861
Other assets
10,466
728 (7,688)
3,506
Total assets
S 1,3172724 S
14986 $ 93,912 S (11,230)
$ 1,405 392
(A) To eliminate intercompany amounts.
so
27
Hoag Memorial. Hospital Presbyterian and Affiliates
Consolidating Balance Sheets (continued)
August 31, 2004
(in thousands)
A
28
Other
(A)
Hospital
Entities
Foundation
Eliminations
Consolidated
Current liabilities:
Accounts payable
S 30,835
$ 740
S 499
S -
S 32,074
Accrued expenses:
Payroll and payroll taxes
12,232
109
-
-
12,341
Employee benefits
31,327
76
-
-
31,403
Other
11,360
2,491
81
(54)
13,678
Accrued liabilities under capitated
contracts
13,715
-
-
-
13,715
Estimated third -party payor settlements
759
-
-
-
759
Due to Hospital
-
1,473
1,710
(3,183)
-
Due to Foundation
351
-
-
(351)
-
Due to other entities
8
-
(8)
Total current liabilities
100,587
4,889
2,290
(3,596)
104,170
Estimated malpractice claims
13,140
-
-
-
13,140
Bonds payable
316,000
-
-
-
316,000
Liability to annuitants and other
beneficiaries
-
-
2,997
-
2,997
Other long -term liabilities
4,919
4,688
-
(3,002)
6,605
Total liabilities
434,646
9,577
5,287
(6,598)
442,912
Net assets:
Unrestricted
879,228
5,409
21,288
(4,632)
901,293
Temporarily restricted
3,850
-
46,860
-
50,710
Permanently restricted
-
-
10,477
-
10,477
Total net assets
883,078
5,409
78,625
(4,632)
962,480
Total liabilities and net assets
S 1,317,724
S 14,986
S 83,912
S (11,230)
S 1,4052392
(A) To eliminate intercompany amounts.
A
28
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidating Balance Sheets
August 31, 2003
(in thousands)
Other
(A)
Hospital
Entities
Foundation
Eliminations
Consolidated
Current assets:
Cash and equivalents
$ 35,590
$ 3,015
$ 5,556
$ -
$ 44,161
. Patient accounts receivable, net of
allowance for doubtful accounts
34,928
495
-
-
35,423
Investments
2,989.
-
13,683
-
16,672
Other receivables
6,428
844
-
-
7,272
Other
5,639
301
-
-
5,940
Due from Hospital
- .
-
366
(366)
-
Due from Foundation
1,750
-
-
(1,750).
-
Due from other entities
1,385
-
-
(1,385) ..
-
Total current assets
88,709
4,655
19,605
(3,501)
109,468
Assets limited as to use:
Board designated for capital
improvements
705,408
-
-
-
705,408
Bond proceeds
5
For endowments
-
-
37,968
-
37,968
Under indenture agreement held by
trustee
319
-
-
-
319
Under malpractice claims funding
arrangement held by trustee
15,076
-
-
-
15,076
For health and dental insurance claims
2,684
-
-
-
2,684
Total assets limited as to use
i
723,492
-
37,968
-
761,460
Donations and bequests pledged, net of
allowance for doubtful accounts and
unamortizeddiscount
4,500
-
22,694
-
27,194
Property and equipment, net
365,570
6,376
-
-
371,946
Other assets
8,889
771
49
(7,145)
2,564
Total assets
$ 1,191,160
$ 11,802
$ 80,316
$ (10,646)
$ 1,272,632
(A) To eliminate intercompany amounts.
I
29
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidating Balance Sheets (continued)
August 31 2003
(in thousands)
(A) To eliminate intercompany amounts
00
30
Other
(A)
Hospital
Entities
Foundation
Eliminations
Consolidated
Current liabilities:.
Accounts payable
$ 16,567
$ 289
$ 119
$ -
$ 16,975
Accrued expenses:
Payroll and payroll taxes
10,037
79
-
-
10,116
Employee benefits
27,965
69
-
-
28,034
Other
1,462
1,575
-
(203)
2,834
Accrued liabilities under capitated
contracts
9,665
-
-
-
9,665
Estimated third -party payor settlements
706
-
-
-
706
Due to Hospital
-
1,385
1,750
(3,135)
-
Due to Foundation
366
-
(366)
-
Total current liabilities
66,768
3,397
1,869
(3,704)
68 ,330
Estimated malpractice claims
10,072
-
-
-
10,072
Bonds payable
316,000
-
-
-
316,000
Liability to annuitants and other .
beneficiaries
-
-
2,055
-
2,055
Other long -term liabilities
10,354
4,350
105
(3,806).
11,003
Total liabilities
403,194
7,747
4,029
(7,510)
407,460
Net assets:
Unrestricted
784,207
4,055
17,978
(3,136)
803,104
Temporarily restricte&
3,759
-
47,845
-
51,604
Permanently restricted
10,464
-
10,464
Total net assets
787,966
4,055
76,287
(3,136)
865,172
Total liabilities and net assets
$ 1,191,160
$ 11,802
$ 80,316
$ (10,646)
$ 1,272,632
(A) To eliminate intercompany amounts
00
30
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidating Statements of Operations
Year ended August 31, 2004
(in thousands)
Other (A)
Hospital Entities Foundation Eliminations Consolidated
Unrestricted operating revenues:
I
Net patient service
$ 380,690 $
19,5%
S -
s -
S 400,286
Capitation
69,804
-
-
-
69,804
Other
43,058
61
7,078
(5,206)
44,991
Total unrestricted operating revenues
493,552
19,657
7,078
(5,206)
515,081
.. . ,j
Operating expenses:
Salaries and employee benefits
220,807
4,783
-
(1,996)
223,594
Supplies
86,483
2,569
-
89,052
-
Purchased services
66,529
2,713
-
(48)
69,194
Depreciation and amortization
30,513
1,832
-
-
32,345
Professional fees
6,243
-
-
-
6,243
.
Provision for doubtful accounts
14,025
47
-
-
14,072
Utilities
5,028
171
-
-
5,199
Insurance
5,449
130
-
-
5,579
Lease rental
7,350
1,013
-
(252)
8,111
Other
15,066
672
7,957
(2,910)
20,785
Total operating expenses
457,493
13,930
7,957
(5,206)
474,174
Income (loss) from operations
36,059
5,727
(879)
-
40,907
Other income (expense):
Investment income, net
54,757
1
3,016
-
57,774
Interest expense
(7 ,573)
(422)
-
-
(7,995)
Other nonoperating gains (losses)
2,807
104
(2,959)
(48)
Other income (expense), net
49,991
(317)
3,016
(2,959)
49,731
Excess of revenues over expenses before
minority interest
86,050
5,410
2,137
(2,959)
90,638
Minority interest
-
(546)
-
-
(546)
Excess of revenues over expenses
86,050
4,864
2,137
(2,959)
90,092
Transfers from Hoag Hospital Foundation
11,892
-
(11,892)
Net assets released from restrictions used for
purchase of property and equipment and
specific program purposes
-
-
13,065
-
13,065
Equity distributions
(3,510)
-
1,463
(2,047)
Unrealized gain from interest rate swap
871
-
-
-
871
Change in net unrealized gains and losses on
investments
(3,792)
-
-
(3,792)
Increase in unrestricted net assets
$ 95,021 8
1,354
S 3,310
S (1,496)
S 982189 ,
(A) To eliminate intercompany amounts.
31
0
i
Hoag Memorial Hospital Presbyterian and Affiliates
Consolidating Statements of Operations
(A) To eliminate intercompany amounts.
I
32
to
Year ended August 31, 2003
(in thousands)
Other
(A)
Hospital
Entities Foundation
Eliminations
Consolidated
Unrestricted operating revenues:
Net patient service
$ 336,612
$ 14,188 $
-
$ -
$ 350,800
. Capitation
69,459
-
-
-
69,459
Other
37,979
91
8,395
(4,928)
41,537
Total unrestricted operating revenues
444,050
14,279
8,395
(4,928)
461,796
Operating expenses:
Salaries and employee benefits
200,630
4,194
-
(1,828)
202,996
Supplies
78,973
2,300
-
-
81,273
Purchased serviccs
57,130
1,820
-
(55)
58,895
Depreciation and amortization
28,179
1,206
-
-
29,385
Professional fees
5,422
-
-
-
5,422
Provision for doubtful accounts
9,281
5
-
-
9,286
Utilities
6,169
1%
-
-
6,365
Insurance
3,987
118
-
-
4,105
Lease rental
6,978
1,544
(240)
8,282
Other
14,472
495
7,830
(2,805)
19,992
Total operating expenses
411,221
11,878
7,830
(4,928)
426,001
Income from operations
32,829
2,401
565
-
35,795
Other income (expense):
Investment income, net
27,298
5
567
-
27,870
.i Interest expense
(7,758)
(274)
-
-
(8,032)
Other nonoperating gains
1,363
67
11,373)
57
Other income (expense), net
20,903
(202)
567
(1,373)
19,895
Excess of revenues over expenses
53,732
2,199
1,132
(1,373)
55,690
Transfers from Hoag Hospital Foundation
8,596
-
(8,596)
-
-
Net assets released from restrictions used for
purchase of property and equipment and
specific program purposes
-
-
9,873
-
9,873
Equity distributions
-
(2,052)
-
1,035
(1,017)
Unrealized gain from interest rate swap
92
-
-
-
92
Change in net unrealized gains and losses on
investments
32,527
-
-
-
32,527
Increase in unrestricted net assets
$ 94,947
S 147 $
2,409
$ (338)
$ 97,165
(A) To eliminate intercompany amounts.
I
32
to
(Tfus PAGE INTENTIONALLY LEFT BLANK]
I
APPENDIX C
AUCTION PROCEDURES
The following is a summary of certain provisions of the Bond Indenture, the Auction Agent Agreement and
the Broker - Dealer Agreement relating to the Auction Rate Securities. This summary is not intended to be a full
statement of the term of such documents and, accordingly, is qualified by reference thereto and is subject to the full
text thereof Copies of the Bond Indenture, the Auction Agent Agreement and the Broker - Dealer Agreement may be
obtained from the Bond Trustee. See also "THE AUCTION RATE SECURITIES" in the Official Statement for a
description of certain other provisions of the documents .relating to the Auction Rate Securities ( "ARS'l and
i Appendix D — "SUMMARY OF PRINCIPAL DOCUMENTS" for a summary of certain other provisions of the
Bond Indenture relating to the Auction Rate Securities.
i Certain Definitions Relating to the Auction Rate Securities
i
Capitalized terms used in this Appendix and elsewhere in this Official Statement have the meanings set
forth below. Capitalized terms used but not defined in this Appendix or elsewhere in this Official Statement have
the meanings given in the Bond Indenture, the Auction Agent Agreement or the Broker Dealer Agreement, as
applicable.
"Auction Agent Agreement" means the auction agent agreement between the Trustee and the Auction
Agent, as amended or supplemented from time to time.
"Auction Agent Fee" has the meaning provided in the Auction Agent Agreement
"Auction Procedures" means, with respect to each Series of ARS, the auction procedures set forth in the
Indenture and described in this Appendix under "Auction Procedures" and "Settlement Procedures."
"Auction Rate" means, with respect to the interest rate on a Series of ARS, the rate of interest per annum
that results from implementation of the Auction Procedures, and detertumed as described in the Auction Procedures
with respect to such Series; provided, however, that the Auction Rate shall not exceed the ARS Maximum Rate.
"Bid" has the meaning described in this Appendix under "Auction Procedures."
"Code" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto and any
regulations promulgated thereunder.
"Existing Holder" means, with respect to any Auction, a Person who was listed as the ARS Beneficial
Owner in the applicable Existing Holder Registry at the close of business on the Business Day immediately
preceding such Auction -
i 'Txistmg Holder Registry' means, with respect to each Series of ARS, the registry of Persons who are
ARS Beneficial Owners of such Series, maintained by the Auction Agent as provided in the Auction Agent
Agreement
"Favorable Opinion of Bond Counsel" means an opinion of Bond Counsel, addressed to the Authority, the
Remarketing Agent (if any), the Broker - Dealer (if any), the Auction Agent (if any), the Corporation and the Bond
Trustee to the effect that the action proposed to be taken is authorized or permitted by the Bond Indenture and will
not result in the inclusion of interest on the Bonds in gross income for federal income tax purposes.
"Hold Order" has the meaning provided in the Auction Procedures.
"Index" means, on any Auction Date with respect to a Series of Bonds in any Auction Period, the One
Month LIBOR Rate on such date. If such rate is unavailable, the Index for such Series of Bonds shall be an index or
C -1
A
rate agreed to by all Broker - Dealers. if the Index shall not be determined as provided, the Index shall be the Index
for the Auction Period ending on such Auction Date.
I
"Maximum Interest Rate" shall mean 15% per annum; provided, however, that the Maximum Interest Rate
shall not exceed the maximum interest rate permitted by law from time to time.
"Minimum Authorized Denominations" means, with respect to any ARS Interest Rate Period, $5,000 and
any integral multiple thereof
4 "Notice of ARS Payment Default" means a notice substantially in the form attached to the Auction Agent
Agreement.
"Notice of Cure of ARS Payment Default" means a notice substantially in the form attached to the
Indenture.
"One Month LIBOR Rate" means, as of any date of determination, the offered rate for deposits in U.S.
dollars for a one -month period which appears on the Telerate Page 3750 at approximately 11:00 a.m., London time,
on such date, or if such date is not a date on which dealings in U.S. dollars are transacted in the London interbank
market, then on the next preceding day on which such dealings were transacted in such market.
"Order" has the meaning described in this Appendix under "Auction Procedures."
1 "Potential Holder" means, with respect to any Auction, any Person, including any Existing Holder, who
may be interested in acquiring a beneficial interest in ARS of a Series subject to such Auction in addition to the ARS
of such Series, if any, currently owned by such Person.
"Securities Exchange Act' means the Securities Exchange Act of 1934, as amended, and any successor
thereto.
"Sell Order" has the meaning described in this Appendix under "Auction Procedures."
"Submitted Hold Orders" has the meaning described in this Appendix under "Auction Procedures."
"Sufficient Clearing Bids" has the meaning described in this Appendix under "Auction Procedures —
Determination oJSufficient Clearing Bids and Winning Bid Rate."
Payments with Respect to Auction Rate Securities
See the provisions summarized in Appendix D — "SUMMARY OF PRINCIPAL DOCUMENTS — BOND
INDENTURE — ARS Provisions." Interest with respect to each Series of ARS shall accrue from and including; as
P applicable, the Date of Issuance, the Conversion Date or the most recent Interest Accmal Date to which interest has
been paid or duly provided for. The Trustee shall determine the aggregate amount of interest payable with respect to
each Series of ARS on each ARS Interest Payment Date. The Trustee shall promptly notify the Depository of its
calculations, as provided in the Indenture.
{ Auction Participants
Existing Holders and Potential Holders. Participants in each Auction will include: (i) "Existing Holders,"
which means any Person who is listed as the Beneficial Owner in the applicable Existing Holder Registry at the
close of business on the Business Day immediately preceding such Auction, and (ii) "Potential Holders," which
means any Person, including any Existing Holder, who may be interested in acquiring ARS (or, in the case of an
Existing Holder, an additional principal amount of ARS).
By purchasing ARS, whether in an Auction or otherwise, each prospective purchaser of ARS or its Broker -
Dealer must agree and will be deemed to have agreed: (i) to participate in Auctions on the terms described in the
C-2
Auction Ptocedures; (ii) so long as the beneficial ownership of the ARS is maintained in book -entry form by the
Depository, to sell, transfer or otherwise dispose of ARS only pursuant to a Bid or a Sell Order in art Auction, or to
or through a Broker- Dealer, provided that in the case of all transfers other than those pursuant to an Auction, the
Existing Holder of ARS so transferred, its Participant or its Broker - Dealer advises the Auction Agent of such
transfer, (iii) to have its beneficial ownership of ARS maintained at all times in book -entry form by the Depository
for the account of its Participant of the Depository, which in turn will maintain records of such beneficial ownership,
and to authorize such Participant to disclose to the Auction Agent such information with respect to such beneficial
ownership as the Auction Agent may request; (iv) that a Sell Order placed by an Existing Holder shall constitute an
irrevocable offer to sell the principal amount of ARS specified in such Sell Order if Sufficient Clearing Bids exist;
(v) that a Sell Order placed by an Existing Holder shall constitute an irrevocable offer to sell such principal amount
or a lesser principal amount of Outstanding Series ARS as set forth in the Auction Agent Agreement, if Sufficient
Clearing Bids have not been made; (vi) that a Bid placed by an Existing Holder shall constitute an irrevocable offer
to sell the principal amount or a lesser principal amount of ARS specified in such Bid if the rate specified in such
Bid is greater than the Auction Rate determined in the Auction; (vu) that a Bid placed by an Existing Holder shall
i constitute an irrevocable offer to sell the principal amount of Outstanding Series ARS to be determined as set forth
. in the Auction Agent Agreement, if the rate specified in such Bid is equal to the Applicable ARS Rats determined in
the Auction or is higher than the Maximum Interest Rate and Sufficient Clearing Bids have not been made; (viii)
.. ! that a Bid placed by a Potential Holder shall constitute an irrevocable offer to purchase the principal amount of ARS
.:.. specified in such Bid if the rate specified in such Bid is less than the Applicable ARS Rate determined in the
Auction and (ix) that a Bid placed by a Potential Holder shall constitute an irrevocable offer to purchase such
principal amount or a lesser principal amount of Outstanding Series ARS as set forth in the Auction Agent
Agreement, if the rate specified in such Bid is equal to the Applicable ARS Rate.
Auction Agent. Any Auction Agent shall be (i) subject to the written approval of each Broker - Dealer, (ii) a
bank or trust company duly organized under the laws of the United States of America or any state or territory thereof
having its principal place of business in the Borough of Manhattan, New York, or such other location as approved
j by the Bond Trustee in writing and having a combined capital stock or surplus of at least $50,000,000, or (iii) a
I member of the National Association of Securities Dealers, Inc., having a capitalization of at least $50,000,000, and,
in either case, authorized by law to perform all the duties imposed upon it under the Bond Indenture and under the
Auction Agent Agreement The Auction Agent for a Series may at any time resign and be discharged of the duties
and obligations created by the Bond Indenture by giving at least 45 days' notice to the Bond Trustee, the Broker -
Dealer, the Authority and the Corporation. The Auction Agent may be removed at any time as Auction Agent for a
Series by the Bond Trustee, upon the written direction of (i) the Authority, (ii) the Corporation, (iii) ARS Beneficial
Owners of 66 -2/3% of the aggregate principal amount of the ARS of that Series then Outstanding, by an instrument
signed by the Bond Trustee and filed with the Auction Agent, the Authority and the Corporation upon at least 30
days' notice. Neither the resignation nor the removal of the Auction Agent pursuant to the preceding two sentences
shall be effective until and unless a substitute Auction Agent has been appointed and has accepted such
appointment. The Auction Agent may terminate the Auction Agent Agreement if, within 45 days after notifying the
Bond Trustee, the Authority, the Corporation, and the Broker - Dealer in writing that it has not received payment of
�.. any Auction Agent Fee due it in accordance with the terms of the Auction Agent Agreement, the Auction Agent
.' does not receive such payment. The Auction Agent may be removed at any time, at the written request of the
Corporation for any breach of its obligations under the Bond Indenture or the Auction Agent Agreement. The
Auction Agent shall not be responsible or liable for any failure or delay in the performance of its obligations under
the Bond Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control,
including without limitation, acts of God; earthquakes; fires; floods; wars; civil or military authority or
governmental actions; acts of terrorism; failure of telephone (or other communications systems); computer systems
i (hardware or software); it being understood that the Auction Agent shall use reasonable efforts which are consistent
with accepted practices in the banking industry to resume performance as soon as practicable under the
I circumstances.
If the Auction Agent shall resign or be removed or be dissolved, or if the property or affairs of the Auction
Agent shall be taken under the control of any state or federal court or administrative body because of bankruptcy. or
insolvency, or for any other reason, the Bond Trustee, at the direction of the Corporation, shall use its best efforts to
appoint a substitute Auction Agent.
C -3
Broker- Dealers. The Corporation may, from time to time, appoint one or more Persons to serve as Broker -
Dealers. Any Broker -Dealer may be removed at any time, at the written request of the Corporation.
Auction Procedures
Submission of Orders. While the ownership of the ARS is maintained in book -entry form by the Securities
Depository, an Existing Holder may sell, transfer or otherwise dispose of ARS only pursuant to a Bid or Sell Order
placed in an Auction or through a Broker - Dealer, provided that, in the case of all transfers other than pursuant to
Auctions, such Existing Holder, its Broker -Dealer or its Participant advises the Auction Agent of such transfer.
Subject to the provisions of the Bond Indenture, Auctions will be conducted on each Auction Date, if there is an
Auction Agent on such Auction Date, in the following manner.
Prier to the Submission Deadline: (a) each Existing Holder of Series ARS may submit to a Broker-Dealer
by telephone or otherwise any information as to: (i) the principal amount of Outstanding Series ARS, if any, held by
such Existing Holder which such Existing Holder desires to continue to hold without regard to the Auction Rate for
the next succeeding ARS Interest Period (a "Hold Ordeel; (u) the principal amount of Outstanding Series ARS, if
any, which such Existing Holder offers to sell if the Auction Rate for the next succeeding ARS Interest Period shall
be less than the rate per annum specified by such Existing Holder (a 'Bid'); and/or (iii) the principal amount of
Outstanding Series ARS, if any, held by such Existing Holder which such Existing Holder offers to sell without
regard to the Auction Rate for the next succeeding ARS Interest Period (a "Sell OrderJ; and (b) one or more
Broker- Dealers may contact Potential Holders to determine the principal amount of Series ARS which each
Potential Holder offers to purchase if the Auction Rate for the next succeeding ARS Interest Period shall not be less
than the rate per annum specified by such Potential Holder (also a'13id'7.
Each Hold Order, Bid and Sell Order shall be an "Order." Each Existing Holder and each Potential Holder
placing an Order is referred to as a "Bidder."
Subject to the provisions described below under " — Validity of Orders," a Bid by an Existing Holder shall
constitute an irrevocable offer to sell (in each case for settlement in same day finds on the next ARS Interest
Payment Date therefor at a price equal to 100% of the principal amount thereof): () the principal amount of
Outstanding Series ARS specified in such Bid if the Auction Rate shall be less than the rate specified in such Bid; -
(ii) such principal amount or a lesser principal amount of Outstanding Series ARS to be determined as described
below in " — Acceptance and Rejection of Orders," if the Auction Rate shall be equal to the rate specified in such
Bid; or (iii) such principal amount or a lesser principal amount of Outstanding Series ARS to be determined as
described below in " — Acceptance and Rejection of Orders," if the rate specified therein shall be higher than the
ARS Maximum Rate and Sufficient Clearing Bids have not been made.
Subject to the provisions described below under " — Validity of Orders," a Sd Order by an Existing Holder
shall constitute an irrevocable offer to sell (in each case for settlement in same day finds on the next ARS Interest
Payment Date therefor at a price equal to 100% of the principal amount thereof): (i) the principal amount of
Outstanding Series ARS specified in such Sell Order if Sufficient Clearing Bids exist; or (ii) such principal amount
or a lesser principal amount of Outstanding Series ARS as described below in " — Acceptance and Rejection of
Orders," if Sufficient Clearing Bids have not been made.
Subject to the provisions described below under "— Validity of Orders," a Bid by a Potential Holder shall
constitute an irrevocable offer to purchase (in each case for settlement in same day finds on the next ARS Interest
{ Payment Date therefor at a price equal to 100% of the principal amount thereof): (i) the principal amount of
Outstanding Series ARS specified in such Bid if the Auction Rate shall be higher than the rate specified in such Bid,
or (ii) such principal amount or a lesser principal amount of Outstanding Series ARS as described below in " —
Acceptance and Rejection of Orders," if the Auction Rate is equal to the rate specified in such Bid.
Validity of Orders. Each Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and shall specify with
respect to each Order: (A) the mane of the Bidder placing such Order, and (B) the aggregate principal amount of
Series ARS that are subject to such Order. To the extent that such Bidder is an Existing Holder, each Broker- Dealer
shall also specify: (i) the principal amount of Series ARS, if any, subject to any Hold Order placed by such Existing
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Holder,' (ii) the principal: amount of Series ARS, if any, subject to any Bid placed by such.Existing Holder and the
rate specified in such Bid, and (iii) the principal amount of Series ARS, if any, subject to any Sell Order placed by
such Existing Holder. To the extent such Bidder is a Potential Holder, each Broker - Dealer shall specify the rate
specified in such Potential Holder's Bid.
If any rate specified in any Bid contains more than three figures to the right of the decimal point, the
Auction Agent shall round such rate up to the next higher one - thousandth (.001) of 1 %.
If an Order or Orders covering all Outstanding Series ARS held by any Existing Holder is not submitted to
the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to have been
submitted on behalf of such Existing Holder covering the principal amount of Outstanding Series ARS held by such
Existing Holder and not subject to an Order submitted to the Auction Agent
None of the Corporation, the Authority, the Bond Trustee or the Auction Agent shall be responsible for.any
failure of a Broker - Dealer to submit an Order to the Auction Agent on behalf of any Existing Holder or Potential
Holder, nor shall any such party be responsible for failure by any Securities Depository to effect any transfer or. to
provide the Auction Agent with current information regarding registration of transfers.
If any Existing Holder submits through a Broker - Dealer to the Auction Agent one or more Orders coveting
in the aggregate more than the principal amount of Outstanding Series ARS held by such Existing Holder, such
Orders shall be considered valid as follows and in the order of priority described below.
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All Hold Orders shall be considered valid, but only up to and including in the aggregate the principal
amount of Outstanding Series ARS held by such Existing Holder, and if the aggregate principal amount of Series
ARS subject to such Hold Orders exceeds the aggregate principal amount of Series ARS held by such Existing
Holder, the aggregate principal amount of Series ARS subject to each such Hold Order shall be reduced so that the
aggregate principal amount of Series ARS subject to such Hold Orders equals the aggregate principal amount of
{I Outstanding Series ARS held by such Existing Holder.
Any Bid shall be considered valid up to and including the excess of the principal amount of Outstanding
Series ARS held by such Existing Holder over the aggregate principal amount of Series ARS subject to any Hold
f Order referred to in the preceding paragraph. Subject to the preceding sentence, if more than one Bid with the same
rate is submitted on behalf of such Existing Holder and the aggregate principal amount of Outstanding Series ARS
subject to such Bids is greater than such excess, such Bids shall be considered valid up to and including the amount
of such excess. Subject to the preceding two sentences, if more than one Bid with different rates .is submitted on
behalf of such Existing Holder, such Bids shall be considered valid first in the ascending order of their respective
rates until the highest rate is reached at which such excess exists and then at such rate up to and including the
amount of such excess. In any such event, the amount of Outstanding Series ARS, if any, subject to Bids not valid
j under the provisions described in this paragraph shall be treated as the subject of a Bid by a Potential Holder at the
rate therein specified.
All Sell Orders shall be considered valid up to and including the excess of the principal amount of
1 Outstanding Series ARS held by such Existing Holder over the aggregate principal amount of Series ARS subject to
Hold Orders and valid Bids referred to in the preceding two paragraphs.
If more than one Bid for Series ARS is submitted on behalf of any Potential Holder, each Bid submitted
shall be a separate Bid with the rate and principal amount therein specified. Any Bid or Sell Order submitted by an
Existing Holder covering an aggregate principal amount of Series ARS not equal to a Minimum Authorized
Denomination shall be rejected and shall be deemed a. Hold .Order. Any Bid submitted by a Potential Holder
covering an aggregate principal amount of Series ARS not equal to a Minimum Authorized Denomination shall be
rejected.
Any Bid specifying a rate higher than the ARS Maximum Rate will be treated as a Sell Order if submitted
by an Existing Holder and will not be accepted if submitted by a Potential Holder. Any Bid submitted by an
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Existing Holder or on behalf of a Potential Holder specifying a rate lower than the. Ail- Hold.Rate: shall be considered
as valid and shall be selected in the ascending order of their respective xates contained in the Submitted Bids.
A Hold Order, a Bid or a Sell Order that has been determined valid pursuant to the procedures described
above is referred to as a "Submitted Hold Order," a "Submitted Bid" and a "Submitted Sell Order," respectively
(collectively, "Submitted Orders'J.
Determination ofSuf 9cient Clearing Bids and Winning Bid Rare. Not earlier than the Submission Deadline
on each Auction Date; the Auction Agent will assemble all Submitted Orden and willdetetmine:
(a) the excess of the total principal amount of Outstanding Series ARS over the sum of the,
aggregate principal amount of Outstanding Series ARS subject to Submitted Hold Orders (such excess being
hereinafter referred to as the "Available Series ARS "); and
(b) from the Submitted Orders whether the aggregate principal amount of Outstanding Series
ARS subject to Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the ARS
Maximum Rate exceeds or is equal to the sum of-(i) the aggregate principal amount: of Outstanding Series ARS
subject to Submitted Bids by Existing Holders specifying one or more rates higher than the ARS Maximum Rate
and (ii) the aggregate principal amount of Outstanding Series ARS subject to Submitted Sell Orders (in the event
such. excess.or such equality exists, other than because all of.the Outstanding Series ARS are subject to Submitted
Hold Orders, such Submitted Bids by Potential. Holders described above shall be referred:.to collectively as
"Sufficient Clearing Bids "); and
(c) if Sufficient Clearing Bids exist, the lowest rate specified in such Submitted Bids (the
"Winning Bid Rate'), such that if.
(i) each such Submitted Bid from Existing Holders specifying such lowest rate and all
other Submitted Bids from Existing Holders specifying lower rates were rejected (thus entitling such Existing
Holders to continue to hold the principal amount of Series ARS subject to such Submitted Bids); and
(ii) each such Submitted Bid from Potential Holders specifying such lowest rate and
all other Submitted Bids from Potential Holders. specifying such lower rates were accepted,
the result would be that such Existing Holders described in clause (c)(i) above would continue to hold an aggregate
4 principal amount of Outstanding Series ARS, which, when added to the aggregate principal amount of Outstanding
Series ARS to be purchased by such Potential Holders described in clause (c)(u) above, would equal not less than
the Available Series ARS.
Notice of Applicable ARS Rare.. Promptly after the Auction Agent has made the determinations described
above, the Auction Agent will advise the Broker - Dealer and the Bond Trustee of the All -Hold Rate and the
components thereof on the Auction Date and, based on such determinations, the Auction Rate for the next
succeeding ARS Interest Period as follows: (a) if Sufficient Clearing Bids exist, that the Auction Rate for the next
succeeding ARS Interest Period shall equal the Winning Bid Rate so determined; (b) if Sufficient Clearing Bids do
not exist (other than because all of the Outstanding Series ARS are subject to Submitted Hold Orders), that the
Auction Rate for the next succeeding ARS Interest Period shall equal the ARS Maximum Rate; or (c) if all
i Outstanding Series ARS are subject to Submitted Hold Orders, that the Auction Rate for the next succeeding ARS
Interest Period shall equal the All -Hold Rate.
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Acceptance and Rejection of Orders. Existing Holders shall continue to hold the principal amount of Series
ARS that are subject to Submitted Hold Orders. Based on the determinations made as described above in " -
i Determination ofSufficient Closing Bids and Winning Bid Rare," Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent sball take such other action as set forth below:
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If Sufficient Cleating Bids have been made, all Submitted Sell Orders shall be accepted and, subject to the
requirements described below under " Authorized Denomination Requirement," Submitted Bids shall be accepted
or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected:
(a) Existing Holders' Submitted Bids specifying any rate that is'higher than the Winning Bid
Rate shall be accepted, thus requiring each such Existing Holder to sell the aggregate principal amount of Series
j ARS subject to such Submitted Bids;
(b) Existing Holders' Submitted Bids specifying any rate that is lower than the Winning Bid
Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the aggregate principal amount of
Series ARS subject to such Submitted Bids;
(c) Potential Holders' Submitted Bids specifying any rate that is lower than the Winning Bid
Rate shall be accepted;
(d) each Existing Holder's Submitted Bid specifying a rate equal to the Winning Bid Rate
shall be rejected, thus entitling such Existing Holder to continue to hold the aggregate principal amount of Series
ARS subject to such Submitted Bid, unless the aggregate principal amount of Outstanding Series ARS subject to all
such Submitted Bids shall be greater than the principal amount of Series ARS (the "remaining principal amount's
equal to the excess of the Available Series ARS over the aggregate principal amount of Series ARS subject to
Submitted Bids described in subparagraphs (b) and (c) above, in which event such Submitted Bid of such Existing
Holder shall be rejected in part, and such Existing Holder shall be entitled to continue to hold the principal amount
of Series ARS subject to such Submitted Bid, but only in an amount equal to the aggregate principal amount of
Series ARS obtained by multiplying the remaining principal amount by a fraction, the numerator of which shall be
the principal amount of Outstanding Series ARS held by such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the sum of the principal amount of Outstanding Series ARS subject to such
Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and
(e) each Potential Holder's Submitted Bid specifying a rate equal to the Winning Bid Rate
shall be accepted, but only in an amount equal to the principal amount of Series ARS obtained by multiplying the
excess of the aggregate principal amount of Available Series ARS over the aggregate principal amount of Series
ARS subject to Submitted Bids described in subparagraphs (b), (c) and (d) above by a fraction, the numerator of
which shall be the aggregate principal amount of Outstanding Series ARS subject to such Submitted Bid and the
denominator of which shall be the sum of the principal amounts of Outstanding Series ARS subject to Submitted
Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate.
If Sufficient Cleating Bids have not been made (other than because all of the Outstanding Series ARS are
subject to Submitted Hold Orders), subject to the requirements described below under ° Authorized Denomination
Requirement," Submitted Orders shall be accepted or rejected as follows in the following order of priority and all
other. Submitted Bids shall be rejected:
Y (a) Existing Holders' Submitted Bids specifying any rate that is equal to or lower than the
ARS Maximum Rate shall be rejected, thus entitling such Existing Holders to continue to hold the aggregate
principal amount of Series ARS subject to such Submitted Bids;
(b) Potential Holders' Submitted Bids specifying any rate that is equal to or lower than the
j ARS Maximum Rate shall be accepted, and specifying any rate that is higher than the ARS Maximum Rate shall be
rejected; and
(c) each Existing Holder's Submitted Bid specifying any rate that is higher than'the ARS
Maximum Rate and the Submitted Sell Order of each Existing Holder shall be accepted, thus entitling each Existing
Holder that submitted any such Submitted Bid or Submitted Sell Order to sell the Series ARS subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount equal to the aggregate principal amount
of Series ARS obtained by multiplying the aggregate principal amount of Series ARS subject to Submitted Bids
described in subparagraph (b) above which are accepted by a fraction, the numerator of which shall be the aggregate
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principal amount of Outstanding Series ARS held by such Existing Holder subject to such Submitted Bid or
Submitted.Sell Order.and the denominator of which shall be the aggregate principal amount of Outstanding Series
ARS subject to all.such Submitted Bids and Submitted Sell Orders..
If all Outstanding.Series ARS are subject to Submitted Hold Orders, all Submitted Bids shall be rejected
Authorized Denomination Requirement. ]f, as a result of the procedures described above regarding
Sufficient Clearing Bids and Insufficient Clearing Bids, any Existing Holder would be entitled or required to sell, or
any Potential Holder would be entitled or required to purchase, a principal amount of Series ARS that is not equal to
a Minimum. Authorized Denomination, the Auction Agent shall, in such manner as in its sole discretion it shall
determine, round up or down the principal amount of Series ARS to be purchased or sold by any Existing Holder or
Potential Holder so that the principal amount of Series ARS purchased or sold by each Existing Holder or Potential
Holder shall be equal to a Minimum Authorized Denomination. ]f, as a result of.dte procedures described above
regarding Insufficient Clearing Bids, any Potential Holder would be entitled or required to purchase less, than a
Minimum Authorized Denomination of Series ARS, die Auction Agent shall, in such manner as in its sole discretion
it shall determine, allocate Series ARS for purchase among Potential Holders so that only Series ARS in Minimum
Authorized Denominations are purchased by any Potential Holder, even if such allocation results one or more of
such.Potential Holders not purchasing any.Series ARS. .
No_Liabihty..The Corporation, Authority, the Bond Trustee, die Broker - Dealer and the Auction Agent shall
have no liability in the event that there are not Sufficient. Clearing Bids from time to time pursuant to the Auction
Procedures.
Settlement Determinations. Based on the results of each Auction, the Auction Agent. shell detemhine the
aggregate principal amount of Series ARS to be purchased and the aggregate principal amount of Series ARS to be
sold by Potential Holders and Existing Holders.on whose behalf each Broker- Dealer Submitted Bids or Sell Orders
and with respect to. each Broker - Dealer; to the extent that such aggregate principal amount of Series ARS to be sold
differs from such aggregate principal amount of Series ARS to be purchased, determine to which other Broker -
Dealer(s) acting for one or more purchasers such Broker - Dealer shall deliver, or from which Broker- Dealer(s) acting
for one or more sellers such Broker - Dealer shall receive, as the case may be, Series ARS.
Rate Determinations. Any calculation by the Auction Agent (or the Bond Trustee, if applicable) of the
Applicable ARS Rate, the All -Hold Rate and the Non - Payment Rate shall, in the absence of manifest error, be
binding on all ARS Beneficial Owners and other parties.
Settlement Procedures
(a) Not later than 3:00 pm., New York City time, on each Auction Date, the Auction Agent
shall notify by telephone (or other means acceptable to the parties) each Broker - Dealer that participated in the
Auction held on such Auction Date and submitted an Order on behalf of an Existing Holder or Potential Holder of:
(i) the Auction Rate fixed for the next ARS Interest Period; (ii) whether there were Sufficient Clearing Bids in such
Auction; (iii) if such Broker -Deaf (a "Seller's Broker - Dealer') submitted a -Bid or a Sell Order on behalf of an
Existing Holder, whether such Bid or Sell Order was accepted or rejected, in whole or in part, and the principal
amount of Series ARS, if any, to be sold by such Existing Holder, (iv) if such Broker - Dealer (a "Buyer's Broker -
Dealer') submitted a Bid on behalf of a Potential Holder, whether such Bid was accepted or rejected, in whole or in
part, and the principal amount of Series ARS, if any, to be purchased by such Potential Holder; (v) if the aggregate
principal amount of Series ARS to be sold by all Existing Holders on whose behalf such Broker - Dealer submitted a
Bid or a Sell Order exceeds the aggregate principal amount of Series ARS to be purchased by all Potential Holders
on whose behalf such Broker - Dealer submitted a Bid, the name or names of one or more Buyer's Broker - Dealers
(and the name of the Participant, if any, of each such Buyer's Broker - Dealer) acting for one or more purchasers of
such excess principal amount of Series ARS and the principal amount of Series ARS to be purchased from one or
more Existing Holders on whose behalf such Broker - Dealer acted by one or more Potential Holders on whose behalf
each of such Buyer's Broker - Dealers acted; (vi) if the principal amount of Series ARS to be purchased by all
Potential Holders on whose behalf such Broker - Dealer submitted a Bid exceeds the aggregate principal amount of
Series ARS to be sold by all Existing Holders on whose behalf such Broker - Dealer submitted a Bid or a Sell Order,
the name or names of one or more Seller's Broker - Dealers (and the name of the Participant, if any, of each such
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Seller's Broker - Dealer) acting for one or more sellers of such excess principal amount of Series ARS and the
principal amount of Series ARS to be sold to one or more Potential. Holders on whose behalf such Broker - Dealer
acted by one or more Existing Holders on whose behalf each of such Seller's Broker - Dealers acted; and (vii) the
Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker - Dealer, that submitted an Order on behalf of any
'i Existing Holder or Potential Holder shall: (i). advise each Existing Holder and Potential Holder on whose behalf such
Broker - Dealer submitted a Bid or Sell Order in the Auction on such Auction Date . whether such Bid or Sell Order
was accepted or rejected, in whole or in part; (ii) in the case of a Buyer's Broker - Dealer, advise each Potential
Holder on whose behalf such Bmker- Dealer submitted a Bid that was accepted, in whole or in part, to instruct such
Potential Holder's Participant to pay to such Broker - Dealer (or its Participant) through the Securities Depository the
amount necessary to purchase the principal amount of Series ARS to be purchased pursuant to such Bid against
receipt of such Series ARS; (iii) in the case of a Seller's Broker - Dealer, instruct each Existing Holder on whose
behalf such Broker - Dealer submitted a Sell Order that was accepted, in whole or in part, or a Bid that was accepted,
in whole or in part, to instruct such Existing Holder's Participant to deliver to such Broker - Dealer (or its Participant)
through the Securities Depository the principal amount of Series ARS to be sold pursuant to such Order against
li payment therefor, (iv) advise each Existing Holder on whose behalf such Broker - Dealer submitted an Order and
each Potential Holder on whose behalf such Broker - Dealer submitted a Bid of the Auction Rate for the next ARS
Interest Period; (v) advise each Existing Holder on whose behalf such Broker - Dealer submitted an Order of the next
Auction Date; and (vi) advise each Potential Holder on whose behalf such Broker - Dealer submitted a Bid that was
accepted, in whole or in part, of the next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph (a) above, each
Broker - Dealer that submitted a Bid or Sell Order in an Auction is required to allocate any funds received by it in
connection with such Auction pursuant to clause (b)(ii) above, and any Series ARS received by it in connection with
such Auction pursuant to clause (bxiii) above among the Potential Holders, if any, on whose behalf such Broker -
Dealer Submitted Bids, the Existing Holders, if any, on whose behalf such Broker - Dealer Submitted Bids or Sell
Orders in such Auction, and any Broker - Dealers identified to it by the Auction Agent following such Auction
pursuant to clause (axv) or (a)(vi) above.
(d) On each Auction Date: (i) each Potential Holder and Existing Holder with an Order in the
Auction on such Auction Date shall instruct its Participant as provided in clause (b)(ii) or (b)(iii) above, as the case
may be; (ii) each Seller's Broker - Dealer that is not a Participant of the Securities Depository shall instruct its
Participant to (A) pay through the Securities Depository to the Participant of the Existing Holder delivering Series
ARS to such Broker - Dealer following such Auction pursuant to clause (bxiii) above the amount necessary to
purchase such Series ARS against receipt of such Series ARS, and (B) deliver such Series ARS through the
Securities Depository to a Buyer's Broker -Deals (or its Participant) identified to such Seller's Broker - Dealer
pursuant to clause (a)(v) above against payment therefor, and (iii) each Buyer's Broker - Dealer that is not a
Participant in the Securities Depository shall instruct its Participant to (A) pay through the Securities Depository to
Seller's Broker - Dealer (or its Participant) identified following such Auction pursuant to clause (axvi) above the
,,. amount necessary to purchase the Series ARS to be purchased pursuant to clause (b)(ii) above against receipt of
such Series ARS, and (B) deliver such Series ARS through the Securities Depository to the Participant of the
purchaser thereof against payment therefor.
(e) On the Business Day following each Auction Date: (i) each Participant for a Bidder in the
Auction on such Auction Date referred to in clause (d)(i) above shall instruct the Securities Depository to execute
the transactions described under clause (b)(ii) or (b)(iii) above for such Auction, and the Securities Depository shall
execute such transactions; (ii) each Seller's Broker - Dealer or its Participant shall instruct the Securities Depository
to execute the transactions described in clause (d)(ii) above for such Auction, and the Securities Depository shall
execute such transactions; and (iii) each Buyer's Broker - Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in clause (d)(iii) above for such Auction, and the Securities
Depository shall execute such transactions.
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(f) If an Existing Holder selling Series ARS in an Auction fails to deliver such Series ARS
(by authorized book-entry), a Broker - Dealer may deliver to the Potential Holder on behalf of which it submitted a
Bid that was accepted a principal amount of Series ARS that is less than the principal amount of Series ARS that
otherwise was to be purchased by such Potential Holder. In such'event, the principal amount of Series ARS to be so
delivered shall be determined solely by such Broker - Dealer. Delivery of such lesser principal amount of Series ARS
shall constitute good delivery. Notwithstanding the foregoing terms described in this paragraph (f),.any delivery or
nondelivery of Series ARS which shall represent any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or
nondelivery in accordance with the provisions of the Auction Agent Agreement and the Broker - Dealer Agreements.
APPENDIX D
SUMMARY OF PRINCIPAL DOCUMENTS
The following is a summary of certain provisions of the Master Indenture, Supplement No. 14, the Bond
Indenture and the Loan Agreement which are not described elsewhere in this Official Statement These summaries
do not purport to be comprehensive and reference should be made to each of said documents for a full and complete
statement of their provisions.
Definitions of Certain Terms
The following is a summary of certain terms used in this APPENDIX D — SUMMARY OF PRINCIPAL
DOCUMENTS. All capitalized terns not defined herein or elsewhere in this Official Statement have the meanings
set forth in the Master Indenture or the Bond Indenture.
"Additional Indebtedness" shall mean any Indebtedness (including all Indenture Indebtedness) incurred, as to
the Corporation, after the issuance of the initial Obligations dated as of October 1, 1984 issued under the Master
Indenture and, as to any other Member of the Obligated Croup, after it becomes a Member of the Obligated Group.
"Additional Payments" shall mean the payments so designated and required to be made by the Corporation
pursuant to the Loan Agreement
"Administrative Fees and Expenses" shall mean .any application, commitment, financing or similar fee
charged or reimbursement for administrative or other expenses incurred by the City or the Bond Trustee, including
Additional Payments.
"Aggregate Income Available for Debt Service" shall mean, as to any period of time, the aggregate of Income
Available for Debt Service of each Member of the Obligated Group for such period, determined in a manner such that
no portion of Income Available for Debt Service of any such Member is included more than once.
"All -Hold Rate" shall mean, on any date of determination, the interest rate per annum equal to 65% (as
such percentage may be adjusted pursuant to the Bond Indenture) of the Index
"Alternate Liquidity Facility" shall mean a line of credit, letter of credit, standby purchase agreement or
similar liquidity facility issued by a commercial bank or financial institution delivered or made available to the
Tender Agent in accordance with the Loan Agreement which replaces the Liquidity Facility then in effect
"Applicable ARS Rate" shall mean, with respect to any Series of Bonds which are ARS, the rate per
annum at which interest accrues on the Bonds of such Series for army ARS Interest Period
"ARS" shall mean, -on any date, all Bonds of any Series which on such date bear interest as auction rate
securities as provided in the Bond Indenture and the Auction Procedures applicable thereto.
"ARS Beneficial Owner" shall mean the Person who is the beneficial owner of ARS according to the
records of (i) the Securities Depository or its participants while such ARS are in book -entry form or (ii) the Bond
Trustee while such ARS are not in book -entry form
"ARS Defaulted Interest" shall mean interest on any ARS which is payable but is not punctually paid or
duly provided for on any ARS Interest Payment Date.
"ARS Interest Payment Date" shall mean, with respect to each Series of ARS, the Business Day
immediately following each Auction Period for such Series.
"ARS Interest Period" shall mean, with respect to each Series of ARS, the period commencing on and
including an ARS Interest Payment Date and ending on the day immediately preceding the next succeeding ARS
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Interest Payment Date; provided, that the fast ARS. Interest Period within each ARS Interest Rate Period other than
the one immediately following the Date of Issuance shall commence on and include the Conversion Date.
"ARS Interest Rate" shall mean the interest rate on ARS of any Series determined as provided in the Bond
Indenture and the Auction Procedures;
"Am Interest Rate Period" shall mean each period during which the Bonds of a Series are ARS.
"ARS Maximum Rate" shall mean 15% per annum; provided, that in no event shall the ARS Maximum
Rate be more than the Maximum Lawful Rate
"ARS Payment Default" shall mean any failure by the.City and the Bond Issuer to make timely payment of
the principal of or interest on ARS when due.
"Auction" shall mean the implementation of the Auction Procedures on an Auction Date.
"Auction Agent" shall mean initially, Wells Fargo,Bank, National Association and any auction agent
appointed in accordance with the Bond.Indenture that agrees with the Bond Trustee to perform the duties of the
Auction Agent with respect to a Series of ARS.
"Auction Date" shall mean, with respect to each Series of ARS, the Business Day immediately preceding
the first day of each Auction Period, other than: (i) each Auction Period commencing after the ownership of such
Series of ARS is no longer maintained in book -entry form by. a Securities Depository; (ii) each Auction Period
commencing after the occurrence and during the continuance of an ARS Payment Default; or (iii) any Auction
Period commencing less than two Business Days after the cure or waiver of an ARS Payment Default. The Auction
Date determined as provided in this definition may be adjusted as provided in the Bond Indenture.
"Auction Period" shall mean (i) with respect to a Series of ARS in a seven -day mode, any of (A) a period,
generally of seven days, beginning on and including a Monday (or the day following the last day of the prior
Auction Period if the prior Auction Period does not end on a Sunday) and ending on and including the Sunday
thereafter (unless such Sunday is not followed by a Business Day, in which case ending on and including the next
i+
succeeding day which is followed by a Business Day), (B) a period, generally of seven days, beginning on and
including a Tuesday (or the day following the last day of the prior Auction Period if the prior Auction Period does
not end on a Monday) and ending on and including the Monday thereafter (unless such Monday is not followed by a
Business Day, in which case ending on and including the next succeeding day which is followed by a Business
Day), (C) a period, generally of seven. days, beginning on and including a Wednesday (or the day following the last
day of the prior Auction Period if the prior Auction Period does not end on a Tuesday) and ending on and including
the Tuesday thereafter (unless such Tuesday is not followed by a Business Day, in which case ending on and
including the next succeeding day which is followed by a Business Day), (D) a period, . generally of seven days,
beginning on and inchidiog a Thursday (or the day following the last day of the prior Auction Period if the prior
Auction Period does not end on a Wednesday) and ending on and including the Wednesday thereafter (unless such
Wednesday is not followed by a Business Day, in which case ending on. and including the next succeeding day
which is followed by a Business Day) or (E) a period, generally of seven days, beginning on and including a Friday
(or the day following the last day of the prior Auction Period if the prior Auction Period does not end on a
Thursday) and ending on and including the Thursday thereafter (unless such Thursday is not followed by a Business
Day, in which case ending on and including the next succeeding day which is followed by a Business Day) and
(ii) with respect to a Series of ARS Bonds in a 35-day mode, any of (A) a period, generally of 35 days, beginning on
and including a Monday (or the day following the last day of the prior Auction Period if the prior Auction Period
does not end on a Sunday) and ending on and including the fifth Sunday thereafter (unless such Sunday is not
followed by a Business Day, in which case ending on and including the next succeeding day which is followed by a
Business Day), (B) a period, generally of 35 days, beginning on and including a Tuesday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a Monday) and ending on and
j including the fifth Monday thereafter (unless such Monday is not followed by a Business Day, in which case ending
on and including the next succeeding day followed by a Business Day), (C) a period, generally of 35 days,
beginning on and including a Wednesday (or the day following the last day of the prior Auction Period if the prior
I Auction Period does not end on a Tuesday) and ending on and including the fifth Tuesday thereafter (unless such
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Tuesday is not followed by a Business Day, in which case ending on and including the next succeeding day
followed by a Business Day), (D) a period, generally of 35 days, beginning on and including a Thursday (or the day
following the last day of the prior Auction Period if the prior Auction Period does not end on a Wednesday) and
ending on and including the fifth Wednesday thereafter (unless such Wednesday is not followed by a Business Day,
in which case ending on and including the next succeeding day followed by a Business Day) or (E) a period,
generally of 35 days, beginning on and including a Friday (or the day following the last day of the prior Auction
Period if the prior Auction Period does not end on a Thursday) and ending on and including the fifth Thursday
thereafter (unless such Thursday is not followed by a Business Day, in which case ending on and including the next
succeeding day which is followed by a Business Day); provided, however, that the initial Auction Period with
i respect to each Series of Bonds that are issued in an ARS Interest Rate Period shall begin on and include the Date of
Issuance, and that in the event of a Conversion of Bonds from another Interest Rate Period to an ARS Interest Rate
J Period, the initial Auction Period with respect to such Series of Bonds following such Conversion shall begin on and
include the Conversion Date.
"Auction Procedures" shall mean, with respect to each Series of ARS, the provisions set forth in the
Auction and Settlement Procedures included as an exhibit to the Bond Indenture.
"Authorized Representative" shall mean with respect to the Corporation in whatever capacity it may then
be acting, the chairman of its governing body, its chief executive officer, its chief financial officer or any other
person designated as an Authorized Representative of the Corporation by a Certificate of the Corporation signed by
the chairman of its governing body, its chief executive officer or its chief financial officer, and filed with the Bond
Trustee.
"Balloon Long -Term Indebtedness" shall mean Long -Term Indebtedness 25% or more of the principal of
which (i) is due in a single year or (ii) may, at the option of the holder thereof', be required to be redeemed or
otherwise paid in a single year (which portion of the principal is not required to be amortized by redemption prior to
such date) unless such Long -Term Indebtedness is secured by a commitment from a financial institution having a
combined capital and surplus of at least $250,000,000, providing for the refinancing of such Long -Term
Indebtedness.
"Beneficial Owner" shall mean any Person which has or shares the power, directly or indirectly, to make
investment decisions concerning ownership of any of the Bonds (including any Person holding Bonds through
nominees, depositories or other intermediaries).
"BMA Index" shall mean on any date, a rate determined on the basis of the seven-day high grade market
index of tax - exempt variable rate demand obligations, as produced by Municipal Market Data and published or
made available by the Bond Market Association ( "BMA") or any Person acting in cooperation with or under the
sponsorship of BMA and acceptable to the Bond Trustee and effective from such date.
I
l "Bona Fide Loan" shall mean a loan made with a reasonable expectation of timely repayment, and at a
reasonable rate of interest given the terms and nature of the loan and the conditions under which such loan was made.
"Bond Counsel" shall mean Orrick, Herrington & Sutcliffe LLP or another attorney -at -law, or firm of such
attorneys, of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on obligations
issued by states and their political subdivisions and acceptable to the City and the Bond Trustee.
"Bond Indenture" shall mean the Bond Indenture, as originally executed or as it may from time to time he
supplemented, modified or amended by any Supplemental Bond Indenture.
`Bond Insurance' Policy" shall mean that certain municipal bond new issue insurance policy issued by the
Bond Insurer with respect to the Bonds, which Bond Insurance Policy guarantees the payment when due of the
principal of and interest on the Bonds, as provided therein.
"Bond Insurer" shall mean Financial Guaranty Insurance Company, a New York stock insurance company,
or any successor thereto.
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"Bond Interest Term" shall mean, with respect to any Bond, each period established in accordance with the
Bond Indenture during which such Bond shall bear interest at a Bond Interest Term Rate.
`Bond Interest Term Rate" shall mean, with respect to any Bond, an interest rate on such Bond established
periodically in accordance with the Bond Indenture.
"Bond Trustee" shall mean . Wells Fargo Bank, National Association, a national banking association
organized and existing under and by virtue of the laws of the United States, or its successor, as Bond Trustee under
the Bond Indenture.
Bonds" shall mean the City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, Series 2005B and Series 2005C authorized by, and at any time Outstanding pursuant
to, the Bond Indenture. .
"Book Value" shall mean when used in connection with Property, Plant and Equipment or other property
means the value of such property as carried on the books of the Member owning such property, net of accumulated
depreciation.
"Broker - Dealer" shall mean, with respect to any Series of Bonds, Citigroup Global Markets Inc., and any
other broker or dealer (each as defined in the Securities Exchange Act of 1934), commercial bank or other entity
permitted by law to perform the functions required of a Broker - Dealer set forth in the Auction Procedures which (i)
! is a participant in or member of the Securities Depository as determined by the rules or bylaws of the Securities
Depository (or an affiliate of such a participant or member), (ii) has been appointed as such by the Corporation
pursuant to the Bond Indenture, and (iii) has entered into a Broker - Dealer Agreement that is in effect an the date of
reference. When more than one Broker - Dealer is acting. under the Bond Indenture, the term "the Broker - Dealer"
means, as the context dictates, either all such Broker - Dealers collectively, or only each Broker - Dealer acting with
respect to the applicable Series of ARS.
i
Broker- Dealer Agreement" shall mean that certain Broker - Dealer Agreement dated as of August 1, 2005,
among the Auction Agent, the Corporation and a Broker - Dealer pursuant to which the Broker - Dealer agrees to
participate in Auctions as set forth in the Auction Procedures, and any similar agreement with a successor Broker-
Dealer, each as from time to time amended or supplemented.
"Business Day" shall mean any day on which banks located in the State of California, New York, New
j York and the city in which the Principal Office of the Bond Trustee is located are not required or authorized to be
closed and on which The New York Stock Exchange is open.
j
j "Certificate," "Statement," "Request" and "Requisition" of the City or. the Corporation shall mean,
respectively, a written certificate, statement, request or requisition signed in the name of the City by its Mayor, City
Clerk or such other person as may be designated and authorized to sign for the City in writing to the Bond Trustee,
or in the name of the Corporation by an Authorized Representative of the Corporation. Any such instrument and
supporting opinions or representations, if any, may, but need not be combined in a single instrument with any other
instrument, opinion or representation, and the two or more so combined shall be read and construed as a single
instrument If and to the extent required by the Bond Indenture, each such instrument shall include the statements
provided for in the Bond Indenture.
"City" shall mean the City of Newport Beach, a municipal corporation and charter city duly organized and
existing under a freeholder's charter under the Constitution and the laws of the State of California
"Code" shall mean the Internal Revenue Code of 1986, or any successor statute thereto and any regulations
promulgated thereunder.
"Completion Indebtedness" shall mean any Indebtedness incurred by any Member of the Obligated Group to
complete constructing or equipping facilities for which Indebtedness has theretofore been incurred to the extent
necessary to provide a completed and equipped facility of the type and scope contemplated at the time.
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"Consultant" shall means Person or firm' mdependent of every member 'of the Obligated Group who of which
is a certified public accounting firm, banker or nationally recognized professional management consultant, selected by
the Corporation or any other Member of the Obligated Group, and satisfactory to the Master Trustee, and having the
skill and experience necessary to render the.particular report required.
"Continuing Disclosure Certificate" shall mean the continuing disclosure certificate executed by the
Corporation with respect to the Bonds on the Date of Issuance pursuant to the Loan Agreement.
"Conversion" shall mean a conversion of a'Series of Bonds from one Interest Rate Period to another
Interest Rate Period.
"Conversion Date" shall mean the effective date of a Conversion of a Series of Bonds.
.t "Corporate Trust Office' shall mean'the office of the Master Trustee at which its principal corporate trust
ibusiness is conducted.
i
"Corporation" shall mean Hoag Memorial Hospital Presbyterian, a California nonprofit public benefit
IM corporation duly organized and existing under the laws of the State of Califomia or any corporation that is the
surviving, resulting or transferee corporation in any merger, consolidation or transfer of all or substantially all assets
i
permitted under the Master Indenture.
"Current Value" shall mean as of any date of determination, with respect to the Property, Plant and
Equipment, 125% of the Book Value thereof as of such date of determination. Notwithstanding the foregoing, any
Member of the Obligated Group may elect to have Property, Plant and Equipment appraised, in which case "Current
Value' as of any date of determination means the aggregate of (i) the fair market value of all Property, Plant and
Equipment as evidenced by a written report delivered to the Master Trustee, dated not more than 6 months prior to the
date as of which such determination of Current Value is made, of an appraiser satisfactory to the Master Trustee and
who is a Member of the Appraisal Institute (MAI) and (ii) the historical cost of all Property, Plant and Equipment
acquired since the date of the last such report, adjusted for the period from the date' of the last such report or from the
date of acquisition of Property, Plant and Equipment acquired since the date of the last such report, for changes in the
implicit price deflator for the gross national product as reported by the United States Departrnent of Commerce or its
successor agency, or if such index is no longer published, such other index certified to be comparable and appropriate
in an Officer's Certificate delivered to the Master Trustee. Once such written report is filed with the Master Trustee,
the term "Current Value" shall thereafter be determined in the manner, provided in the second sentence of this definition
without regard to the first sentence of this definition. Notwithstanding the foregoing, the Master Indenture provides
that the Corporation may elect to have the site of its existing (on the date of the Master Indenture)' hospital located at
y301 Newport Boulevard in Newport Beach, California, apprised by an appraiser satisfactory to the Master Trustee and
who is a Member of the Appraisal Institute (IvtAI) for purposes of determining the "Crarerit Value" of said site without
1 making such election with respect to any other Property, Plant and Equipment, and such appraised value shall be
treated as the "Current Value " -of such site and no subsequent appraisals shall be required for such site.
"Date of Issuance" shall mean August 24, 2005.
"Eligible Bonds" shall mean any Bonds other than Liquidity Facility Bonds or Bonds owned by, for the
account of, or on behalf of, the City or any Member.
"Encumbered" shall mean subject to a Lien mentioned in clauses (e), (f), (g) or (h) under the definition of
"Permitted Liens."
"Event of Default" shall mean any of the events specified in the Master Indenture and the Bond Indenture.
"Expiration Date" shall mean (i) the date upon which a Liquidity Facility is scheduled to expire (taking into
account any extensions of such Expiration Date by virtue. of extensions of a particular Liquidity Facility, from tune
to time) in accordaince with its terms, including without limitation termination upon the effective date of an
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Altemate Liquidity Facility delivered in accordance with the Loan Agreement and (ii) the date upon which a
Liquidity Facility terminates following voluntary termination by the Corporation pursuant to the Loan Agreement.
"Favorable Opinion of Bond Counsel" shall mean an opinion of Bond Counsel, addressed to the City, the
Remarketing Agent (if any), the Broker - Dealer (if any), the Auction Agent (if any), the Corporation and the Bond
Trustee to the effect that the action proposed to be taken is authorized or permitted by the laws of the State of
California and the Bond Indenture and will not result in the inclusion of interest on the Bonds in gross income for
federal income tax purposes.
"Fiscal Year" shall mean the fiscal year of the Corporation, which at the date hereof ends on August 31 of
each calendar year
"Governing Agreement" shall mean an agreement executed by each Member of the Obligated Group (which
agreement may be pursuant to bylaw provisions adopted by each Member of the Obligated Group) establishing for all
Members a system for governance of all actions with respect to the Master Indenture and the matters covered thereby.
Any term or provision of the Master Indenture shall preempt any conflicting term or provision of the Governing
Agreement. A certified copy of the Governing Agreement and all amendments thereto shall be filed with the Master
Trustee. The Governing Agreement shall. in all cases set forth procedures for the issuance by any Member of any
Indebtedness and for the admission of new Members and shall provide for another Member of the Obligated Group to
firmich Officces Certificates in the event the Corporation is no longer a Member of the Obligated Group.
j "Governing Body" shall mean, when used with respect to the Corporation or any Member of the Obligated
i Group, its members, board of directors, board of trustees or other board or gaup of individuals in which all of the
powers of the Corporation or such Member of the Obligated Group vested.
"Government Obligations" shall mean: (1) direct obligations of the United States of America (including
obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of
America) or obligations the timely payment of the principal of and interest on which are guaranteed by the United
States of America, and (2) obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any
of the following: Resolution Funding Corp., Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Home
Loan Bank System, Export-Import Bank of the United States, Federal Financing Bank, Federal Land Banks, Federal
National Mortgage Association, Government National Mortgage Association, Farmer's Home Administration, Federal
Home Loan Mortgage Corporation or Federal Housing Administration, and (3) obligations, debentures notes or other
evidence of indebtedness that are backed by direct obligations of the United States of America (including obligations
issued or held in book -entry form on the books of the Department of the Treasury of the United States of America) as
collateral hinder an arrangement by which the interest and Principal payments on the collateral generally flow immedi-
ately through to the owner of such evidence of indebtedness.
"Guaranty+' shall mean any obligation of any Member of the Obligated Group guaranteeing in any manner,
whether directly or indirectly, any obligation of any other Person which obligation of such other Person would
constitute Indebtedness.
"Holder," or "Holders" shall mean the registered owner or holder of any Indenture Indebtedness.
"Holder" or `Bondholder," whenever used with respect to a Bond, shall mean the Person in whose name
such Bond is registered.
"Income Available for Debt Service" shall mean, with respect to each Member of the Obligated Group, as to
any period of time, the excess of revenues over expenses of such Member for such period, determined in accordance
with generally accepted accounting principles, to which shall be added interest, amortization and depreciation expense
arid extraordinary or unusual non -cash items, each item determined in accordance with generally accepted accounting
principles, and transfer to such Member from Hoag Hospital Foundation, and excluding (a) any profits or losses on the
sale or other disposition, not in ordinary course of business, of investments or fixed capital assets or resulting from the
early extinguishment of debt, (b) gifts, grants, bequests, donations and contributions, to the extent specifically restricted
by the donor to a particular purpose inconsistent with their use for the payment of Debt Service and otherwise included
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in income in accordance with generally accepted accounting principles, and (c) the net proceeds of insurance (other
than business interruption insurance) and condemnation awards.
"Indebtedness" shall mean all obligations (including guaranties) for payment of principal and interest
incurred or assumed by one or more Member of the Obligated Group, except obligations between Members of the
Obligated Group.
"Indenture Indebtedness" shall mean any Obligation or other evidence of Indebtedness, including a Guaranty,
issued and delivered under the Master Indenture which has been authenticated by the Master Trustee pursuant to the
Master Indenture.
"Insurance Consultant" shall mean a Person or fun who or which is not and no member, director, officer or
employee of whom or of which is, a director, trustee, officer or employee of the Corporation, any Subsidiary, or any
other Member of the Obligated Group, and who or which is selected by the Corporation or other Member of the
Obligated Group, as the case may be, and satisfactory to the Master Trustee and. qualified to survey risks and to
recommend insurance coverage for hospitals, health - related facilities and services and organizations engaged in such
operations and who or which may be an insurance agent or broker with whom or which the Corporation and other
Member of the Obligated Group or any Subsidiary transacts insurance business.
"Interest Accrual Date" shall mean for any Auction Period within an ARS Interest Rate Period, the fast day
thereof.
"Interest Payment Date" shall mean with respect to Bonds or any Series of Bonds which are ARS, each
ARS Interest Payment Date.
"Interest Rate Period" shall mean a Weekly Interest Rate Period, a Short-Term Interest Rate Period, a
Serial Bond Interest Rate Period or an ARS Interest Rate Period.
"Inveshnent Securities" shall mean any of the following that at the time are legal investments under the
laws of the State of California for moneys held under the Bond Indenture and then proposed to be invested therein:
(a) United States Government Obligations;
(b) Obligations of any of the following federal agencies which obligations represent the full faith and
credit of the United States of America
(i) Export-Import Bank;
(ii)
• (iii)
(iv)
(V)
(vi)
(vii)
Rural Economic Community Development Administration;
U.S. Maritime Administration;
Small Business Administration;
U.S. Department of Housing & Urban Development (PHAs);
Federal Housing Administration; and
Federal Financing Bank.
(c) Direct obligations of any of the following federal agencies which obligations are not fully
guaranteed by the full faith and credit of the United States of America:
(i) Senior debt obligations issued by the Federal National Mortgage Association
(FNMA) or Federal Home Loan Mortgage Corporation (FHLMC);
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(ii) Obligations of the Resolution Funding Corporation (REFCORP);
(iii) Senior debt obligations of the Federal Home Loan Bank System; and
(iv) Senior debt obligations of other government sponsored agencies approved by the
Bond Insurer.
(d) U.S. dollar.denominated deposit accounts, federal fund and bankers' acceptances with domestic
commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "P -1 "by
Moody's and "A -1" or "A -1 +" S&P and
y by maturing not more than 360 calendar days after the date of purchase;
-(e) Commercial paper which is rated at the time of purchase in the single highest classification, "P -1"
by Moody's and "A -1 +" by S&P and which matures not more than 270 calendar days after the date of purchase;
(f) Investments in money market f coda rated "AAAm" or "AAm -G" or better by S&P;
(g) Pre- refunded Municipal Obligations defined as follows: any bonds or other obligations of any
state of the United States of America or of any agency, mstrumentality.or local govemmental.unit of any such state
which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been
given by the obligor to call on the date specified in the notice; and
(i) which are rated, based on irrevocable escrow account or fund (the "escrow's, in
the highest Rating Category of Moody's or S&P or any successors thereto; or
(ii) (a) which are fully secured as to principal, interest and redemption premium, if
any, by an escrow consisting only of cash or United States Government Obligation, which escrow
may be applied only to the payment of such principal of and interest and redemption premium, if
any, on such bonds or other obligations on the maturity date or dates thereof or the specified
redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (b) which
escrow is sufficient, as verified by a nationally recognized independent certified public accountant,
to pay principal of and interest and redemption premium, if any, on the bonds or other obligations
described in this paragraph on the maturity date or dates specified in the irrevocable instructions
referred to above, as appropriate.
(h) Municipal obligations rated "Aaa/AAA" or general obligations of States with a rating of
"A2W' or higher by both Moody's and S&P;
(i) Investment agreements approved in writing by the Bond Insurer (supported by
appropriate opinions of counseo; and
Other forms of investments (including repurchase agreements) approved in writing by the Bond Insurer.
"Irrevocable Deposit" shall mean the irrevocable deposit in trust of cash in an amount (or Government
Obligations the principal of and interest on which will be in an amount) and under terms sufficient to pay all or a
portion of the principal of, premium, if any, and interest on, as the same shall become due, any Indebtedness which
would otherwise be considered outstanding. The trustee of such deposit may be the Master Trustee or a Related
Bond Trustee.
"Law" shall mean Ordinance No. 85 -23 and 84-4 of the City, as now in effect and as it may from time to
time be amended or supplemented
"Lien" shall mean any mortgage or pledge of, security interest in, or lien or encumbrance on, any Property of
any Member of the Obligated Group which secures any Indebtedness or other obligation of any Member of the
iObligated Croup, or which secures any obligation of any Person other than an obligation to any Member of the
I
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Obligated Group, excluding liens applicable to Properly in which the Member of the Obligated Group has only a
leasehold interest unless the lien secures Indebtedness of any Member of the Obligated Group.
"Liquidity Facility" shall mean a line of credit, letter of credit, standby purchase agreement or similar
liquidity facility issued by a commercial bank or other financial institution and delivered or made available to the
Tender Agent in accordance with the Loan Agreement or, in the event of the delivery or availability of an Alternate
Liquidity Facility, such Alternate Liquidity Facility.
"Liquidity Facility Bonds" shall mean Bonds purchased with moneys-drawrt under (or otherwise obtained
pursuant to the terms of) a Liquidity Facility, but exchuding Bonds no longer considered to be Liquidity Facility
Bonds in accordance with the terms of the applicable Liquidity Facility.
"Liquidity Facility Provider" shall mean the commercial bank or other financial institution issuing (or
having primary obligation, or acting as agent for the financial institutions obligated, under) a Liquidity Facility then
in effect.
I
"Loan Agreement" shall mean that certain loan agreement by and between the City and the Corporation,
dated as of August 1, 2005, as originally executed and as it may from time to time be supplemented, modified or
amended in accordance with the terms thereof and of the Bond Indenture.
"Loan Default Event" shall mean any of the events specified in the Loan Agreement
""an Repayments" shall mean the payments so designated and required to be made by the Corporation
pursuant to the Loan Agreement
"Long -Term Debt Service Coverage Ratio" shall mean the ratio for the period in question of Aggregate
hicome Available for Debt Service to Maximum Annual Debt Service.
" Long -Tema Debt Service Requirement' shall mean as of the date of calculation, for any period of time, the
aggregate of the payments to be made in respect of principal and interest on all outstanding Long -Term Indebtedness of
the Members of the Obligated Group during such period (provided, however, with respect to Indebtedness represented
by a Guaranty of obligations of a Person which is not a Member of the Obligated Group, the amount of the principal
and interest payments to be taken into account pursuant to the provisions of the Master Indenture summarized below
under "Restrictions on Guaranties') but excluding Indebtedness to the extent that Irrevocable Deposits sufficient to pay
principal, premium, if any, and interest thereon have been made.
"Long -Tenn Indebtedness" shall mean all Indebtedness, including Indenture Indebtedness incurred or
assumed by one or more Members of the Obligated Group (other than any Guaranty of (i) Long -Term Indebtedness of
any other Member of the Obligated Group or (ii) Short -Term Indebtedness) or, in the case of a calculation to be made
pursuant to the provisions described below under "Restrictions on Guaranties," a Guaranty beneficiary for any of the
following: .
0) Payments of principal and interest with respect to money borrowed for an original, term, or
renewable at the option of the borrower for a period from the date originally incurred, longer than one year, of
for a tern treated as being longer than one year pursuant to the definition of "Maximum Annual Debt Service"
set forth below; and
(u) Payments under leases, installment sales agreements or other contracts which are
capitalized having an original term, or renewable at the option of the lessee for a period from the date originally
incurred, longer than one year, or for a term treated as being longer than one year pursuant to the definition of
'Maximum Annual Debt Service" set forth below.
"Master Indenture" shall mean that certain master bust indenture, dated as of October 1, 1984, as
supplemented or amended, between the Corporation and the Master Trustee, and as it may from time to time be
supplemented, modified or amended in accordance with the terms thereof.
to
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"Master Trustee" shall mean Wells Fargo Bank, National Association, a national banking association duly
organized and existing under the laws of the United States of America as successor master trustee or its successor, as
master trustee under the Master Indenture.
"Maturity Date" shall mean, with respect to each Series of the Bonds, December 1, 2040.
"Maximum Annual Debt Service" shall mean the highest Long -Term Debt Service Requirement for any
succeeding Fiscal Year. For the purpose of demimming Maximum Annual Debt Service (a) m the event that any
Indebtedness is secured by a commitment from a financial institution having a combined capital and surplus of at least
$250,000,000, providing for the refinancing of such Indebtedness for a term ofat least five years, then it shall be heated
as Long -Term Indebtedness with a 30 -year maturity with level debt service which would be required to amortize a
30 -year, level debt service hospital obligation of comparable quality (which debt service schedule, including an
assumed interest rate, for such comparable obligation shall be set forth in a certificate delivered to the Master Trustee
and dated not more than 30 days prior to the date of issuance of the Indebtedness then proposed to be issued of a
nationally recognized investment banking firm with expertise in municipal finance satisfactory to the Master Trustee);
and (b) in the event that the terms of an obligation giving rise to Long -Term Indebtedness provide for a variable rate of
interest or some other method of calculation.of interest not then susceptible of precise determination for purposes of
determining Maximum Annual Debt Service requirements and there is not in place with regard to such Long -Term
Indebtedness a commitment of the nature described in clause (a) above, the annual interest rate for such long -Term
Indebtedness shall be deemed to be equal to the average annual rate of interest which was payable for such Long -Term
j Indebtedness for the 12 -month period ended on the last day of the month ended immediately prior to the date of
determination of Maximum Annual Debt Service, or which would have been payable if such Long -Term Indebtedness
had been outstanding throughout such period and (c) in the event that Indebtedness is Balloon Long -Term Indebtedness
and is not described in clause (a) above, then it shall be treated as Long -Term Indebtedness with substantially level debt
service over a term of 20 years from the date of determination of Maximum Annual Debt Service (provided that if such
Indebtedness matures more than 20 years from the date of determination of the Maximum Annual Debt Service, the
actual number of years to maturity shall be used) at an interest rate certified to the Master Trustee in an Officer's
Certificate to be the interest rate at which the obligor could reasonably expect to borrow the same amount for such term
by issuance of an Obligation under the Master Indenture. The Officefs Certificate shall be delivered to the Master
Trustee "and dated not more than 30 days prior to the date of issuance of the Indebtedness then proposed to be issued
Debt service requirements with respect to Guaranties constituting Long -Term Indebtedness shall be recalculated in
accordance with the provision of the Master Indenture restricting Guaranties of obligations of a Person who is not a
Member of the Obligated Group at each time that Maximum Annual Debt Service is calculated based upon then current
financial statements and then current debt of the Guaranty beneficiary.
"Maximum Interest Rate" shall mean (a) with respect to Bonds other than ARS, the lesser of 12% per
annum and the Maximum Lawful _ Rate and (b) with respect to ARS, the ARS Maximum Rate, in each case
calculated in the same manner as interest is calculated for the particular interest rite oil-the Bonds.
"Maximum Lawful Rate" shall mean the maximum rate of interest on the relevant obligation permitted by
applicable law.
"Member" shall mean the Corporation and each other Person that is then obligated as a Member under the
Master Indenture.
" Moody's" shall mean Moody's Investors Service, a corporation organized and existing under the laws of
the State of Delaware, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, any other nationally recognized securities rating
agency designated by the Corporation by notice in writing to the City and the Bond Trustee.
"Non- Payment Rate" shall mean 15% per annum; provided, that in no event shall the Non - Payment Rate be
more than the Maximum Lawful Rate.
"Non- Recourse Indebtedness" shall mean any Indebtedness secured by a Lien, liability for which is effectively
limited to the Property subject to such Lien with no recourse, directly or indirectly, to any other Property of any
Member of the Obligated Group.
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A
"Obligated Group" shall mean the Corporation and each otherMember (if any)
"Obligation" shall mean the evidence of particular jgdenture Indebtedness issued under the Master
Indenture, including a Guaranty, provided it has been authenticaed by the Master Trustee as provided in the Master
Indenture.
"Officer's Certificate" shall mean with respect to the Master Indenture a certificate, a certified copy of which
shall be delivered to the Master Trustee, with respect to the Corporation, signed by the chairman or president of the
Corporation, or other person designated in writing by the chairman or president or by resolution of the Board of
Directors of the Corporation; provided, however, that the Corporation's chief financial officer shall sign any no default
certificates and, with respect to any other Member of the Obligated Group, signed by the chairman of the Governing
Body, the president or chief executive officer, the chief financial officer, or the chairman of the finance committee of
the Governing Body of such Member of the Obligated Group.
"Opinion of Bond Counsel" shall mean an opinion in writing signed by an attorney or firm of attorneys
satisfactory to the Master Trustee and experienced in the field of municipal bonds whose opinions are generally
accepted by the purchasers of municipal bonds.
"Outstanding" when used with reference to Indebtedness, shall mean (subject to the provisions of the
Master Indenture), as of any date of determination, all Indebtedness theretofore issued or incurred and not paid and
discharged other than (i) Obligations theretofore cancelled by the Master Trustee or delivered to the Master Trustee
for cancellation, (ii) Obligations deemed paid and no longer Outstanding as provided in the Master Indenture have
been satisfied, (iii) Obligations in lieu of which other Obligations have been authenticated and delivered or have
been paid pursuant to the provisions of the Related Supplement regarding mutilated, destroyed, lost or stolen
Obligations unless proof satisfactory to the Master Trustee has been received that any such Obligation is held by a
bona fide purchaser and (iv) Indebtedness (other than Indenture Indebtedness) to the extent that Irrevocable Deposits
sufficient to pay principal, premium, if any, and interest thereon have been made with the Master Trustee, such
,. Indebtedness shall continue to be deemed Outstanding until there shall have been delivered to the Master Trustee a
certificate of the trustee with which such Irrevocable Deposit was made certifying that such Irrevocable Deposit has
been made as provided in the Master Indenture.
"Outstanding" when used with respect to the Bond Indenture, when used as of any particular time with
I reference to Bonds, shall mean (subject to the provisions of the Bond Indenture) all Bonds theretofore, or thereupon
being, authenticated and delivered by the Bond Trustee under the Bond Indenture except (1) Bonds theretofore
canceled by the Bond Trustee or surrendered to the Bond Trustee for cancellation; (2) Bonds with respect to which
all liability of the City shall have been discharged in accordance with the Bond Indenture, including Bonds (or
portions of Bonds) referred to in the Bond Indenture; and (3) Bonds for the transfer or exchange -of or in lieu of or in
substitution for which other Bonds shall have been authenticated and delivered by the Bond Trustee pursuant to the
Bond Indenture.
"Permitted Liens" shall mean any of the following:
(a) Liens arising by reason of good faith deposits by any Member of the Obligated Group in
connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any
Member of the Obligated Group 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;
I
j (b) 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 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, or to enable the Corporation, any other Member of the Obligated Group, or a Subsidiary to
maintain self - insurance or to participate in any funds established to cover any insurance risks or in connection with
professional liability or medical malpractice insurance, workers' compensation insurance, unemployment insurance,
social security insurance or other pension or profit sharing plans, or to share in the privileges or benefits required for
companies participating in such arrangements;
{ D -11
i_ �
(c) Any jndgment Lien or notice of pending action against any Member of the Obligated Croup
so long as such judgment or pending action is being contested and execution thereon is stayed or while the period for
responsive pleading has not lapsed; .
(d) (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 and adversely affect the
value thereof, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, 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, laborers, suppliers or vendors for work or services performed or
materials furnished in connection with such Property, in each case, 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 which,
with respect to Liens of mechanics, materialmen, and laborers , have been due for less than 60 days; (C) easements,
rights -of -way, servitudes, restrictions and other minor defects, encumbrances, and irregularities in the title to any
Property which do not materially impair the use of such Property or materially and adversely.affea the value thereof;
(D) 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 (E) to the extent that it affects title to any Property, the Master Indenture;
(e) Any Lien (other than a Lien on Property which is part of the Property. Plant and
Equipment) securing Non - Recourse Indebtedness; .
(1) Any Lien on Property (other than a Lien on Property which is part of the Property, Plant
and Equipment) acquired by a Member of the Obligated Group if the Indebtedness .secured by the Lien is not assumed
by a Member of the Obligated Group or, if assumed, the assumption of such Indebtedness is Additional hndebtedness
permitted under the Master Indenture and if an Officer's Certificate is delivered to the Master Trustee certifying that
(A) the Lien and the Indebtedness secured thereby were created and incurred by a Person other than the Member of the
Obligated Group who acquired such Property prior to acquisition of such Property by the Member of the Obligated
Group, and (B) the Lien was not created for the purpose of enabling the Member of the Obligated Group to avoid the
limitations of the Master Indenture on creation of Liens on Property of the Obligated Group;
(g) Any Lien on Property, Plant and Equipment if: prior to its creation, an Officer's Certificate
of the Corporation is delivered to the Master Trustee stating that, immediately after giving effect to the Lien, (A) the
Current Value of the Property which is part of the Property, Plant and Equipment and is encumbered is not more than
25% of the Current Value of all Property, Plant and Equipment and (B) the Obligated Croup and each Member thereof
will not be in default, and no event shall exist which with the passage of time or giving notice or both would constitute
an Event of Default, under the Master Indenture;
(h) Any Lien on inventory, securities or obligations (other than securities or obligations issued
by any Member of the Obligated Group or Related Bonds), or pledges of gifts or grants to be received in the future,
which Lien secures Short -Term Indebtedness or Non - Recourse Indebtedness incurred in compliance with the
provisions of the Mister Indenture with respect to such types of Indebtedness;
(i) Any Lien arising by reason of an Irrevocable Deposit;
0) Any Lien in favor of the Master Trustee an the proceeds of Indebtedness prior to the
applications of such proceeds;
(k) Any Lien in favor of the Master Trustee securing all brdentme Indebtedness on a parity
basis;
p) Any Lien subordinate to the Liens described in clause (k) above required by stanne under
which a Related Bond is issued;
D -12
(m) t Any Lien on any Related Bond or other bWd tedness in favor of a bank or other institution
issuing a letter of credit or other commitment to make a loan to a Member of the Obligated Group to secure or provide
liquidity in connection with Indebtedness permitted under the 1, � Indenture; and
{n) All Liens set forth on an exhibit to Supplemental Master Indenture for Obligation No. 7 and
in existence as of the date of said Supplemental Master Indenture.
"Person" shall mean an individual, corporation, firm, association, partnership, trust or other legal entity or
group of entities, including a governmental entity or any agency or political subdivision thereof.
"Principal Office" shall mean, as appropriate, the designated corporate trust office of the Bond Trustee, the
Tender Agent or the Bond Insurer.
'Project" shall mean the acquisition and construction of certain additions and improvements to, and
equipment for, the acute care hospital and related facilities owned by the Corporation and located on the campus
. I� known as One Hoag Drive, Newport Beach, California 92658. The Project may include improvements at or relating
to the South Tower following evidence being submitted to the Bond Trustee that all approvals required from the
City for such additional project elements under the California Environmental Quality Act have been completed
"Property" shall mean any and all rights, titles and interests in an to any and all property whether real or
personal, tangible or intangible, and wherever situated.
"Property, Plant and Equipment" shall mean all Property of the Members of the Obligated Group which is
property, plant or equipment under generally accepted accounting principals.
"Purchase Date" shall mean the date on which Bonds are to be purchased following optional or mandatory
tender in accordance with the Bond Indenture.
"Purchase Price" of any Purchased Bond shall mean the principal amount thereof plus accrued interest to,
but not including, the Purchase Date, as further set forth in the Bond Indenture.
"Purchased Bonds" has the meaning set forth in the Bond Indenture.
"Rating Agency" shall mean S &P and/or Moody's, as the context requires.
"Rating Category" shall mean a generic securities rating category, without regard to any refinement or
gradation of such rating category by a numerical modifier or otherwise.
"Record Date" shall mean with respect to any Bonds which are AM, the second Business Day next
preceding each ARS Interest Payment Date.
"Redemption Price" shall mean, with respect to any Bond (or portion thereof), the principal amount of such
Bond (or portion) plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions
of such Bond and the Bond Indenture.
"Related Bond Indcnture" shall mean any indenture, bond resolution or other comparable. instrument
pursuant to which a series of Related Bonds are issued.
"Related Bonds" means the revenue bonds, notes, other evidences of indebtedness or any other obligations
issued by any state, territory or,patsession of the United States or any municipal corporation or political subdivision
forced under the laws thereof or any constituted authority or agency or instrumentality of any of the foregoing
empowered to issue obligations on behalf thereof ( "governmental issuer "), pursuant to a single Related Bond Indenture,
the proceeds of which are loaned or otherwise made available to (i) a Member of the Obligated Group in consideration
of the execution, authentication and delivery of an Obligation to or for the order of such governmental issuer or (ii) any
I
D -13
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Person.other than a Member of the Obligated Group in consideration of the issuance to such governmental issuer by a
Member of the Obligated Group of an Obligation.
'Related Bond Issuer" shall mean the governmental issuer of any issue of Refined Bonds.
"Related Bond Trustee" shall mean the. trustee and its successors in the trust created under any Related Bond
Indenture, and if there is no such trustee, shall mean the Related.Bond Issuer.
"Related Supplement" shall mean an indenture supplemental to, and authorized and executed pursuant to
the terms of, the Master Indenture.
"Remarketing Agent" shall mean, with respect to any Series of Bonds, any Remarketing Agent or successor
or additional Remarketing Agent appointed in accordance with the Bond Indenture.
"Revenues" shall mean all amounts received by the City or the Bond Trustee for the account of the City
pursuant or with respect to the Loan Agreement or the. applicable Master Indenture Obligation, including, without
limiting the generality of the. foregoing, Loan Repayments (including both timely and delinquent payments and any
late charges, and whether paid from any source), prepayments, insurance proceeds, condemnation proceeds and all
interest, profits or other income derived from the investment of amounts- in any fiord or account established pursuant
to the Bond Indenture, but not including any Administrative Fees and Expenses or any moneys required to be
deposited in the Rebate Fund
"S&P" means Standard & Poor's Ratings Services, 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 their assigns, or, if
such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating
agency, any other nationally recognized securities rating agency designated by the Corporation by notice in writing
to the City and the Bond Trustee.
"Securities Depository" shall mean The Depository Trust Company and its successors and assigns, or any
other securities depository selected as set forth in the Bond Indenture.
"Serial Bond Interest Rate" shall mean, with respect to the Bonds, an interest rate on such Bonds
established in accordance with the Bond Indenture.
j "Serial Bond Interest Rate Period" shall mean each period during which such a Serial Bond Interest Rate is
in effect for the Bonds.
...: 'j
"Series," when used with respect to the Bonds, shall mean all the Bonds designated as being of the same
series, authenticated and delivered in a simultaneous transaction, and any Bonds thereafter authenticated and
delivered upon a transfer or exchange or in lieu of or in substitution for such Bonds as herein provided.
' . I "Short -Term Indebtedness" shall mean all Indebtedness that is not Long -Term Indebtedness.
I
"Subordinated Indebtedness" shall mean Indebtedness which is subordinate as to payment and security to all
other outstanding Indebtedness.
"Subsidiary" shall mean a corporation, partnership, joint venture, association, business trust or similar entity
organized under the laws of the United States of America or a state thereof which is directly or indirectly controlled by,
or under common control with the same Person as, any Member of the Obligated Group or any other Subsidiary. For
! purposes of this definition, control means the power to direct the management and policies of a Person through the
ownership of a majority of members of its board of directors or the governing board or body by contract or otherwise.
"Short -Term Interest Rate Period" shall mean each period with respect to the Bonds, comprised of Bond
Interest Terms, during which Bond Interest Term Rates are in effect,
D-14
"Sinking Fund Installment" shall mean the amount required by the Bond Indenture to be paid by the City
on any single date for the retirement of Bonds.
"Sinking Fund Installment Date" shall mean each December 1, commencing December 1, 2016, for each
Series of Bonds; provided, that if any such Bond is in a Weddy Interest Rate Period, a Short-Term Interest Rate
Period or a Serial Bond Interest Rate Period, and any such October 1 is not a Business Day, the applicable Sinking
Fund Installment Date shall be the next succeeding Business Day; and provided fiather, that if any such Bond is in
an ARS Interest Rate Period and any such October 1 is not an ARS Interest Payment Date, the applicable Sinking
Fund Installment Date shall be the.next succeeding ARS Interest Payment Date.
"Special Record Date" means the date established by the Bond Trustee pursuant to the Bond Indenture as
the record date for the payment of defaulted interest on the Bonds that are not ARS and pursuant to the Bond
Indenture as the record date for the payment of ARS Defaulted Interest.
"Supplemental Bond Indenture" shall mean any indenture hereafter duly authorized and entered into
between the City and the Bond Trustee, supplementing, modifying or amending the Bond Indenture; but only if and
to the extent that such Supplemental Bond Indenture is specifically authorized under the Master Indenture.
`"fax Agreement" shall mean the Tax Certificate and Agreement delivered by the City and the Corporation
i at the rime of issuance and delivery of the Bonds, as the same may be amended or supplemented in accordance with
its terms.
"Tender Agent" shall mean the Tender Agent appointed in accordance with the Bond Indenture.
"Total Operating Revenues" shall mean the aggregate of net patient revenue and other operating revenue.
"United States Government Obligations" shall mean (1) noncallable direct obligations of the United States
of America (including obligations issued or held in book -entry form on the books of the Department of Treasury of
the United States of America) and obligations of any agency or instrumentality of the United States of America the
timely payment of the principal of and interest on which are fully guaranteed by the United States of America, and
(2) any other obligations approved in writing by the Bond Insurer.
"Weekly Interest Rate" shall mean a variable interest rate borne by a Series of Bonds and established in
accordance with the Bond Indenture.
"Weekly Interest Rate Period" shall mean each period with respect to a Series of Bonds during which a
Weekly Interest Rate is in effect,
MASTERINDENTURE
General
The Master Indenture authorizes the issuance of Obligations by the Obligated Group, which may be
unsecured general obligations or, to the extent permitted by the Master Indenture, secured by a claim on Property. An
Obligation is stated in the Master indenture to be a joint and several obligation of each Member of the Obligated
i Group.
j
The following are summaries of certain provisions of the Master Indenture. See also
'BONDHOLDERS' RISKS" in this Official Statement These summaries do not purport to be complete or definitive
and are qualified in their entireties by reference to the full terms of the Master Indenture.
D -15
to
Membership in the Obligated Group
Conditions for Membership. A Person may become a Member of the Obligated Group entitled to
issue Indenture Indebtedness under the Master Indenture only upon the following conditions:
(a) Such Person shall execute and deliver to the Master Trustee an instrument containing. the
agreement of such Person (i) to become a Member of the Obligated Group under,the Master Indenture and thereby to
become subject to compliance with all provisions of the Master Indenture pertaining to a Member of the Obligated
Group, including the performance and observance of all covenants and obligations of a Member of the Obligated
Group under the Master Indenture, and (ii) subject to the cross- guaranties under the Master Indenture, unconditionally
and irrevocably guaranteeing to the Master Trustee and each other Member of the Obligated Group that all .Indenture
Indebtedness issued and at any time outstanding under the Master Indenture and all Reimbursement Agreement
Indebtedness will be paid in accordance with the terms thereof and of the Master Indenture when due; subject,
however, to the usual exceptions relating to the rights of guarantors and equitable remedies, and qualifications dealing
with the rights of guarantors under California law.
(b) The Master Trustee shall also have received (i) an Officer's Certificate of the Corporation
certifying that, immediately upon such Person becoming a Member of the Obligated Group (A) no Event of Default
under the Master Indenture would exist with respect to any existing Member of the Obligated Group solely as a result
of such Person becoming a Member of the Obligated Group; (B) no event would exist which with the passage of time
or the giving of notice or both would constitute an Event of Default as a result of such Person becoming a Member of
the Obligated Group, and (C) the Members of the Obligated Group would meet the conditions described in the Master
Indenture for the creation of a Lien on Property, Plant and Equipment; (ii) an Officer's Certificate of the Corporation
and/or a written report of a Consultant (in compliance with the Master Indenture), certifying that, immediately upon
such Person becoming a Member of the Obligated Group, the Members of the Obligated Group would meet the
conditions contained in the Master Indenture for the incurrence of one dollar of additional Long -Term Indebtedness,
and the Long -Tenn Debt Service Coverage Ratio requirements contained in the Master Indenture would be satisfied;
(iii) if all amounts due or to become due on any Related Bond which bears interest that is not includable in gross
income of the registered owner or holder thereof under the Code have not been paid to such registered owner cr holder,
an opinion of bond counsel in form and substance satisfactory to the Master Trustee, to the effect that, under then
existing law, such Person's becoming a Member of the Obligated Group, whether or not contemplated on any date of
the delivery of any such Related Bond, would not cause the interest payable on such Related Bond to become
includable in gross income of the registered owner or holder thereof under the Code; (iv) an Office's Certificate of the
Corporation certifying compliance with all applicable conditions to such Person's becoming a Member of the Obligated
Group under the Master Indenture and under the Governing Agreement; and (v) an opinion of counsel acceptable to the
Master Trustee to the effect that upon becoming a Member of the Obligated Group, the obligation of such Person set
forth in the Master Indenture with respect to the payment of Indenture Indebtedness is a, valid, binding and enforceable
obligation of such Person, subject however to the usual exceptions with respect to bankruptcy, insolvency (including
laws relating to fraudulent conveyances or transfers) and equitable remedies and that all conditions precedent to such
Person's becoming a Member of the Obligated Group contained in the Master Indenture or the Governing Agreement
have been satisfied..
(c) The execution and delivery by such Person of the Governing Agreement
(d) The conditions specified in clause (bxi)(C) above need not be complied with if there is
delivered to the Master Trustee an Officer's Certificate of the Person proposed to become a Member to the effect that
- such Person, if taken by itself, would meet the conditions contained in the Master Indenture for the creation of a Lien
on such Person's Property, Plant and Equipment.
(e) The conditions specified in clause (b)(ii) above need not be complied with if there is
delivered to the Master Trustee a report of a Consultant certifying that the Person proposed to become a Member, taken
by itself; would meet the conditions specified in the Master Indenture for the incurrence of one dollar of additional
Long -Term Indebtedness and the Long -Term Debt Service Coverage Ratio requirements contained in the Master
Indenture, as the case may be.
D-16
RA
c.
Effects of Membership. Upon any Person becoming a Member of the Obligated Group, it may
create Indenture Indebtedness and enter into a Related Supplement pursuant to the provisions of the Master Indenture.
Cross- Guaranties. Pursuant to the Master Indenture, the Corporation and each other Member of the
Obligated Group will unconditionally and irrevocably, jointly and severally guarantee and promise to pay any and all
payments on any Indenture Indebtedness and Reimbursement Agreement Indebtedness (other than Indenture
Indebtedness or Reimbursement Agreement Indebtedness issued subsequent to any Member's withdrawal from the
Obligated Group in compliance with the Master Indenture) according to the terms thereof when due. If for any reason
any payment required pursuant to the terms of any Indenture Indebtedness.issued under the Master Indenture has not
been timely paid by the Member which issued such Indenture Indebtedness, the Corporation and all other Members
shall be obligated under the Master Indenture to make such payment
Withdrawal From the Obligated Group. (a) No Member of the Obligated Group may withdraw
from the Obligated Group unless:
(i) . all Indenture Indebtedness issued by such Member shall no longer be outstanding:
(ii) not less than five days prior to the effective date of such withdrawal the Master Trustee
shall have received (A) an Officer's Certificate of the Corporation which slates that, immediately after the
{i withdrawal of such Member from the Obligated Group, (1) no remaining Member of the Obligated Group
would be in default, in the performance or. observance of any covenant or condition to be performed or
observed by it under the Master Indenture and (2) the remaining Members of the Obligated Group would meet
the conditions described in the Master Indenture for the creation of a Lien on Property, Plant and Equipment;
(B) a report of a Consultant which certifies that immediately after such withdrawal, the remaining Members
of the Obligated Group would meet the conditions described in the Master Indenture for the incurenc:e of one
dollar of additional Long -Term Indebtedness and the Long -Term Debt Service Coverage Ratio requirements
contained in the Master Indenture; (C) if all amounts due on any Related Bond which bears interest that is not
includable in gross income under the Code have not been paid to the holders thereot an opinion of bond
counsel in form and substance satisfactory to the Master Trustee, stating that under then existing law such
Member's withdrawal from the Obligated Group, whether or not contemplated on any date of delivery of any
Related Bond, would not cause the interest payable on such Related Bond to become includable in gross
income of the registered owner thereof under the Code; and (D) an Officer's Certificate of the Corporation
certifying compliance with all applicable conditions and requirements of the Master Indenture and under
Govetnumg Agreement;
!, (iii) not less than five days prior to the effective date of such withdrawal there is delivered to the
Master Trustee an opinion of counsel stating that all requirements and conditions precedent to such
withdrawal under the Master Indenture and under the Governing Agreement have been complied with and
satisfied; and
i
(iv) unless the tests described in paragraph (c) below are met, the withdrawing Member delivers
to the Master Trustee not less than five days prior to the effective date of such withdrawal a guaranty executed
by such Member confirming that its obligations with respect to Indenture Indebtedness pursuant to the Master
Indenture shall survive such Member's withdrawal from the Obligated Group, which Guaranty shall be
! accompanied by an opinion of counsel to the effect that such Guaranty is a valid, binding and enforceable
obligation of such withdrawing Member, subject to the usual exceptions with
respect to banlmtPU7',
insolvency (including laws relating to fraudulent conveyances or transfers) and the availability of equitable
remedies.
(b) Notwithstanding the foregoing any Member may withdraw from the Obligated Group if
within five days prior to. such withdrawal there is delivered to the Master Trustee an Officer's Certificate of the
Corporation certifying that (A) such Member's Long -Term Debt Service Coverage Ratio is less than 1.10, (B) after
giving effect to such withdrawal, the Long -Term Debt Service Coverage Ratio of the Obligated Group has not
decreased as a result of such withdrawal and (C) after giving effect to such withdrawal, the percentage of the Current
Value of Encumbered Property, Plant and Equipment with respect to the Content Value of all Property, Plant and
Equipment has not decreased from such percentage prior to such withdrawal.
D17
00
(c) Notwithstanding the withdrawal of any Member from the Obligated Group, any Guaranty
of such Member (except any Member whose Total Operating Revenues in the previous Fiscal Year did not exceed 10%
of the Total Operating Revenues of the Obligated Group for such Fiscal Year and the Current Value of whose Property,
Plant and Equipment does not exceed 10% of the Current Value of the Property, Plant and Equipment of the Obligated
Group) of Indenture Indebtedness shall remain in full force and affect until the Indenture Indebtedness to which such
Guaranty relates shall no longer be outstanding, and such Member shall continue to be bound by the provisions of the
Master Indenture summarized under the caption "MASTER INDENTURE — Particular Covenants of Each Member of
the Obligated Group;' unless there is delivered to the Master Trustee (i) an Officer's Certificate certifying that for the
two Fiscal Years immediately preceding such withdrawal and also immed arrly after giving effect to such withdrawal,
the Long -Term Debt Service Coverage Ratio was and will be at least 2.0 as determined from independently audited
financial statements closest in time to the withdrawal, adjusted to reflect the withdrawal of such Member and (ii) a
Consultant's opinion certifying that, in its opinion, the Long -Term Debt Service Coverage Ratio will remain at or above
2.0 for the three Fiscal Years following such Members withdrawal from the Obligated Group.
(d) No Member of the Obligated Group may withdraw from the Obligated Group during the
continuance of an Event of Default under the Master Indenture.
Authorization and Issuance of Obligations
There is no limit on the aggregate principal amount of Indenture Indebtedness or on the number of
Obligations evidencing Indenture Indebtedness that may be issued, but no Indenture Indebtedness may be issued unless
the provisions of the Master Indenture are followed
Particular Covenants of Each Member of the Obligated Group
Payment of Principal and Interest Each Member of the Obligated Group jointly and severally
covenants in the Master Indenture that it will pay any and all payments on any Indenture Indebtedness, according to the
terms thereof, when due.
Limitations on Creation of Liens. Each Member of the Obligated Group agrees in the Master
Indenture that it will not create or suffer to be created or permit to exist any Lien upon Property now owned or hereafter
acquired by it other than Permitted Liens.
Limitations on Incurrence of Additional Indebtedness. The Master Indenture provides that each
Member of the Obligated Group may incur Additional Indebtedness which is not Indenture Indebtedness, and that each
Member of the Obligated Group-will agree in the Master Indenture that it will not incur any Additional Indebtedness
other than one or more of the following:
(a) Long -Term Indebtedness if prior thereto, there is delivered to the Master Trustee: (i) an
Officers Certificate of the Corporation certifying that the Long -Term Debt Service Coverage Ratio for the
Obligated Group is not less than 1.25 (computed on the basis of Aggregate Income Available for Debt Service
far the full Fiscal Year immediately preceding the date of delivery of such Officers Certificate and Maximum
Annual Debt Service immediately after giving effect to the Indebtedness proposed); or (ii) either (A) (x) an
Officer's. Certificate of the Corporation addressed to the Master Trustee stating that the Aggregate Income
Available for Debt Service for each of the preceding two Fiscal Years was not less than 1250W of Maximum
Annual Debt Service (other than the Indebtedness proposed to be issued), provided that if Aggregate Income
Available For Debt Service for the later of such two Fiscal Years is higher than the earlier Fiscal Year, the
average Aggregate Income Available for Debt Service for such Fiscal Years may be used in such computation
and (y) a written report addressed to the Master Trustee of a Consultant stating that the estimated or forecasted
Long -Term Debt Service Coverage Ratio for each of the two Fiscal Years immediately following the issuance
of said Indebtedness (or immediately following the anticipated acquisition or completion date of the facilities
to be acquired or constructed with the proceeds of such Indebtedness if such Indebtedness is being issued to
finance the acquisition or construction of new income producing hospital facilities less than 30"/0 of the total
cost of which to be financed is to be for equipment), is not less than 1250/9 of Maximum Annual Debt Service
after giving effect to the Indebtedness proposed to be issued; or (B) a written Consuhant's report containing an
D -18
....I . A
opinion of such Consultant that'. (x) applicable laws or regulations have prevented or will prevent the
Obligated Group from generating the amad& -of Aggregate Ines Available for Debt Service required to be
generated by (A) above as a prerequisite to the issuance of Additional Indebtedness and, if requested by the
Master Trustee, such report is accompanied by a concurring opinion of counsel acceptable to the Master
Tmstee as to any conchuions of law supporting the opinion of such Consultant (y) the Obligated Group has
generated and the forecasts or estimates contained in such Consultants report . are that it will generate the
maximum amount of Aggregate. Income Available for Debt Service which in the opinion of such.Consultant
can reasonably be generated given such :laws and regulations during the period affected thereby ; 'and (z) the
Aggregate' Income Available for Debt Service so. generated is at least. 100% of Maximum Annual Debt
Service of outstanding Indebtedness of the Obligated Group and the Aggregate Income Available for Debt
Service estimated or forecasted to be so generated is at least 100% of such estimated Maximum Annual Debt
Service on the outstanding Indebtedness of the Obligated Group and the Indebtedness proposed to be issued.
(b) Completion Indebtedness, without limitation.
(c) Long -Term Indebtedness (other than Balloon Long -Term Indebtedness) incurred to refund
any outstanding Long -Term Indebtedness if prior to incurrence thereof: (i) either (A) the Master Trustee
receives an Offices Certificate stating that, taking the proposed Long -Term Indebtedness and the refunding
of the existing Long -Term Indebtedness into account, Maxim>un Annual Debt Service of the Obhpted.Grpup•
will not be increased by more than 5% as a result of the incurrence of such :Long -tam Indebtedness, or (B) the
conditions described in paragraph (a) above we met with respect to the incurrence of such proposed Long
Term Indebtedness; and (ii) either (A) the. Master Trustee receives an opinion of cainsel stating that upon
application of the proceeds of such proposed Long- Tam Indebtedness, the Long -Term Indebtedness to be
proposed
refunded will no longer be outstanding, or (B) the proceeds of such Long -Term Indebtedness are to
:i be irrevocably deposited in an escrow account with the Mashy Trustee or other depository, in the.form of cash
and/or Government Obligations, in an amount sufficient to pay when due the outstanding Long -Term
Indebtedness to be refunded, and the Master Trustee receives either a written release from the holders of the
i Long -Term Indebtedness to be re:fimded or an opinion of counsel stating the holders could not accelerate such
outstanding Long-Term Indebtedness.
(d) Short -Term Indebtedness, provided that. (i) such Short-Term Indebtedness is unsecured
Indebtedness or secured only by a Lien on Property which is inventory, securities or obligations (other than
j securities or obligations issued by Members of the Obligated Group or Related Bonds), pledges of future gifts
I or grants and (ii) immediately after the incurrence of such Short -Term Indebtedness the aggregate outstanding
principal amount of all Short -Term Indebtedness does not exceed 201/0 of Total Operating Revenues of the
Members of the Obligated Group for the most recent Fiscal Year for which financial statements are available; .
provided that during any 20 consecutive day period during each Fiscal Year, the amoumt.of.Short-Tenn
Indebtedness does not exceed three percent of the aggregate Total Operating Revenue- of the Members of the
Obligated Group for the most recent Fiscal Year for which financial statements of each Member of the
Obligated Group are available
(e) Non Recourse Indebtedness, without limitation
(f) Subordinated Indebtedness, provided that such Subordinated Indebtedness does not exceed
100/6 of the Current Value of the Property, Plant and Equipment
(g) . Any Indebtedness notmentioned -in paragraphs (a) through (f) above or (h) and (i) below, if
incurred in the ordinary course of business.
(h) At no time shall the aggregate outstanding amounts of Indebtedness of the Corporation and
other Members of the Obligated Group incurred pursuant to the provisions described in paragraphs (d), (e)
and (f) above exceed 25% of the aggregate of Total Operating Revenues of the Members of the Obligated
Group for the most recent Fiscal Year for which financial statements of each Member of the Obligated Group
have been reported upon by independent certified public ac ountants:
D -19
i
W Reimbursement aniother obligations arising under reimbursement agreements relating to
letter of credit or similar credit facilities iced. to secure or provide liquidity in connection with Indebtedness,
without limitation.
Restrictions oar Guaranties. The Master Indenture provides that each Member of the Obligated
Group will not make any Guaranty unless such Guaranty (i) is an Obligation and could then be incurred as Additional
Indebtedness under the provisions of the Master Indenture and taking into account the provision described in the next
paragraph, or (ii).is a. Guaranty of Indebtedness of another Member of the Obligated Group which Indebtedness is
issued in compliance with the provisions of the Master Indenture. For purposes of this covenant, "Beneficiary" means
a Person not a Member. .
The Master Indenture provides that with respect to Guaranties of obligations of a Beneficiary, the
following criteria are to be used for calculating amounts to be included as Long -Term Indebtedness and Short-Term
Indebtedness: (i) if the Beneficiary's obligation to-repay the Member for advances made under such Guaranty is secured
directly or by subrogation by a security interest in real or personalproperty with a Current Value at least equal to the
principal amount of the - obligation subject to the Guaranty (subject ouly to security interests directly securing such
underlying. obligation), 25% of the debt service on the underlying obligation of such Beneficiary is to be included in
determining Long -Term Indebtedness, or (ii) if the Guaranty is not so secured but the Beneficiary has a Long -Term
Debt Service Coverage Ratio (determined as if the Beneficiary alone constitutes the Obligated Group) for the
immediately preceding fiscal year of such Beneficiary of at least 1.50 when such guaranteed debt and all debt incurred
by such Beneficiary since the most recant independently audited financial statements of such Beneficiary is added to
the debt shown on such financial statements, then 50% of -the debt service on the underlying obligation of such
Beneficiary is to be included in determining Long-Term. Indebtedness; or (iii) if the Guaranty is not so secured but the
Beneficiary has a Long -Term Debt Service.Coverage Ratio (determined as if the Beneficiary alone constitutes the
Obligated Group) for the immediately preceding fiscal year of such Beneficiary of at least 1.20 when such guaranteed
debt and all debt incurred since the most recent independently.audited financial statements of such Beneficiary is added
to the debt shown on such financial statements, then 75% of the debt service on the underlying obligation of such
Beneficiary is to be included in determining the Long -Term Indebtedness, or (iv) otherwise, 1000A of the underlying
obligation of such Beneficiary is to be included in determining the Long -Term Indebtedness and, in all cases, 1000/6 of
the underlying obligation shall be included in determining Short-Term Indebtedness.
Debt Service Coverage Ratios. Each Member of the Obligated Group agrees in the Master
Indenture that it will take. actions which may be necessary to maintain the Long -Term Debt Service Coverage Ratio
above 1.25 as calculated at the end of each Fiscal Year; provided, however,.that the failure to maintain such ratio shall
not constitute an Event of Default under the Master Indenture. The Master Indenture contains the covenant that if the
Long -Tema Debt Service Coverage Ratio, as calculated at the end of any Fiscal Year, is below 1. 10, the Obligated
Group will retain promptly. a Consultant to make recommendations to increase such Ratio for subsequent Fiscal Years
to 1.25 or, if in Ore .opinion of the Consultant the attainment of such level is impracticable, to the highest practicable
level. Each Member of the Obligated Group agrees in the Master Indenture that it will, to the extent feasible and to the
extent permitted by law, follow the recommendations of the Consultant. So long as the Obligated Group shall retain a
Consultant and each Member of the Obligated Group shall follow such Consultant's recommendations to the extent
feasible, and to the eitent permitted by law, this requirement shall be deemed to have been complied with even if the
ratio attained for any subsequent Fiscal Year is below 1.25. Anything to the contrary notwithstanding, it shall be an
Event of Defaultunderthe Master Indenture if the Long -Term Debt Service Coverage Ratio at the end of a Fiscal Year
is below 1.0.
Sale, Lease or other Disposition of Property, Plant and Equipment. Each Member of the
Obligated Group agrees in the Master Indenture that it will not in any calendar year sell, lease or otherwise dispose of
Property, Plant and Equipment which would cause the aggregate Current Value of Property, Plant and Equipment so
disposed of in such year to exceed two percent of the Current Value of the Property, Plant and Equipment, except for
transfers in connection with a "sale and lease back" transaction that would constitute and be treated as a sale and "true
lease ".,under the Code, and except for transfers of Property; Plant and Equipment: .
(a) To any.Person if prior to the sale, lease or other disposition the- Master Tmstee
receives an Officer's Certificate stating that in the judgement of the signer such Property, Plant and Equipment
have become, or within the next succeeding 24 calendar months are reasonably expected to become,
ro
D-20.
inadequate, obsolete, worn out: unsuitable, rmprofitable, undesirable or unnecessary and the sale, lease,
removal or other disposition thereof will not impair the structural soundness, efficiency or economic value of
the remaining Property, Plant and Equipment; or
(b) .. To another Member of the Obligated Coup; or
(c) To a Person not a Member of the Obligated Group and not a Subsidiary, provided
that prior to the sale, lease or other disposition, the Master Trustee receives an tf'icees Certificate stating that
immediately after such transaction the requirements of paragraph (i) under the definition of "Permitted Liens"
contained herein would be met and either (i) the Long -Term Debt Service Coverage Ratio for the most recent
Fiscal Year preceding the proposed date of such transaction for which financial statements of each Member of
the Obligated Group are available, assuming such hnnsae ion to have occurred at the beginning of such
period, would not have been reduced by more than 15 %, and in no event to less than 1.25; or (u) the Master
Trustee receives a Consultant's report demonstrating that the Long -Term Debt Service Coverage Ratios for
each of the two Fiscal Years immediately succeeding the proposed date of such transaction is expected to be
either (A)(x) no less than 115 and (A)(y) no less than 85% of the Long -Term Debt Service Coverage Ratio
for the period described in clause (i) of this paragraph or (B) higher than it would have been had such
transaction not been effected; or
(d) To a Subsidiary which is not a Member of the Obligated Group:
(i) If the Property, Plant and Equipment being transferred do not include
leasehold interests and the aggregate Current Value of the Property, Plant and Equipment transferred
to such Subsidiaries which are not Members of the Obligated Group in the.then current Fiscal Year,
including the Property, Plant and Equipment proposed to be transferred, does not exceed 3% of the
aggregate Current Vatic of all Property, Plant and Equipment or
(ii) If the Property, Platt and Equipment being transferred are . leasehold
interests and the portion of Aggregate Income Available for Debt Service for the most recent Fiscal
Year for which financial statements of each. Member of the Obligated Group. are available
attributable to the aggregate of such interests transferred to Subsidiaries which are not Members of
the Obligated Group in the then current calendar year, including the interests to be transferred, does
not exceed 5% of the Aggregate Income Available for Debt Service for such period
Disposition of Cash. The Master Indenture contains the agreement of each Member of the
Obligated Group that except in the ordinary course of business it will not in any Fiscal Year cause the disposition of
more than 20° /s, in the aggregate, of cash or other immediately available fiords of the Obligated Group, as calculated at
the end of the immediately preceding Fiscal Year, to any Person not a Member of the Obligated Group unless prior to
such transfer there is delivered to the Master Trustee an Officer's Certificate stating that the Long -Tenn Debt Service
Coverage Ratio for the most recent Fiscal Year preceding the proposed date of such transaction for which financial
statements of each Member of the Obligated Group are available, assuming such transaction actually occurred at the
'j beginning of such period, would not have been reduced by more than 109'o and in no event to less than 2.00 unless such
transfer is to be used to make Bona Fide Loans.
The Master lndentue provides that notwithstanding the provisions described in the immediately
preceding paragraph, each Member of the Obligated Group agrees that except in the ordinary course of business, it will
not make dispositions of cash or other immediately available funds to any Person not a Member of the Obligated Group
if the Long -Tenn Debt Service Coverage Ratio for the most recent Fiscal Year for which financial statements of each
Member of the Obligated Group are available, assuming such transaction actually occurred at the beginning of such
period, would have been less than 1.25.
Consobida6om, Merger, Sale or Conveyance. The Master Indenture provides that each Member of
the Obligated Group will agree that it will not merge or consolidate with, or sell or convey all or substantially all of its
assets.to, any Person not a Member of the Obligated Group unless:
D-21
(i) Either it will be the surviving corporation, or the successor corporation shall be a
corporation organized and existing under the laws of the United States of America or a state thereof and such
corporation shall become a Member of the Obligated Group and shall expressly assume the due and punctual
payment ofthe principal of and premium, if any, and interest on all outstanding Indenture Indebtedness issued
under the Master Indenture according to its tenor, and the due and punctual performance and observance of all
of the covenants and conditions of the Master Indenture by a Related Supplement satisfactory to the Master
Trustee, executed and delivered to the Master Trustee by such corporation;
(ii) No Member of the Obligated Group immediately after such merger or
consolidation, or such sale or .conveyance, would be in default in the performance or observance of any
covenant or condition of the Master Indenture, and no event shall exist which with the giving of notice or the
passage of time or both would constitute an Event of Default under the Master Indenture, and the conditions
for the creation of a Lien on Property, Plant and Equipment, the conditions for the incurrence of one dollar of
additional Long -Term Indebtedness and the Long -Term Debt Service Coverage Ratio requirements contained
in the Master Indenture would be net;
(iii) Prior to such merger, consolidation, sale or conveyance, the surviving corporation
demonstrates, in a report of a Consultant delivered to the Master Trustee, that its long -term debt service
coverage ratios, computed as though such surviving corporation had been a Member of the Obligated Group
for the periods in question and as though each such ratio were its Long -Term Debt Service Coverage Ratio, in
each of the two Fiscal Years immediately succeeding the proposed date of such merger, consolidation, sale or
conveyance is expected to be at least 1.35 (or, if such ratio of the Member of the Obligated Group was less
than 1.35 for the Fiscal Year immediately preceding the merger, consolidation, sale or conveyance, then such
long -term debt service coverage ratios are expected to be higher than such ratio for such period); and
(iv) If all amounts due or to become due on any Related Bond which bears interest that
is not includable in gross income of the registered owner or holder thereof under the Code have not been fully
paid to such registered owner or holder, there shall have been delivered to the Master Trustee an Opinion of
Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing
law the consummation of such merger, consolidation, sale or conveyance, whether or not contemplated on any
date of the delivery of such Related Bond, would not cause the interest payable on such Related Bond to
become includable in gross income of the registered owner or holder thereof under the Code.
In case of any such consolidation, merger, sale or conveyance the successor corporation will be
substituted for its predecessor, as if it were a Member of the Obligated Group: The Master Trustee shall 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.
. Insurance. Each Member of the Obligated Group, respectively, agrees that it will maintain, or cause
to be maintained, insurance (including one or more self - insurance programs considered to be adequate by an Insurance
Consultant) covering such risks and in such amounts as, in its reasonable judgment, is adequate to protect it and its
Properties and operations, including (to the extent that such Member is a health care institution) professional liability or
medical malpractice insurance. The insurance required to be maintained pursuant to the Master Indenture shall be
subject to the review of an Insurance Consultant who shall prepare and file with the Master Trustee a report on the
adequacy of such insurance annually not late than five months after the end of each Fiscal Year of each Member.
Each Member of the Obligated Group, respectively, agrees that it will follow any recommendations of the Insurance
Consultant to the extent reasonable.
Restrictions on Encumbering Revenues. Each Member of the Obligated Group covenants in the
Master Indenture that, except as provided in the provisions of the Master hmdemmme dealing with restrictions on the
creation of Liens and Liens on Property, Plant and Equipment and the limitation on incurrence of Additional
Indebtedness, itmill not cause or permit any of its reveres, receipts or other moneys or right to receive the same to
become encumbered or sold except (i) with respect to amounts realized by a Person for whose benefit a Permitted Lien
has been created upon enforcement thereof, or (ii) as permitted by the Master hmdentum with respect to insurance or
condemnation proceeds or awards.
D -22
NO
Filing of Finsacial Staten to of No Defaek, Other Iaformation. Each Member of .
the Obligated Group,.respectively, covenants m the_ '' IndenLae that it will:
(a) As soon as practicable but in no event late than five months after the end of its fiscal year,
file with the Master Trustee, with each Obligation. Holder who may. have so. requested and if any Indenture
Indebtedness is then rated by Moody's Investors Service, Inc. or.Standard& Poces Corporation, with such rating
agency, as the case may be (i) its revenue and expense statement (or a revenue and expense statement of any
consolidated group of companies of which it is a member) for such fiscal year and (ii) its balance sheet (or a balance
! sheet of any consolidated group of companies of which it is a member) as of the end of such fiscal year, each
accompanied by the certificate or opinion of independent certified public accountants.
(b) As soon as practicable but in no event later tban five months after the end of each Fiscal
Year, file, or cause to be filed, with the Master Trustee and if any Indenture Indebtedness is then rated by Moody's
Investors Service, Inc., and Standard & Poor's Corporation, with such rating agency, as the case may be (i) a
consolidating revenue and expense statement of the Corporation (or of any consolidated group of companies of which
the Corporation is a member) and each other Member of the.Obligated Group (or of any consolidated group of
companies of which such Member of the Obligated Group is a member) presenting each separately and consolidated,
along with consolidating entries eliminating material intercompany balances and transactions, for such Fiscal Year and
(ii) a consolidating balance sheet presented on the basis described in (i) above as of the end of such Fiscal Year, each
accompanied by the certificate or opinion of independent certified public accountants.
(c) As soon as practicable but in no event later than five months after the end of each Fiscal
Year, file with the Master Trustee, and with each Obligation Holder who may have so requested or in whose behalf the
Master Trustee may have so requested, an Officer's Certificate stating the Long Term Debt Service Coverage Ratio for
such Fiscal Year and stating whether or not to the best knowledge of the signer such Member of the Obligated Group is
in default in the performance of any covenant contained in this Master Indentme, and, if so, specifying each such
default of which the signer may have knowledge.
(d) If an Event of Default shall have occurred and be continuing (i) file with the Master Trustee
such other financial statements and information concerning its operations and financial affaits.(or of any consolidated
group of companies of which it is a member) as the Master Trustee may from time to time reasonably request,
excluding specifically privileged information, donor records, patient records and personnel records and (ii) provide
access to its facilities for the purpose of inspection by the Master Trustee or its agent during regular business horns or at
such other times as the Master Trustee may reasonably request.
(e) Within 10 days after its receipt thereof; file with the Master Trustee a copy of each report
which any provision of the Master Indenture requires to be prepared by a Consultant or an Insurance Consultant.
Insurance and Condemnation Proceeds. The Master Indenture provides that each Member of the
Obligated Group may make agreements and covenants with the holder of secured Indebtedness incurred in compliance
with the Master Indenture and seared by a Permitted Lien with respect to the use of insurance or condemnation
proceeds received in connection with the Property subject to such Permitted Lien
The Master Indenture provides that proceeds received with respect to any casualty loss or as
condemnation awards may be used as the recipient determines; provided that if the amount received exceeds 5% of the
Current Value of the Property, Plant and Equipment, the recipient must notify the Master Trustee immediately and
within 12 months after the casualty loss or taking deliver to the Master Trustee (i) an Officer's Certificate of the
Corporation certifying that the expected Long -term Debt Service Coverage Ratio for each of the two Fiscal Years
following the expected date of application of such funds, is not less than 1.50, as shown by pro forma financial
statements for each such period, accompanied by a statement of relevant assumptions upon which such pro forma
statements are based, and a written report of a Consultant confirming such certification, or (ii) a written Consultant's
report containing the recommendations of such Consultant as to the use of such proceeds, to cause the Long Term Debt
Service Coverage Ratio for each of such periods to be not less than 125, or, if in the opinion of such Consultant the
attainment of such level is impracticable, to the highest practicable level. Each Member of the Obligated"Group will
agree in the Master Indenture that it will, to the extent permitted by law, use such proceeds only in accordance with
such assumptions or recommendations.
D-23
Other Covenants of the MemMAI of the Obligated Group. Each Member of the Obligated Group
covenants to, among other things, (a) promptly pay a4awfid taxes, goverameedal charges and assessments at any time
levied or assessed upon or against it or its Properties; provided; however, that it shall have the right to contest in good
faith any such taxes, charges and assessments or the collection of any such sums and pending such contest may delay or
defer payment thereof unless as a result of such action such Property will be subject to imminent loss or forfeiture, in
i which case such taxes, charges or assessments shall be paid promptly, (b) cause its Properties to be maintained,
i preserved and kept in goad repair, working order and condition and to make all needfid and proper repairs, renewals
and replacements, or, if such properties shalt be damaged by reason of a farce majeure, including, by of example
only, but not limited to, storm, flood, earthquake, lightning, windstorm or hail, to make reasonable progress in returning
such properties to good repair, working order and condition; and (c) proem and maintain all necessary licenses and
permits, maintain accreditation of any health care institution operated by it (other than those of a type for which
accreditation of any health care institution operated by it (other than those of a type for which accreditation is not
available) by the.applicable recognized accrediting body, and maintain the status of its health care facilities as a
provider of health bare services eligible for reimbursement or other payments under Medicare and comparable
programs, provided, except to the extent that its Governing Body shall have determined in good faith that *such
compliance is not in its best interest snd that lack of such compliance would not impair its ability'to pay its
Indebtedness when due.
— I Default and Remedies
Events of Default The failure to make any payment of principal of, premium, if any, or interest on
any Indenture Indebtedness when due and the continuation of such failure to make such a payment for a period of five
days constitutes an Event of Default under the Master Indenture. In addition, each of the following also constitutes an
Event of Default (a) the failure by any Member of the Obligated Group to observe or perform any covenant or
agreement under the Master Indenture for a period of 30 days after written notice has been given to the Members of the
Obligated Group by the Master Trustee or the Holders of at least 50°/9 in aggregate principal amount of Indenture
Indebtedness then outstanding; (b) a default by any Member of the Obligated Group in the payment of any
Indebtedness in a principal amount in excess of 5500,000 (other than Indenture Indebtedness) after any period of grace
with respect thereto shall have expired on an event of default as defined in any mortgage, indenture, or instrument
under which there may be issued, secured or evidenced any Indebtedness, unless within 30 days after such default or
within the time allowed for service of a responsive pleading in any proceeding to enforce payment of such
Indebtedness a Member of the Obligated Group in good faith commences a proceeding to contest the obligation and
sufficient moneys are escrowed for the payment of such obligation; (c) the dissolution or liquidation of any Member of
the Obligated Group; or the filing by any Member of the Obligated Group of a voluntary petition in bankruptcy-, or the
entry of an order for relief under Title 11 of the United States Code, as the same may from time to time be thereafter
amended, against any Member of the Obligated Group; or the filing of a petition or answer proposing the entry of an
order for relief against any Member of the Obligated Group under Title 11 of the United Stites Code, as the same may
fran time to time be thereafter amended, or proposing the reorganization; arrangement or debt readjustment of any
j Member of the Obligated Group under any present or future federal bankruptcy act or any similar federal or state law in
J any court and the failure of said petition or answer to be discharged or denied within ninety (90) days ater the filing
thereof, or the appointment of a custodian (including without limitation a receiver, trustee' or liquidator of any Member
of the Obligated Group) of all or a substantial part of the property of any Member of the Obligated Group, and the
failure of such a custodian to be discharged. within ninety (90) days after such appointment; or the taking by such a
custodian of possession of any Member of the Obligated Group or a substantial part of its property, and the failure of
such taking to be discharged within ninety (90) days after such taking; or any Member of the Obligated Group's consent
to or acquiescence in such appointment or taking; or assignment by any Member of the Obligated Group for the benefit
of its creditors; or the entry by any Member of the Obligated Group into an agreement of composition with its creditors;
or (d) the Long -Term Debt Service Coverage Ratio as calculated at the end of any Fiscal Year is below 1.0. The term
"dissolution or liquidation of any Member of the Obligated Group," as used in clause (c) above, shall not be construed
to include the cessation of the corporate existence of any Member of the Obligated Group resulting from a merger or
consolidation of any Member of the Obligated Group into or with another corporation or a dissolution or liquidation of
any Member of the Obligated Group following a transfer of all or substantially all of its assets, under the conditions
permitting such actions contained in the Master Indenture.
D-24
An event described in clauses (a) through (c) in the immediately preceding paragraph shall not
constitute an Event of Default under the Master IndlimaiM if, without taking into account the Member of the Obligated
Group involved in such event, there is compliance *0 the provisions of the Master Indenture described under the
caption "MASTER INDENTURE -- Particular CoverusofEach Member of the Obligated Group" and an Officer's
Certificate as to such compliance is delivered to the iMastrr Trustee within 15 days of receipt of notice of the existence
of the event
Acceleration; Annulment of Acceleration. During the continuation of an Event of Default under
the Master Indenture, the Master Trustee may and, upon the written request of the holders of not less than 50% in
aggregate principal amount of Indenture Indebtedness outstanding (other than Indenture Indebtedness which represents
Non - Recourse Indebtedness), shall, by notice to the Members of the Obligated Group, declare all Indenture
Indebtedness outstanding immediately due and payable, whereupon such Indenture Indebtedness will become and be
immediately due and payable. Notwithstanding the foregoing, if the Related Supplement creating a particular series of
Indenture Indebtedness so provides, the holders of not less than 50% in aggregate principal amount of Indenture
Indebtedness of such series may request the Master Trustee to declare all the Indenture Indebtedness of that Series due
and payable, and the Master Trustee shall, by notice to the Members of the Obligated Group, declare such Indenture
Indebtedness immediately due and payable.
At any time after the principal of Indenture Indebtedness has been declared due and before the entry
of final judgment in any suit, action or proceeding instituted on account of such default, if n the Obligated Group has
paid or caused to be paid or deposited with the Mas ter Trustee moneys sufficient to pay'all matured installments of
interest and interest on installments of principal and principal or redemption prices then due (other than the principal
then due only because of such declaration) on all Indenture Indebtedness outstanding, (ii) the Obligated Group has paid
or caused to be paid or deposited with the Master Trustee moneys sufficient to pay the charges; compensation,
expenses, disbursements, advances and liabilities of the Master Trustee and any paying agents, (iii) all either amounts
then payable by the Obligated Group under the Master Indenture shall have been paid or a sum sufficient to pay the
same has been deposited with the Master Trustee, and (iv) every Event of Default under the Master Indenture (other
than a default in the payment of Indenture Indebtedness then due only because of such declaration) shall have been
remedied; then the Master Trustee may annul such declaration and its consequences. No such anaulmern shall extend
to or affect any subsequent Event of Default or impair any right consequent thereon.
Additional Remedies and Enforcement of Remedies. Upon the occurrence and continuance of
any Evart of Default under the Master Indenture, the Master Trustee may, and upon the written request of the holders
of not less than 50% in aggregate principal amount of Indenture Indebtedness outstanding, and upon being indemnified
to its satisfaction, shall, proceed forthwith to protect and enforce its rights and the rights of the Obligation holders under
the Master Indenture by such proceedings as the Master Trustee deems expedient.
Regardless of the happening of an Event of Default under the Master Indenture, the Master Trustee,
if requested in writing by the holders of not less than 50% in aggregate principal amount of Indenture Indebtedness
then outstanding, shall, when indemnified to its satisfaction, institute and maintain proceedings necessary or expedient
ito (i) prevent any impairment of the security under the Master Indenture by any ads which may be unlawful or in
violation of the Master Indenture or (ii) to preserve or protect the interests of the obligation holders, provided that such
I action is not in conflict with applicable law or the Master Indenture and, in the Master Trustee's sole judgment, is not
unduly prejudicial to the interest of holders of obligations not making such request,
Application of Revenues and Other Moneys After Default The Master Indenture provides that
during the continuance of an Event of Default under the Master Indenture all moneys received by the Master Trustee
pursuant to any right given or action taken due to the occurrence of such Event of Default, after payment of costs and
expenses of the proceeding& resulting in the collection of such moneys, are to be applied as follows:
(a) Unless the principal of all outstanding Indenture Indebtedness has been declared due and
payable: First: to the payment of interest then due on the Indenture Indebtedness in order of the maturity, and,
if the amount available is not sufficient to pay in full all amounts due on the same date, then ratably, according
to the amounts due, to the Persons entitled thereto without discrimination or preference; and Second: to the
payment to the Persons entitled thereto of the unpaid principal installments of any Indenture Indebtedness then
due, whether at maturity or by call for redemption, m the order of their due dates, and if the amount available
W5
is not sufficient to pay in full all the Indenture Indebtedness due on any date, then to the payment thereof
ratably, according to the amounts of principal installments due on such date, to the Persons entitled thereto
without discrimination or preference.
(b) If the principal of all outstanding Indenture indebtedness shall have become or shall have
been declared due and payable, to the payment of the principal and interest then due and unpaid upon
Indenture Indebtedness without preference or priority of principal over interest or interest over principal, or of
any installment of interest, or of any Indenture Indebtedness over any other indenture Indebtedness, ratably,
according to the amounts due respectively for principal and interest, to the Persons entitled thereto without
discrimination or preference.
Moneys to be applied by the Master Trustee during continuance of an Event of Default under the
Master Indenture are to be applied at such times as the Master Trustee determines, having due regard for the
amount available and the likelihood of additional moneys becoming available in the future. Wheneverthe
Master Trustee applies such moneys, it will fix the date upon which such application is to be made and upon
such date interest on the amounts of principal to be paid on such dates shall cease to accrue. Tbe Master
Trustee will give such notice as it may deem appropriate of the availability of such moneys and of such date.
i Obligation Holders' Control of Proceedings. If an Event of Delimit under the Master Indenture
has occurred and is continuing the holders of at least a majority in aggregate principal amount of Indersu re
i Indebtedness then outstanding have the right to direct the method and place of conducting any proceeding to be taken
in connection with the enforcement ofthe terms and conditions of the Master Indenture, provided that such direction is
! not in conflict with any applicable law, or the Master Indenture and in the sole judgment of the Master Trustee; is not
unduly prejudicial to the interest of Obligation holders not joining in such direction.
Waiver of Events of Default The Master Indenture provides that no delay or omission of the
Master Trustee or any holder of Indenture Indebtedness to exercise any right or power upon an Event of Default under
the Master Denture will impair any such right or power or be construed to he a waiver of any such Event of Default
The Master Trustee may waive any Event of Default which in its opinion will be remedied before the entry of final
judgment or decree in any suit, action or proceeding instituted by it or before the completion of the enforcement of any
remedy under the Master Indenture. The Master Trustee, upon the written request of the holders of at least 66 213% of
the aggregate principal amount of Indenture Indebtedness then outstanding, shall waive any Event of Default under the
Master Indenture and its consequences, provided, however, that a default m any payment of principal of, premium, if
any, or interest on Indenture Indebtedness may not be waived without the written consent of the Holders of all the
Indenture Indebtedness at the time outstanding except under the circumstances described in the second paragraph under
the caption "MASTER INDENTURE -- Acceleration Annulment of Acceleration" In case of such waiver, all parties
will be restored to their former positions but no such waiver will extend to any subsequent or other Event of Default.
Appointment of Receiver. The Master Indenture provides that upon the occurrence of any Event of
Default under the Master Indenture, the Master Trustee will be entitled to the appointment of a receiver or receivers of
any or all of the Property of the Obligated Group with such powers as the count may confer.
i y
Notice of Default The Master Indenture will provide that the Mas ter Trustee shall, within 10 days
after it has knowledge of the occurrence of an Event' of Default under the Master Indenture, mail to all Obligation
Holders notice of such Event of Default known to the Master Trustee unless cured before the giving of such notice; hut,
except in the case of nonpayment of any Indenture Indebtedness or the occurrence of an event described in clause
(c) under the caption "MASTER INDEN'T'URE — Default and Remedies — Events of Default," the Master Trustee may
withhold such notice if the board of directors, the executive committee, or amust committee of directors or responsible
officers determines in good.faith that such withholding is in the interest of the Obligation holders.
D•26
to
Supplements and Amendments
Supplements Not Requiring Consent 406ligation Holders. The Master Indenture may be
supplemented or amended without the consent of or notice io any of the Obligation holders, but only to cure any
ambiguity or formal defect or omission therein; to correct or supplement any provision of the Master Indenture which
may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions
arising under the Master Indenture which will not materially and adversely affect the interests of the Obligation
Holders; to grant or confer ratably upon all of the Obligation Holders any additional. rights, remedies, powers or
authority that, may lawfully be granted or conferred upon them; to qualify the Master Indenture under the Trost
Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect to create
and provide for the issuance of Indenture Indebtedness pursuant to a Related Supplement; to obligate a successor to the
Corporation or other Member of the Obligated Group; to.malm any change which in the judgment of the Master
Trustee is not to the prejudice of the holders of the Obligations; and to make any change which is necessary in the
opinion of the Corporation as evidenced by an Officer's Certificate to obtain an investment grade or higher rating on
any Obligation then to be issued by any nationally recognized rating agency.
Supplements Requiring Consent of Obligation Holders. Other than Related Supplements referred
to in the preceding paragraph, the Obligation Holders of greater than 5001a in aggregate principal amount of Indenture
Indebtedness then outstanding have the right to approve the execution of Related Supplements modifying, in any
particular, the Master Indenture except a Related Supplement which would (r) extend the stated maturity of or. time for
paying interest on any Indenture Indebtedness or reduce the principal amount of or the redemption premium or rate of
interest payable on any Indenture Indebtedness without the consent of the Obligation holder of such Indenture
Indebtedness, (u) modify, alter, amend, add to or rescind any of the terms or provisions concerning covenants of the
Members of the Obligated Group contained in the Master Indenture described under the caption "MASTER
INDENTURE — Particular Covenants of Each Member of the Obligated Group" in any manner which would
materially and adversely affect the interests of the Obligation Holders of all Indenture Indebtedness then outstanding, or
(iii) reduce the aggregate principal amount of Indenture Indebtedness then outstanding, the consent of the Holders of
which is required to authorize such Related Supplement, without the consent of the Holders of all .Indenture
Indebtedness then outstanding.
Removal and Resignation of the Master Trustee. The Master. Trustee may resign and may be
removed at any time by (i) an instrument or instruments in writing signed by the Holders of not less than 50% of the
principal amount of Indenture Indebtedness then outstmdm& or (u) a written request of the Corporation, provided the
Corporation is not in default of the Master Indenture, and no event shall exist which would with the passage of time or
giving of notice or both constitute an Event of Default, at the time it makes such written request No such resignation
or removal shall become effective unless and until a successor Master Trustee has been appointed and has assumed the
trusts created under the Master Indenture. Written notice of such resignation or removal shallbe given to the Members
of the Obligated Group and to each Holder of Indenture Indebtedness then outstanding atthe address then reflected on
the books of the Master Trustee and such resignation or removal shall take effect upon the appointment and
qualification of a successor Master Trustee. A successor Master Trustee may be appointed at the direction of the
Holders of not less than 50% in aggregate principal amount of Indenture Indebtedness outstanding or by the
Corporation. In the event a successor Master Trustee has not been appointed and qualified within 60 days of the date
notice of resignation is given, the Master Trustee, any Member of the Obligated Group or any Obligation Holder may
apply to any court of competent jurisdiction for the appointment of a successor Master Trustee to act until such time as
a successor is appointed as above provided.
Unless otherwise e¢dered by .a court or regulatory body having competent jurisdiction, or unless
required by law, any successor Master Trustee shall be a trust company or bank having the powers of a trust company
or bank having the powers of a trust company as to trusts, qualified to do and doing trust business in one or more states
of the United States of America and having a combined capital and surplus (or the parent holding company of which
has a combined capital and surplus) of at least $50,000,000, if there is such an institution willing, qualified and able to
accept the trust upon reasonable or customary terms.
Each successor Master Trustee, not later than ten days after its assumption of the duties under the
Master Indenture, shall mail a notice of such assumption to each registered Holder of Indenture Indebtedness.
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D-27
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i
Satisfaction and Discharge of Master Indenture
If all Members of the Obligated Group deliver to the Master Trustee for cancellation all Obligations
then outstandntg, or all Obligations shall have been paid or deemed paid pursuant to the Related Supplement under
which such Obligation was issued, or the Members of the Obligated Group deposit with the Master Trus tee (or with
respect to each series of Indenture Indebtedness make an Irrevocable Deposit with the Related Bond Trustee for the
Related Bonds relating to such series of Indenture Indebtedness) as trust funds the entire amount of moneys or
Government Obligations sufficient, together with interest thereon, to pay at maturity or redemption all outstanding
Obligations, and all other sums payable under the Mas ter Indenture, then the Master Indenture will cease to be of
further effect
General
SUPPLEMENT NO. 14
Supplement No. 14 provides for the issuance of Obligation No. 14 pursuant to the Master Indenture, and
provides the terms and form thereof
The following is a summary of certainprovisions of Supplement No. 14. This summary does not purport to
be complete or definitive and reference is made to Supplement No. 14 for the complete terms thereof.
Payments on Obligation No. 14; Credits
Principal' of and interest and any redemption premium on Obligation No. 14 is payable in any coin or
currency of the United States of America which on the payment date is legal tender for the payment of public and
private debts. Except as provided in the following paragraph with respect to credits, and in the section described
under the heading "Prepayment of Obligation No. 14," payments on the principal of and premium, if any, and
interest on the Obligation No. 14 shall be made it the times and in the amounts specified in Obligation No. 14 by the
Corporation depositing the same with or to the account of the Bond Trustee at or prior to the opening of business on
the day such payments shall become due or payable (or the next succeeding business day if such date is a Saturday.
Sunday or bank holiday in the city in which the principal corporate trust office of the Bond Trustee is located), and
giving notice to the Master Trustee and the Bond Trustee of each payment of principal, interest or premium on
j Obligation No. 14, specifying the amount paid and identifying such payment as a payment on Obligation No. 14.
The Corporation shall receive, credit for payment on Obli gation No. 14, in addition to any credits resulting
from payment or prepayment from other sources, as follows' (a) on installments of interest ou Obligation No. 14 in
an amount equal to moneys deposited in the Interest Account created under the Bond Indenture, to the extent such
. { amounts have not previously been credited against payments on Obligation No. 14; (b) pn installments of principal
of Obligation No. 14 in an amount equal to moneys deposited in the Principal Account created under the Bond
Indenture, to the extent such amounts have not previously been credited on Obligation No. 14; (c) on installments of
principal and interest, respectively, on Obligation No. 14 in an amount equal to the principal amount of the Bonds
for the redemption of which sufficient amounts (as determined by the Bond Indenture) in cash or Investment
Securities, as defined in the Bond Indenture, are on deposit as provided in the Bond Indenture to the extent such
amounts have not been previously credited against payments on Obligation No. 14, and the interest on the Bonds
from and after the date fixed for payment at maturity or redemption thereof Such credits shall be made against the
installments of principal of and interest on Obligation No. 14-which would have been used, but for such call for
redemption, to pay principal of and interest on the Bonds when due at maturity; and (d) on installments of principal
and interest, respectively, on Obligation No. 14 in an amount equal to the principal amount of the Bonds acquired by
the Corporation and surrendered to the Bond Trustee for cancellation or purchased by the Bond Trustee and
canceled, and the interest on the Bonds from and after the date interest thereon has been paid prior to cancellation.
Such credits shall be made against the installments of principal of and interest on Obligation No. 14 which would
have been used, but for such cancellation, to pay principal of and interest on the Bonds when due.
If a Liquidity Facility (as defined in the Bond Indenture) i snot in effect or, if in effect, the Liquidity
Facility Provider (as defined in the Bond Indenture) is not performing thereunder, the Corporation shall pay all
i
j D -28
i
amounts necessary to purchase Bonds in accordance with the Bond Indenture, at the times and in the amounts
specified in the Bond Indenture.
Prepayment of the Obligation No. 14
i
So long as all amounts which have become due under Obligation No. 14 have been paid, the Corporation
shall have the right, at any time and from time to time, to pay in advance and in any order of due dates all or part of
the amounts to become due under such Obligation. Prepayments may be trade by payments of cash, or surrender of
Bonds. All such prepayments (and the additional payment of any amount necessary to pay the premium, if any,
payable upon the redemption of the Bonds) shall be deposited and applied in the manner and subject to the terms
and conditions set forth in the Bond Indenture. Notwithstanding any such prepayment or surrender of Bonds, as
long as any Bonds remain outstanding or any additional payments required to be made under Supplement No. 14
remain unpaid, the Corporation shall not be relieved of its obligations under such Supplement. Prepayments trade
under such Supplement shall be credited against amounts to become due on Obligation No. 14 as provided in the
Supplement No. 14.
Registration, Number, Negotiability and Transfer of Obligation No. 14
Except as provided below, so long as any Bond remains outstanding, Obligation No. 14 shall consist of a
single Obligation without coupons registered as to principal and interest in the name of the Bond Trustee and no
transfer of the Obligation shall be registered under the Master Indenture except for transfers to a successor Bond
Trustee. Upon the principal of all Master Indenture Obligations Outstanding being declared immediately due and
payable upon and during the continuance of an Event of Default, Obligation No. 14 may be transferred, if and to the
extent the.Bond Trustee requests that the above restrictions on transfers be terminated
Right to Redeem
Obligation No. 14 shall be subject to redemption, in whole or in part, prior to maturity, at the times and in
the amounts specified in the Bonds issued under the Bond Indenture; provided that in no event shall Obligation No.
14 be redeemed unless a corresponding amount of Bonds is also redeemed.
Bond Insurer Covenants
Supplement No. 14 includes certain additional financial and operating covenants and certain modifications
to existing Master Indenture definitions and covenants that remain in effect only for so long as Obligation No. 14
remains outstanding and no Insurance Default shall have occurred and be continuing. Bond Insurer covenants may
j be waived by the Bond Insurer in its sole discretion and without the approval of the Master Trustee, the Bond
Trustee, any Holder of any Master Indenture Obligation or any Bondholders, by written notice of waiver delivered
to the Master Trustee and the Corporation. Bondholders cannot be assured that any of the Bond Insurer covenants
will be in place or enforced at any time.
BOND INDENTURE
General
The Bond Indenture set forth the terms of the Bonds, the nature and extent of security, the various rights of
the Holders of the Bonds, the rights, duties and immunities of the Bond Trustee and the rights and obligations of the
City. Certain provisions of the Bond Indenture are summarized below. Other provisions are summarized in this
Official Statement under the captions 'THE AUCTION RATE SECURITIES" and "SECURITY FOR THE
BONDS."
The following is a summary of certain provisions of the Bond Indenture. 77ris summary does not purport to
be complete or def arw and reference is made to the Bond Indenae a for the complete terms thereof.
00
D -29
Establishment of Funds and Accounts
The Bond Indenture creates a Revenue Fund (containing an Interest Account and a Principal Account), a
Redemption Fund (containing an Optional Redemption Account and a Special Redemption Account), a Rebate Fund
and a Project Fund, all of which are to be held by the Bond Trustee. The Bond Indenture also creates a Bond
Purchase Fund, a Remarketing Proceeds Account, a Liquidity Facility Account and a Corporation Purchase
Account, all of which are held by the Tender Agent. References to funds and accounts in this Summary shall be
deemed to be references to the funds and accwnts established under the Bond Indenture.
Pledge and Assignment
Subject only to the provisions of the Bond Indenture permitting the application thereof for the purposes and
on the terms and conditions set forth therein, there are pledged to secure the payment of the principal of and
premium, if any, and interest on the Bonds in accordance with their terms and the provisions of the Bond Indent=,
all of the Revenues and any other amounts held in any fund or account established pursuant to the Bond Indenture
(other than the Bond Purchase Fund and the Rebate Fund).
I Revenue Fund
All Revenues shall be promptly deposited by the Bond Trustee upon receipt thereof in a special fund
designated as the "Revenue Fund" which the Bond Trustee is directed to establish, maintain and hold in trust, except
as otherwise provided in the Bond Indenture and except that all moneys received by the Bond Trustee and required
by the Loan Agreement or Obligation No. 14 to be deposited in the Bond Purchase Fund or the Redemption Fund
shall be promptly deposited in such funds. All Revenues deposited with the Bond Trustee shall be held, disbursed,
allocated and applied by the Bond Trustee only as provided in the Bond Indenture.
Allocation of Revenues
On or before the dates specified below, the Bond Trustee shall transfer from the Revenue Fund and deposit
into the following respective funds and accounts the following amounts, in the following order of priority, the
requirements of each such account (including the making up of any deficiencies in any such account resulting from
lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any
transfer is made to any account subsequent in priority: (1) to the Interest Account, on or before each Interest
Payment Date, the aggregate amount of interest becoming due and payable on such Interest Payment Date on all
Bonds then Outstanding, until the balance in said account is equal to said amount of interest; (2) to the Principal
Account, on or before each Sinking Fund Installment Date, the amount of the Sinking Fund Installment becoming
due. and payable on such date until the balance in said account is equal to said amount of such Sinking Fund
Installment; and (3) to the Rebate Fund, such amounts as are required to be deposited therein by the Bond Indenture
(including the related Tax Agreement).
Any moneys remaining in the Revenue Fund after the foregoing transfers shall be transferred to the
Corporation as an ov erpaym ent of Loan R e
payments.
Application of Interest Account
All amounts. in the Interest Account established under the Bond Indenture shall be used and withdrawn by
the Bond Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable
(including accrued interest on any Bonds purchased or redeemed prior to maturity from funds on deposit in the
Principal Account or the Redemption Fund pursuant to the Bond Indenture).
Application of Principal Account
All amounts in the Principal Account established under the Bond Indenture shall be used andwithdrawn by
the Bond Trustee solely to purchase or redeem or pay Sinking Fund Installments or pay at maturity the Bonds as
described in the Bond Indenture.
D-30
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Application of Redemption Fund
All amounts deposited in the Optional Redemption Account and in the Special Redemption. Account shall
be used and withdrawn by the Bond Trustee solely.for the purpose of redeeming Bonds, in the manner and upon the
terms and conditions specified in the Bond Indenture, at the next succeeding date of redemption for which notice has
not been given and at the Redemption Prices then applicable to redemptions from the Optional Redemption Account
and the Special Redemption Account, respectively, provided that at any time prior to giving such notice of
redemption, the Bond Trustee shall, upon direction of the Corporation, apply such amounts to the purchase of Bonds
at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding
accrued interest, which is payable from the Interest Account) as the Corporation may direct, except that the purchase
price (exclusive of accrued interest) may not exceed the Redemption Price then applicable to the Bonds; and
provided further that in the case of the Optional Redemption Account, in lieu of redemption at such next succeeding
date of redemption, or in combination therewith, amounts in such account may be transferred to the Revenue Fund
and credited against Loan Repayments in order of their due date as set forth in a Request of the Corporation.
Rebate Fund
To the extent required by the Bond Indenture and the Tax Agreement, certain amounts will be deposited in
the Rebate Fund, and thereafter paid to the federal government to the extent required to satisfy the Rebate
Requirement (as defined in the Tax Agreement). Any moneys remaining in a Rebate Fund after the payment of all
such amounts, or provision made therefor, will be remitted to the Corporation.
Bond Pucbase Fund
Moneys paid to the Tender Agent for the purchase of tendered or deemed tendered Bonds received from
(1) the Remarketing Agent shall be deposited in the Remarketing Proceeds Account, (ii) payments pursuant to a
Liquidity Facility, if any, shall be deposited in the Liquidity Facility Account, and (iii) the Corporation or any
Member shall be deposited in the Corporation Purchase Account. Moneys in the Liquidity Facility Account, the
Corporation Purchase Account and the Remarketing Proceeds Account shall not be commingled with other funds
held by the Tender Agent and shall remain uninvested The Tender Agent shall hold all Bonds delivered to it under
the Bond Indenture in trust for the benefit of the Hollers which shall have so delivered the Bonds until moceys
representing the Purchase Price of the Bonds have been delivered to such Holder in accordance with the provisions
of the Bond Indenture and until the Bonds are delivered by the Tender Agent in accordance with the Bond.
Indenture.
Interest Rates and Rate Periods
The term of the Bonds shall be divided into consecutive Interest Rate.Periods selected by the Corporation
in the manner provided in the Bond Indenture during which the Bonds shall bear interest at interest rates determined
in the manner described in the Bond Indenture. The Bonds shall bear interest at either a Serial Bond Interest Rate, a
'. Bond Interest Term Rate, a Weekly Interest Rate or an ARS Interest Rate; provided, however, that no Bond shall
bear interest in excess of the Maximum Interest Rate.
I The initial Interest Rate Period for the Bonds shall be an ARS Interest Rate Period commencing on the
Date of Issuance of the Bonds. After the initial ARS Interest Rate Period, the Bonds will be subject to mandatory
tender for purchase as described in this Official Statement and in this APPENDIX D — SUMMARY. OF
PRINCIPAL DOCUMENTS under the caption "BOND INDENTURE — Mandatory Tender for Purchase on First
Day of Each Interest Rate Period." .
Adjustment to an Altemate Interest Rate Period
The Corporation may elect that the Bonds will be adjusted to an alternate Interest Rate Period, subject to
the satisfaction of certain conditions specified in the Bond Indenture , including delivery of a Favorable Opinion of
Bond Counsel. Upon election by the Corporation to convert to a different Interest Rate Period and satisfaction of
the conditions specified in the Bond Indenture, all of the Bonds will be subject to the alternate Interest Rate Period
I
D-31
The written election must specify (i) the proposed effective date of the adjustment to any alternate Interest Rate
Period and (ii) the date of delivery for the Bonds to be purchased on the effective date of the interest rate adjustment.
In addition, the direction of the Corporation shall be accompanied by a letter of Bond Counsel stating that it expects
to deliver a Favorable Opinion of Bond Counsel on the effective date of the adjustment to an alternate Interest Rate
Period. A change to any alternate Interest Rate Period may not take place unless a Favorable Opinion of Bond
Counsel is delivered on the effective date of the alternate Interest Rate Period.
The Bond Trustee is required to give notice of adjustment to any alternate Interest Rate Period to the
Holders not less than 30 days prior to the proposed effective date of the alternate Interest Rate Period. While the
Bonds are registered in the name of Cede & Co, such notice shall be given only to DTC, and not to any
Beneficial Owner of the Bonds. Such notice will state (i) that the interest rate on the Bonds will be adjusted to a
Serial Bond Interest Rate Period, a Short-Term Interest Rate Period, or a Weekly Interest Rate Period, as
appropriate, unless Bond Counsel fails to deliver a Favorable Opinion of Bond Counsel on the proposed effective
date of the adjustment or any other condition precedent to the adjustment has not been satisfied; (ii) the proposed
effective date of the alternate Interest Rate Period; and ( iii) that the Bonds are subject to mandatory tender for
purchase on the proposed effective date of the alternate Interest Rate Period and the Purchase Price.
If notice of adjustment has been mailed to the Holders of the Bonds and Bond Counsel fails to deliver a
{ Favorable Opinion of Bond Counsel on the effective date as herein desmJW or if other conditions precedent to the
adjustment have not been satisfied, the Bonds of any Series while ARS shall not continue to be subject to mandatory
tender for purchase on the date which would have been the effective date of the adjustment and the subject Series of
ARS shall bear interest at the ARS Maximum Rate until the next succeeding Auction Period that commences at least
.� two Business Days following such proposed Conversion Date, then at the Applicable ARS Rare.
Notwithstanding anything described under this heading 'BOND INDENTURE — Adjustment to an
Alternate Interest Rate Period," in connection with any Conversion of the Interest Rate Period for the Bonds, the
Corporation shall have the right to deliver to the Bond Trustee, the Remarketing Agent (if any), the Tender Agent (if
any), the Liquidity Facility Provider (if any), the City, the Auction Agent (if any), the Broker- Dealer(s) (if any) on
or prior to 10:00 am., New York City time, on the second Business Day preceding the effective date of any such
Conversion a notice to the effect that the Corporation elects to rescind its election to make such Conversion. If the
Corporation rescinds its election to make such Conversion, then the Interest Rate Period shall not be converted and
the Bonds of any Series while ARS shall bear interest at the ARS Maximum Rate until the next succeeding Auction
Period that commences at least two Business Days following such proposed Conversion Date, then at the Applicable
ARS Rate.
ARS Provisions .
J
(A) Payments with Respect to ARS.
i
(1) Interest with respect to each Series of ARS shall accrue from and including, as applicable, the
.. Date of Issuance, the Conversion Date or the most recent Interest Accrual Date to which interest has been paid or
duly provided for.
(2) The Bond Trustee shall determine the aggregate amount of interest payable in accordance with
subsection (5) below with respect to each Series of ARS on each ARS Interest Payment Date. The Bond Trustee
shall promptly notify the Securities Depository of its calculations, as provided in the Bond Indenture
(3) Interest on each Series of ARS shall be computed on the basis of a 360-day year for the actual
number of days elapsed. The Applicable ARS Rate for each ARS Interest Period after the first ARS Interest Period
shall be the Auction Rate relating to such Series; provided that if the Auction Agent fails to calculate or, for any
reason, fails to timely provide the Auction Rate for any Series of ARS for any Auction Period (except as
contemplated otherwise herein pursuant to (x), (y) or (z) below), the new Auction Period for any Series of ARS shall
be the same as the preceding Auction Period and the Auction Rate for the new Auction Period for such Series shall
be the same as the Auction Rate for such Series for the preceding Auction Period
D-32
to
Notwithstanding the foregoing
(x) if the ownership of a Series of ARS is no longer maintained in book -entry form by a
Securities Depository; the Applicable 'ARS Rate with respect to such Series for any ARS Interest Period
commencing after the delivery of certificates representing such Series of ARS pursuant to the Bond
Indenture shall equal the ARS Maximum Rate;
(y) if an ARS Payment Default shall have occurred with respect to a Series of ARS, the
Applicable ARS Rate for the ARS Interest Period commencing on or immediately after such ARS Payment
Default and for each ARS Interest Period -thereafter, to and including the ARS Interest.Period, if any,
during which, or commencing less than two Business Days after, such ARS Payment Default is cured in
accordance with the Bond Indenture shall equal. the Non - Payment Rate on the first day of each such ARS
Interest Period, provided that if an Auction occurred on the Business Day immediately preceding any such
ARS Interest Period, the Applicable ARS Rate for such Series for such ARS Interest Period shall be the
Non- Payment Rate; or
(z) for any Auction Period during which there is no duly appointed Auction Agent, or during
which there is no duly appointed Broker - Dealer, no Auction will be held and the Auction Rate will be the
ARS Maximum Rate.
(4) Medium of Payment.
(a) The principal ofand premium, if any, and interest on each Series of ARS shall be payable
in any currency of the United States of America which on the respective dates for payment thereof is legal
tender for the payment of public and private debts. The principal of and interest on each Series of ARS
(other than at maturity) shall be payable by check mailed to the registered owner thereof on the Record
Date at the address of such registered owner as it appears on the registration books maintained by the Bond
Trustee. '
(b) Interest payable on any ARS Interest Payment Date to a registered owner of ARS in the
aggregate principal amount of $1, 000,000 or more may, upon written request by such registered owner
received by the Bond Trustee prior to the Record Date preceding such ARS Interest Payment Date, be paid
by wire transfer to a designated account in the United States of America Such written request shall remain
in effect until rescinded in writing by such registered owner. The principal of each ARS at maturity will be
paid upon presentation and surrender thereof at the Principal Office of the Bond Trustee.
(c) Unless otherwise requested by the Securities Depository, payments of the principal of
ARS, at maturity or upon redemption, and payments of interest on ARS made by wire transfer, shall be
made by the Bond Trustee in immediately available fiords, provided, however, that such method of
payment may be modified by written agreement among the Bond Trustee, th'e Securities Depository and the
.� Auction Agent.. .
(5) Computation of Interest Distributable on ARS. The amount of interest distributable to ARS
Beneficial Owners, in respect of each $25,000 in principal amount thereof for any ARS Interest Period or part
thereof, shall be calculated by the Bond Trustee by applying the Applicable ARS Rate with respect to the ARS of
such Series, for such ARS Interest Period m part thereof, to the principal amount of $25,000, multiplying such
j product by the actual number of days in such ARS Interest Period or part thereof divided by 360 and rounding the
resultant figure to the nearest cent (half a cent being rounded upward).
(6) ARS Defaulted Interest
(a) The Bond Trustee shall determine not later than 2:00 p.m., New York City time, on each
ARS Interest Payment Date, whether an ARS Payment Default has occurred. If an ARS Payment Default
has occurred, the Bond Trustee shah not later than 2:30 p.m., New York City time, on such Business Day,
send a Notice of ARS Payment Default to the Auction Agent and each Broker - Dealer by telecopy or similar
I
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I
I
means and, if such ARS Payment DdWt is cured, the Bond Trustee shall immediately send a Notice of
Cure of ARS Payment Default to the Auction Agent and each Broker- Dealer by telecopy or similar means.
i
I (b) ARS Defaulted Interest shall forthwith cease to be payable to the ARS Beneficial Owner
on the relevant Record Date by virtue of having been such ARS Beneficial Owner and such ARS Defaulted
Interest shall be payable to the Person in whose name the ARS with respect to such ARS Payment Default
occurred are registered at the close of business on a Special Record Date fixed therefor by the Bond
Trustee, which shall not be more than 15 days and not less than tan days prior to the date of the Proposed
payment of ARS Defaulted Interest. The Bond Trustee shall promptly notify the City and the Corporation
of the Special Record Date and at the Corporation's expense mail to each ARS Beneficial Owner of ARS
as to which it has knowledge and ARS Defaulted Interest is payable, not less than ten days before the
Special Record Date, notice of the date of the proposed payment of such ARS Defaulted Interest.
(B) Calculation of All -Hold Rate. The Auction Agent shall calculate the All -Hold Rate on each
Auction Date. The determination by the Auction Agent of the Applicable ARS Rate and the All-Hold Rate shall (in
the absence of manifest error) be final and binding upon all Holders and ARS Beneficial Owners and all other
parties. if calculated or determined by the Auction Agent, the Auction Agent shall promptly advise the Bond Trustee
of the All-Hold Rate.
(C) Notification of Rates. - Amounts and Pavment Dates.
(1) So long as the ownership of the ARS is maintained in book -entry form by the Securities
Depository, the Bond Trustee shall advise the Securities Depository (i) of each Record Date for the ARS at least two
Business Days prior thereto and (ii) of each succeeding Interest Payment Date on each Interest Payment Date.
(2) On the Business Day preceding each ARS Interest Payment Date with respect to a Series of ARS,
the Bond Trustee shall advise the Securities Depository, so long as the ownership of such Series of ARS is
maintained in book -entry farm by the Securities Depository, of the amount of interest distributable in respect of each
$25,000 in principal amount (taken without rounding to the nearest .000001) of such Series for any ARS Interest
Period or part thereof, calculated in accordance with the Bond Indenture.
(3) if any day scheduled to be an ARS Interest Payment Date shall be changed after the Bond Trustee
shall have given notice, the Bond Trustee shall, not later than 9:15 am., New York City time, on the Business Day
next preceding the earlier of the day prior to the new ARS Interest Payment Date or the old ARS Interest Payment
Date, by such means as the Bond Trustee deems practicable, give notice of such change to the Auction Agent, so
long as no ARS Payment Default has occurred and is continuing and the ownership of such Series of ARS is
maintained in book -entry form by the Securities Depository. _
(D) Amendment of ARS Provisions. Notwithstanding any other provision of the Bond Indenture
relating to ARS, including without limitation the mandatory tender provisions and the definitions of terms used in
the section of the Bond Indenture relating to ARS Provisions (including without limitation the definitions of
Applicable ARS Rate, All -Hold Rate, ARS Maximum Rate and Non - Payment Rate), the ARS provisions may be
amended by the City at the written request of the Corporation, (i) upon obtaining an Minion of Counsel that the
same does not materially adversely affect the rights of the ARS Beneficial Owners or (ii) by obtaining the consent of
a majority of the ARS Beneficial Owners and, in each case, delivering a Favorable Opinion of Bond Counsel. In the
case of clause (ii) above, the Bond Trustee shall mail notice of such amendment to the ARS Beneficial Owners of
which it has knowledge and if, on the first Auction Date occurring at least 20 days after the date on which the Bond
Trustee mailed such notice, Sufficient Clearing Bids have been received or all of the ARS are subject to Submitted
Hold Orders, the proposed amendment shall be deemed to have been consented to by the ARS Beneficial Owners.
Written notice of each such amendment shall be delivered by the City to the Bond Trustee, the Corporation, the
Auction Agent and each Broker - Dealer.
(E) Reserved.
(F) Reserved.
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(G) Provisions Relatin>; to Auctinm' None of the Corporation, the City, the Bond Trustee or the
Auction Agent shall be responsible for any failure of a Broker - Dealer to submit an Order to the Auction Agent on
behalf of any Existing Holder or Potential Hol der, nor shall any of the Corporation, the City, the Bond Trustee or the
Auction Agent be responsible for failure by any Securities Depository to effect any transfer or to provide the
Auction Agent with current information regarding registration of transfers. None of the Corporation, the City, the
Bond Trustee, the Auction Agent.or the Broker- Dealer(s) shall.have any liability in the event that there are not
Sufficient Clearing Bids fsom time to time pursuant to the Auction Procedures.
(R) Agm—ment of Holders By purchasing ARS, whether in an Auction or otherwise, each prospective
purchaser of ARS and its Broker - Dealer will be deemed to have agreed to the provisions for the replacement of the
Auction Agent and each Broker - Dealer as provided in the Bond Indenture, and relevant agreements among the City,
the Corporation, the Bond Trustee, the Auction Agent and the Broker- Dealer(s), as appropriate.
(1) Changes in Auction Period or Auction Date.
(1) Cluumes in Auction Period.
i
(a) The Auction Period for each Series of Bonds with respect to each ARS Interest Rate
Period, if any, for such Series shall commence on the Conversion Date and shall be either a seven -day
period or a 35-day period commencing generally on a Monday, generally on a Tuesday, generally on a
Wednesday, generally on a Thursday or generally on a Friday, in each case. as announced by the
Corporation in its notice of the proposed Conversion to such subsequent AM Interest Rate Period as
provided in the Bond Indenture.
(b) During any ARS Interest Rate Period, the Corporation may from time to time on any
ARS Interest Payment Date with respect to a Series of ARS, change the length of the Auction Period with
respect to all of the Bonds of such Series between seven-days and 35-days or change the first day of each
Auction Period, or both, in each rase in order to accommodate economic and financial factors that may
affect or be relevant to the length of the Auction Period and the interest rate home by the Bonds of such
Series. The Corporation shall initiate the change in the length or day of commencement of the Auction
Period, or both, by giving written notice to the Bond Trustee, the City, the Auction Agent, the Broker-
Dealer, and the Securities Depository that the Auction Period shall change if the conditions described
herein are satisfied and the proposed effective date of the change, at least three Business Days prior to the
Auction Date for such Auction Period
(c) Any such changed Auction Period shall be for a period of seven days or 35 days and shall
be for all of the Bonds of a Series. _
j
(d) The change in length of the Auction Period for any Series of Bonds shall take effect only
if Sufficient Clearing Bids exist at the Auction on the Auction Date for the first such Auction Period and
the Bond Trustee receives a Favorable Opinion of Bond Counsel with respect to such change on or before
such Auction Date. For purposes of the Auction for such first Auction Period only, each Existing Holder
shall be deemed to have submitted Sell Orders with respect to all of its ARS of such Series except to the
I extent such Existing Holder submits a Hold Order with respect to such ARS. If the condition referred to in
the first sentence of this clause (d) is not met, the Auction Rate for the nerd Auction Period shall be the
j ARS Maximum Rate, and the Auction Period shall be the Auction Period already in effect.
- (2) Changes in Auction Date. During any ARS Interest Rate Period, the Corporation may specify an
earlier Auction Date for any Business Day earlier (but in no event more than five Business Days earlier) than the
Auction Date that would otherwise be determined in accordance with the definition of "Auction Date' in order to
conform with then-current market practice with respect to similar securities or to accommodate economic and
financial factors that may affect or be relevant to the day of the week constituting an Auction Date and the interest
rate borne on the applicable Series of ARS. The Corporation shall provide notice of its determination to- specify an
earlier Auction Date for an Auction Period by means of a written notice delivered at least 45 days prior to the
proposed changed Auction Dale to the Bond Trustee, the Broker- Dealer and the Securities Depository accompanied
by a Favorable Opinion of Bond Counsel with respect to such change.
D -35
ro
(J) Conversion of a Series to ARS Interest Rate Period.
(1) Conversion to Atyhcable ARS Rate. Subject to the Bond Indenture, the Corporation, from time
to time, by written direction to the Bond Trustee, the Tender Agent (if any), the Liquidity Facility Provider (if any);
the Remarketing Agent (if any), the Auction Agent (if any), and each Broker - Dealer (if any), may elect that a Series
of Bonds shall bear interest at the Applicable ARS Rate. The direction of the Corporation shall specify (A) the
proposed effective date of the Conversion to the Applicable ARS Rate, which date shall be (1) a Business Day not
earlier than the 30th day following the second Business Day after receipt by the Bond Trustee of such direction, (2)
in the case of a Conversion from a Serial Bond Interest Rate Period, the day immediately following the last day of
the then-current Serial Bond Interest Rate Period or a day on which the Bonds of such Series would otherwise be
subject to optional redemption pursuant to the Bond Indenture if such Conversion did not occur and (3) in the case
of a Conversion from a Short-Term Interest Rate Period, the day immediately following the last day of the Short-
Term Interest Rate Period, (B) the Purchase Date for the Bonds of such Series to be purchased, which shall be the
proposed effective date of the adjustment to the Applicable ARS Rate and (C) the initial Auction Period for such
Series. In additien, the direction of the Corporation shall be accompanied by a form of notice to be mailed to the
Holders of such Series of Bonds by the Bond Trustee as provided in the Bond Indenture and a Favorable Opinion of
Bond Counsel. During each ARS Interest Rate Period for a Series of Bonds.commencing on a date so specified and
ending on the day immediately preceding the effective date of the next succeeding Interest Rate Period, the interest
rate borne by such Series of Bonds shall be the Applicable ARS Rate.
(2) Notice of Conversion to—Applicable ARS Rate. The Bond Trustee shall give notice of an
adjustment to an ARS Interest Rate Period to the Holders of the affected Series not less than 30 days prior to the
proposed effective date of such ARS Interest Rate Period. Such notice shall state (i) that the interest rate shall be
adjusted to the Applicable ARS Rate unless the Corporation rescinds its election to adjust the interest rate to the
Applicable ARS Rate as provided in the Bond Indenture; (ii) the proposed effective date of the ARS Interest Rate
Period; and (iii) that such Series of Bonds is subject to mandatory tender for purchase on the proposed effective
date, regardless of whether any or all conditions to the adjustment are met and setting forth the Purchase Price and
the place of delivery for purchase of such Bonds.
(K) If the Auction Rate on the Bonds shall be the Maximum Interest Rate, the ARS Maximum Rate, or
Non - Payment Rate for a period (A) in excess of thirty (30) days, the Corporation agrees to take all steps necessary to
ensure that the Auction Rate does not exceed the interest rate payable on similar securities (taking into account the
interest period and enhanced/insured rating of the Bonds) or (B) in excess of sixty (60) days, the Corporation agrees
to (i) convert, or cause to be converted, all Bonds to a Serial Bond Interest Rate Period through maturity or, with the
approval of the Bond Insurer, to a Weekly Interest Rate Period or Short-Tenn Interest Rate Period, in each case at
the lowest interest rate that will permit the Remarketing Agent to sell all the Bonds on the Conversion Date at a
price equal to 100% of the principal amount thereof plus accrued interest thereon. If an Event of Default shall have
occurred and be continuing under the Bond Indenture or the Corporation fails to cause a conversion of the Bonds to
another Interest Rate Period as required by the foregoing sentence, the Bond Insurer may, in its discretion, direct the
conversion of the Bonds to a Serial Bond Interest Rate Period or any other Interest Rate Period.
Mandatory Tender for Purchase on First Day of Each Interest Rate Period
Eligible Bonds shall be subject to mandatory tender for purchase on the fast day of each Interest Rate
Period with respect to the Bonds, or, except ARS, on the day which would have been the first day of an Interest Rate
Period had there been no occurrence of an event which resulted in the interest rate on the Bonds not being adjusted,
at the Purchase Price, payable in immediately available funds. Payment of the Purchase Price of any Bond shall be
made on the Purchase Date upon surrender of the Bond to the Tender Agent at its Principal Office, accompanied by
an instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the Holder thereof
or by the Holder's duly - authorized attorney with the signature of the Holder guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange, at or prior to 10:00 a.m., New York City time, on the.
date specified for delivery in the notice described in the Bond Indenture.
W
D-36
Replacement of Obligation No. 14
At the option of the Corporation, the Obligation No. 14 shall be surrendered by the Bond Trustee and
delivered to the Master Trustee for cancellation upon receipt by the Bond Trustee of all of the following.
i (1) a Request of the Corporati on requesting such surrender and delivery and stating that the Corporation
has become a member of an obligated group under a master indenture (other than the Master
Indenture) or has obligated itself pursuant to another form of indebtedness security arrangement, and
that an obligation is being issued to the Bond Trustee under such replacement master indenture or
security arrangement C'Replacement Arrangement');
(2) a properly executed obligation (the "Replacement Obligation') issued under the Replacement
Arrangement and registered in the name of the Bond Trustee with the same tenor and effect as
Obligation No. 14, duly authenticated by the master trustee under the Replacement Arrangement;
(3) an Opinion of Counsel to the effect that the Replacement Obligation has been validly issued under the
Replacement Arrangement and constitutes a valid and binding obligation of the Corporation and each
other member of the obligated group under the Replacement Arrangement;
(4) a copy of the Replacement Arrangement, certified as a true and accurate copy by the master trustee
under the Replacement Arrangement; and
(5) written confirmation from each Rating Agency then rating the Bonds that the replacement of
Obligation No. 14.in accordance with the provisions of the Bond Indenture will not, by itself, result in
a reduction in the then - current ratings on the Bonds; and
(6) the written consent of the Bond Insurer.
Upon satisfaction of such conditions, all references herein and in the loan Agreement to Obligation No. 14
shall be deemed to be references to the Replacement Obligation, all references to the Master Indenture shall be
deemed to be references to the Replacement Arrangement, all references to the Master Trustee shall be deemed to be
references to the master trustee under the Replacement Arrangement, all references to the Obligated Group and the
Members shall be deemed to be references to the obligated group and the members of the obligated group under the
Replacement Arrangement and all references to Supplement No. 14 shall be deemed to be references to the
document pursuant to which the Replacement Obligation is issued
Continuing Disclosure
Pursuant to the Loan Agreement, the Corporation has undertaken all responsibility for compliance with
continuing disclosure requirements, and the City shall have no liability to the Holders of the Bonds or any other
Person with respect to S.E.C. Rule 15c2 -12. Notwithstanding any other provision of the Bond Indenture, failure of
the Corporation or the Dissemination Agent (as defined in the Continuing Disclosure Certificate) to comply with the
Continuing Disclosure Certificate shall not be considered an Event of Default; however, the Bond Trustee may (and,
at the request of the Participating Underwriter (as defined in the Continuing Disclosure Certificate) or the Holders of
at least 25% aggregate principal amount of Outstanding Bonds, shall).or any Holder or Beneficial Owner of Bonds
may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by
court order, to cause the Corporation to comply with its obligations under the Loan Agreement or to cause the Bond
Trustee to comply with its obligations under the Bond Indenture. See APPENDIX F — "FORM OF CONTINUING
DISCLOSURE CERTIFICATE."
Events of Default
Each of the following is an Event of Default under the Bond Indenture: (a) default in the due and punctual
payment of the principal or Redemption Price of any Bond when and as the same shall become due and payable,
whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise or default in
D-37
the redemption of any Bonds from Sinking Fund Installments in the amounts and at the times provided therefor;
(b) default in the due and punctual payment of any installment of interest on any Bond when and as such interest
installment shall become due and payable; (c) failure to pay the Purchase Price of any Bond tendered or subject to
mandatory tender pursuant to the Bond Indenture; (d) default in any material respect by the City in the observance of
any of the other covenants, agreements or conditions on its part contained in the Bond Indenture or in the Bonds, if
such default shall have continued for a period of 60 days after written notice thereof, specifying such default and
requiting the same to be remedied, shall have been given to the City and the Corporation by the Bond Trustee, or to
11 the City, the Corporation and the Bond Trustee by the Bond Insurer and the Holders of not less than 25% in
aggregate principal amount of the Bonds at the time Outstanding; or (e) a Loan Default Event Upon actual
knowledge of the existence of any Event of Default, the Bond Trustee and the City shall notify the Corporation, the
City, the Bond Insurer, the Master Trustee and the Bond Trustee in writing as soon as practicable; provided,
however, that the Bond Trustee or the City need not provide notice of any Loan Default Event if the Corporation has
expressly acknowledged the existence of such Loan Default Event in a writing delivered to the Bond Trustee, the
City, the Bond Insurer, and the Master Trustee.
Acceleration of Maturities
If any Event of Default has happened and is continuing, the Bond Trustee may take the following remedial
steps: (a) In the case of an Event of Default described in clause (a), (b) or (c) of the preceding paragraph, the Bond
Trustee may notify the City and the Master Trustee of such Event of Default, may make a demand for payment
under Obligation No. 14 and request the Master Trustee in writing to give notice pursuant to the Master Indenture to
the Obligated Group Members declaring the principal of all obligations issued under the Master Indenture then
outstanding to be due and immediately payable. Thereupon, the Bond Trustee shall declare the principal of all the
Bonds then Outstanding, and the interest accrued thereon; 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 Bond Indenture to the
contrary notwithstanding. In addition, the Bond Trustee may take whatever action at law or in equity is necessary or
desirable to collect the payments due under Obligation No. 14; (b) In the case of an Event of Default described in
clause (d) of the preceding paragraph, the Bond Trustee may take whatever action at law or in equity is necessary or
desirable to enforce the performance, observance or compliance by the City with any covenant, condition or
agreement by the City under the Bond Indenture; and (c) In the case of an Event of Default described in clause (e) of
the preceding paragraph, the Bond Trustee may take whatever action the City would be entitled to take, and shall
take whatever action the City would be required to take, pursuant to the Loan Agreement, in order to remedy the
Loan Default Event
Notwithstanding anything in the Bond Indenture, the Bond Trustee shall not declare the unpaid principal of
the Bonds to be immediately due and payable except in accordance with the directions of the Master Trustee in the
event the Master Trustee shall have declared the principal amount of Obligation No. 14 and all interest due thereon
immediately due and payable under the Master Indenture. The Bond Trustee shall not declare or rescind or amend a
declaration of acceleration of the Bonds without the written consent of the Bond Issuer (so long as there has been no
Insurer default).
Bond Trustee to Represent Bondholders
If any Event of Default has occurred and is continuing or other occasion giving rise to a right in the Bond
Trustee to represent the Bondholders, the Bond Trustee in its discretion may, and upon the written request of the
Holders of 25% in aggregate principal amount of the Bonds then Outstanding (and in either case subject to the rights
of the Bond Insurer with respect to the enforcement of remedies related to the Bonds as described in the Bond
Indenture) and upon being indemnified to its satisfaction shall, proceed to protect or enforce its rights or the rights of
such Holders by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to
protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or
agreement contained in the Bond Indenture, or in aid of the execution of any power granted in the Bond Indenture,.
or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Bond Trustee or in
such Holders.under the Bond Indenture, the Loan Agreement, Obligation No.. 14, the Law (as defined-in the Bond
Indenture) or any other law; and upon instituting such proceeding, the Bond Trustee shall be entitled, as a matter of
right, to the appointment of a receiver of the Revenues and other. assets pledged under the Bond Indenture, pending
such proceedings.
D -38
Bond Insurer's and Bondholders' Direction of Proceedings
The Bond Insurer or Holders of a majority in aggregate principal amount of the Bonds then Outstanding
under the Bond Indenture (but with the consent of the Bond Issuer) shall, have the right, upon indemnifying the
Bond Trustee to its satisfaction, to direct the method of conducting all remedial proceedings by the Bond Trustee
under the Bond Indenture, provided such direction shall not be otherwise than in accordance with law or the
provisions of the Bond Indenture, and that the Bond Trustee shall have the right to decline to follow any such
direction which in the opinion of the Bond Trustee would be unjustly prejudicial to Bondholders not parties to such
direction.
Limitation on Bondholders' Right to Sue
No Holder of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for
the protection or enforcement of any right or remedy under the Bond Indenture, the Loan Agreement, Obligation
No. 14, the Law or any other applicable law with respect to such Bond unless (a) such Holder shall have given to
the Bond Trustee written notice of the occurrence of an Event of Default, (b) the Holders of not less than 25% in
aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Bond Trustee to
exercise the powers granted to it under the Bond Indenture or to institute such suit, action, proceeding in its own
name; provided, however, that if more than one such request is received by the Bond Trustee from the Holders, the
Bond Trustee shall follow the written request executed by the Holders of the greater percentage of Bonds then
Outstanding in excess of 25 %, (c) such Holder or said Holders shall have tendered to the Bond Trustee indemnity
satisfactory to it against costs, expenses and liabilities, and (d) the Bond Trustee shall have refused or omitted to
comply with such request for a period of 60 days after such written request shall have been received by, and the
tender of indemnity shall have been made to, the Bond Trustee.
Amendment of Bond Indenture
The Bond Indenture may be amended or supplemented from time to time, without the necessity of
obtaining the consent of the Hollers, but with the consent of the Corporation in order to modify the Auction
Procedures in accordance with the provisions of the Bond Indenture and for one or more of the following purposes:
(a) to add covenants of the City, to pledge or assign additional security for the Bonds or to surrender any right or
power in the Bond Indenture reserved to or conferred upon the City, provided, that no such covenant, agreement,
pledge, assignment or surrender shall materially adversely affect the interests of the Holders of the Bonds; (b) to
cure any ambiguity, inconsistency or omission as or to cure or correct any defective provision, the City or the Bond
Trustee may deem necessary or desirable and not inconsistent with the Bond Indenture, and which shall not
materially adversely affect the interests of the Holders of the Bonds; (c) to modify, amend or supplement the Bond
Indenture in such manner as to permit the qualification of the Bond Indenture under the Trust Indenture Act of 1939,
as amended, or any similar federal statute, and to add such other terms, conditions and provisions as may be
permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the
Holders of the Bonds; (d) to evidence or give effect to, or to conform to the terms and conditions of, any Liquidity
Facility, (e) to evidence or give effect to, or conform to the tams and provisions of, any insurance policy, letter of
credit or credit enhancement for the Bonds; (f) to facilitate and implement any book -entry system (or any
j termination of a book -entry system) with respect to the Bonds; (g) to maintain the exclusion from gross income of
interest payable with respect to the Bonds; or (h) to make any modification or amendment to the Bond Indenture
which will be effective upon remarketing of the Bonds following the mandatory tender of the Bonds pursuant to the
'J
Bond Indenture.
The Bond Indenture may be modified or amended from time to time, in accordance with the Bond
Indenture, by a Supplemental Indenture with the written consent of the Bond Insurer, the Holders of a majority in
aggregate principal amount of the Bonds then Outstanding and the Corporation; provided, that no such modification
or amendment shall (a) extend the stated maturity of any Bond, or reduce the amount of principal thereof, or extend
the time of payment or change the method of computing the rate of interest thereon, or extend the time of payment
of interest thereon, or reduce any premimn payable thereon, or change the purchase price to be paid to Holders
tendering their Bonds, without the consent of the Holder of each Bond so affected, or (b) reduce the aforesaid
percentage of Bonds, the consent of the Holders of which is required to effect any such modification or amendment,
or permit the creation of any lien on the Revenues and other assets pledged under the Bond Indenture prior to or on a
D-39
parity with the hen created by the Bond Indenture, or deprive the Holders of the Bonds of the ben created by the
Bond Indenture on such Revenues and other assets (except as ctpressly provided in the Bond Indenture), without the
consent of the Holders of all Bonds then Outstanding.
Defeasance
The Bonds may be paid by the City or the Bond Trustee on behalf of the City in any of the following ways:
(a) by paying or causing to be paid the principal or Redemption Price of and interest on all Bonds Outstanding, as
and when the same become due and payable; (b) by depositing with the Bond Trustee, in trust, at or before maturity,
moneys or securities in the necessary amount to pay when due or redeem all Bonds then Outstanding; or (c) by
delivering to the Bond Trustee, for cancellation by it, all Bonds then Outstanding.
Liability of City Limited to Revenues
Notwithstanding anything contained in the Bond Indenture or in the Bonds, the City shall not be required to
advance any moneys derived from any source other than the Revenues and other assets pledged under the Bond
Indenture for any of the purposes m the Bond Indenture, whether for the payment of the principal or Redemption
Price of or interest on the Bonds or for any other purpose of the Bond Indenture. The City may, but shall not be
required to, advance for any purposes under the Bond Indenture any funds of the City that may be made available to
it for such purposes.
LOAN AGREEMENT
The Loan Agreement provides the terms of a loan of the proceeds of the Bonds by the City to the
Corporation and the repayment of such loan by the Corporation.
The following is a summary of certain provisions of the Loan Agreement. This summary does not purport
to be complete or definitive and reference is made to the Loan Agreement for the complete terms thereof'
Loan Repayments
The Corporation agrees to pay, or cause to be paid, "Loan Repayments" in an amount sufficient to enable
the Bond Trustee to make the transfers and deposits required at the times and in the amounts described in the Bond
Indenture to be made to the Revenue Fund. Notwithstanding the foregoing, the Corporation agrees to make
payments, or cause payments to be made, at the times and in the amounts required to be paid as principal or
Redemption Price of or interest on the Bonds from time to time Outstanding under the Bond Indenture and other
amounts required to be paid under the Bond Indenture, as the same shall become due whether at maturity, upon
redemption, by declaration of acceleration or otherwise.
Additional Payments
The Corporation also agrees to pay certain Additional Payments in connection with the issuance of the
Bonds, including certain taxes and assessments charged to the City, the Bond Trustee, the Tender Agent (if any), the
Liquidity Facility Provider (if any), the Bond Insurer, the Auction Agent (if any) or the Broker - Dealer (if any) all
reasonable fees, charges, expenses and indemnities of the City and the Bond Trustee under the Loan Agreement and
under the Bond Indenture, of the Tender Agent (if any) under the Bond Indenture, of the Liquidity Facility Provider
(if any) under the Liquidity Facility (if any), the Auction Agent (if any) or the Broker - Dealer (if any) and under the
Bond Indenture, of the Bond Insurer and the reasonable fees and expenses of experts engaged by the City and the
Bond Trustee and all other reasonable and necessary fees and expenses attributable to the Loan Agreement, the Tax
Agreement, Supplement No. 14 or Obligation No. 14.
Prepayment
The Corporation shall have the right, so long as all amounts which have become due under the Loan
Agreement have been paid, at any time or from time to time to prepay all or any part, of the Loan Repayments and
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the City agrees that the Bond Trustee shall accept such prepayments when the same are tendered. Prepayments may
be made by payments of cash, deposit of United Stailovermnent Obligations or surrender of Bonds. All such
prepayments (and the additional payment of any amount nemteary to pay the premium, if any, payable upon the
iredemption of Bonds) shall be deposited upon receipt at the Corporation's direction and at the request of and as
determined by the Corporation, credited against payments due under the Loan Agreement or used for the redemption
or purchase of Outstanding Bonds in the manner and subject to the terms and conditions set forth in the Master
Indenture and the Bond Indenture. Notwithstanding any such prepayment or surrender of Bonds, as long as any
j Bonds remain Outstanding or any Additional Payments required to be made under the Loan Agreement remain
unpaid, the Corporation shall not be relieved of its obligations under the Loan Agreement
Payment of Purchase Price of Purchased Bonds
If the Liquidity Facility Provider, if any, has not paid the full amount required by the Bond Indenture at the
times required under the Bond Indenture, the Corporation shall pay to the Tender Agent all amounts necessary for
the purchase of Bonds of such Series, when applicable, on the Purchase.Date pursuant to the Bond Indenture.
Obligations Unconditional
The obligations of the Corporation under the Loan Agreement and pursuant to Obligation No. 14 are
absolute and unconditional, notwithstanding any other provision of the Loan Agreement, Supplement No. 14 , the
Obligation No 36, the Master Indenture or the Bond Indenture. Until the Loan Agreement is terminated and all
payments under the Loan Agreement are made, the Corporation: (a) will pay all amounts required under the Loan
Agreement and under Obligation No 36 without abatement, deduction or setoff except as otherwise expressly
provided in the Loan Agreement; (b) will not suspend or discontinue any payments due under the Loan Agreement
and under Obligation No 36 for any reason whatsoever, including, without limitation, any right of setoff. or
counterclaim; (c) will perform and observe all its other agreements contained in the Loan Agreement; and (d) except
as provided in the Loan Agreement, will not terminate the Loan Agreement for any cause including, without limiting
the generality of the foregoing, damage, destruction or condemnation of the financed or refinanced facilities or any
part thereof, commercial frustration of purpose, any change in the tax or other laws of the United States of America
or of the State of California, or any political subdivision of either or any failure of the City to perform and observe
any agreement, whether express or implied, duty, liability or obligation arising out of or connected with the Loan
Agreement. Nothing contained in the Loan Agreement shall be construed to release the City from the performance
of any of the agreements on its part, contained in the Loan Agreement, and in the event the City should fail to
perform any such agreement on its part, the Corporation may institute such action against the City as the
Corporation may deem necessary to compel performance,
The rights of the Bond Trustee, the Bond Insurer or any party or parties on behalf of whom the Bond
Trustee is acting shall not be subject to any defense, setoff, counterclaim or recoupment whatsoever, whether arising
out of any breach of any duty or obligation of the City, the Master Trustee, the Bond Insurer or the Bond Trustee
owing to the Corporation, or by reason of any other indebtedness or liability at any time owing by the City,,the
Master Trustee, the Bond Insurer or by the Bond Trustee to the Corporation.
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Acquisition, Construction and Installation of the Project .
The Corporation shall.acquire, construct and install the Project elements financed with proceeds of the
Bonds and shall proceed with due diligence and use its best efforts to cause the construction and installation of such
Project elements to be completed by no later than the third anniversary date of the Date of Issuance, delays beyond
the reasonable control of the Corporation only excepted. The Corporation grants to the City, until completion of the
Project, all rights of access necessary for the City to carry out its obligations and to enforce its rights under the Loan
Agreement It is expressly understood and agreed that the City and the Bond Trustee shall be under no liability of
lany kind or character whatsoever for the payment of any cost of the Project or any expense incurred in connection
with the Project and that all such costs and expenses shall be paid by the Corporation.
Events of Default
Each of the following events shall be a Loan Default Event under the Loan Agreement: (1) failure by the
Corporation to pay in full any payment required by the Loan Agreement or Obligation No. 14 when due; (2) if any
material representation or warranty made by the Corporation or any Member in any document, instrument or
certificate furnished to the Bond Trustee or the City in connection with the issuance of Obligation No. 14 or the
Bonds shall at any time prove to have been incorrect in any respect as of the time made; (3) if the Corporation shall
fail to observe or perform any other covenant, condition, agreement or provision in the Loan Agreement on its part
to be observed or performed for a period of 60 days after written notice specifying such failure or breach and
requesting that it be remedied, has been given to the Corporation by the City, the Bond Insurer or the Bond Trustee,
except that, if such failure or breach can be remedied but not within such 60-day period, such failure shall not
become a Loan Default Event for so long as the Corporation shall diligently proceed to remedy same in accordance
with and subject to any directions or limitations of time established by the Bond Trustee; (4) files a petition in
voluntary bankruptcy, for the composition of its affairs or for its corporate reorganization under any state or federal
bankruptcy or insolvency law, or makes an assignment for the benefit of creditors, or admits in writing to its
insolvency or inability to pay debts as they mature, or consents in writing to the appointment of a trustee or receiver
j for itself or for the whole or any substantial part of the Corporation's facilities; (5) if a court of competent
jurisdiction shall enter an order, judgment or decree declaring the Corporation an insolvent, or adjudging it bantaupi,
or appointing a trustee or receiver of the Corporation or of the whole or any substantial part of the Corporation's
facilities, or approving a petition filed against the_Corporation seeking reorganization of the Corporation under any
applicable law or statute of the United States of America or any state thereof, and such order, judgment or decree
shall not be vacated or set aside or stayed within sixty (60) days from the date of the entry thereof; (6) if, under the
provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody
or control of the Corporation's facilities, and such custody or control shall not be terminated within sixty (60) days
from the date of assumption of such custody or control; ('n if the Corporation shall abandon the Corporation's
facilities or any substantial part thereof and such abandonment shall continue for a period of sixty (60) days after
written notice thereof shall have been given to the Corporation by the City or the Bond-Trustee; and (8) any Event of
Default under the Bond Indenture or the Master Indenture shall occur and is continuing.
Remedies on Default
.:: -
If a Loan Default Event shall occur under the Loan Agreement, the Bond Trustee on behalf of the City, but
subject to the limitations in the Bond Indenture as to the enforcement of remedies, may, among other things, declare
all installments of Loan Repayments payable for the remainder of the term of the Loan Agreement to be
immediately due and payable. The City or the Bond Trustee may also take any action, at law or in equity, to collect
the payment required under the Loan Agreement then due or to otherwise enforce the performance and observance
of any obligation, agreement or covenant of the Corporation under the Loan Agreement.
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APPENDIX E
FORM OF OPINION OF BOND COUNSEL
i
[Closing Date]
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) Series 2005A_, Series 2005B and Series 2005C
(Final Opinion)
Ladies and Gentlemen
We have acted as bond counsel in connection with the issuance by the City of Newport
Beach (the "City) of $200,000,000 principal amount of its Insured Revenue Bonds (Hoag Memorial
Hospital Presbyterian), Series 2005A, Series 2005B and Series 2005C (collectively, the `Bonds "), issued
pursuant to the provisions of Ordinance No. 85 -23 and 844 adopted by the City Council of the City on
February 13, 1984, under Sections 3, 5 and 7 of Article XI of the Constitution of the State of California
and Section 200 of Article E of the Charter of the City, a resolution adopted by the City Council on July
26, 2005 and a Bond Indenture dated as of August 1, 2005 (the Bond Indenture"), between the City and
Wells Fargo Bank, National Association, as bond trustee (the `Bond Trustee'7. The Bond Indenture
provides that the Bonds are issued for the purpose of making a loan of the proceeds thereof to Hoag
Memorial Hospital Presbyterian (the "Corporation'] pursuant to a Loan Agreement dated as of
August 1,2005 (the. "Loan Agreement', between the City and the Corporation. Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the Bond Indenture.
In such connection, we have reviewed the Bond Indenture; the Loan Agreement, the Tax
Certificate and Agreement; opinions of counsel to the City and the Corporation; certificates of the City,
the Bond Trustee, the Corporation, and others; and such other documents, opinions and matters to the
extent we deemed necessary to render the opinions set forth herein.
We have relied on the opinion of Sttadling Yocca Carlson & Rauth, counsel to the
Corporation, regarding, among other matters, the current qualification of the Corporation as an
organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the "Code'l. We note
that the opinion is subject to a number of qualifications and limitations. We have also relied upon
representations of the Corporation regarding the use of the facilities financed with the proceeds of Bonds
in activities that are not considered unrelated trade or business activities of the Corporation within the
meaning of Section 513 of the Code. We note that the opinion of counsel to the Corporation does not
address Section 513 of the Code. Failure of the Corporation to be organized and operated in accordance
with the Internal Revenue Service's requirements for the maintenance of its status as an organization
described in Section 501(cx3) of the Code, or use of the bond - financed facilities in activities that are
considered unrelated trade or business activities of the Corporation within the meaning of Section 513 of
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the Code, may result in interest on the Bonds being included in gross income for federal income tax
purposes, possibly from the date of issuance of the Bonds.
The interest rate mode and certain agreements, requirements and procedures contained or
referred to in the Bond Indenture, the Loan Agreement, the Tax Certificate and Agreement and other
relevant documents may be changed and certain actions (including, without limitation, defeasance of
Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth
in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such
E change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves.
The opinions expressed herein are based on an analysis of existing laws, regulations,
rulings and court decisions and cover certain matters not directly addressed by such authorities. Such
opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have
not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or
events do occur or any other matters come to our attention after the date hereof. We disclaim any
obligation to update this letter. We have assumed the genuineness of all documents and signatures
presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof
by, and validity against, any parties other than the City. We have assumed, without undertaking to verify,
the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal
conclusions contained in the opinions, referred to in the second and third paragraphs hereof. Furthermore,
we have assumed compliance with all covenants and agreements contained in the Bond Indenture, the
Loan Agreement and the Tax Certificate and Agreement, including (without limitation) covenants and
agreements compliance with which is necessary to assure that future actions, omissions or events will not
cause interest on the Bonds to be included in gross income for federal income tax purposes. We call
attention to the fact that the rights and obligations under the Bonds, the Bond Indenture, the Loan
Agreement and the Tax Certificate and Agreement and their enforceability may be subject to bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or
affecting creditors' rights, to the application of equitable principles and to the exercise of judicial
discretion in appropriate cases. We express no opinion with respect to any indemnification, contribution,
penalty, choice of law, choice of forum, waiver or severability provisions contained in the foregoing
documents, nor do we express any opinion with respect to the state or quality of title to or interest in any
of the real or personal property described in or as subject to the lien of the Bond Indenture or the accuracy
or sufficiency of the description contained therein of or the remedies available to enforce liens on, any
such property. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the
Official Statement or other offering material relating to the Bonds and express no opinion with respect
thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we
are of the following opinions:
The Bonds constitute the valid and binding limited obligations of the City.
2. The Bond Indenture has been duly executed and delivered by, and constitutes the
valid and binding obligation of, the City. The Bond Indenture creates a valid pledge, to secure the
payment of the principal of and interest on the Bonds, of the Revenues and any other amounts (including
proceeds of the sale of the Bonds) held by the Bond Trustee in any fund or account established pursuant
to the Bond Indenture, except the Rebate Fund and the Bond Purchase Fund, subject to the provisions of
the Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set
forth in the Bond Indenture. The Bond Indenture also creates a valid assignment to the Bond Trustee, for
the benefit of the Holders from time to time of the Bonds, of the right, title and interest of the City in the
Loan Agreement (to the extent more particularly described in the Bond Indenture).
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3. The Loan Agreement has been duly executed and delivered by, and constitutes the
valid and binding agreement of, the City.
4. The Bonds are not a lien or charge upon the fiords or property of the City except
to the extent of the aforementioned pledge and assignment. Neither the faith and credit nor the taxing
power of the City, the State of California or of any political subdivision thereof is pledged to the payment
of the principal of or interest on the Bonds. The Bonds are not a debt of the State of California, and said
State is not liable for the payment thereof.
5. Interest on the Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Code and is exempt from State of California personal income taxes.
Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate
alternative minimum taxes, although we observe that it is included in adjusted current earnings when
calculating corporate alternative minimum taxable income. We express no opinion regarding other tax
consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds.
Faithfully yours,
ORRIM HERRINGTON & SUPCLIFFE LLr
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APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
,I
This Continuing Disclosure Certificate (the "Disclosure Certificate') is executed and delivered by
Hoag Memorial Hospital Presbyterian ( "Hospital"), a nonprofit public benefit corporation duly organized
I and existing under the laws of the State of California in connection with the execution and delivery of
$200,000,000 City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C (the `Bonds "). The Bonds are being issued pursuant to a bond
indenture, dated as of August 1, 2005 (the "Indenture"), between the City of Newport Beach (the "City")
and Wells Fargo Bank, National Association, as Trustee. The proceeds of the Bonds are being loaned by
the City to Hospital pursuant to a loan agreement, dated as of August 1, 2005 (the "Loan Agreement'),
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between the City and the Hospital. The Hospital covenants and agrees as follows:
{ SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the Hospital for the benefit of the Holders and Beneficial Owners of the Bonds.
The Hospital acknowledges that the City has not undertaken any responsibility with respect to any
reports, notices or disclosures provided or required under this Disclosure Certificate, and has no liability
to any person, including any Holder or Beneficial Owner of the Bonds, with respect to the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply
to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Hospital pursuant to, and as
described in, Section 3 and 4 of this Disclosure Agreement.
i `Beneficial Owner" or "Holder" shall mean any person which (a) has the power, directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of
any Bonds for federal income tax purposes.
"Dissemination Agent" shall mean any Dissemination Agent designated in writing by the
Hospital.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities Information
Repository for purpose of the Rule. The National Repositories currently approved by the Securities and
Exchange Commission are listed at http: / /wwwl sec .gov /info /municipal/mmsir.htm.
"Participating Underwriter' shall mean the original underwriter of the Bonds required to comply
with the Rule in connection with the offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2 12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
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"State Repository" shall mean any public or private repository or entity designated by the State of
California as a state repository for the purpose of the Rule and recognized as such by the Securities and
Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository.
SECTION 3. Provision of Annual Reports. The Hospital shall, or shall cause the
Dissemination Agent to, not later than six months following the end of its fiscal year (which fiscal year as
of the date hereof ends August 31, 2005), commencing with the report for the 2005 fiscal year, provide to
each Repository an Annual Report which is consistent with the requirements of Section 4 of this
Disclosure Certificate. In each case, the Annual Report may be submitted as a single document or as
separate documents comprising a package, and may cross- reference other information as provided in
Section 4 of this Disclosure Certificate; provided that audited financial statements may be submitted
separately from the balance of the Annual Report and later than the date required above for the filing of
the Annual Report if they are not available by that date. If the Hospital's fiscal year changes, it shall give
notice of such change in the same manner as for a Listed Event under Section 4.
SECTION 4. Content of Annual Reports. The Hospital's Annual Report shall contain or
include by reference the following:
(a) The audited financial statements of the Obligated Group (which may be the
audited financial statements of the Hospital consolidated with its Wholly -Owned Subsidiaries (as defined
in Appendix A of the Official Statement) and/or affiliates so long as the Hospital is the sole Member of
the Obligated Group) for the prior fiscal year, audited by a firm of nationally recognized independent
certified public accountants approved by the Hospital as having been prepared in accordance with
generally accepted accounting principles (except in the case of special purpose financial statements, for
required consolidations).
If such audited financial statements are not available by the time the Annual
Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial
statements in a format similar to the financial statements contained in the Official Statement (defined
below), and the audited financial statements shall be filed in the same manner as the Annual Report when
they become available.
(b) Unless a single financial statement (including a single special purpose financial
statement) is delivered pursuant to clause (a) above for the Obligated Group, an unaudited combined
balance sheet and an unaudited combined statement of operations for such fiscal year for the Obligated
Group, prepared by the Hospital; provided, if the Hospital is the only Member of the Obligated Group
during the applicable fiscal year, such unaudited statement may include operations of the Hospital and its
Wholly -Owned Subsidiaries.
(c) An update of the following information contained in Appendix A to the Official
Statement, dated August 2005 (the "Official Statement "), related to the Bonds:
1. List of Obligated Group Members;
2. Updated information provided in tabular form under the caption
"Medical Staff";
3. Updated information provided in tabular form under the heading
"Sources of Patient Service Revenue," for the most recent fiscal year,'
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4. Updated information provided in tabular form under the heading
"Historical Utilization;"
5. Updated information provided in tabular form under the heading
"Capitalization" presenting the actual capitalization of the Hospital and its Wholly -Owned Subsidiaries
for the most recent fiscal year;
6. Updated information provided in tabular form under the heading
"Estimated Debt Service Coverage;" with no pro forma adjustments, for the Hospital and its Wholly -
Owned Subsidiaries for the most recent fiscal year, and
7. Number of employees and percentage of employees subject to collective
bargaining agreements.
j SECTION 5. Reporting of Significant Events. The Hospital shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Bonds, if material:
i1. principal and interest payment delinquencies;
2. non - payment related defaults;
3. unscheduled draws on debt service reserves reflecting financial
difficulties;
4. unscheduled draws on credit enhancements reflecting financial
difficulties;
5. substitution of credit or liquidity providers or their failure to perform;
6. adverse tax opinions or events affecting the tax - exempt status of the
Bonds;
I
7. modifications to rights of Bondholders;
8. optional, contingent or unscheduled bond calls;
9. defeasances;
10. release, substitution or sale of property securing repayment of the Bonds;
and
11. rating changes.
i SECTION 6. Manner of Filing. Any filing under this Disclosure Certificate may be made
solely by transmitting such filing to the Texas Municipal Advisory Council (the 'MAC as provided at
http: / /www.disclos=usa.org unless the United States Securities and Exchange Commission has
withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004.
SECTION 7. Termination of RevortmR Obligati on The Hospital's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all
of the Bonds. If the Hospital's obligations under the Loan Agreement are assumed in full by some other
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entity, such person shall be responsible for compliance with this Disclosure Certificate in the same
manner as if it were the Hospital and the Hospital shall have no fiuther responsibility, hereunder. If such
termination or substitution occurs prior to the final maturity of the Bonds, the Hospital shall give notice of
such termination or substitution in the same manner as for a Listed Event under Section 5.
SECTION 8. Dissemination Agent. The Hospital may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the Hospital pursuant to this Disclosure Certificate. The Dissemination. Agent may resign by
providing thirty (30) days written notice to the Hospital. If at any time there is not any other designated
Dissemination Agent, the Hospital shall be the Dissemination Agent. The initial Dissemination Agent
shall be the Hospital.
SECTION 9. Amendment Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the Hospital may amend this Disclosure Certificate (and the Dissemination Agent shall agree
to any amendment so requested by the Hospital which does not impose any greater duties, nor greater risk
of liability, on the Dissemination Agent) and any provision of this Disclosure Certificate may be waived,
provided that the following conditions are satisfied
(a) If the amendment or waiver relates to the provisions of Sections 3, 5 or 7, it may
only. be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law or change in the identity, nature or status of an obligated person with respect
to the Bonds or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the
time of the original issuance of the Bonds, after taking into account any amendments or interpretations of
the Rule, as well as any change in circumstances; and
(c) The amendment or waiver either (i) is approved by the Holders of the Bonds in
the same manner as provided in the Indenture for amendments to the Indenture with the consent of
Holders, or (ii) does not in the opinion of nationally recognized bond counsel, materially impair the
interests of the Holders or Beneficial Owners of the Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the
Hospital shall describe such amendment in the next Annual Report, and shall include, as applicable, a
narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case
of a change of accounting principles, on the presentation) of financial information or operating data being
presented by the Hospital. In addition, if the amendment relates to the accounting principles to be
followed in preparing financial statements, (i) notice of such change shall be given in the same manner as
j for a Listed Event under Section 5, and (ii) the Annual Report for the year in which the change is made
I should present a comparison in narrative form and also, if feasible, in quantitative form) between the
1 financial statements as prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles.
SECTION 10. Additional Information Nothing in this Disclosure Certificate shall be deemed
to prevent the Hospital from disseminating any other information, using the means of dissemination set
forth in this Disclosure Certificate or any other means of communication, or including any other
information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is
required by this Disclosure Certificate. If the Hospital chooses to include any information in any Annual
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Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this
Disclosure Certificate, the Hospital shall have no obligation under this Disclosure Certificate to update
such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 11. Default. In the event of a failure of the Hospital or the Dissemination Agent to
comply with any provision of this Disclosure Certificate, the Trustee may (at the written request of the
Participating Underwriter or the Holders of at least twenty -five percent (25 %) aggregate principal amount
i of Outstanding Bonds shall, or any Holder or Beneficial Owner of the Bonds may take such actions as
may be necessary and appropriate, including seeking mandate or specific performance by court order, to
cause the Hospital or the Dissemination Agent, as the case may be, to comply with its obligations under
this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of
Default under the Indenture or Loan Agreement, and the sole remedy under this Disclosure Certificate in
the event of any failure of the Hospital or the Dissemination Agent to comply with this Disclosure
Certificate shall be an action to compel performance.
SECTION 12. Notices. Any notices or communications to the Hospital may be given as
follows:
One Hoag Drive
P.O. Box 6100
Newport Beach, CA 92658 -6100
Attention: President
The Hospital may, by written notice, designate a different address to which subsequent notices or
communications should be sent.
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent (if any), the Participating Underwriter and Holders and Beneficial Owners
from time to time of the Bonds, and shall create no rights in any other person or entity.
Dated August _, 2005.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
Authorized Representative
7MS PAGE INI=ONALLY LEFT' BLANK]
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APPENDIX G
FDIC
Financial Guaranty Insurance Company
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212.312,3000
T 600'352,0001
Municipal Bond
New Issue Insurance Policy
Issuer: Policy Number:
Control Number: 0010001
Bonds:
Financial Guaranty insurance Company ("Financial t. Ta New York stock insurance company, in
consideration of the payment of the premium an ect a terms of this Policy, hereby unconditionally
and irrevocably agrees to pay to U.S. Ba Association or its successor, as its agent (the
"Fiscal Agent"), for the benefit of Bon jol rs, at portion of the principal and interest on the above -
described debt obligations (the "Bonds ") ch shall become Due for Payment but shall be unpaid by
reason of Nonpayment by the Issuer.
Financial Guaranty will make such payments to the Fiscal Agent on the date such principal or interest
becomes Due for Payment or on the Business Day next following the day on which Financial Guaranty shall
have received Notice of Nonpayment, whichever is later. The Fiscal Agent will disburse to the Bondholder
the face amount of principal and interest which is then Due for Payment but is unpaid by reason of
Nonpayment by the Issuer but only upon receipt by the Fiscal Agent, in form reasonably satisfactory to it, of
(i) evidence of the Bondholder's right to receive payment of the principal or interest Due for Payment and
(ii) evidence, including any appropriate instruments of assignment, that all of the Bondholder's rights to
payment of such principal or interest Due for Payment shall thereupon vest in Financial Guaranty. Upon
such disbutsetrient, Financial Guaranty shall become the owner of the Bond, appurtenant coupon or right to
payment of principal or interest on such Bond and shall be fully subrogated to all of the - Bondholder's rights
thereunder, including the Bondholder's right to payment thereof.
This Policy is non - cancellable for any reason. The premium on this Policy is not refundable for any reason,
including the payment of the Bonds prior to their maturity. This Policy does not insure against loss of any
prepayment premium which may at any time be payable with respect to any Bond.
j As used herein, the term `Bondholder" means, as to a particular Bond, the person other than the Issuer who,
at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof "Due for Payment"
means, when referring to the principal of a Bond, the stated maturity date thereof or the date on which the
same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier
date on which payment is due by reason of call for redemption (other than by mandatory sinking fund
redemption), acceleration or other advancement of maturity and means, when referring to interest on a
Bond, the stated date for payment of interest. "Nonpayment" in respect of a Bond means the failure of the
Issuer to have provided sufficient funds to the paying agent for payment in full of all
FGIC is a MOSlered servke mark used by FlnWX l Guaranty 1=n=e Company urdff trcanse aom Rs pmenm OWVany FGIC Cape bm.
Fomn 9000 (1053) G-1 Page 1 of 2
80
'i
I
FGIC
Financial Guaranty Insurance Company
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212312.3000
T 800.352.0001
Municipal Bond
New Issue Insurance Policy
principal and interest Due for Payment on such Bond. "Notice" means telephonic or telegraphic notice,
subsequently confirmed in; writing, or written notice by registered or ed mail, from a Bondholder or a
paying agent for the Bonds to Financial Guaranty. "Business Day" any day other than a Saturday,
Sunday or a day on which the Fiscal Agent is authorized 6y law c
In Witness Whereof, Financial Guaranty has causedYo%effective e affixed with its corporate seal and to
be signed by its duly authorized officer in fa le to e and binding upon Financial
Guaranty by virtue of the countersignature o rized representative.
C.
President
Effective Date:
Authorized Representative
U.S. Bank Trust National Association, acknowledges that it has agreed to perform the duties of Fiscal
Agent under this Polity.
Authorized Officer
FGIC is a reeaww service mark used by Financial Guaranty Insurance Company under license tom em pgent u>inpery, FGIC Corporation.
Fonn 9DOD (10183) Papa 2 of 2
G_2
FGIC
Financial Guaranty Insurance Company
Dobrg business in California ar FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212 312 3000
T 800 352 0001
I
Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
i
i
I
i
'I
i
s '
Policy Number:
It is further understood that the term "Nonpayment"
or interest made to a Bondholder by or on behal
such Bondholder pursuant to the United S
with a final, nonappealable order of a coo hayvmg
Control
&,-d a Bond includes any piyment of principal
a of such Bond which has been recovered from
Code by a trustee in bankruptcy in accordance
NOTHING HEREIN SHALL BE. CONSTRUED, TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE
POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
LANGUAGE.
In Witness Whereof, Financial Guaranty has.caused this Endorsement to be affixed with its corporate seal
and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
President
Effective Date:
Acknowledged as of the Effective Date written above:
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
Authorized Representative
FGIC is a reasimed eeryioe mark used by Financial Guaranty Insuranoe Coninew under kerse from ne patent comaanv FGIC Corporation.
Form E-0002 (10193) - G -3 Page 1 of 1
to
i
FGIC
Financial Guaranty Insurance coripany
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212.3123000
T 800.3520001
Mandatory California State
Amendatory Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number:
0010001
The insurance provided by this Policy is the Califomia Insurance Guaranty Association
(California Insurance Code, Article 14.21. � No&
NOTHING HEREIN SHALL BE COQTRUED TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY. IF FOUND CONTRARY TO THE
POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
LANGUAGE.
In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal
and to he signed by its duly authorized officer in facsimile to been= effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
President
Effective Date: Authorized Representative
Acknowledged as of the Effective Date written above:
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
I _
FGIC i6 a repGnmd Service mark used by Financial Guaranty In6uaKe Company un0er ioarso from as paem mmpany, FGIC Corpordaon,
Form E-0059 (1093) page 1 of 1
G-4
10
FGIC
Financial Guaranty Insurance Company
Doing business in California as FGIC Insurance Company
125 Park Avenue
New York, NY 10017
T 212312.3000
I T 800352-0001
Mandatory California State
Amendatory Endorsement
To Financial Guaranty Insurance Company
Insurance Policy
Policy Number: Centro u be 0010001
i
i
Notwithstanding the terms and conditions in t licy s further understood that there shall be no
i acceleration of payment due under such PoA h acceleration is at the sole option of Financial
Guaranty. `�,1,/
NOTHING HEREIN SHALL BE C T, mr TO WAIVE, ALTER, REDUCE OR AMEND
COVERAGE IN ANY OTHER SECTION OF THE POLICY., IF FOUND CONTRARY TO THE
POLICY LANGUAGE, THE TERMS OF THIS ENDORSEMENT SUPERSEDE THE POLICY
LANGUAGE,
In Witness Whereof, Financial Guaranty has caused this Endorsement to be affixed with its corporate seal
and to be signed by its duly authorized officer in facsimile to become effective and binding upon Financial
Guaranty by virtue of the countersignature of its duly authorized representative.
I President
Effective Date: Authorized Representative
Acknowledged as of the Effective Date written above:
G=
Authorized Officer
U.S. Bank Trust National Association, as Fiscal Agent
FGIC is a reolsuaed service agk used by FinandW Guaranty 1�rarce Company under Grease trap as parent company, FGIC Caocn*on.
Fpm &0075 (3194) Page I of 1
G -5
[THIS PAGE INTENTIONALLY LEFT BLANK]
[Tins PAGE nqTENnoNALLY LEFT' BLANK]
rrl-HS PAGE INTENTIONALLY LEFT BLANK)
EXHIBIT-NO. 14
Rating Letters from
Moody's Investors
Service and
Standard & Poor's
(UC)
C�
Financial Guaranty Insurance Company
125 Park Avenue, 5th Floor
New York, New York 10017
To Whom It May Concern:
Moody's Investors Service
99 Church Street
New York, NY
August 24, 2005
Moody's Investors Service has assigned the rating of Aaa (Financial Guaranty
Insurance Company Insured - Policy No. 05010567) to the $200,000,000.00, City of
Newport Beach, California - Revenue Bonds (Hoag Memorial Hospital
• Presbyterian) Series 2005A, Series 2005B and Series 2005C, dated August 24, 2005
which sold through negotiation on August 22, 2005. The rating is based upon an
insurance policy provided by Financial Guaranty Insurance Company.
Should you have any questions regarding the above, please do not hesitate to contact
the assigned analyst, Margaret Kessler at (212) 553 -7884.
MILK /DC
E
Sincerely yours,
Margaret L. Kessler
Vice President/Senior Analyst
•
•
0
MoodYs investors Service
_ 99 Church[ Street
New York, New York 10007
Dear Ms. Mitzner: '
We wish to inform you that Moody's Investors Service assigned a Aa3 underlying rating to Hoag Memorial
Hospital Presbyterian's Series 2005 Insured Revenue Bonds to be issued by the City of Newport Beach.
CA. The outlook is stable. We are also affirming our Aa3NMIGI ratings on Hoag's outstanding bonds.
Moody's will monitor these ratings and reserves the right, at its sole discretion. to revise or withdraw these
ratings at any time.
The ratings as well as any other revisions or withdrawals thereof will be publicly disseminated by Moody's
through the normal print and electronic media and in response to verbal requests to Moody's rating desk.
In order for us to maintain the currency of our rating, we request that you provide ongoing disclosure,
including annual and quarterly financial and statistical information.
Should you have any questions regarding the above, please do not hesitate to contact me
Sincerely.
Mimi Park
MP:rI
Pc-` - -/
cc: Mr. Charles Plimpton, Citigroup Global Markets Inc.
Mimi Park
August 1, 2005
ViicePresideOSer"Analyst
Td: 212.553.1348
Fax. 212.298.7125
Ms. Jennifer C. Mitzner
mmi.park®moodys.com
Vice President of Finance
Hoag Memorial Hospital Presbyterian
301 Newport Blvd., Box 6100
Newport Beach, CA 92658 -6100
Dear Ms. Mitzner: '
We wish to inform you that Moody's Investors Service assigned a Aa3 underlying rating to Hoag Memorial
Hospital Presbyterian's Series 2005 Insured Revenue Bonds to be issued by the City of Newport Beach.
CA. The outlook is stable. We are also affirming our Aa3NMIGI ratings on Hoag's outstanding bonds.
Moody's will monitor these ratings and reserves the right, at its sole discretion. to revise or withdraw these
ratings at any time.
The ratings as well as any other revisions or withdrawals thereof will be publicly disseminated by Moody's
through the normal print and electronic media and in response to verbal requests to Moody's rating desk.
In order for us to maintain the currency of our rating, we request that you provide ongoing disclosure,
including annual and quarterly financial and statistical information.
Should you have any questions regarding the above, please do not hesitate to contact me
Sincerely.
Mimi Park
MP:rI
Pc-` - -/
cc: Mr. Charles Plimpton, Citigroup Global Markets Inc.
■ The M[Grow•Hill Companies
STANDARD
* &POOR'S
August 2, 2005
Hoag Memorial Hospital Presbyterian
One Hoag Drive
PO Box 6100
Marb D. Amck
Managing Director
55 Water Street, 38th Floor
Newyork NY 10041 -M
tM 212435.7963
marft_a"k:ktsbrn vdtndpoore.eom
reference no.: 735M
Newport Beach, CA 92658- -6100
Attention: Ms. Jennifer Mitzner, Vice President/Chief Financial Officer
Steven G. Zimmermann
Managing Director -- .
One Market
Steuart Tower, 15th Floor
San Francisco, CA 941057000
tell 415 371-MU
stave- immermanr@sbndardandpoors.com
Re: US$200,000,000 Newport Beach, California, Health Auction Rate Securities Revenue
Bonds, (Hoag Memorial Hospital Presbyterian), Series 2005A D, due: December 1, 2040
Dear Ms. Mitzner:
Pursuant to your request for a Standard & Poor's rating on the above - referenced obligations, we
have reviewed the information submitted to us and, subject to the enclosed Terms and Conditions,
have assigned a rating of "AA ". Standard & Poor's views the outlook for this rating as stable. A
copy of the rationale supporting the rating is enclosed.
•The rating is not investment, financial, or other advice and you should not and cannot rely upon
the rating as such. The rating is based on information supplied to us by you or by your agents but
does not represent an audit. We undertake no duty of due diligence or independent verification of
any information. The assignment of a rating does not create a fiduciary relationship between us
and you or between us and other recipients of the rating. We have not consented to and will not
consent to being named an "expert" under the applicable securities laws, including without
limitation, Section 7 of the Securities Act of 1933. The rating is not a "market rating" nor is it a
recommendation to buy, hold, or sell the obligations. .
This letter constitutes Standard & Poor's permission to you to disseminate the above - assigned
rating to interested parties. Standard & Poor's reserves the right to inform its own clients,
subscribers, and the public of the rating.
Standard & Poor's relies on the issuer /obligor and its counsel, accountants, and other experts for
the accuracy and completeness of the information submitted in connection with the rating. This
rating is based on financial information and documents we received prior to the issuance of this
letter. Standard & Poor's assumes that the documents you have provided to us are final. If any
subsequent changes were made in the final documents, you must notify us of such changes by
sending us the revised final documents with the changes clearly marked.
To maintain the rating, Standard & Poor's must receive all relevant financial information as soon
as such information is available. Placing us on a distribution list for this information would
.facilitate the process. You must promptly notify us of all material changes in the financial
Ms. Jennifer Mitzner
Page 2
August 2, 2005
•
information and the documents. Standard & Poor's may change, suspend, withdraw, or place on
CreditWatch the rating as a result of changes in, or unavailability of, such information. Standard
& Poor's reserves the right to request additional information if necessary to maintain the rating.
Please send all information to:
Standard & Poor's Ratings Services
Public Finance Department
55 Water Street
New York, NY 10041 -0003
Standard & Poor's is pleased to be of service to you. For more information on Standard & Poor's,
please visit our website at www.standardandnoorS.com. if we can be of help in any other way,
please call or contact us at nypublicfinance(a).standardand000rs com. Thank you for choosing
Standard & Poor's and we look forward to working with you again. ' -
Sincerely yours,
Standard & Poor's Ratings Services
a division of The McQraw -Hill Companies, Inc.
• � ICJ• �6fi�c��
By: Martin D. Arrick
Managing Director
bt
enclosures
cc: Mr. Chad Kenan
Mr. Charles G. Plimpton
Mr. Dennis Danner
•
ti
STANDARD
&POOR'S
• Standard & Poor's Ratings Services
Terms and Conditions..::
Applicable To ,�°
U.S. Public Finance t' rags
Request for a ratin¢. Standard & Poor's issues public finance ratings for a fee,upon request from an issuer, or from an
underwriter, financial advisor, investor, insurance company, or other entity, provided that the obligor and issuer (if
different from the obligor) each has knowledge of the request. The term "issuer /obligor" in these Terms and
Conditions means the issuer and the obligor if the obligor is different from the issuer.
Ameement to Accept Terms and Conditions. Standard & Poor's assigns Public Finance ratings subject to the terms
and conditions stated herein and in the rating letter. The issuer/obligor's use of a Standard & Poor's public finance
rating constitutes agreement to comply in all respects with the terms and conditions contained herein and in the rating
letter and acknowledges the issuer /obligor's understanding of the scope and limitations of the Standard & Poor's rating
as stated herein and in the rating letter.
Fees and expenses. In consideration of our analytic review and issuance of the rating, the issuer /obligor agrees to pay
Standard & Poor's a rating fee. Payment of the fee is not conditioned on Standard & Poor's issuance of any particular
rating. Inmost cases an annual surveillance fee will be charged for so long as we maintain the rating. The
issuer /obligor will reimburse Standard & Poor's for reasonable travel and legal expenses if such expenses are not
included in the fee. Should the rating not be issued, the issuer/obligor agrees to compensate Standard & Poor's based on
the time', effort, and charges incurred through the date upon which it is determined that the rating will not be issued.
scope . The issuedobligm understands and agrees that (i) an issuer rating reflects Standard & Poor's current
•opinion of the issuer /obligor's overall financial capacity to pay its financial obligations as they come due, (ii) an issue
rating reflects Standard -& Poor's current opinion of the likelihood that the issuer/obligor will make payments of principal
and interest on a timely basis in accordance with the terms of the obligation, (iii) a rating is an opinion and is not a
verifiable statement of fact, (iv) ratings are based on information supplied to Standard & Poor's by the issuer/obligor or
by its agents and upon other information obtained by Standard & Poor's from other sources it considers reliable, (v)
Standard & Poor's does not perform an audit in connection with any rating and a rating does not represent an audit by
Standard & Poor's, (vi) Standard & Poor's relies on the issuer /obligor, its accountants, counsel, and other experts for the
accuracy and completeness of the information submitted in connection with the rating and surveillance process, (vii)
Standard & Poor's undertakes no duty of due diligence or independent verification of any information, (viii) Standard &
Poor's does not and cannot guarantee the accuracy, completeness, or timeliness of the information relied on in connection
with a rating or the results obtained from the use of such information, (ix) Standard & Poor's may raise, lower, suspend;
place on CreditWatch, or withdraw a rating at any time, in Standard & Poor's sole discretion, and (x) a rating is net a
"market" rating nor a recommendation to buy, hold, or sell any financial obligation.
Publication Standard & Poor's reserves the right to publish, disseminate, or license others to publish or disseminate the
rating and the rationale for the rating unless the issuer /obligor.specifically requests that the rating be assigned and
maintained on a confidential basis. If a confidential rating subsequently becomes public through disclosure by the
issuer/obligor or a third party other than Standard & Poor's, Standard & Poor's reserves the right to publish it
Standard & Poor's may publish explanations of Standard & Poor's ratings criteria from time to time and nothing in this
Agreement shall be construed as limiting Standard & Poor's ability to modify or refine Standard & Poor's criteria at any
time as Standard & Poor's deems appropriate.
Information to be Provided by the Issuer / obligor. The issuer/obligor shall meet with Standard & Poor's for an analytic
review at any reasonable time Standard & Poor's requests. The issuer /obligor also agrees to provide Standard &
Poor's promptly with all information relevant to the rating and surveillance of the rating including information on
material changes to information previously supplied to Standard & Poor's. The rating may be affected by Standard &
•Poor's opinion of the accuracy, completeness, timeliness, and reliability of information received from the
issuer/obligor or its agents. Standard & Poor's undertakes no duty of due diligence or independent verification of
information provided by the issuer /obligor or its agents. Standard & Poor's reserves the right to withdraw the rating if
the issuer/obligor or its agents fails to provide Standard & Poor's with accurate, complete, timely, or reliable
information.
• Standard & Poor's Not an AdvisoL Fiduciam or Expert. The issuer /obligor understands and agrees that Standard &
Poor's is not acting as an investment, financial, or other advisor to the issuer /obligor and that the issuer /obligor should
not and cannot rely upon the rating or any other information provided by Standard & Poor's as investment or financial
advice. Nothing in this Agreement is intended to or should be construed as creating a fiduciary relationship between
Standard & Poor's and the issuer/obligor or between Standard & Poor's and recipients of the rating. The issuer /obligor
understands and agrees that Standard & Poor's has not consented to and will not consent to being named an "expert"
under the applicable securities laws, including without limitation, Section 7 of the U.S. Securities Act of 1933.'
Limitation on Damages. The issuer/obligor agrees that Standard & Poor's, its officers, directors, shareholders, and
employees shall not be liable to the issuer/obligor or any other person for any actions, damages, claims, liabilities,
costs, expenses, or losses in any way arising out of or relating to the rating or the related analytic services provided for
in an aggregate amount in excess of the aggregate fees paid to Standard & Poor's for the rating, except for Standard &
Poor's gross negligence or willful misconduct. In no event shall Standard & Poor's, its officers, directors,
shareholders, or employees be liable for consequential, special, indirect, incidental, punitive or exemplary damages,
costs, expenses, legal fees, or losses (including, without limitation, lost profits and opportunity costs). In furtherance
and not in limitation of the foregoing, Standard & Poor's will not be.liable in respect of any decisions made by the
issuer /obligor or any other person as a result of the issuance of the rating or the related analytic services provided by
Standard & Poor's hereunder or based on anything that appears to be advice or recommendations.. The provisions of
this paragraph shall apply regardless of the form of action, damage, claim, liability, cost, expense, or loss, whether in
contract, statute, tort (including, without limitation, negligence), or otherwise. The issuer/obligor acknowledges and
agrees that Standard & Poor's does not waive any protections, privileges, or defenses it may have under law, including
but not limited to, the First Amendment of the Constitution of the United States of America.
Term. This Agreement shall terminate when the ratings are withdrawn. Notwithstanding the foregoing, the paragraphs
above, "Standard & Poor's-Not an Advisor, Fiduciary, or Expert" and "Limitation on Damages ", shall survive the - --
termination of this Agreement or any withdrawal of a rating.
• Third Parties. Nothing-in this Agreement, or the rating when issued, is intended or should be construed as creating any
rights on behalf of any third parties, including, without limitation, any recipient of the rating. No person is intended as
a third party beneficiary to this Agreement or to the rating when issued.
Binding Effect This Agreement shall be binding on, and inure to the benefit ot; the parties hereto and their successors
and assigns.
Severabili ty. In the event that any term or provision of this Agreement shall be held to be invalid, void, or
unenforceable, then the remainder of this Agreement shall notbe affected, impaired, or invalidated, and each such term
and provision shall be valid and enforceable to the fullest extent permitted by law.
Complete Agreement This Agreement constitutes the complete agreement between the parties with respect to its subject
matter. This Agreement may not be modified except in a writing signed by authorized representatives of both parties.
Governing Law. This Agreement and the rating letter shall be governed by the internal laws of the State of New York.
The parties agree that the state and federal courts of New York shall be the exclusive forums for any dispute arising
out of this Agreement and the parties hereby consent to the personal jurisdiction of such courts.
r �
LJ
The McGraw-Hill c mpanres
STANDARD
0 &POOR'S
August 2, 2005
Hoag Memorial Hospital Presbyterian
One Hoag Drive
PO Box. 6100
Martin D. Arrick
Managing Director
55 Water Street, 36th Floor
New York, NY 70047-0003
tel272438.7963
mardtLankk@standardarxlWm.com
refererm no.:378MI
Newport Beach, CA 92658- -6100
Attention: Ms. Jennifer Mitzncr, Vice President/Chief Financial Officer
Stwea G.Zimmemm m
Managkrg DkwWr
One Market =
Steuart Tower, 15th Floor
San Francisco, CA 94105.166
te1415371 -M
stw"mmmmnn@standardandpoors.com
Re: $91,000,000.00 Newport Beach, California, (Hoag Memorial Hospital Presbyterian), Series
1992
$100,000,000.00 Newport Beach, California, (Hoag Memorial Hospital Presbyterian),
Series1996A -C
$45,000,000.00 Newport Beach, California, (Hoag Memorial Hospital Presbyterian), Series
1999A
$40,000,000.00 Newport Beach, California, (Hoag Memorial Hospital Presbyterian), Series
• 1999B
$40,000,000.00 Newport Beach, California, (Hoag Memorial Hospital Presbyterian), Series
1999C
Dear Ms. Mitzner:
Standard & Poor's has reviewed the rating on the above - referenced obligations. After such
review, we have affirmed the "AA/A -1 +" rating and stable outlook. A copy of the rationale
supporting the rating and outlook is enclosed.
The rating is not investment, financial, or other advice and you should not and cannot rely upon
the rating as such. The rating is based on information supplied to us by you or by your agents but
does not represent an audit. We undertake no duty of due diligence or independent verification of
any information. The assignment of a rating does not create a fiduciary relationship between us
and you or between us and other recipients of the rating. We have not consented to and will not
consent to being named an "expert" under the applicable securities laws, including without
limitation, Section 7 of the Securities Act of 1933. The rating is not a "market rating" nor is it a
recommendation to buy, hold, or sell the obligations.
This letter constitutes Standard & Poor's permission to you to disseminate the above- assigned
rating to interested parties. Standard & Poor's reserves the right to inform its own clients,
• subscribers, and the public of the rating.
Ms. Jennifer Mifzner
Page 2
August 2, 2005
•
•
•
Standard & Poor's relies on the issuer /obligor and its counsel, accountants, and other experts for
the accuracy and completeness of the information submitted in connection with the rating. To
maintain the rating, Standard & Poor's must receive all relevant financial information as soon as
such information is available. Placing us on a distribution list for this information would facilitate
the process. You must promptly notify us of all material changes in the financial information and
the documents. Standard & Poor's may change, suspend, withdraw, or place on CreditWatch the
rating as a result of changes in, or unavailability of, such information. Standard & Poor's reserves
the right to request additional information if necessary to maintain the rating.
Please send all information to:
Standard & Poor's Ratings Services
Public Finance Department
55 Water Street
New York, NY 10041 -0003
If you have any questions, or if we can be of help in any other way, please feel free to call or
contact us at nvpublic financeQstandardandpoors.com. For more information on Standard &
Poor's, please visit our website at www.standardandpoors.com. We appreciate the opportunity to
work with you and we look forward to working with you again.
Sincerely yours,
Standard & Poor's Ratings Services
a division of The McGraw -Hill Companies, Inc.
r
By: Martin D. Arrick G,
Managing Director
cm
enclosure
cc: Mr. Chad Kenan
Mr. Charles G. Plimpton
Mr. Dennis Danner
ibn date: 01- Aug -2005
e from RatingsDirect
loag Memorial Hospital Presbyterian, California; Newport Beach; Health
:are, Hospital
imary Credit Analyst(s): James Cortez, San Francisco (1) 415 -371 -5014; james_cortez@standardandpoors.com
econdary Credit Analyst(s): Geraldine Poon, San Francisco (1) 415 -371 -5078; geraldine _poon@standardandpoors.com
Rationale
Standard & Poor's Ratings Services assigned its 'AA' rating to the City of Newport
Beach, Calif.'s $200 million series 2005A -D revenue bonds, issued for Hoag
Memorial Hospital Presbyterian (Hoag). At the same time, Standard & Poor's
affirmed its 'AA/A-1+' rating on Newport Beach's outstanding debt, also issued for
Hoag. The new rating and affirmation reflect Hoag's history of profitable operating
results and solid debt service coverage, due in part to its market position. Hoag also
benefits from a sizable liquidity position and moderate pro fora leverage. More
specifically, the rating was based upon:
Excellent financial performance characterized by good generation of cash
flow and continued profitability, with operating margins of 6.4% and excess
margins of 15.8% in fiscal 2004;
Hoag's historically strong and growing liquidity position, despite significant
recent capital spending, representing 688 days' cash (inclusive of $75
million of reimbursement) and 167% of pro fora long -ter debt; and
A high - quality reputation and favorable business position, with a leading
35% market share in the affluent service area of Orange County.
The short-ter rating on the series 1999 bonds (Hoag is the liquidity provider on the
series 1999 bonds) reflects:
Sufficient high - quality and qualified liquid assets of $289.8 million ($779.5
million of total investments available for liquidation in the general fund) to
gross fund the purchase price of tendered bonds, which provide about 2.2x
coverage of unenhanced variable -rate bonds;
The board's acceptable financial policy to maintain sufficient bond coverage
assets equal to principal plus six months of accrued interest at the
maximum interest rate of 12%; and
Management's timely security liquidity procedures, which conform to the
indenture and ensure that bondholders will receive immediately available
funds on the purchase date.
The series 1992 and 1996 short-ter ratings reflect liquidity from a standby
purchase agreement issued by Bank of America.
Series 2005 bonds will be used to reimburse ($75 million of reimbursement) and
• complete construction costs related to the new women's pavilion as well as fund
construction costs for a new outpatient building, seismic upgrades, and other
remodeling and expansion projects. The series 2005 bonds will be secured by the
gross revenues of Hoag Hospital.
Hoag Memorial Hospital Presbyterian, California Newport Beach; Health Care, Hospital
Annual financial results analyzed by Standard & Poor's and mentioned throughout
this report are based on Hoag Memorial Hospltal Presbyterian.and affiliates'- audited
• results. The affiliates consist of nonobligated entities, including Hoag Hospital
Foundation, which is consolidated by Standard & Poor's, as its purpose is to
support Hoag and its health care mission. Hoag's nine -month year -to -date results
are based solely on the results of the obligated group.
Hoag has continued to produce excellent operating results as the facility has
continued to benefit from its strong reputation and market- leading position in the
Newport Beach service area. While inpatient utilization has been fairly flat over the
past few years due to capacity constraints, profitability has remained strong as a
result of Hoag's favorable payor mix and negotiating leverage with commercial
payors. Hoag has continued to obtain double -digit rate increases on its commercial.
contracts, which, along with a slight increase in outpatient utilization, contributed to
operating revenue growth of 11.0% in fiscal 2004 to $515.0 million from $461.8
million in 2003. Hoag's 2004 operating margin also increased for the third straight
year to 6.4% from 6.0% in 2003, which along with investment earning growth
resulted in an improved excess margin of 15.8% in 2004 versus 11.4% in 2003.
While 100% of Hoag's outstanding debt is variable rate resulting in large bullet
maturities in 2022, 2026, and 2029, Hoag's large liquidity position reduces concerns
regarding the sizable future maturities. Pro forma maximum annual debt service
(MADS) coverage (assuming the bullets are amortized) was solid at 3.6x in 2004,
while pro forma MADS coverage exclusive of the bullet payments was very strong
at 4.6x in fiscal 2004. Nine -month year -to -date financial performance has remained
consistent based on unaudited May financial results with operating margin
• increasing slightly to 7.3% while profit margin remained robust at 13.8 %.
Hoag's sizable unrestricted cash position continues tor be an additional credit
strength supporting the 'AA' rating. Unrestricted cash and.investments grew to
$796.8 million in 2004, representing 647 days' cash on hand. Based on unaudited
nine -month May financials and inclusive of the planned $75 million of
reimbursement, Hoag's unrestricted liquidity of $863.8 million represented 688
days' cash. Hoag's overall liquidity position has experienced continued growth over
the past two years despite significant capital spending, which has been funded with
Hoag's robust cash flow. Inclusive of the new series 2005 issuance, pro forma
leverage continues to be manageable at 36% with variable -rate debt accounting for
all of Hoag's outstanding long -term debt. Although the hospital's debt is structured
with sizable bullet maturities, concern is mitigated by the hospital's solid liquidity
position, with cash (inclusive of the reimbursement) representing 167% of pro forma
long -term debt. Hoag has been assigned a Standard & Poor's debt derivative profile
(DDP) overall score of 7 (on a scale of'1' to 'S', with '1' representing the lowest risk
and V the highest) on its outstanding swap portfolio. The overall score of '2' reflects
Standard & Poor's view that Hoag's swap portfolio, consisting of one floating to
fixed swap totaling $150 million in notional amount, reflects a neutral credit risk at
this time. Inclusive of the swap, Hoag has a net variable rate exposure ratio of
approximately 70 %, which currently does not represent a concern given Hoag's
strong liquidity levels.
• Outlook
The stable, outlook anticipates a continuation of Hoag's strong market position and
robust profitability levels. It is assumed that operating margins will likely decrease
from current levels due to the unlikelihood of sustained double -digit contract rate
Hoag Memorial Hospital Presbyterian, California Newport Beach; Health Care, Hospital
increases; however, they are expected to remain at levels consistent with 'AA'
rating medians.
Organizational Profile And Market Overview
• Hoag Hospital, located 50 miles south of Los Angeles in the City of Newport Beach
in Orange County, services a broad primary service area with a population of about
600,000. Although Hoag is a single -site hospital, management has executed an
effective outreach strategy through the operation of six health centers in the
surrounding area. Additionally, Hoag has solidified its business position by
continuing to focus on four "centers of excellence" (cancer center, heart and
vascular institute, orthopedic services, and women's health). Hoag's primary service
area extends to some of the fastest - growing areas of Orange County, including
Newport Beach, Huntington Beach, Irvine, Fountain Valley, and Laguna Beach.
Competition is primarily from local hospitals that are part of established systems
such as for -profit Tenet Healthcare ('B/Negative'), St. Joseph Health ('AA- /Stable'),
and Memorial Health Services ('A/Stable'). As a result of strong patient preference,
Hoag's market share has increased to 35 %, which is approximately triple the
amount of its nearest competitor, Tenet -owned Fountain Valley Hospital. While the
possibility of physician -owned surgery centers in the service area is a potential
threat to Hoag's utilization, management is attempting to minimize this threat by
researching partnering opportunities with local physicians. The threat of a
competing inpatient facility in the service area is somewhat mitigated by the high
cost of real estate in the area.
Hoag's service area is highlighted by strong wealth and income levels, which has
resulted in Hoag's favorable payor mix of very little Medi -Cal and self -pay patients.
Hoag's payor mix is heavily weighted toward managed care, with about 30% from
• preferred provider organizations and 30% from HMOs. About 60% of the HMO
business is capitated, primarily through a risk - sharing agreement with Greater
Newport Physicians, a 450- member independent practice association managed by
Hoag, with 116,000 capitated members. Hoag continues to contract with
substantially all of the managed-care providers in Orange County and also receive
contract rate increases due to its strong market position.
Hoag recently completed its search for a new CEO after the announced retirement
of the current CEO in 2004. The new CEO is expected to join the organization in .
mid - August 2005. At the time the newly named CEO joins the organization, the
current CEO will officially retire from his position; however, his contract with the
hospital allows for overlap during the transition to the newly appointed CEO. Hoag's
current CEO has served in the position since 1975.
Construction Update
Hoag has invested a significant amount of capital in its physical plant over the
recent past and has maintained a low average age of plant of 8.7 years. Annual
capital expenditures have averaged approximately three times the annual
depreciation expense over the past five years. Hoag is currently completing The
Sue and Bill Gross Women's Pavilion and Wellness Center, which is expected to be
completed in October 2005. In addition to maternity services, the new pavilion will
incorporate other existing services, including the laboratory, patient registration,
women's outpatient services, and outpatient surgery and recovery, and will add
• approximately 80 additional beds. Hoag is also continuing to address seismic
compliance issues and expects to complete the approximate $65 million of
remaining seismic retrofitting work by 2011. Hoag's recent building projects have
Hoag Memorial Hospital Presbyterian, California Newport Beach: Health Care, Hospital
been funded with series 1999's bond proceeds of $125 million, strong cash flow
and contributions received from strong community fundraising support. Fundraising
success for additional projects is expected to continue in the future due to. Hoag's
strong reputation within the community and its favorable market demographic.
• Hoag is expected to commence construction of two new buildings in upcoming
years to address capacity issues. Inpatient utilization has been fairly flat over the
past three years at approximately 25,000 discharges as the current occupancy rate
for the entire hospital is in excess of 80 %. While the new women's pavilion will add
capacity for certain services, management is expecting the need for additional
critical care beds, which will not be added as part of the women's pavilion project.
Hoag expects to commence construction of a new outpatient building in 2006 and
Hoag's board and management are currently evaluating construction of a new
patient care tower. The patient care tower would include two floors of critical care
beds and the new outpatient center would allow for reconfiguration of current space
being used for outpatient services. Construction would likely take place in 2007-
2010 at 'a cost of $400 million and would possibly be funded by approximately $100
million of new debt.
Short -Term Rating
A standby purchase agreement from Bank of America supports the series 1992 and
1996 bonds, while liquidity for Hoag's series 1999A, 19998, and 1999C
unenhanced variable -rate bonds is provided by investments in securities with same -
day liquidity totaling about $271.6 million and representing about 2.2x the series
1999 debt. The 1999 bonds were initially issued and remain in a weekly interest -
rate mode. Conversion to a daily interest rate requires the hospital to secure a bank
• liquidity facility. In the event of a failed remarketing, Hoag has procedures in place
to honor a full tender for the series 1999 bonds within seven business days. A
resolution by Hoag to maintain liquidity for the principal amount plus six months of
accrued interest at the maximum interest rate of 12% for 1999 bonds provides
further strength for the rating.
Debt Derivative Profile
Hoag has been assigned a DDP overall score of'2' (on a scale of'1'to'5', with'T
representing the lowest risk and'S' the highest) on its outstanding swap portfolio.
Hoag entered into an interest rate swap in 2002 on a notional amount of $150
million that effectively converts a portion of the floating rate series 1992 and 1999
bonds to a fixed -rate basis over the next five years. Settlements on the swap are
made monthly with the counterparty, Merrill Lynch Capital Services ('A+/Stable'),
over the term of agreement, which expires in February 2007. Hoag management
monitors the outstanding swap monthly and tests for hedge accounting treatment
on quarterly. Inclusive of the swap, Hoag has a net variable rate exposure ratio of
53 %, which currently does not represent a concern given Hoag's current level of
liquidity.
Table 1 Hoag Mew m rial Hospital Presbyterian & Affillates'.Financial Statistics.
2003 2
Aug 31, Aug. 30,
20 a Aug. 31 2001
, t Sept 1,
04 002
6tcome Statement and Cash FI_ owl'
I Operating revenue ($OOOs) 515,081 461,796 417,10 372,107
I Total expenses ($OOOS) 482,169. 434,033 , 394,982' 359,445
Hoag Memorial Hospital Presbyterian, California Newport Beach; Health Care, Hospital
•
Operating income ($000s) 32,912: 27,763: 22,126; 12,662
Operating margin (/°) 6.4 i 6.0 i 5.3 i 3.4 s
o
' NPt nOnnnP.rati nl rPVPniiP.S
($000s) - ;
Dr,n4t zr,azr 1z,4uu+ Du, tab
t
Excess income ($OOOs)
r _
r 90.638['
0 638 55.690 34,272 62,290!
r Excess margin ( %)
15 ,8, 11.4 ( 8 0 ° 14.71
# Change in net assets
97,308! 99,825 12,415 26,656
($000s)
u
EBIDAftotal revenue ( %)
22.9 19.0 15.3 22.2
Cash flowftotal liabilities ( %)
27.8 -_ 21.1 14.2 m 20.9
Capital expenditures
($000s)
112 418 83,051 62,355 55,184
Deb
Net available for debt
130,978
94,124
65,506
93,648
service ($000s)
Maximum debt service
28,552
28,552
12,640
18,423
($000s)
Maximum debt service
4.6
3.3
5:2
5.1
coverage (x)
Maximum debt service -to-
5.0
�5.8
2.9
4.4
total revenue ( %)
lance Shw . r
Unrestricted cash and
investments ($000s)
796,809
766,241
687,464
658,773
Restricted cash ($000s)
63,387
56,052
79,740
117,651
Unrestricted days'cash on
647
691
6.77
712
hand
Unrestricted cash/debt ( %)
252.2
242.5
212.5
208.5
Cushion ratio (x)
27.9
26.8
54.4
35.8
Net fixed assets ($OOOs)
451,861
371,946
319,819
281,981
Long -term debt ($000s)
316,000
316,000
323,445
316,000
Unrestricted fund balance
($000s)
901 293
803,104
705,939
693,492
Debt/capitalization ( %)
26.0
28.2
31.41
31.3
Average age of plant
8 7
8 6
T9.3
9.5
(years)
Contacts
Obligor: Jennifer Mitzner, Chief Financial Officer, Hoag Memorial Hospital
Presbyterian (949) 764 -4411
• Lead Manager. Charles G. Plimpton, Director, Citigroup, (213) 486 -8856
Bond Trustee: Kathryn Valdivia, Wells Fargo Bank, (213) 614- 3350..
Hoag Memorial Hospital Presbyterian, California Newport Beach; Health Care, Hospital
•
•
•
Published by Standard & Poors, a Division of The McGraw -Hill Companies, Inc. Executive offices:
1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water Street, New York,
NY 10041. Subscriber services: (1) 212 -438 -7280. Copyright 2005 by The McGraw -Hill Companies,
Inc. Reproduction in whole or in part prohibited except by permission. All rights reserved. Information
has been obtained by Standard & Poors from sources believed to be reliable. However, because of
the possibility of human or mechanical error by our sources, Standard & Poors or others, Standard
& Poors does not guarantee the accuracy, adequacy, or completeness of any information and is not
responsible for any errors or omissions or the result obtained from the use of such information.
Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell
any securities.
rile McGraw -Hill companies
EXHIBIT
0915
Agreed Upon
Procedures Letter
for the
Official Statement
(Auditor; UQ
•
•
11
J ERNST & YOUNG
August 22, 2005
Hoag Memorial Hospital Presbyterian
One Hoag Drive
P. O. Box 6100
Newport Beach, California 92658
And
Citigroup Global Markets Inc.
444 South Flower St.
27th Floor
Los Angeles, California 90071
As Underwriters for
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
(Auction Rate Securities)
Series 2005 A, B, C
Ladies and Gentlemen:
■ Ernst & Young up ■ Phone: (949) 794 -2300
Suite 1000 Fax: (949) 437 -0590
18111 Von Karman Avenue www.ey.coni
Irvine, California 92 61 2 -1 007
We have audited the consolidated balance sheets of Hoag Memorial Hospital
Presbyterian and Affiliates ( "Hoag ") as of August 31, 2004 and 2003, and the
consolidated statements of operations, changes in net assets, and cash flows, for each of
the two years in the period ended August 31, 2004, all included in the official statement.
Our report with respect thereto is included in the official statement. The official
statement, dated August 12, 2005, is herein referred to as the "Official Statement."
We are independent certified public accountants with respect to Hoag under Rule 101 of
the Code of Professional Conduct of the American Institute of Certified Public
Accountants, and its rulings and interpretations.
We have not audited any financial statements of Hoag as of any date or for any period
subsequent to August 31, 2004. The purpose (and therefore the scope) of our audit for the
year ended August 31, 2004 was to enable us to express an opinion on the consolidated
financial statements as of August 31, 2004 and for the year then ended but not on the
financial statements for any interim period within that year. Therefore, we are unable to
and do not express any opinion on the unaudited Balance Sheet of the Corporation and its
Wholly -Owned Subsidiaries (consisting of Hoag Memorial Hospital Presbyterian,
Coastal Physicians Purchasing Group, Inc. and Hoag Practice Management, Inc.) at
A Member Practice of Ernst & Young Global
0
•
•
JERNST &YOUNG
Hoag Memorial Hospital Presbyterian
And
• Ernst & Young LLv
Citigroup Global Markets Inc.
As Underwriters for City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) (Auction Rate Securities)
Series 2005 A, B, C
Page 2
August 22, 2005
May 31, 2005; or the unaudited Summary of Revenues and Expenses of the Corporation
and its Wholly -Owned Subsidiaries for the nine -month periods ended May 31, 2005 and
2004, included in the Official Statement; or on the financial position, results of
operations, or cash flows of Hoag or the Corporation and its Wholly -Owned Subsidiaries
as of any date or for any period subsequent to August 31, 2004.
At our request, we read the fiscal year 2005 minutes of the meetings of the Board
of Directors, and the Finance and Audit Committees of Hoag as set forth in
minute books through August 12, 2005, officials of Hoag having advised us that
the minutes of all such meetings through that date were set forth therein, and have
carried out other procedures to August 12, 2005 as follows (our work did not
extend to the period from August 13, 2005 to August 22, 2005, inclusive):
a. With respect to the nine -month periods ended May 31, 2005 and 2004, we
have:
(i) Read the unaudited Balance Sheet of the Corporation and its
Wholly -Owned Subsidiaries as of May 31, 2005 and the
unaudited Summary of Revenues and Expenses of the
Corporation and its Wholly -Owned Subsidiaries for the nine -
month periods ended May 31, 2005 and 2004 included in the
Official Statement and agreed the amounts contained therein
to Hoag's accounting records as of May 31, 2005 and for the
nine -month periods ended May 31, 2005 and 2004.
(ii) Inquired of certain officials of Hoag who have responsibility
for financial and accounting matters whether the unaudited
financial statements of the Corporation and its Wholly -
Owned Subsidiaries referred to in a.(i) are in conformity with
accounting principles generally accepted in the United States
applied on a basis substantially consistent with that of the
audited consolidated financial statements of Hoag included in
the Official Statement. Those officials stated that the
unaudited financial statements referred to in a.(i) are in
conformity with accounting principles generally accepted in
the United States applied on a basis substantially consistent
with that of the audited consolidated financial statements of
Hoag included in the Official Statement.
J ERNST &YOUNG
■ Ernst & Young LLP
• Hoag Memorial Hospital Presbyterian
And
Citigroup Global Markets Inc.
As Underwriters for City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) (Auction Rate Securities)
Series 2005 A, B, C
Page 3
August 22, 2005
b. With respect to the period from June I, 2005 to June 30, 2005, we have:
(i) Read the unaudited financial statements of the Corporation
and its Wholly -Owned Subsidiaries for June 2005, furnished
us by Hoag, and agreed the amounts contained therein to
Hoag's accounting records. The unaudited financial
statements are incomplete in that they omit the statements of
changes in net assets, the statements of cash flows, and other
disclosures. Also, the unaudited financial statements only
include entities of the Corporation and its Wholly -Owned
Subsidiaries as defined in the Official Statement and not all
of the entities included in the consolidated financial
statements of Hoag. Officials of Hoag have advised us that
no such financial statements as of any date or for any period
subsequent to June 30, 2005, were available.
• (ii) Inquired of certain officials of Hoag who have responsibility
for financial and accounting matters whether (1) the
unaudited financial statements of the Corporation and its
Wholly -Owned Subsidiaries referred to in b.(i) are stated on
a basis substantially consistent with that of the audited
consolidated financial statements included in the Official
Statement, (2) at June 30, 2005, there was any increase in
bonds payable or decrease in total net assets of the
Corporation and its Wholly -Owned Subsidiaries as compared
with amounts shown in the May 31, 2005 unaudited Balance
Sheet of the Corporation and its Wholly -Owned Subsidiaries
included in the Official Statement, and (3) for the period
from June I, 2005 to June 30, 2005, there were any
decreases, as compared with the corresponding period in the
preceding year, in the total operating revenue or in the excess
of revenue over expenses of the Corporation and its Wholly -
Owned Subsidiaries.
Those officials stated (1) the unaudited financial statements referred to in
b.(i) are stated on a basis substantially consistent with that of the audited
consolidated financial statements included in the Official Statement, (2) at
June 30, 2005, there was no increase in bonds payable or decrease in total
• net assets of the Corporation and its Wholly -Owned Subsidiaries as
J ERNST &YOUNG
■ Ernst & Young UP
• Hoag Memorial Hospital Presbyterian Page 4
And August 22, 2005
Citigroup Global Markets Inc.
As Underwriters for City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) (Auction Rate Securities)
Series 2005 A, B, C
compared with amounts shown in the May 31, 2005 unaudited Balance
Sheet of the Corporation and its Wholly -Owned Subsidiaries included in
the Official Statement, and (3) there were no decreases for the period from
June 1, 2005 to June 30, 2005, as compared with the corresponding period
in the preceding year in the total operating revenue or in the excess of
revenue over expenses of the Corporation and its Wholly -Owned
Subsidiaries, except that there was a decrease in excess of revenue over
expenses for the period from June 1, 2005 to June 30, 2005, as compared
with the corresponding period in the preceding year as set forth below:
Period Excess of revenue over expenses
June I — June 30, 2005 $ 8,179,000
June I — June 30, 2004 $ 15,499,000
Decrease $ (7,320,000)
• c. As mentioned in I .b.(i), officials of Hoag have advised us that no financial
statements as of any date or for any period subsequent to June 30, 2005
are available, accordingly the procedures carried out by us with respect to
changes in financial statement items after June 30, 2005 have, of
necessity, been even more limited than those with respect to periods
referred to in La and I.b. We have inquired of certain officials of Hoag
who have responsibility for financial and accounting matters whether
(1) at August 12, 2005, there was any increase in bonds payable or any
decrease in total net assets of the Corporation and its Wholly -Owned
Subsidiaries as compared with the amounts shown in May 31, 2005
unaudited Balance Sheet of the Corporation and its Wholly -Owned
Subsidiaries included in the Official Statement or (2) for the period from
June 1, 2005 to August 12, 2005 there were any decreases, as compared
with the corresponding period in the preceding year, in the total operating
revenue or in the excess of revenue over expenses of the Corporation and
its Wholly -Owned Subsidiaries.
Those officials referred to above stated that (1) at August 12, 2005 there was no
increase in bonds payable or decrease in total net assets of the Corporation and its
Wholly -Owned Subsidiaries as compared with the amounts shown in the May 31,
2005 unaudited Balance Sheet of the Corporation and its Wholly -Owned
Subsidiaries, and (2) there was no decrease for the period from June 1, 2005 to
August 12, 2005, as compared with the corresponding period in the preceding
40 year, in the Corporation and its Wholly -Owned Subsidiaries' total operating
11
•
J ERNST &YOUNG
Hoag Memorial Hospital Presbyterian
And
■ Ernst & Young LLv
Citigroup Global Markets Inc.
As Underwriters for City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) (Auction Rate Securities)
Series 2005 A, B, C
Page 5
August 22, 2005
revenue or the excess of revenue over expenses except that there continues to be a
decrease in the excess of revenue over expenses for the period from June I, 2005
to August 12, 2005 as compared with the corresponding period in the preceding
year, comparable to the decrease noted in the period from June I, 2005 to June 30,
2005 as compared with the corresponding period in the preceding year, detailed in
b.(ii) above.
2. Our audits of the consolidated financial statements of Hoag for the periods
referred to in the introductory paragraph of this letter comprised audit tests and
procedures deemed necessary for the purpose of expressing an opinion on such
financial statements taken as a whole. For none of the periods referred to therein,
nor for any other period, did we perform audit tests for the purpose of expressing
an opinion on individual balances of accounts or summaries of selected
transactions such as those enumerated below, and, accordingly, we express no
opinion thereon. At your request for the purposes of this letter, we have read the
following circled information identified by you and set forth in the attached pages
from the Official Statement (Attachment A consisting of 9 pages) and have
performed the following procedures which were applied as indicated with respect
to the symbols explained below.
Symbol Procedures and Findings
A We compared the dollar amount to the corresponding amount in the
consolidating balance sheets and statements of operations of Hoag included in
the "Other Financial Information" appended to the audited consolidated
financial statements of Hoag for the years ended August 31, 2004 and 2003, or
the audited consolidated financial statements of Hoag for the years ended
August 31, 2003 and 2002 to the extent such amount is included in or can be
derived from such statements and found it to be in agreement. For changes
between periods stated in dollar amounts and/or percentages, we proved the
arithmetical accuracy of these items. It should be noted that "EBDI," is not a
measure of operating performance or liquidity defined by accounting
principles generally accepted in the United States and may not be comparable
to similarly titled measures represented by other companies. We make no
comment about Hoag's definition, calculation or presentation of "EBDI" or
their usefulness for any purposes. Additionally, we make no comment with
respect to reasons given for changes between periods.
J ERNST &YOUNG
■ Ernst & Young UP
Hoag Memorial Hospital Presbyterian Page 6
And August 22, 2005
Citigroup Global Markets Inc.
As Underwriters for City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) (Auction Rate Securities)
Series 2005 A, B, C
B Compared the dollar amount to a schedule prepared by Hoag from its
accounting records and found such amount to be in agreement. We also (a)
compared the amount on the schedule to a corresponding amount in Hoag's
accounting records, rounded to hundreds of thousands, and found such amount
to be in agreement, and (b) determined that the schedule was mathematically
correct. For percentages and changes between periods stated in dollar amounts
and/or percentages, we proved the arithmetical accuracy of these percentages
and amounts. However, we make no comment with respect to reasons given
for changes between periods. Furthermore, we make no comment as to the
classification of investments in the various Portfolios as enumerated in the
table under the Section "Liquidity and Investment Policy" on page A -23 of
Appendix A.
C We proved the arithmetical accuracy of the percentage or the amount, rounded
to hundred thousands where indicated, based on the amounts included in the
• Other Financial Information appended to Hoag's audited consolidated
financial statements for the years ended August 31, 2004 and 2003. It should
be noted that "Income Available for Debt Service ," "Total Capitalization,"
and "Percent Long -Term Debt to Capitalization" are not measures of
operating performance or liquidity defined by accounting principles generally
accepted in the United States and may not be comparable to similarly titled
measures presented by other companies. We make no comment about Hoag's
definition, calculation or presentation of "Income Available for Debt Service,"
"Total Capitalization," and "Percent Long -Term Debt to Capitalization" or
their usefulness for any purposes. Furthermore, we make no comment as to the
classification of investments in the various Portfolios as enumerated in the
table under the Section "Liquidity and Investment Policy" on page A -23 of
Appendix A.
3. It should also be understood that we have no responsibility for establishing (and
did not establish) the scope and nature of the procedures enumerated in
paragraphs I and 2 above; rather, the procedures enumerated therein are those that
the requesting party asked us to perform. Accordingly, we make no
representations regarding questions of legal interpretation or as to the sufficiency
for your purposes of the procedures enumerated in the preceding paragraphs; also
such procedures would not necessarily reveal any material misstatement of the
information identified in the preceding paragraphs as set forth in the Official
Statement. Further, we have addressed ourselves solely to the foregoing data and
• make no representations as to the adequacy of disclosures or whether any material
•
40
JERNST &YOUNG
■ Ernst & Young LLP
Hoag Memorial Hospital Presbyterian
And
Citigroup Global Markets Inc.
As Underwriters for City of Newport Beach Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) (Auction Rate Securities)
Series 2005 A, B, C
Page 7
August 22, 2005
facts have been omitted. This letter relates only to the financial statement items
specified above and does not extend to any consolidated financial statements of
Hoag taken as a whole.
4. The foregoing procedures do not constitute an audit conducted in accordance with
generally accepted auditing standards. Had we performed additional procedures or
had we conducted an audit or a review of Hoag's consolidated or the Corporation
and its Wholly -Owned Subsidiaries' May 31 or June 30, 2005 and 2004 unaudited
financial statements in accordance with standards established by the American
Institute of Certified Public Accountants, other matters might have come to our
attention that would have been reported to you.
5. These procedures should not be taken to supplant any additional inquiries or
procedures that you would undertake in your consideration of the proposed
offering.
6. This letter is solely for your information and to assist you in your inquires in
connection with the offering of the bonds covered by the Official Statement, and
it is not to be used, circulated, quoted, or otherwise referred to for any other
purpose, including but not limited to the purchase or sale of bonds, nor is it to be
filed with or referred to in whole or in part in the Official Statement or any other
document, except that reference may be made to it in any list of closing
documents pertaining to the offering of the bonds covered by the Official
Statement.
7. We have no responsibility to update this letter for events and circumstances
occurring after August 12, 2005.
Very truly yours,
f9M4t.f fIT LLl
H ERNST &YOUNG ar Emst & Young LLP
. Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc. August 22, 2005
ATTACHMENT A to the Letter dated August 22, 2005 to Hoag Memorial Hospital Presbyterian and
Citigroup Global Markets Inc.
GENERAL
History
Hoag Memorial Hospital Presbyterian (the "Corporation") was incorporated as a nonprofit corporation
under the laws of the State of California on May 22, 1944. The Corporation is currently operating as a nonprofit
public benefit corporation under the laws of the State of California. The Corporation is an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code'), and is not a private foundation
under Section 509 of the Cade. The initial funding for the Corporation was provided in half by the George Hoag
Family Foundation and in half by fiords raised from the community through the Presbyterian Church.
Hospital Facilities
The Corporation established a nonprofit acute care hospital (the "Hospital') licensed for 75 beds in the City
of Newport Beach, California (the "City'l in 1952. The Hospital underwent major expansions in 1969, 1974 and
1990 and is currently licensed for 409 general acute rare beds. Further major improvement projects have been
undertaken in recent years and arc ongoing. See'Tbe Project" below. As of January 1, 2005, there wan over 1,000
members on the Hospital's medical staff. The Hospital is licensed by the Department of Health Services of the State
of California as a general acute care hospital and is accredited by the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO"). R
• The primary Hospital facility is on a 38 -acre parcel in Newport Beach in a camp a setting of 35
buildings which total approximately 883,000 square feet and approximately 2,517 parking The Corporation
has funded previous improvements from its own resources and the proceeds of to revenue bond issues
of the City, outstanding as of May 31, 2005, in the aggregate principal amount $316,000,000. Most recently, the
Corporation utilized the proceeds of the City's $125,000,000 Variable Rate and mue Bonds (Hoag
Memorial Hospital Presbyterian) 1999 Series A, B and C (the 9999 Bonds"), and additional monies to fund
construction of the Sue and Bill Cross Women's Pavilion, replacement of certain Hospital infrastructure and other
general capital expenditures. Proceeds of the 1999 Bonds are fully expended. The expansion project being financed
with proceeds of the Bonds is a continuation of the project financed in part with proceeds of the 1999 Bonds and
includes other new improvements to the Hospital campus. See The Project" below.
The Corporation provides a wide range of medical, surgical, diagnostic and therapeutic services, and has
established specialty centers refaced to as Centers of Excellence in Heart and Vascular, Cancer, Orthopedics and
Women's Health. The Corporation operates two free - standing facilities for outpatient surgery. The fist was opened
on the Hospital site in 1972 and contains three operating rooms. The second opened in 1983, is located four miles
from the Hospital in one of four major medical office buildings in Newport Center and contains four operating
rooms. The Corporation also operates six medical office buildings ("Health Centers") in the s4acent cities of Irvine
(approximately 33,000 square feet), Huntington Beach (approximately 53,000 square fed), Huntington Harbor
(approximately 6,500 square fed), Costa Mesa (approximately 20,000 square feet), Aliso Viejo (approximately
33,000 square feet), and Fountain Valley (approximately 8,263 square fed). In January of 1991, the Corporation
opened the Patty and George Hoag Cancer Center (approximately 60,000 square feet) located on the Hospital's
campus in Newport Beach (the "Cancer Center'). The Cancer Center houses dun linear accelerators, a day hospital
for chemotherapy, a biotherapeutics laboratory and physician offices for medical oncologists. The Corporation
owns the facilities and land in the Newport Beach, Huntington Beach, Irvine and Aliso Viejo Health Centers, rows
the facility in Huntington Harbor, and leases space in the Newport Center and Costa Mesa facilities.
JERNST &YOUNG + Ernst &Yuungttr
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc. August 22, 2005
Moreover, significant elements of the Project will need to be licensed by the State upon completion. There can be
no assurance that the required approvals will be obtained in a timely manner or at a0.
Cost Estimates Construction of portions of the Master Plan Project is expected to occur over a ten -year
period, in addition to Bond proceeds end eamings thereon, the Corporation expects to toad catam Project costa
through charitable contributions. The Corporation expects to receive as much as SI00 million in charitable
contnbutioos, a portion of which may be used towards costs of the PrcjecL The remainder of the Project costs is
expected to be funded from cash flow from operations and investment income during the course of construction and
from existing resources. The estimated contribution from cash flow has been derived from certain cash flow plans
prepared by the Corporation's finance staff. In the event such sources am inadequate, the Corporation would expect
to fund costs from existing reserves, or to modify elements of the Project, if feasible. For a further discussion of
certain risks relating to cost ovemms on the Project, please refer to the section of this Official Statement entitled
BONDHOLDERS' RISKS —Other Risk Factors — "Contributions "and "Construction Risks"
The Corporation has estimated the costs of the improvements to be financed with the proceeds of the Bonds
and other Project elements based on architects' and engineers' estimates. It is expected that the work for that portion
of improvements to be constructed in and around the existing Corporation activities will be conducted in a manner
to minimize disruption to Corporation services. While this effort is expected to be successful, it will involve
significaut increased cost and occasional disruption to construction work. The degree of this disruption is hard to
pr edict, and may cause costs to exceed the estimates shown.
The Corporation has not let contracts for a portion of the Project, including some elements expected to be
fimded with proceeds of the Bonds, primarily related to the lower campus building and remodel projects. Therefore,
the Corporation's estimates are imprecise. In addition, the scope of some Project components is subject to periodic
internal review and revision which may cause estimates to increase. Especially in light of the substantial
• rehabilitation work to be conducted, it is possible the Corporation will experience significant cost overruns with
respect to part or all of the Project, and such overruns could be in amounts which would in the aggregate be material
to the Corporation's operating results. While contingencies have been included in all Corporation cost estimates set
forth hero, it is possible that the scope of some Project elements may need to be reduced if actual costs exceed
estimates.
SELECTED UTILIZATION AND FINANCIAL INFORMATION
Sources of Patient Services Revenue
The Corporation receives payment for its services from several sources with a variety of payment
arrangements. Insurance payments include preferred provider organizations (PPOs), health maintenance
organizations (HMOs) and indemnity, agreements. The federal government, through the Medicare program, pays for
most services for persons over 65 years old and the State of California pays for indigent patients through the Medi-
Cal program. Orange County also funds certain indigent patients through the Medical Services for the Indigent
(MSI) program and other patients through the Cal -Optima program. The following table shows the Corporation's
distribution of gross patient revenue by payor for the past three fiscal years.
(1) Includes apitated commercial and Medicare.
• For a further discussion of Medicare, Medi -Cal and other payors, please refer to the section of this Official
Statement entitled "BONDHOLDERS' RISKS."
A -17
Fiscal Year Ended Apmut.31.
2002 2003 2004
Medicare
33.40A 33.9% 33.90A
PPO
27.8 28.1 28.1
HMO (1)
313 301 30.7
Medi -Cal & MSI
3.0 41 3.6
Other
4.5 3.8 3.7
(1) Includes apitated commercial and Medicare.
• For a further discussion of Medicare, Medi -Cal and other payors, please refer to the section of this Official
Statement entitled "BONDHOLDERS' RISKS."
A -17
J FRNST &YOUNG . Ernst a Young LLP
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc. August 22, 2005
accordance with accounting principles generally accepted in the United States.
Operating results for the nine
months ended May 31, 2005, are not necessarily indicative of the results which may be expected for the entire fiscal
year ended August 31, 7005. At May 31, 2005, the percentage of Income from Operations, Excess of Revenue over
Expenses, Total Assets and Total Net Assets attributable to the Corporation's Wholly -Owned Subsidiaries (which
are not Members of the Obligated Group) totaled approximately
-0.5%,-0-3%,0.8% and 0.5%,
respectively.
Summary of Revenues and Expenses of the Corporation and Its Wholly -Owned Subsidiaries 111
(Dollars in Thousands)
Fiscal Years Ended
Nine Months Ended
g
A
Ammst
31,
May
3
2003
2004
2004
2005
Net Patient Service Revenue
$336,612
$380,690
5277,007
5307,663
Revenue Earned on Prepaid Contracts
69,459
69,804
52,120
53,129
Other Operating Revenue
37.979
43.058
32,353
32,305
TOTAL OPERATING REVENUE
444,050
493,552
361,480
393,097
Operating Expenses:
Salaries & Benefits
200,630
220,807
163,561
180,516
Supplies
78,973
86,483
63,837
67,012
Purchased Services
57,130
66,529
46,000
45,204
Professional Fees
5,422
6,243
4,603
4,885
Depreciation and Amortization
28,179
30,513
22,524
23,908
Provision' for Bad Debts
9,281
14,025
9,676
10,056
Utilities
•
6,169
5,028
3,485
3,824
Insmsnce
3,987
5,449
4,574
3,060
Lease rental
6,978
7,350
5,603
5,393
Other
14.472
15.066
10.775
13339
TOTAL OPERATING EXPENSES
411,221
457,493
334,638
357,197
INCOME FROM OPERATIONS
32,829
36,059
26,842
35,900
Nonoperating Revemres/Expenses:
Interest Expense
(7,758)
(7,573)
(5,661)
(6,857)
Investment Income, Net
27,298
54,757
35,817
28,569
Other
1.363
2.807
697
1.309
TOTAL NONOPERATING
20,903
49,991
30,853
23,021
•
EXCESS OF REVENUE OVER
EXPENSES 1 $53,732 S86,050 1 $57.695
1'1 The information presented in this table is based on the financial information of the Corporation, CPPG and HPMI.
CPPG and HPMI are not Members of the Obligated Group and are not obligated with respect to the Bonds. See
"Summery of Financial Information" above.
►III]
DERNST &YOUNG ■ Emsta, Young LLP
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc.
Balance Sheet of the Corporation and Its Wholly -Owned Subsidiaries pt
(Dollars in Thousands)
•
ASSETS '
CURRENT ASSETS.
Cash and Cash Egnivalents
Patient accounts receivable, net of allowance
for doubtful accounts
Investments
Other Current Assets
Due From Related Parties
TOTAL CURRENT ASSETS.
ASSETS LIMITED AS TO USE.
Board designated for Capital Improvements
Boad procce is
Under indenture agreement hold by trustee
Under malpractice claims funding arrangement
held by trustee
For health and dental insurance claims
TOTAL ASSETS LIMITED AS TO USE
PROPERTY AND EQUIPMENT, NET
OTHER ASSETS
TOTAL ASSETS
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Account payable
Accrued expenses
Accrued liabilities under capitated contracts
Estimated third -party payor settlements
Due to Related Parties
TOTAL CURRENT LIABILITIES:
NONCURRENT LIABILITIES:
Estimated malpractice claims
Bonds payable
Other long -teen liabilities
TOTAL NONCURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL NET ASSETS
TOTAL LIABILITIES & NET ASSETS
Focal Years
Ended August 31,
2003 2004
535,590 x82,044
34,928
42,776
2,989
3,841
12,067
13,931
3.135
3.183
88,709 145,775
705,408 690,859
5
5
319
315
15,076
16,040
2.684
4.580
723,492 711,799
365,570 445,184
13,389 14,966
191.160 SI.317.724
$16,567 $30,835
39,464
54,919
9,665
13,715
706
759
366
359
66,768 100,587
10,072
13,140
316,000
316,000
10,354
4.919
336,426
334,059
403,194
434,646
787,966
883,078
51.191.160
$1.317.724
August 22, 2005
2005 B
$7,653
45,827
4,065
15,510
1.118
74,173
776,980
5
308
16,626
1.689
795,608
497,592
15,372
$1.382.745
$23,949
43,770
12,575
1,506
356
82,156
14,835
316,000
1.897
332,732
414,888
967,857
1.382.745
10 The information presented in this table is based on the financial infomtation of the Corporation, CPPG and HPMI.
• CPPG and HPMI are not Members of the Obligated Group and are not obligated with respect to the Bonds. See
"Summary of Financial Information" above.
A -20
JERNST &YOUNG • Ermt &YOUngLLP
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc. August 22, 2005
Management's Discussion an yais of Flaando' InfWaatlo A A
For ended August 31 orporation reported Net Patient Serv' W A
approximstel Et-ou in comparison $337 ' 'en for the year prior. The approx�a 544 milli 13%,
increase is d rate increases third petty payers as well as growth in eat
Forth interim ds of a months ended May 31, 2005 and 2004, Net Patent Service Revenue totaled
approximate $308 277 milliop, respectively. Continued strength in payor mix and rates has contributed to
this increase.
B &--, �,. A.
For the August 31, 2 Corporation reported Revenue Earned on Prepaid Contracts
of approximatel S70 mil n in comparison 69 mi for the year prior. Revenue Earned on Prepaid Con
consists of raven by the Corporation capitated payment arrangements with payers. Th 0.5 % %l
increase is due to payment rates increases offset in part by the decline in covered membership of 17% for the
period. For the interim periods e n onths ended May 31, 2005 and 2004, Revenue Earned on Prepaid
Contracts totaled approximate( 553 S52 respectively with rate increases from health pleas continuing
to offset declining memb rp. le contracts remain an active payor category, the Corporation does
not expect to grow siaess. As ay 31, 2005, the Corporation had approximately 58,894 equivalent lives
covered order aid contracts. Fj A A�
6
The Coryoration's inpatient activity .m =:n° strong as evident in the high aLV rotes of
81 %, 83% and 81% for 2002, 2003 and 2004, respectively. Despite declines ' outpatient surgical v e, overall
outpatient growth has continued, 6.5% for the period 2002 through 2 Successful ounce strategies and
investment in key outpatient technologies and programs have contrib this contimred gro Other Operating
• Revenue for the Corporation and its Wholly -Owned Subsidiaries o 3 rot : on far 2004 a 38 mil n for 2003 is
comprised mainly of attain management agreements between the an, its Wholly ubsit iaries and
physician related entities as part of the Corporation's and its Wholly-Owned Subsidiaries' physician integration
strategies. For the nine months ended May 31 May 31, 2004, the Corporation and its WholVDwned
Subsidiaries reported Other Operating Revenue o 032 mi
and benefits for the fiscal y � endtng August 31, 2004 total
$221 mi a 10% crease over -
2003 01 mt 'on. During fiscal 2004, the Corporation experienced wage press to th going nursing
and c ' shortages with the majority of the 10% increase attributed to wage inflation. During this same
period, however, the Corporation reduced its exposure and cost to outside agency sta% including registry and
travelers, by 33 %. Despite the strong labor shortages in California, the Corporation's overall turnover rate remains
below 16% with nursing at approximately 11 °/a For the nine m ended May 31, 2005, the on and its
Wholly-Owned Subsidiaries reported Salaries and Benefits o 5181 m' in comparison 164 m for the
comparison period The Corporation staffs to the dated nurse- os. See •-
"BONDHOLDERS' RISKS — Significant Risk Areas ' d— Nursing and (7th rtages" is the forepart
of this Official Statement for more informs staf a
Supplies expense a fiscal year end' 31, 2004 totaled approximatal 086 mill( n. This
represents an approxima 9% crease over 2003 579 millmo ). Advancements in certain techno treatment
modalities, particularly in ac care, have eonni creased supply expenditures. The Corporation remains
committed to supporting its Centers of Excellence, including advancements in technologies which often contain
supply related components. For the nine ended May 31,1, 20 Corporation and its WholVOwned
Subsidiaries reported SttppGes Expense o S67 milk in comparison 564 mdl for the 2004 comparison period
i+ a s A
Purcb ervras for the fiscal year ending August 31, 2004 totaled approximately S66 mil n as
compared to $57 milli n for time year prior. The increase over 2003 was largely attributable tot m the
Corporation's Care/HMO business and relates to the cost of covered lives utilizing outside purchased
health care, including emergency and trauma, for which the Corporation is financially responsible. Other increases
occurred in the areas of maintenance (including information technology and software), marketing and
collectionlrecovery costs. For the nine moot ended May 31, 2005, the orati on and its Wholly -Owned
Subsidiaries reported Pt Services o 5 m71 in comparison 546 mil m for the comparison period.
The decrease realized to date is largely rel ccrease in the Cc 0 business and relates to the
g a
A -21
J ERNST &YOUNG ■ Ernst & Young ltP
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc August 22, 2005
cost of covered lives utilizing outside purchased health Cate, ' udiag emergency and traurne for which the
Corporation is financially responsible, which represents a rev tread from 2004 (see above).
A
Professional fees represent the Corporal s investment in certain icim coverage programs and 8
medical directorships. Examples of coverage imbide contract an hospitalises and iataasivists, es
well as OH night call ooverage, to pmvi ed patient care. For year ended August 31, 2004,
Corporation reported professional fees o S6 tai n as competed t 5 tai the year prior. For the oath
interim periods ended May 31, 2005 and 2004, the Cwpmatio professional fees o 5 milli /}
For year ended A t 31, 20 taciation use totaled approximate) S31 milh
compared to 28 for they prior. pro the capital expansion program o
firm eat has con ed o m reciadon a for the trine months ended May 5 4
million as compared o ate S23 anlh or cornpmisou period ran for bad deb
fiscal year 2004 total 14 ' ' es eompaied $9 m illio for the year prior $10 milhon r months
ended May 31, 2005 and y 2004. While in s tghty, bad debt I art 1% fro
revenues. Other expenjoIg the fiscal year ended August 31, 2004 total $15 milho as c 14 mdlion
for the yen prior ati#1319M�p for the nine months ended May 31, 200 d S 11 milli or
comparison period. A B
Interest expense totaled approximate) $S mil for the fiscal years ended August 31, 2
Interest expense is attributable o the Corporation s existing variable rate long-tam dew totalin 531 w ' n at
2004. Additionally interest expense contains certain costs associated with n fixed rate swap en y the
Corporation in 2002, nose fully described trader `T.itpddity and Investment Po@cy below. This contract expires in
first quarter 2007. See "In and Certain Liabil' ' " dow. For the nine month period ended May 31,
2005, intacai expensestotal $7 mil6o u compared t66 m ' for the comparison period
• Investment income for the fiscal year ended August 31, 2004 totaled 55 milli in comparison to S27
million for the year prior. The fluctuation is periods is due o changes in market en titre as the Corporation s
investment policies and practices have remained largely consistent through August 31, 2004. Investment income for
the nine -month period ended May 31, 2005 was S29 million in comparison to $36 million for the comparison period.
The fluctuations are due Imply to changes in market conditions; however, material chimps to the Corporation's
investment policies were made in the latter half of calendar year 2004. Investment income reported in the Summary
of Revenue and Expenses represented the net result of realized gains and losses on investment activity, as well as
dividend and interest income.
The Corporation's and its Wholly-Dwned Subsidiaries' total net income before depreciation and interest
( "EBDI) is as follows for fiscal years 2002, 2003 and 2004:
2002 2003 0
EBDI Pr 566,2% 589,669 5124,13 A
hanous those periods in EBDI are largely due to investment performance results o $14
million, 27 migi m 555w1h t, respectively, as well as continued strength in operating margins of 6.6 %, 7.4 0
and 73% m , 2003 respectively.
Overall, the Corporation's operations have remained financially strong. The Corporation has been able to
respond successfully in rate negotiations, implementing certain cost containment strategies, focusing on recruitment
and retention and maintaining market share in its primary and secondary service area while seeking out creative
interim solutions to inpatient capacity constraints. It is management's expectation that competitive wage pressure
and labor shortages will continue to stress labor budgets and staffing plems. Additionally, management expects
pressure from payors and employers on reimbursement rates. However, management expects to maintain overall
positive operating margins and strong rash flow margins whsle continuing to invest in facilities, programs and
technologies to maintain and then grow market share, particularly in support of the Corporation's Centers of
• Excellence.
A -22
J ERNST &YOUNG a Ernst & Young LLP
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc. August 22, 2005
Liquidity and Investment Policy
The Corporation and its Wholly -Owned Subsidiaries bad approximately $777 million of cash, cash
equivalents and inveshments, including board designated funds and other investments, at August 31, 2004. The
following table sets forth the Corporation's and its Wholly -Owned Subsidiaries' cash and investments for fiscal
years 2003, 2004, and the nine months ended May 31, 2005.
Cash and cash equivalents consist mainly of bank deposits and shat -term investments in money market
fiords. In accordance with its investment and operating objectives, the Corporation has segregated its Board
Designated Investment Reserves into time distinct portfolios: Building Plan Portfolio, Liquidity Portfolio, and
Long -Term Portfolio.
Value
The Corporation's finds are invested pursuant to investment policies established by the Corporation's
Board of Directors. The investment policies provide for an overall philosophy that is specific enough to
demonstrate what is expected of selected investment managers yet sufficiently flexible to allow for changing
economic conditions and securities markets. The policy seeks to identify acceptable risk levels associated with
reaching long -term rate of return objectives, which serve as criteria for evaluating investment performance. The
Corporation's Long Term Portfolio investment policy directs such assets to be invested in a manner which:
• Preserves principal through prudent diversification and investment in highly rated securities as well as
certain non-rated securities such as small capitalization stocks and intonational equities and high yield
bonds, where permitted;
• Reduces overall portfolio volatility while pursuing targeted investment returns through allocation of a
portion of the portfolio's long -term investment reserves to alternative investment strategies;
•
A -23
August 31, 2003 An¢ust 31, 2004
May 3L 2005
Cash & Cub Equivalents
$35,590 4.8% $82,044 10.6%
$7,653 1.0%
Other Short-Term Investmentsni
2,989 0.4% 3,841 0.5%
4,065 OS%
Building Plan Portfollonl
Fixed Income Securities
107,180 14A016 114,244 14.7%
1181948 15.1%
Liquidity Portfollom
Fixed Income Securities
102,548 13.8% 110,600 14.2%
113,740 14.4%
Long -Term Portfaild"
Fixed Income Securities
310,804 150,718
146,538
U.S. Large Cap Equity
39,776 22,522
25,275
Securities
U.S. Smaller & Mid Cap
72,444 57,939
66,835
Equities
Global Equity
72,656 88,253
98,684
Absolute Retum
0 146.583
206.960
Total Long -Term Portfolio
495,680 66.6% 466,015 60%
544,292 69.0%
Total Cash & Iovestmettts
S 743"987 100.00/0 S 776.744 100.0%
788.698 100.0%
aad equity mutual finds.
pl Comprised of investments in debt
P1 In 2004, the Corporation segregated
its Board Designated Reserves into three distinct pools:
Building
Plan Pordblic,
Liquidity Portfolio, and Long-Term
Portfolio.
The Corporation's finds are invested pursuant to investment policies established by the Corporation's
Board of Directors. The investment policies provide for an overall philosophy that is specific enough to
demonstrate what is expected of selected investment managers yet sufficiently flexible to allow for changing
economic conditions and securities markets. The policy seeks to identify acceptable risk levels associated with
reaching long -term rate of return objectives, which serve as criteria for evaluating investment performance. The
Corporation's Long Term Portfolio investment policy directs such assets to be invested in a manner which:
• Preserves principal through prudent diversification and investment in highly rated securities as well as
certain non-rated securities such as small capitalization stocks and intonational equities and high yield
bonds, where permitted;
• Reduces overall portfolio volatility while pursuing targeted investment returns through allocation of a
portion of the portfolio's long -term investment reserves to alternative investment strategies;
•
A -23
J ERNST &YOUNG
• Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc.
•
■ Ernst & Young Lu,
August 22, 2005
Each of the 1992 Bonds, the 1996 Bonds and the 1999 Bonds provide for variable interest rates computed
over interest periods selected by the Corporation. At the end of each Interest Period, bondholders have the right to
tender their bonds for repurchase by the Corporation. The Corporation manages the risk that bonds will be tendered
in the manner described below, and may address the liquidity requirement with respect to the 1999 Bonds on its
own, without third party liquidity support. These bonds, like the Bonds, may also impose the risk of significant
fluctuation of interest rates, with attendant impact on Corporation interest expense.
During 2002, the Corporation entered.into an interest rate swap with respect to tiro 1992 Bonds and the
1999 Bonds that effectively converted a portion of its floating -rate debt to a fitted -rate basis for a term of five years,
thus reducing the impact of interest -rate changes on fimue interest expense. The swap agreement hedges an initial
notimal amount of $150,000,000 at a 3.235% fixed interest rate against 67% of the average USD -LIBOR BBA rate
(1.089% on August 31, 2004). Settlements are made on a monthly basis with the countegtarty, Merrill Lynch Capital
Services, over the term of the agzKmmt, which expires in February, 2007.
Existing Liquidity Facility
The Corporation's obligations with respect to the S 191, 000,000 aggregate outstanding principal amount of
1992 Bonds and 1996 Bonds may also require the Corporation to provide liquidity in connection with the obligation
to purchase such bonds upon mandatory or optional tender. While the Corporation currently maintains a liquidity
facility with Bank of America, National Association to provide funds for such liquidity events, this liquidity facility
expires in November, 2005 (subject to annual renewal at the option of the provider upon the Corporation's request).
The Corporation can give no assurance that this liquidity facility will be renewed by the provider or replaced with a
substitute liquidity facility from a different provider. The Corporation may also eleet to provide self- liquidity in
such event, on a similar basis as exists with respect to the 1999 Bonds. Moreover, under the liquidity facility for
each of the 1992 Bonds and the 1996 Bonds, the provider can to n.inate its obligation to provide liquidity for the
purchase of such bonds under certain circumstances prior to the expiration date. In any of such events, the
Corporation would be required to transfer to the tender agent for such bonds sufficient fiords to pay the purchase
price therefor on short notice (mg., 7 days while such bonds bear interest at a weekly interest rate}
Self-Liquidity
The Corporation currently maintains self - liquidity in connection with the 1999 Bonds. The Corporation is
subject to an arrangement with certain of the bond rating agencies related to the 1999 Bonds whereby It must
maintain, in the aggregate, sufficient long -term assets, primarily marketable fixed Income securities and other
liquidity support vehicles, to be used to repurchase the bonds in the unlikely event that tendered bonds am not resold
in the open market The total investments in securities with same day liquidity totaled about $289,792,662 and
represented about 2.3x the outstanding principal amount of the 1999 Bonds as of May 31, 2005.
Capitalization
Tito following table sets forth the capitalization for the Corporation and its Wholly -Owned Subsidiaries and
its Wholly -Owned Subsidiaries at August 31, 2004. The pro forma capitalization has been adjusted to reflect the
issuance of the Bonds, as if such transaction had occurred on August 31, 2004.
Outstanding Long Term Debt
Plus: The Bonds
Subtotal
Total Net Assets
Total Capitalization
Percent Long -Tenn Debt to Capitalization
C
Actual
August 31, 2004
Pro Forma
August 31,.2004
000's}
$316,000
$316,000
200.000
316,000
516,000
883.078
883.078
$1,199,078
51,399,078
26.4%
36.9%
JERNST &YOUNG
Hoag Memorial Hospital Presbyterian
and
Citigroup Global Markets Inc.
Estimated Debt Service Coverage
■ Emst & Young LLP
August 22,2005
The following table sets forth the C tion's and its Wholly -Owned Subsidiaries' estimated annual debt
service coverage for the fiscal years ended AuXot 31, 2003 and 2004. The pro forma debt service coverage has
been adjusted to reflect the issuance of the B nds, as if such transaction had occurred on September 1, 20M in the
aggregate amount of $200 million. All de assumes an interest rate of 2.72% per annum, the approximate 1 D.year
average of the BMA Index.
► The presentation of the Debt Service Coverage Ratio does not correlate to the determination of debt service
coverage as required under the Master bidenam Calculations of debt service coverage under the Master Indenture
require an assumption of interest rates and amortization of existing debt and may not involve the same elements of
income avai able for debt service. Applying these assumptions regarding interest and amortization, and including
• unnsfets tram Hoag Hospital Foundation, the debt service coverage ratio under the Master Indenture approximates
3.70x as of August 31, 2004. See "APPENDIX D — SUMMARY OF PRINCIPAL DOCUMENTS — Master
Indenture — Particular Covenants of Each Member of the Obligated Group - Limitations on incurrence of Additional
indebtedness."
•
ORGANIZATION AND MANAGEMENT
Corporate Structure
The Corporation has fifty members, twenty-five appointed by the George Hoag Family Foundation and
twenty-five by the Association of Presbyterian Members of Orange County. The members elect the Board of
Directors of the Corporation. Nominations to the Board am made as follows: the George Hoag Family Foundation -
five; the Association of Presbyterian Members - five; a nominating committee of the Board from the community at
large - five; the Medical Staff— thrm, and the President & CEO as an ex- officio member.
A -27
Actual
Actual
Pro Forma
AnEast 31, 2003
August 3L 2004
August 31. 2004
{ODD}
Net Income
$53,732
$96,050
$79,588
Depreciation and Amortization
28,179
30,513
30,513
Interest
7,759
7,5p
14,035
Income Available for Debt Service
89-669
IM IIA
124,136
Estimated Debt Service
9.595
1595
14.035
Debt Service Coverage Ratio (times)*
10.4
14.4
8.8
► The presentation of the Debt Service Coverage Ratio does not correlate to the determination of debt service
coverage as required under the Master bidenam Calculations of debt service coverage under the Master Indenture
require an assumption of interest rates and amortization of existing debt and may not involve the same elements of
income avai able for debt service. Applying these assumptions regarding interest and amortization, and including
• unnsfets tram Hoag Hospital Foundation, the debt service coverage ratio under the Master Indenture approximates
3.70x as of August 31, 2004. See "APPENDIX D — SUMMARY OF PRINCIPAL DOCUMENTS — Master
Indenture — Particular Covenants of Each Member of the Obligated Group - Limitations on incurrence of Additional
indebtedness."
•
ORGANIZATION AND MANAGEMENT
Corporate Structure
The Corporation has fifty members, twenty-five appointed by the George Hoag Family Foundation and
twenty-five by the Association of Presbyterian Members of Orange County. The members elect the Board of
Directors of the Corporation. Nominations to the Board am made as follows: the George Hoag Family Foundation -
five; the Association of Presbyterian Members - five; a nominating committee of the Board from the community at
large - five; the Medical Staff— thrm, and the President & CEO as an ex- officio member.
A -27
EXHIBIT NO. 16
Consent Letter for the
Official Statement
(Auditor; Disclosure Counsel)
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Acknowledgement of Independent Auditors
We agree to the inclusion in the Official Statement dated August 12, 2005 for the
$200,000,000 City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian ) ( Auction Rate Securities ) Series 2005A, Series 2005B and Series 2005C,
of our report dated November 12, 2004, with respect to the consolidated financial
statements of Hoag Memorial Hospital Presbyterian and Affiliates.
Irvine, California
August 12, 2005
/s/ Ernst & Young LLP
EXHIBIT NO. 17
Certified Copy of the
City Charter
(BC and City)
U
CERTIFICATE REGARDING CITY CHARTER
I hereby certify that the attached is a true, correct and complete copy of the Charter
of the City of Newport Beach.
DOCSSCI 358317.3
Dated: August 24, 2005.
CITY OF NEWPORT BEACH
Byz2�Z 6AWL �/ o / . A/ /�
City Clerk
5�
CHARTER OF THE
CITY OF NEWPORT BEACH
TABLE OF CONTENTS
Article H. Powers of City
• Section 200 Powers
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Article III. Form of Government
Section 300 Form of Government
Article I. Incorporation and Succession
Section
100
Name and Boundaries
Section
101
Succession, Rights and Liabilities
Section
102
Ordinances
Section
103
Continuance of Present Officers and
Reimbursement for Expenses
Section
Employees
Section
104
Continuance of Contracts and Public
The Mayor. Mayor Pro Tempore
Section
Improvements
Section
105
Pending Actions and Proceedings
Section
106
Effective Date of this Charter
Article H. Powers of City
• Section 200 Powers
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Article III. Form of Government
Section 300 Form of Government
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(NV WPW Eexn zol)
Article IV. City Council
Section
400
Elective Officers
Section
401
Eligibility
Section
402 -A
Compensation
Section
402-B
Reimbursement for Expenses
Section
403
Vacancies
Section
404
The Mayor. Mayor Pro Tempore
Section
405
Powers Vested in the City Council
Section
406
Interference in Administrative Service
Section
407
Regular Meetings
Section
408
Special Meetings
Section
409
Place of Meetings
Section
.410
Quorum. Proceedings
Section
411
Citizen Participation
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(NV WPW Eexn zol)
0
Section
412
Adoption of Ordinances and Resolutions
Section
413
Ordinances. Enactment
Section
414
Ordinances. Publication
Section
415
Codification of Ordinances
Section
416
Ordinances. When Effective
Section
418
Ordinances. Amendment.
Section
419
Publishing of Legal Notices
Section
420
Contracts. Restrictions
Section
421
Contracts. Execution
Section
422
Freeway and Expressway Agreements;
Connection with Freeways; Vote of
Electors Required for Approval
Section 423
Protection from Traffic and Density
Article V. City Manager
Section
500
City Manager
Section
501
Residence
Section
502
Eligibility
Section
503
Compensation and Bond
•
Section
504
Powers and Duties
Section
505
Meetings
Section
506
Removal
Section
507
Manager Pro Tempore
Article VI. Officers and Employees
Section
600
Officers to be Appointed by the City
Council
Section
601
Administrative Departments
Section
. 602
City Attorney. Powers and Duties
Section
603
City Cleric_ Powers and Duties
Section
605
Director of Finance
Section
606
Administering Oaths
Section
607
Department Heads. Appointment Powers
Section
608
Illegal Contacts. Financial Interest
Section
609
Acceptance of Other Office
Section
610
Nepotism
Section
611
Official Bonds
•
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•
Article X. Election.
Section
1000
Article VII. Appointive Boards and Commissions
Section
Section
700
In General
1002
Section
701
Appropriations
Initiative, Referendum and Recall
Section
702
Appointments. Terms
Section
Section
703
Existing Boards
1006
Section
704
Meetings. Chairmen
Section
705
Compensation. Vacancies
Section
706
Planning Commission. Members
Section
707
Planning Commission. Powers and
Duties
Section
708
Board of Library Trustees. Powers and
Duties
Section
709
Parks, Beaches and Recreation
Commission. Powers and Duties
Section
710
Civil Service Board
Section
711
Civil Service Board. Powers and Duties
Section
712
City Arts Commission
•
Article VIII. Civil Service System
Section
800
Continuance of Present System
Section
801
System to be Maintained
Section
802
Positions Included in the System
Section
803
Withdrawal from System
Article IX. Retirement
Section 900 Retirement System
• C -3
Article X. Election.
Section
1000
General Municipal Elections
Section
1001
Special Municipal Elections
Section
1002
Procedure for Holding Elections
Section
1003
Initiative, Referendum and Recall
Section
1004
Voters Signing Nomination Petitions
Section
1005
Districts
Section
1006
Territory Not Specifically Described
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Article XU. Board of Education
Section 1200 State Law Governs
Section 1201 Effect of Charter
Article XIIL Franchises
Section
Article M. Fiscal Administration
Section
1100
Fiscal Year
Section
1101
Annual Budget. Preparation by the City
Public Hearing
Section
Manager
Section
1102
Budget Submission to City Council
Section
1103
Budget Public Hearing
Section
1104
Budget Adoption
Section
1105
Budget Appropriations
Section
1106
Centralized Purchasing
Section
1107
Tax Limits
Section
1108
Tax Procedure
Section
1109
Bonded Debt Limit
Section
1110
Contracts on Public Works
Section
1111
Purchasing Supplies
Section
1112
Cash Basis Fund
Section
1113
Capital Improvement Fund
Section
1114
Claims and Demands
Section
1115
Registering Demands
Section
1116
Independent Audit. •
Article XU. Board of Education
Section 1200 State Law Governs
Section 1201 Effect of Charter
Article XIIL Franchises
Section
1300
Granting of Franchises
Section
1301
Resolution of Intention, Notice and
Public Hearing
Section
1302
Terms of Franchise
Section
1303
Grant to be in Lieu of all Other
Franchises
Section
1304
Eminent Domain
Section
1305
Duties of Grantees
Section
1306
Exercising Rights Without Franchise
is
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Article MV. Miscellaneous
Section
1400
Definitions
Section
1401
Oil Well Drilling
Section
1402
Water -front Property
Section
1402(a)
Exception to Section 1402
Section
1402(b)
Exception to Section 1402
Section
1402(c)
Exception to Section 1402
Section
1402(d)
Exception to Section 1402
Section
1402(e)
Exception to Section 1402
Section
14020
Exception to Section 1402
Section
1403
Service and Utility Charges
Section
1404
Violations
Section
1405
Validity
Appendix A
C
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(:ewpw Beach 2-01)
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We, the People of the City of Newport Beach,
State of California, do ordain and establish this
Charter as the organic law of the City under the
Constitution of the State.
Article I
Incorporation and Succession
Section 100. Name and Boundaries.
The City of Newport Beach, hereinafter termed
the City, shall continue to be a municipal corpora-
tion under its present name of "City of Newport
Beach." The boundaries of the City shall be the
boundaries as established at the time this Chatter
takes effect, and as such boundaries may be changed
thereafter in the manner authorized by law.
Section 101. Succession, Rights and Liabilities.
The City of Newport Beach shall continue to
own, possess and control all rights and property of
every kind and nature owned, possessed or con-
trolled by it at the time this Charter takes effect and
shall be subject to all its debts, obligations, liabili-
ties and contracts.
Section 102. Ordinances.
All lawful ordinances, resolutions, rules and
regulations, and portions thereof, in force at the time
this Charter takes effect, and not in conflict or in-
consistent herewith, are hereby continued in force
until the same shall have been duly repealed,
amended, changed or superseded by proper authori-
ty.
Section 103. Continuance of Present Officers
and Employees.
The present officers and employees shall continue
without interruption to perform the duties of their
respective offices and employments upon the same
conditions and for the compensation provided by the
existing ordinances, resolutions, rules or laws, until
the election, or appointment, and qualification of
their successors. under this Charter and subject to
such removal and control as is provided in this
C -7
Charter
Charter. The terms of office of elective officers
whose offices are made appointive under this Char-
ter shall expire upon the appointment of their suc-
cessors, respectively.
Section 104. Continuance of Contracts and
Public Improvements.
All contracts entered into by the City, or for its
benefit, prior to the taking of effect of this Charter,
shall continue in full force and effect Public im-
provements for which proceedings have been insti-
tuted under laws existing at the time this Charter
takes effect, in the discretion of the City Council,
tray be carried to completion as nearly as practica-
ble in accordance with the provisions of such exist-
ing laws or may be continued or perfected under
this Charter.
Section 105.. Pending Action and Proceedings.
No action or proceeding, civil or criminal, pend-
ing at the time when this Charter takes effect,
brought by or against the City or any officer, office,
department or agency thereof, shall be affected or
abated by the adoption of this Charter or by any-
thing herein contained, but all such actions or pro-
ceedings may be continued notwithstanding that
functions, powers and duties of any.officer,,office,
department or agency party thereto, by or under this
Charter, may be assigned or transferred to another
officer, department or agency, but in that event the
same may be prosecuted or defended by the head of
the office, department or agency to which such
functions, powers and duties have been assigned or
transferred by or under this Charter.
Section 106. Effective Date of this Charter.
This Charter shall take effect upon its approval
by the Legislature.
Charter
r. 1
Powers of City
Section 200. Powers.
The City shall have the power to make and en-
force all laws, rules and regulations in respect to
municipal affairs, subject only to such restrictions
and limitations as may be provided in this Charter
and in the Constitution of the State of California. It
shall also have the power to exercise, or act pursu-
ant to any and all rights, powers, privileges, or
procedures, heretofore or hereafter established,
granted or prescribed by any law of the State, by
this Charter, or by other lawful authority, or which
a municipal corporation might or could exercise, or
act pursuant to, under the Constitution of the State
of California. The enumeration in this Charter of
any particular power shall not be held to be exclu-
sive of, or any limitation upon, the generality of the
foregoing provisions.
rr{"ITITMIII
Form of Government
Section 300. Form of Government.
The municipal government established by this
Charter shall be known as the "Council- Manager"
form of Government.
Article IV
City Council
Section 400. Elective Officers.
The elective officers of the City shall consist of
a City Council of seven members. Candidates for
City Council shall be nominated from and by the
electors of each of the seven districts referred to in
Article X of this Charter and one shall be elected
from each of such districts by the voters of the City
at large at the times and in the manner provided in
this Charter. Ties in voting among candidates for
office shall be settled by the casting of lots.
Alternatively, and successively, four four -year
terms shall be filled at one general municipal elec-
tion and three four -year terms at the next such elec-
tion, consistent with the sequence of terns of
Councilmembers existing on the effective date of
this amendment.
The term of office shall be four years. The term
of each Council member shall commence on the
date of the City Council meeting, following his or
her election, at which the council receives the certif-
ication of election results from the City Clerk. (As
amended by amendments effective April 8, 1980,
and November 6, 1984)
Section 401. Eligibility.
No person shall be eligible to -hold office as a
member of the City Council unless he or she is, and
shall have been for at least thirty (30) days immedi-
ately preceding nomination or. appointment, a regis-
tered elector of the district from which he or she is
nominated or appointed, and for at least thirty (30)
days immediately preceding his or her election or
appointment, a registered elector of the City.
Notwithstanding the provisions of Section 400,
no person shall be or remain eligible to hold office
as a member of the City Council for more than two
consecutive four -year terms. Members of the City
Council who have served one or more terms prior
to their current term shall be entitled to complete
such term, but shall not be eligible for re-election
except as provided below. Members of the City
Council who are serving their first term as of the
effective date of this amendment shall be eligible to
hold office during a second four year term when the
current term expires.
This section is intended to prevent persons from
serving more than two consecutive terms, and shall
not be construed to render ineligible any person who
would not, by virtue of his or her election, serve
more than two consecutive terms. (As amended by
amendments effective on June 19, 1968, June 6,
1964, April 8, 1980, and November 3, 1992)
C -8
Section 402A. Compensation.
The members of the City Council shall receive no
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•
compensation for their services as such. (As amend-
ed by amendments effective on April 23, 1958,
April 28, 1966, June 6, 1974, and April 8, 1980)
Seddon 402B. Reimbursement for Expenses.
The members of the City Council shall receive
reimbursement on order of the City Council for
Council authorized traveling expenses when on
official duty. In addition, each member shall receive
the sum of four hundred forty -one dollars and Frf-
teen Cents ($441.15) per month, adjusted annually
in accordance with the U.S. Department of Labor,
Bureau of Labor Statistics, Consumer Price Index,
or five percent (5%) whichever amount is lesser, as
reimbursement for other expenditures imposed upon
him in serving as a City Councilman. Absence of a
Councilman from all regular and special meetings
of the Council during any calendar month shall
render such Councilman ineligible to receive such
sum for such calendar month. (As amended by
amendments effective April 23, 1958, April 28,
1966, June 6, 1974, and April 8, 1980)
Section 403. Vacancy.
A vacancy in the City Council from whatever
cause arising, shall be filled by appointment by the
City Council of a qualified person from the district
in which the vacancy has occurred, such appointee
to hold office until the fast Tuesday following the
next general municipal election and until his succes-
sor qualifies. At the next general municipal election
following any vacancy, a Councilman shall be elect-
ed from the district in which the vacancy exists to
serve for the remainder of the unexpired term.
If a member of the City Council absents himself
from all regular meetings of the City Council for a
period of sixty days consecutively from and after the
last regular City Council meeting attended by such
member, unless by permission of the City Council
expressed in its official minutes, or is convicted of
• crime involving moral turpitude, or ceases to be
• qualified elector of his district, his office shall
become vacant and shall be so declared by the City
Council.
• C -9
Charter
In the event the City Council shall fail to fill-a
vacancy by appointment within thirty days after
such office shall have been so declared vacant, it
shall forthwith cause an election to be held to fill
such vacancy from the proper district
Section 404. The Mayor. Mayor Pro Tempore.
On the date of any meeting of the City Council
at which time the Council receives the certification
of the results of any general or special municipal
election at which any member of Council is elected,
the City Council shall, after swearing and qualifying -'
any newly elected member, elect one of its members
as its presiding officer, who shall have the title of
Mayor. The Mayor shall have a voice and vote in
all its proceedings. The Mayor shall have the prima-
ry but not exclusive responsibility for interpreting
the policies, programs and needs of the city govem-
ment to the people, and, as occasion requires, the
Mayor may inform the people of any change in such
other duties consistent with the office as may be
prescribed by this Charter or as may be imposed by
the City Council. The Mayor shall serve in such
capacity at the pleasure of the City Council.
In addition to the payment for expenses as a
Council Member under Section 402B, the City
Council may provide by resolution for the payment
to the Mayor of an allowance of not exceeding Two
Hundred Twenty Dollars and Fifty -Eight Cents per
month, adjusted annually in accordance with the
U.S. Department of Labor, Bureau of Labor Statis-
tics, Los Angeles, Long Beach, Anaheim Consumer
Price Index, or Five Percent (5%) whichever amount
is lesser, to reimburse the Mayor for the additional
expenses incurred in serving in that capacity.
The City Council shall at the same time the May-
or is elected also designate one of its members -as
Mayor Pro Tempore, who shall serve in such capac-
ity at the pleasure of the City Council. The Mayor
Pro Tempore shall perform the duties of the Mayor
during the Mayor's absence or disability. (As
amended by amendments effective on April 28,
1966, June 6, 1974, April 8, 1980, and November
6, 1984)
Charter
Section 405. Powers Vested in the City
Council.
All powers of the City shall be vested in the City
Council except as otherwise provided in this Char-
ter.
Section 406. Interference in Administrative
Service.
Neither the City Council nor any of its members
shall interfere with the execution by the City Man-
ager of his powers and duties, or order, directly or
indirectly, the appointment by the City Manager or
by any of the department heads in the administrative
service of the City, of any person to an office or
employment or his removal therefrom. Except for
the purpose of inquiry, the City Council and its
members shall deal with the administrative service
under the City Manager solely through the City
Manager and neither the City Council nor any mem-
ber thereof shall give orders to any subordinates of
the City Manager, either publicly or privately.
Section 407. Regular Meeting.
The City Council shall hold regular meetings at
least twice each month at such times as it shall fix
by ordinance or resolution and may adjourn or re-
adjourn any regular meeting to a date and hour
certain which shall be specified in the order of
adjournment and when so adjourned each adjourned
meeting shall be a regular meeting for all purposes.
If the hour to which a meeting is adjourned is not
stated in the order of adjournment such meetings
shall be held at the hour for holding regular meet-
ings. If at any time any regular meeting falls on a
holiday such regular meeting shall be held on the
next business day.
Section 408. Special Meetings.
Special meetings may be called at any time by
the Mayor, or by four members of the City Council,
by written notice delivered personally to each mem-
ber and to each local newspaper of general circula-
tion and to each radio and television station which
has made written.request at least twenty-four hours
before the time specified for the proposed meeting.
A special meeting may also be validly held without
the giving of such written notice, if required to be
held by this Charter or if all members shall give
their consent, in writing, to the holding of such
meeting and such consent is on file in the office of
the City Clerk at the time of such meeting. A tele-
graphic communication from a member consenting
to the holding of a meeting shall be considered a
consent in writing. At any special meeting only such
matters may be acted upon as are referred to in such
written notice or consent. (As amended effective
June 6, 1974)
Section 409. Place of Meetings.
All meetings shall be held in the Council Cham-
bers of the City Hall, or in such place to which any
such meeting may be adjourned, and shall be open
to the public. If, by reason of fire, flood or other
emergency, it shall be unsafe to meet in the place
designated, the meetings may be held for the dura-
tion of the emergency at such place as is designated
by the Mayor, or, if he should fail to act, by four
members of the City Council.
Section 410. Quorum. Proceedings.
A majority of the members of the City Council
shall constitute a quorum to do business but a less
number may adjourn from time to time. In the ab-
sence of all the members of the Council from any
regular meeting or adjourned regular meeting, the
City Clerk may declare the same adjourned to a
stated day and hour. Notice of a meeting adjourned
by less than a quorum or by the Clerk shall be
given by the Clerk or may be waived by consent in
the same manner as specifi ed in this Charter for the
giving or waiving of notice of special meetings of
the City Council, but need not specify the matters
to be acted upon. The City Council shall judge the
qualifications of its members as set forth by the
Charter. It shall judge all election returns. It may
establish rules for the conduct of its proceedings and
evict or prosecute any member or other person for
disorderly conduct at any of its meetings.
Each member of the City Council shall have the
power to administer oaths and affirmations in any
C -10
•
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•
investigation or proceeding pending before the City
Council. The City Council shall have the power and
authority to compel the attendance of witnesses, to
examine them under oath and to compel the produc-
tion of evidence before it. Subpoenas shall be issued
in the name of the City and be attested by the City
Clerk. Disobedience of such subpoenas, or the refus-
al to testify (upon other than constitutional grounds),
shall constitute a misdemeanor, and shall be punish-
able in the same manner as violations of this Charter
are punishable.
At the demand of any member, and upon the
adoption of any ordinance, resolution, or order for
the payment of money, the City Clerk shall call the
roll and shall cause the ayes and noes taken on such
questions to be entered in the minutes of the meet-
ing.
Section 411. Citizen Participation.
No citizen shall be denied the right, personally or
through counsel, to present grievances at any regular
meeting of the City Council, or offer suggestions for
the betterment of municipal affairs.
Section 412. Adoption of Ordinances and
Resolutions.
With the sole exception of ordinances which take
effect upon adoption, referred to in this Article, no
ordinance shall be adopted by the City Council on
the day of its introduction, nor within five days
thereafter nor at any time other than at a regular or
adjourned regular meeting. At the time of its intro-
duction an ordinance shall become a part of the
proceedings of such tweeting in the custody of the
City Clerk. At the time of adoption of an ordinance
or resolution it shall be read in full, unless after the
reading of the title thereof, the further reading there-
of is waived by unanimous consent of the Council-
men present. In the event that any ordinance is
altered after its introduction, the same shall not be
finally adopted except at a regular or adjourned
regular meeting held not less than five days after the
date upon which such ordinance was so altered. The
correction of typographical or clerical errors shall
Charter
not constitute the making of an alteration within the
meaning of the foregoing sentence.
No order for the payment of money shall be
adopted or made at any other than a regular or
adjourned regular meeting.
Unless a higher vote is required by other provi-
sions of this Charter, the affirmative votes of at least
four members of the City Council shall be required
for the enactment of any ordinance or resolution, or
for the making or approving of any order for the
payment of money. All ordinances and resolutions
shall be signed by the Mayor and attested by the
City Clerk
Any ordinance declared by the City Council to be
necessary as an emergency measure for preserving
the public peace, health or safety, and containing a
statement of the reasons_ for its urgency, may be
introduced and adopted at one and the same meeting
if passed by at least five affirmative votes.
C -11
Section 413. Ordinances. Enactment.
In addition to such other acts of the City Council
as are required by this Charter to be by ordinance,
every act of the City Council establishing a fine or
other penalty, or granting a franchise, shall be by
ordinance.
The enacting clause of all ordinances shall be
substantially as follows'
"The City Council of the City of Newport
Beach ordain as follows: ".
Section 414. Ordinances. Publication.
The City Clerk shall cause each ordinance to be
published at least once in the official newspaper
within fifteen days after its adoption.
Section 415. Codification of Ordinances.
Any or all ordinances of the City which have
been enacted and published in the manner required
at the time of their adoption, and which have not
been repealed, may be compiled, consolidated, re-
vised, indexed and arranged as a comprehensive
ordinance code, and such code may be adopted by
reference, with the same effect as an ordinance, by
Charter
the passage of an ordinance for such purpose. Such
code need not be published in the manner required
for other ordinances, but not less than three copies
thereof shall be filed for use and examination by the
public in the office of the City Clerk prior to the
adoption thereof. Ordinances codified shall be re-
pealed as of the effective date of the code. Such
code may be subsequently revised, recompiled,
recodified and indexed, including such restatement
and substantive change as is necessary in the interest
of clarity, in the same manner as prescribed in this
section for the original adoption by reference of an
ordinance code. Amendments to the code shall be
enacted in the same manner as ordinances.
Detailed regulations pertaining to the construction
of buildings, plumbing and wiring, when arranged
as a comprehensive code, may likewise be adopted
by reference in the manner provided in this Section.
Maps, charts and diagrams also may be adopted by
reference in the same manner. (As amended effec-
tive June 29, 1962)
Section 416. Ordinances. When Effective.
No ordinance shall become effective until thirty
days from and after the date of its adoption, except
the following, which shall take effect upon adoption:
(a) An ordinance calling or otherwise relating to
an election.
(b) An improvement proceeding ordinance adopt-
ed under some law or procedural ordinance.
(c) An ordinance declaring the amount of money
necessary to be raised by taxation, or fixing the rate
of taxation, or levying the annual tax upon property.
(d) An emergency ordinance adopted in the man-
ner provided for in this Article.
Section 417, Ordinances, Violation, Penalty, re-
pealed by amendment effective June 6, 1974.
Section 418. Ordinances. Amendment.
The amendment of any section or sections of an
ordinance may be accomplished solely by the men -
actment of such section or sections at length, as
amended.
Section 419. Publishing of Legal Notices.
In the event that there is more than one newspa-
per of general circulation published and circulated
in the City, the City Council, annually, prior to the
beginning of each fiscal year, shall publish a notice
inviting bids and contract for the publication of all
legal notices or other matter required to be pub-
lished in a newspaper of general circulation in said
City, during the ensuing fiscal year. In the event
there is only one newspaper of general circulation
published and circulated in the City, the City Coun-
cil shall have the power to contract with such news-
paper for the printing and publishing of such legal
notices or matter without being required to advertise
for bids therefor. The newspaper with which any
such contract is made shall be designated the official
newspaper for the publication of such notices or
other matter for the period of such contract.
In no case shall the contract prices for such publi-
cation exceed the customary rates charged by such
newspaper for the publication of legal notices of a
private character.
In the event there is no newspaper of general
circulation published and circulated in the City, then
all legal notices or other matter may be published
by posting copies thereof in at least three public
places in the city.
No defect or irregularity in proceedings taken
under this Section, or failure to designate an official
newspaper, shall invalidate any publication where
the same is otherwise in conformity with this Char-
ter or law or ordinance.
Section 420. Contracts. Restrictions.
The City Council shall not have the power to
snake or authorize any contract or lease or extension
thereof for a longer period than twenty-five years
unless said contract, lease or extension be approved
by a majority of the qualified electors of the City
voting on such question at any election. A contract,
lease or extension for a longer period shall be valid
without such approval if it provides for the acquisi-
tion by the City at the end of such period of the real
or personal property so leased or contracted for.
This Section shall not apply to any franchise granted
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pursuant to the provisions of this Charter or to any
contract for the furnishing, or acquisition of the
products, commodity or services of any public utili-
ty.
Section 421. Contracts. Execution.
The City shall not be bound by any contract,
except as hereinafter provided, unless the same shall
be made in writing, approved by the City Council
and signed on behalf of the City by the Mayor and
City Clerk or by such other officer or officers as
shall be designated by the City Council. Any of said
officers shall sign a contract on behalf of the City
when directed to do so by the City Council.
By ordinance or resolution the City Council may
authorize the City Manager to bind the City, with
or without a written contract, for the acquisition of
equipment, materials, supplies, labor, services or
Other items included within the budget approved by
the City Council, and may impose a monetary limit
upon such authority.
The City Council may by ordinance or resolution
provide a method for the sale or exchange of per-
sonal property not needed in the City Service or not
fit for the purpose for which intended, and for the
conveyance of tide thereto.
Contracts for the sale of the products, commodi-
ties or services of any public utility owned, con-
trolled or operated by the City may be made by the
manager of such utility or by the head of the depart-
ment or City Manager upon forms approved by the
City Manager and at rates fixed by the City Council.
The provisions of this Section shall not apply to
the services rendered by any person in the employ
of the City at a regular salary.
Section 422. Freeway and Expressway
Agreements; Connection with
Freeways; Vote of Electors
Required for Approval.
Unless and until approved by a majority of the
City's electors voting at a general or special elec-
tion, the City shall not enter into an agreement or
contract with the State of California or any other
government or department, subdivision, agency or
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Charter
commission_ thereof (1) allowing construction of a
freeway or expressway which would be in whole or
in part within the boundaries of the City, or (2) to
close any City street at or near the point of its inter-
ception with any freeway or expressway or to make
provision for carrying such City street over or under
or to a connection with the freeway or expressway
or to do any work on such City street as is neces-
sary therefor. (Added by amendment effective April
26, 1971)
Section 423. Protection from Traffic and
Density.*
Voter approval is required for any major amend-
ment to the Newport Beach General Plan. A `major
amendment" is one that significantly increases the
maximum amount of traffic that allowed uses could
generate, or significantly increases allowed density
or intensity. "Significantly increases" means over
100 peak hour trips (traffic), or over 100 dwelling
units (density), or over 40,000 square feet of floor
area (intensity); these thresholds shall apply to the
total of- 1) Increases resulting from the amendment
itself, -plus 2) Eighty percent of the increases result-
ing from other amendments affecting the same
neighborhood and adopted within the preceding ten
years. "Other amendments" does not include those
approved by the voters. "Neighborhood" shall mean
a Statistical Area as shown in the Land Use Element
of the General Plan, page 89, in effect from 1988 to
1998, and new Statistical Areas created from time
to time for land subsequently annexed to the City.
"Voter approval is required" means that the
amendment shall not take effect unless it has been
submitted to the voters and approved by a majority
of those voting on it. Any such amendment shall be
submitted to a public vote as a separate and distinct
ballot measure notwithstanding its approval by the
city council at the same time as one or more other
amendments to the City's General Plan. The city
council shall -set -any election required by this Sec-
tion for the municipal election next following city
council approval of the amendment, or, by mutual
agreement with the applicant for the amendment,
may call a special election for this purpose with the
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Charter
cost of the special election shared by the applicant
and the City as they may agree. In any election
required by this Section, the ballot measure shall be
worded such that a YES vote approves the amend-
ment and a NO vote rejects the amendment; any
such election in which the ballot measure is not so
worded shall be void and shall have no effect.
. This section shall not apply if state or federal law
precludes a vote of the voters on the amendment
(Added by amendment effective December 15,
2000)
Editor's Note: The statistical divisions/statistical areas map is
found in Appendix A to this Charter.
Article V
City Manager
Section 500. City Manager.
There shall be a City Manager appointed by the
City Council who shall be the chief administrative•
officer of the City. In the selection of a City Manag-
er the City Council shall screen all qualified appli-
cants and other qualified persons known by the
Council to be available. It shall appoint by a majori-
ty vote, the person that it believes to be best quali-
fied on the basis of his executive and administrative
qualifications, with special reference to his experi-
ence in, and his knowledge of, accepted practice in
respect to the duties of the office as set forth in this
Charter. The City Manager shall serve at the plea-
sure of the City Council
Section 501. Residence.
The City Manager need not be a resident of the
City at the time of his appointment, but he shall
establish his residence within the City within ninety
days after his appointment, unless such- period is
extended by the City Council, and thereafter main-
tain his residence within the City during his tenure
of office.
Section 502. Eligibility.
No person shall be eligible to receive appoint-
ment as City Manager while serving as a member
of the City Council nor within one year after he has
ceased to be a City Councilman.
Section 503. Compensation and Bond.
The City Manager shall be paid a salary commen-
surate with his responsibilities as chief administra-
tive office of the City, which salary shall be estab-
lished by ordinance or resolution. The City Manager
shall furnish a corporate surety bond in such form
and in such amount as may be determined by the
City Council.
Section 504. Powers and Duties..
The City Manager shall be the head of the admin-
istrative branch of the City government. He shall be
responsible to the City Council for the proper ad-
ministration of all affairs of the City. Without limit-
ing the foregoing general grant of powers, responsi-
bilities and duties, the City Manager shall have
power and be required to:
(a) Appoint, and he may suspend or remove,
subject to the provisions of this Charter, all depart-
ment heads and officers of the City except elective
officers and those department heads and officers the
power of whose appointment is vested by the Char-
ter in the City Council, and approve or disapprove
all proposed appointments and removals of subordi-
nate employees by officers or department heads.
(b) Prepare the budget annually, submit such
budget to the City Council and be responsible for its
administration after its adoption.
(c) Prepare and submit to the City Council as of
the end of the fiscal year a complete report on the
finances and administrative activities of the City for _
the preceding fiscal year.
(d) Keep the City Council advised of the finan-
cial condition and future needs of the City and make
such recommendations as may seem to him desir-
able.
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(e) Establish a centralized purchasing system for
all City offices, departments and agencies.
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(f) Prepare rules and regulations governing the
• contracting for, purchasing, storing, distribution, or
disposal of all supplies, materials and equipment
required by any off -ice, department or agency of the
City government and recommend them to the City
Council for adoption by it
(g) See that the laws of the State pertaining to
the City, the provisions of this Charter and the ordi-
nances of the City are enforced.
(h) Exercise control of all administrative offices
and departments of the City and of all appointive
officers and employees except those directly ap-
pointed by the City Council and prescribe such
general rules and regulations as he may deem neces-
sary or proper for the general conduct of the admin-
istrative offices and departments of the City under
his jurisdiction.
(i) Perform such other duties consistent with this
Charter as may be required of him by the City
Council.
Section 505. Meetings.
The City Manager shall be accorded a seat at the
City Council table and at all meetings of boards and
• commissions and shall be entitled to participate in
their deliberations, but shall not have a vote.
Section 506. Removal.
The City Manager shall not be removed from
office during or within a period of ninety days next
succeeding any municipal election at which a mem-
ber of the City Council is elected. At any other time
the City Manager may be removed only at a regular
meeting of the City Council and upon the affirma-
tive votes of a majority of the members of the City
Council.
Section 507. Manager Pro Tempore.
The City Manager shall appoint, subject to the
approval of the City Council, one of the other offi-
cers or department heads of the City to serve as
Manager Pro Tempore during any temporary ab-
sence or disability of the City Manager. If he fails
to make such appointment, the City Council may
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appoint an officer or department head to serve as
such Manager Pro Tempore.
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Article VI
Officers and Employees
Section 600. Officers to be Appointed by the
City Council.
In addition to the City Manager, there shall be a
City Attorney and a City Clerk, who shall be ap-
pointed by and serve at the pleasure of the City
Council and may be removed only upon the affir-
mative votes of a majority of the members of the
City Council. (As amended effective January 20,
1959)
Section 601. Administrative Department.
The City Council may provide, by ordinance not
inconsistent with this Charter, for the organization,
conduct and operation of the several offices and
departments of the City as established by this Char-
ter, and for the creation of additional departments,
divisions, offices and agencies and for their consoli-
dation, alteration or abolition. Each new department
created by the City Council shall be headed by an
officer as department head who shall be appointed
and may be suspended or removed by the City
Manager.
The City Council, by ordinance or resolution,
may assign additional functions or duties to offices,
departments or agencies not inconsistent with this
Charter. Where the positions are not incompatible,
the City Council may combine in one person the
powers and duties of two or more offices created or
authorized by this Charter. No office provided in
this Charter to be filled by appointment by the City
Manager may be consolidated with an office to be
filled by appointment by the City Council. The City
Council shall provide for the number, titles; qualifi-
cations, powers, duties and compensation of all
officers and employees.
Section 602, City Attorney. Powers and Duties.
To become and remain eligible for City Attorney
the person appointed shall be an attorney at law
duly licensed as such under the laws of the State of
California, and shall have been engaged in the prac-
Charter
tice of law for at least three years prior to his ap-
pointment The City Attorney shall have power and
may be required to:
(a) Represent and advise the City Council and all
City Officers in all matters of law pertaining to their
offices.
(b) Prosecute on behalf of the people any or all
criminal cases arising from violation of the provi-
sions of this Charter or City ordinances. He shall
prosecute misdemeanor offenses arising under State
law if authorized and directed to do so by ordinance
or resolution adopted by the City Council.
(c) Represent and appear for the City in any or
all actions or proceedings in which the City is con -
cemed or is a party, and represent and appear for
any City officer or employee, or former City officer
or employee, in any or all actions or proceedings in
which any such officer or employee is concerned or
is a party for any act arising out of his employment
or by reason of his official capacity.
(d) Attend all regular meetings of the City Coun-
cil and give his advice or opinion in writing when-
ever requested to do so by the City Council or by
any of the boards or officers of the City.
(e) Approve the form of all contracts made by
and all bonds given to the City, endorsing his ap-
proval thereon in writing.
(f) Prepare any and all proposed ordinances and
resolutions for the City and amendments thereto.
(g) Devote such time to the duties of his office
as may be specified in the ordinance or resolution
fixing the compensation for such office.
(h) Surrender to his successor all books, papers,
files and documents pertaining to the City's affairs.
The City Council shall have control of all legal
business and proceedings and may employ other
attorneys to take charge of any litigation or matter
or to assist the City Attorney therein. (As amended
effective April 28, 1966)
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Section 603. City Clerk, Powers and Duties.
The City Clerk shall have power and be required
to:
(a) Attend all meetings of the City Council un-
less excused and be responsible for the recording
Charter
and maintaining of a full and true record of all of
the proceedings of the City Council in books that
shall bear appropriate titles and be devoted to such
purpose.
(b) Maintain separate books, in which shall be
recorded respectively all ordinances and resolutions,
with the certificate of the Clerk annexed to each
thereof stating the same to be the original or a cor-
rect copy, and as to an ordinance requiring publica-
tion,. stating that the same has been published or
posted in accordance with this Charter, keep all
books properly indexed and open to public inspec-
tion when not in actual use.
(c) Maintain separate books, in which a record
shall be made of all written contracts and official
bonds.
(d) Be the custodian of the -seal of the City.
(e) Administer oaths or affirmations, take affida-
vits and depositions pertaining to the affairs and
business of the City and certify copies of official
records.
(f) Be ex -officio Assessor, unless the City Coun-
cil has availed itself, or does in the future avail
itself, of the provisions of the general laws of the
State relative to the assessment of property and the
collection of City taxes by county officers, or unless
the City Council by ordinance provides otherwise.
(g) Have charge of all City elections.
(h) Perform such other duties consistent with this
Charter as may required of him by ordinance or
resolution of the City Council.
(Section 604, City Treasurer, deleted by amend-
ment effective January 20, 1959)
Section 605. Director of finance.
There shall be a Director of Finance appointed by
the City Manager and subject to suspension or re-
moval by the City Manager who shall have power
and shall be required to:
(a) Have charge of the administration of the
financial affairs of the City under the direction of
the City Manager, and be head of the Finance De-
partment of the City.
(b) Compile the budget expense and income esti- •
mates for the City Manager.
(c) Maintain a general accounting system for the
City government and each of its offices, departments
and agencies.
(d) Receive all taxes, assessments, license fees
and other revenues of the City, or for• whose collec-
tion the City is responsible, and receive all taxes or
other money receivable by the City from the Coun-
ty, State or Federal Government, or from any Court,
or from any office, department, or agency of the
City.
(e) Have custody of all public funds belonging
to or under control of the City or any office, depart-
ment or agency of the City government and deposit
all funds coming into his hands in such depository
as may be designated by resolution of the City
Council, or, if no such resolution be adopted, then
in such depository designated in writing by the City
Manager, and in compliance with all of the provi-
sions of the State Constitution and laws of the State
governing the handling, depositing and securing of
public fonds. •
(f) Supervise and be responsible for the disburse-
ment of all moneys and have control of all expendi-
tures to insure that budget appropriations are not
exceeded; audit all purchase orders before issuance;
audit, approve and provide for the payment of all
bills, invoices, payrolls, demands or charges against
the City and, with the advice of the City Attorney,
when necessary, determine the regularity, legality
and correctness of such claims, demands or charges.
(g) See that all taxes, assessments, license fees
and other revenues of the City, or for whose collec-
tion the City is responsible, and all other money
receivable by the City from the County, State or
Federal Government, of from any court, office, -
department or agency of the City are collected.
(h) Through the City Manager submit to the City
Council and to the certified public accountant em-
ployed by the City as an iridependent auditor a
monthly statement of all receipts, disbursements and
fund balances in sufficient detail to show the exact
financial condition of the City; and, as of the end of
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each fiscal year, submit a complete financial state-
ment and report.
(i) Supervise the keeping of current inventories
of all property of the City by all City departments,
offices and agencies.
0) Assume the title of and act as City Treasurer
and with the approval of the City Manager appoint
deputies as necessary to act under the provisions of
any law requiring or permitting action by a City
Treasurer.
(k) Perform such other duties consistent with this
Charter as may be required of him by ordinance or
resolution of the City Council. (As amended effec-
tive January 20, 1959)
Section 606. Administering Oaths.
Each department head and his deputies shall have
the power to administer oaths and affirmations in
connection with any official business pertaining to
his department,
Section 607. Department Heads. Appointment
Powers.
Each department head and appointive officer shall
have the power to appoint, suspend and remove
such deputies, assistants, subordinates and employ-
ees as are provided for by the City Council for his
department or office, subject to the provisions of
this Charter and of any personnel, merit or civil
service system adopted hereunder. Any such ap-
pointment or removal by a department head appoint-
ed by the City Manager shall be subject to approval
by the City Manager,
Section 608. Illegal Contracts. Financial
Interest.
No member of the City Council, department head
or other officer of the City (except a member of any
board or commission), shall be financially interested,
directly or indirectly, in any contract,.sale or trans-
action to which the City is a party.
No member of any board or commission shall be
financially interested directly or indirectly, in any
contract, sale or transaction to which the City is a
party and which comes before the board or commis-
Charter
sion of which such person is a member for approval
or other official action or which pertains to the
department, office or agency of the City with which
such board or commission is connected.
Any contract, sale or transaction in which there
shall be such an interest, as specified in this Section,
shall become void at the election of the City when
_so declared by resolution of the City Council.
No member of the City Council, department head
or other officer of the City, or member of any board
or commission shall be deemed to be financially
interested, within the meaning of the foregoing
provisions, in any contract made with a corporation
where his only interest in the corporation is that of
a stockholder and the stock owned by him shall
amount to less than three percent (3%) of all the
stock of such corporation issued and outstanding.
If any member of the City Council, department
head or other officer of the City, or member of a
board or commission shall be financially interested
as aforesaid, upon conviction thereof he shall forfeit
his office in addition to any other penalty which
may be imposed for such violation of this Charter.
Section 609. Acceptance of Other Office.
Any elective officer of the City who shall accept
or retain any other elective public office, except as
provided in this Charter, shall be deemed thereby to
have vacated his office under the City Government.
Section 610. Nepotism.
The City Council shall not appoint to a salaried
position under the City government any person who
is a relative by blood or marriage within the third
degree of any one or more of the members of such
City Council, nor shall any department head or other
officer having appointive power appoint any relative
of his within such degree to any such position. (As
amended effective April 28, 1966)
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Section 611 Official Bonds.
The City Council shall fix by ordinance or resolu-
tion the amounts and terms of the official bonds of
all officials or employees who are required by this
Charter or by ordinance to give such bonds. All
Charter
bonds shall be executed by responsible corporate
surety, shall be approved as to form by the City
Attorney, and shall be filed with the City Clerk.
Premiums on official bonds shall be paid by the
City.
There shall be no personal liability upon, or any
right to recover against, a superior officer, or his
bond, for any wrongful act or omission of his subor-
dinate, unless such superior officer was a party to,
or conspired in, such wrongful act or omission.
Article VII
Appointive Boards and Commissions.
Section 700. In General.
There shall be the following named boards and
commissions which shall have the powers and duties
herein stated. In addition, the City Council may
create by ordinance such additional advisory boards
or commissions as in its judgment are required, and
may grant to them such powers and duties as are,
consistent with the provisions of this Charter.
Section 701. Appropriations.
The City Council shall include in its annual bud-
get such appropriations of funds as in its opinion
shall be sufficient for the efficient and proper func-
tioning of such boards and commissions.
Section 702. Appointment. Terms.
The members of each of such boards or commis-
sions shall be appointed by the City Council from
the qualified electors of the City, none of whom
shall hold any paid office or employment in the City
Government. They shall be subject to removal by
motion of the City Council adopted by at least four
affirmative votes. The members thereof shall serve
for a term of four years and until their respective
successors are appointed and qualified.
The members first appointed to such boards and
commissions shall so classify themselves by lot that
the term of one of each of their number shall expire
each succeeding July fast. Where the total number
of the members of a board or commission to be
appointed exceeds four, the classification by lot
shall provide for the pairing of terms to such an
extent as is necessary in order that the terms of at
least one and not more than three shall expire in
each succeeding year. Thereafter, any appointment
to fill an unexpired term shall be for such unexpired
period. (As amended effective April 1, 1955)
Section 703. Existing Boards.
The respective terms of office of all members of
the boards and commissions in existence at the time
this Charter takes effect shall terminate upon the
effective date of this Charter. The present members
of the boards and commissions which will continue
in effect under this Charter shall be deemed reap-
pointed to the respective boards and commissions of
which they are members as first appointed members
thereof under this Charter.
Section 704. Meetings, Chairmen.
As soon as practicable, following the first day of
July of every year, each of such boards and com-
missions shall organize by electing one of its mem-
bers to serve as presiding officer at the pleasure of
such board or commission. Each board or commis-
sion shall hold regular meetings at least once each
month and such special meetings as such board or
commission may require. All proceedings shall be
open to the public.
Except as may be otherwise provided in this
Charter, the City Manager shall designate a secretary
for the recording of minutes for each of such boards
and commissions, who shall keep a record of its
proceedings and transactions. Each board or com-
mission may prescribe its own rules and regulations
which shall be consistent with this Charter and
copies of which shall be kept on file in the office of
the City Clerk where they shall be available for
public inspection. Each board or commission shall
have the same power as the City Council to compel
the attendance of witnesses, to examine them under
oath, to compel the production of evidence before
it and to administer oaths and affirmations.
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Section 705. Compensation. Vacancies.
The members of boards and commissions shall
serve without compensation for their services as
such but may receive reimbursement for necessary
traveling and other expenses incurred on official
duty when such expenditures have received authori-
zation by the City Council. In addition, the City
Council may by resolution fix an amount as reim-
bursement of other expenditures incurred by the
members of boards and commissions while in the
performance of their official duties.
Any vacancies in any board or commission, from
whatever cause arising, shall be filled by appoint-
ment by the City Council. Upon a vacancy occur-
ring leaving an unexpired portion of a term, any
appointment to fill such vacancy shall be for the
unexpired portion of such term. If a member of a
board or commission absents himself from three
consecutive regular meetings of such board or com-
mission, unless by permission of such board or
commission expressed in its official minutes, or is
convicted of a crime involving moral turpitude, or
ceases to be a registered elector of the City, his
office shall become vacant and shall be so declared
by the City Council. (As amended effective June 6,
1974)
Section 706. Planning Commission. Members.
There shall be a Planning Commission consisting
of seven members. (As amended by amendments
effective on April 1, 1955, and April 28, 1966, and
June 6, 1974)
Section 707. Planning Commission. Powers
and Duties.
The Planning Commission shall have the power
and be required to:
(a) After a public hearing thereon, recommended
to the City Council the adoption, amendment or
repeal of a Master Plan, or any part thereof, for the
physical development of the City.
(b) Exercise such control over land subdivisions
as is granted to' it by ordinance not inconsistent with
'the provisions of this Charter.
Charter
(c) Make recommendations to the City Council
concerning proposed public works and for the clear-
ance and rebuilding of blighted or substandard areas
within the City.
(d) Exercise such functions with respect to zon-
ing and land use as may be prescribed by ordinance
not inconsistent with the provisions this Charter.
Section 708. Board of Library Trustees.
Powers and Duties.
There shall be a Board of Library Trustees con-
sisting of five members which shall have the power
and duty to:
(a) Have charge of the administration of City
libraries and make and enforce such by -laws, rules
and regulations as may be necessary therefor.
(b) Designate its own secretary.
(c) Consider the annual budget for library pur-
poses during the process of its preparation and make
recommendations with respect thereto to the City
Council and City Manager.
(d) Purchase and acquire books, journals, maps,
publications and other supplies peculiar to the needs
of the library, subject, however, to the limitations of
the budget for such purposes. The expenditure and
disbursement of funds for such purchases shall be
made and approved as elsewhere in this Charter
provided.
(e) Approve or disapprove the appointment,
suspension or removal of the Librarian, who shall
be the department head.
(f) Accept money, personal property or real
estate donated to the City for library purposes, sub-
ject to the approval of the City Council.
(g) Contract with schools, county or other gov-
ernmental agencies to render or receive library ser-
vices or facilities, subject to the approval of the City
Council.
Section 709. Parks, Beaches and Recreation
Commission. Powers and Duties.
There shall be a Parks, Beaches and Recreation
Commission consisting of seven members.
The Parks, Beaches and Recreation Commission
shall have the power and duty to:
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(a) Act in an advisory capacity to the City Coun-
cil in all matters pertaining to parks, beaches, recre-
ation, parkways and street trees.
(b) Consider the annual budget for parks, beach-
es, recreation, parkways and street tree purposes
during the process of its preparation and make rec-
ommendations with respect thereto to the City
Council and the City Manager.
(c) Assist in the planning of parks and recreation
programs for the inhabitants of the City, promote
and stimulate public interest therein, and to that end
solicit to the fullest extent possible the cooperation
of school authorities and other public and private
agencies interested therein.
(d) Establish policies for the acquisition, develop-
ment and improvement of parks, beaches and play-
grounds and for the planting, care and removal of
trees and shrubs in all parks, playgrounds and
streets, subject to the rights and powers of the City
Council.
(e) Perform such other duties as may be pre-
scribed by ordinance not inconsistent with the provi-
sions of this Charter. (As amended by amendments
effective April 28, 1966, and June 6, 1974)
Section 710. Civil Service Board.
The Civil Service Board shall consist of five
members, none of whom while a member of the
board, or for a period of one year after he has
ceased for any reason to be a member, shall occupy
or be eligible for appointment to any salaried office
or employment in the service of the City.
The members of the Civil Service Board shall be
nominated and appointed in the following manner.
Two members shall be appointed by the City Coun-
cil from a list of five persons to be nominated by
vote of the employees in the Classified Service, two
members shall be appointed by the City Council
directly, and the fifth shall be appointed by the City
Council from a list of three persons nominated by
a majority of the four thus appointed. The successor
of any member of the board shall be nominated and
appointed in the same manner as such member was
nominated and appointed.
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Section 711. Civil Service Board. Powers and
Duties.
The Civil Service Board shall have the power and
duty to:
(a) Recommend to the City Council, after a
public hearing thereon, the adoption, amendment or
repeal of civil service rules and regulations.
(b) Act in an advisory capacity to the City Coun-
cil on problems concerning personnel administration.
(c) Hear appeals of any person in the City em-
ployment relative to any suspension, demotion or
dismissal and make findings and recommendations
thereon.
(d) Make any investigation concerning the ad-
ministration of personnel in the municipal service
and report its findings to the City Council and City
Manager when requested to do so by the City Coun-
cil, the City Manager or by any organized City
Employees' association.
(e) Perform such other duties as may be pre-
scribed by ordinance.
Section 712. City Arts Commission.
There shall be a City Arts Commission with the
number of members to be established by ordinance
or resolution and it shall have the power and duty
to:
(a) Act in an advisory capacity to the City Coun-
cil in all matters pertaining to artistic, aesthetic and
cultural aspects of the City.
(b) Recommend to the City Council the adoption
of such ordinances, rules and regulations as it may
deem necessary for the administration and preserva-
tion of fine arts, performing arts, historical, aesthetic
and cultural aspects of the community.
(c) On behalf of the City, actively encourage pro-
grams for the cultural enrichment of the community.
(d) Perform such other duties relating to the Arts
as the City Council may require. (As added by
amendment effective June 6, 1974, and November
3, 1992)
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Article VIII
Civil Service System
Section 800. Continuance of Present System.
The civil service system existing at the time this
Charter takes effect, to the extent that the same is
not inconsistent with any of the provisions of this
Chatter, is hereby continued in existence subject to
all of the terms and provisions of this Chatter and
subject to amendment by proper authority as in this
Charter provided.
Section 801. System to Be Maintained.
The City Council shall by ordinance continuously
maintain a civil service system for the selection,
employment, classification, advancement, suspension
and discharge of those appointive officers and em-
ployees who shall be included in the system. The
system shall comply with all other provisions of this
Charter.
Section 802. Positions Included in the System.
The civil service system shall include all full
time, regular and permanent positions or employ-
ment on the Police and Fire Department of the City
and may, by ordinance, include any other appointive
officers or positions in the service of the City except
the following:
1. All elective officers.
2. City. Manager, Assistant City Manager, if any,
one private secretary to the City Manager, City
Attorney, Assistant City Attorney, if any, City
Clerk, Director of Finance, City Engineer, all De-
partment Heads, and all employees of the Library
Department, including the Librarian.
3. All members of boards and'commissions.
4. Positions in any class or grade created for a
special or temporary purpose and which may exist
for a period of not longer than six months in any
one calendar year.
5. Persons employed to render professional,
scientific, technical or expert service.
Charter
6. Persons who render part -time service without
pay or who are paid on an hourly or per diem basis.
(As amended effective January 20, 1959)
Section 803. Withdrawal From System. '
After inclusion in the system, any departments or
appointive officers or employees shall not be with-
drawn therefrom, either by an outright repeal of the
civil service ordinance or otherwise, unless such
withdrawal has been submitted to the city electors
at a special or regular municipal election and ap-
proved by a majority of two- thirds of those electors
voting on the proposition.
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Article IX
Retirement
Section 900. Retirement System.
Plenary authority and power are hereby vested in
the City, its City Council and its several officers,
agents and employees to do and perform any act,
and to exercise any authority granted, permitted, or
required under the provisions . of the Public
Employees' Retirement Act, as it now exists or
hereafter may be amended, to enable the City to
continue as a contracting City under the Public
Employees' Retirement System. The City Council
may terminate any contract with the Board of Ad-
ministration of the Public Employees' Retirement
System only under authority granted by ordinance
adopted by a majority vote of the electors of the
City, voting on such proposition at an election at
which such proposal is presented. (As amended
effective June 6, 1974)
Article X
Elections
Section 1000. -.. General Municipal Elections.
Commencing with the election of November 2,
1982, General Municipal elections for the election
of officers and for such other purposes as the City
Council may prescribe shall be held in the City.on
Charter
the fast Tuesday after the First Monday of Novem-
ber in each even - numbered year, and consolidated
with the Statewide general election in the manner
provided by the California Elections Code. (As
amended by amendments effective on April 8, 1980)
Section 1001. Special Municipal Elections.
. All other municipal elections that may be held by
authority of this Charter, or of any law, shall be
known as special municipal elections.
Section 1002. Procedure for Holding Election.
Unless otherwise provided by ordinance hereafter
enacted, all elections shall be held in accordance
with the provisions of the Elections Code of the
State of California, as the same now exist or hereaf-
ter may be amended, for the holding of municipal
elections so far as the same are not in conflict with
this Charter.
Section 1003. Initiative, Referendum and
Recall.
There are hereby reserved to the electors of the
City the powers of the initiative and referendum and
of the recall of municipal elective officers. The
provisions of the Elections Code of the State of
California, as the same now exist or hereafter may
be amended, governing the initiative and referendum
and the recall of municipal officers, shall apply to
the use thereof in the City so far as such provisions
of the Elections Code are not in conflict with the
provisions of this Charter.
Section 1004. Voters Signing Nomination
Petitions.
The voters signing and petition for the nomina-
tion of any person to the office of Councilman shall
be residents and registered voters of the district from
which such person is to be nominated. (As amended
effective June 19, 1968)'
Section 1005. Districts.
The City is hereby divided into seven districts,
the names and respective boundaries of which shall
be as established by ordinance. No ordinance chang-
ing and redefining the boundaries of any district
shall be enacted within six months prior to any
regular Councilmanic election.
In 1959 and each fourth year thereafter the City
Council shall appoint a committee to study and
report to the City Council on the advisability of
redistricting the City. Upon receipt of any such
committee report, and at any other time deemed
necessary or desirable in order that the district
boundaries be fair and logical, the City Council may
by ordinance change and redefine the boundaries of
any or all of the seven districts herein established.
The boundaries so defined shall be established in
such manner that the district shall, as nearly as
practicable, constitute natural areas of contiguous
and compact territory and provide fair representation
on the City Council. Notwithstanding the provisions
of Section 401, no redistricting shall disqualify any
Councilman from serving as Councilman from the
district from which he was nominated. or appointed
for the remainder of his term, if elected, or until the
next general municipal election, if appointed. Any
territory hereafter annexed to or consolidated with
the City shall, at the time of such annexation or
consolidation, be added by ordinance of the City
Council to an adjacent district or districts. (As
amended effective June 19, 1968).
(Sections 1006 through 1012, entitled "FIRST
DISTRICT' through "SEVENTH DISTRICT,"
deleted by amendment effective April 28, 1966)
Section 1006. Territory Not Specifically
Described.
Any territory constituting a part of the City and
not specifically included in any district shall be
deemed included in the district with which it has the
longest common boundary line. If there is no com-
mon boundary line with any district, then such
territory shall be deemed included in the nearest
district to it
(Section 1013 as renumbeied by amendment
effective April 28, 1966)
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Article III
Fiscal Administration
Section 1100. Fiscal Year.
The fiscal year of the City government shall
begin on the first day of July of each year and end
on the thirtieth day of June of the following year.
Section 1101. Annual Budget. Preparation by
the City Manager.
At such date as the City Manager shall determine,
each board or commission and each department head
shall furnish to the City Manager estimates of reve-
nue and expenditures for his department for such
board of commission for the ensuing fiscal year,
detailed in such manner as may be prescribed by the
City Manager. In preparing the proposed budget, the
City Manager shall review the estimates, hold con-
ferences thereon with the respective department
heads, boards or commissions and may revise the
estimates as he may deem advisable.
Section 1102. Budget. Submission to City
Council.
At least thirty-five days prior to the beginning
of each fiscal year, the City Manager shall submit
to the City Council the proposed budget as prepared
by him. After reviewing the same and making such
revisions as it may deem advisable, the City Council
shall determine the time for the holding of a public
hearing thereon and shall cause to be published a
notice thereof not less than ten days prior to said
hearing, by at least one insertion in the official
newspaper. Copies of the proposed budget shall be
available for inspection by the public in the office
of the City Clerk at least ten days prior to said
hearing.'
.Section 1103. Budget. Public Hearing.
At the time so advertised or at any time to which
such public hearing shall from time to time be ad-
journed, the City Council shall hold a public hearing
on the proposed budget, at which interested persons
desiring to be heard shall be given such opportunity.
Charter
Section 1104. . Budget. Adoption.
After the conclusion of the public hearing the
City Council shall make any revision of the pro-
posed budget that it may deem advisable and on or
before June 30, it shall adopt the budget. A copy
thereof, certified by the City Clerk, shall be filed
with the person retained by the City Council to
perform auditing functions for the Council and a
further copy shall be placed, and shall remain on the
file, in the office of the City Clerk where it shall be
available for public inspection. The budget so certi-
fied shall be reproduced and copies made available
for the use of the public and of departments, offices
and agencies of the City.
Section 1105. Budget Appropriations.
From the effective date-of the budget, the several
amounts stated therein as proposed expenditures
shall be and become appropriated to the several•
departments, offices and agencies for the respective
objects and purposes therein named. All appropria-
tions shall lapse at the end of the fiscal year to the
extent that they shall not have been expended or
lawfully encumbered.
At any meeting after the adoption of the budget,
the City Council may amend or supplement the
budget by motion adopted by the affirmative votes
of at least four members so as to authorize the trans-
fer of unused balances appropriated for one purpose
to another purpose or to.appropriate available funds
not included in the budget or to cancel any appro-
priation not expended or encumbered.
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Section 1106. Centralized Pnrchasing.
Under the control and.direction of the City Man-
ager there shall be established a centralized
purchasing system for all, City departments and
agencies, except as otherwise in this Charter provid-
ed.
Section 1107. Tax Limits
(a) The City Council shall not levy a property
tax, for municipal purposes, in excess of One Dollar
($1) annually on each One Hundred Dollars ($100)
of the assessed value of taxable property in the City,
Charter
except as otherwise provided in this Section, unless
authorized by the affirmative votes of three- fifths of
the electors voting on a proposition to increase such
levy at any election at which the question of such
additional levy for municipal purposes is submitted
to the electors. The number of years that such addi-
tional levy is to be made shall be specified in such
proposition.
(b) There shall be levied and collected at the
same time and in the same manner as other property
taxes for municipal purposes are levied and collect-
ed, as additional taxes, if no other provision for
payment thereof is made:
1. A tax sufficient to meet all liabilities of the
City for principal and interest of all bonds and judg-
ments due and unpaid, or to become due during the
ensuing fiscal year, which constitute general obliga-
tions of the City; and
2. A tax sufficient to meet all obligations of the
City to the State Employees' Retirement System for
the retirement of City employees, due and unpaid or
to become due during the ensuing fiscal year.
(c) Special levies in addition to the above, may
be made annually for the following purposes in
amounts not to exceed the limits hereinafter respec-
tively enumerated in this Section, on each One
Hundred Dollars ($100) of the assessed value of
taxable property in the City:
1. For libraries in an amount not to exceed
fifteen cents.
2. For advertising and promotion in an amount
not to exceed ten cents.
3. For parks, beaches, civic beautification, recre-
ation and playgrounds in an amount not to exceed
fifteen cents.
The proceeds of special levies may be used solely
for the respective purposes for which such levies
have been made. (As amended effective April 28,
1966)
Section 1108. Tax Procedure.
The procedure for the assessment, levy and col-
lection of taxes upon property, taxable for municipal
purposes, may be prescribed by ordinance of the
City Council.
Section 1109. Bonded Debt Limit.
The City. shall not incur an indebtedness evi-
denced by general obligation bonds which shall in
the aggregate exceed the sum of fifteen percent
(15%) of the total assessed valuation, for purposes
of City taxation, of all the real and personal proper-
ty within the City.
No bonded indebtedness which shall constitute a
general obligation of the City may be created unless
authorized by the affirmative votes of two-third of
the electors voting on such proposition at any elec-
tion at which the question is submitted to the elec-
tors and unless in full compliance with the provi-
sions of the State Constitution and of this Charter.
Section 1110. Contracts on Public Works.
Every project for the construction or improvement
of public buildings,_ works, streets, drains, sewers,
utilities, parks or playgrounds, and every purchase
of supplies or materials for any such project, when
the total expenditures required for the project exceed
Thirty Thousand Dollars ($30,000), or such lesser
amount as may be established by ordinance, shall be
let by the City Council by contract to the lowest
responsible bidder after notice by publication in the
official newspaper by one or more insertions, the
first of which shall be at least ten days before the
time for opening bids. Projects for the maintenance
or repair of such facilities are excepted from the
requirements of this paragraph if the City Council
determines that such work can be performed more
economically by a City department than by contract-
ing for the doing of such work.
All bids shall be accompanied by either a certi-
fied or cashier's check, or a bidder's bond executed
by a corporate surety authorized to engage in such
business in California, made payable to the City.
Such security shall be in an amount not less than
that specified in the notice inviting bids or in the
specifications.referred to therein, or if no amount be
so specified then in an amount not less than ten
percent (10%) of the aggregate amount of the bid.
If the successful bidder neglects or refuses to enter
into the contract, within the time specified in the
notice inviting bids or in the specifications referred
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to therein, the amount of his or her bidder's security
shall be declared forfeited to the City and shall be
collected and paid into its general fund, and all
bonds so forfeited shall be prosecuted and the
amount thereof collected and paid into such fund.
The City Council may reject any and all bids pre-
sented and may readvertise in its discretion.
The City Council, without advertising for bids, or
after rejecting bids, or if no bids were received, may
.declare and determine that, in its opinion, based on
estimates approved by the City Manager, the work
in question may be performed better and more eco-
nomically by the City with its own employees or the
supplies or materials may be purchased more eco-
nomically on the open market, and after the adop-
tion of a resolution to this effect by at least five
affirmative votes of the.. Council may proceed to
have said work done or said supplies or materials
purchased in the manner stated, without further
observance of the provisions of this Section. Such
contracts likewise may be let without advertising for
bids, if such work or supplies or materials shall be
deemed by the City Council to be of urgent necessi-
ty for the preservation of life, health or property,
and shall be authorized by resolution passed by at
least five affirmative votes of the Council and con-
taining a declaration of the facts constituting such
urgency. (As amended by amendments effective
April 28, 1966, June 6, 1974, and November 4,
1986)
Section 1111. Purchasing Supplies.
The City Council may prescribe by ordinance
rules and regulations for the purchasing of supplies,
materials and equipment When making purchases
for the City, merchants maintaining an established
place of business within the City shall be given the
preference, quality and prices being equal.
Section 1112. Cash Basis Fund.
The City Council may maintain a revolving fund,
to be known as the "Cash Basis Fund," for the pur-
pose of placing the payment of the running expenses
of the City on a cash basis. A balance may be built
up in this fund from any available sources in an
Charter
amount which the City Council deems sufficient
with which to meet all lawful demands against the
City for the first five months, or other necessary
period, of the succeeding fiscal year prior to the
receipt of ad valorem tax revenues. Transfers may
be made by the City Council from such fund to any
other fund or funds of such sum or sums as may be
required for the purpose of placing such funds, as
nearly as possible, on a cash basis. All money so
transferred from the Cash Basis Fund shall be re-
turned thereto before the end of the fiscal year.
Section 1113. Capital Improvement Fund.
A fund for capital improvements generally is
hereby created, to be known as the "Capital Im-
provement Fund ". The City.Council may create by
ordinance a special fund or funds for a special capi-
tal improvement purpose. The City Council may
levy and collect taxes for capital improvements and
may include in the annual tax levy a levy for such
purposes in which event it must apportion and ap-
propriate to any fund or funds the moneys derived
from such levy. It may not, in making such levy,
exceed the maximum tax rate provided for in this
Charter, unless authorized by the affirmative votes
of three- fifths of the electors voting on the proposi-
tion at any election at which such question is sub-
mitted. The City Council may transfer to any such
fund any unencumbered surplus funds remaining on
hand in the City at any time.
Once created, such fund shall remain inviolate for
the purpose for which it was created; if for capital
improvements generally, then for any such purposes,
and if for a special capital improvement, then for
such purpose only, unless the use of such fund for
some other capital improvement purpose is autho-
rized by the affirmative votes of a majority of the
electors voting on such proposition at a general or
special election at which such proposition is submit-
ted
If the purpose for which any special capital im-
provement fund has been created has been accom-
plished, the City. Council may transfer any unex-
pended or unencumbered surplus remaining in such
fund to the fund for capital improvements generally,
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Charter
established by this Charter. (As amended effective
April 28, 1966)
Section 1114. Claims and Demands.
Except as otherwise provided by the provisions
of State law applicable to chartered cities, all claims
for damages against the City shall be filed as pre-
scribed by ordinance.
All other demands against the City must be in
writing and may be in the form of a bill, invoice,
payroll, or formal demand. Each such demand shall
be presented to the Director of Finance within nine-
ty days after the last item of the account or claim
accrued. The Director of Finance shall examine the
same. If the amount thereof is legally due and there
remains on his books an unexhausted balance of an
appropriation against which the same may be
charged, he shall approve such demand and provide
for its payment out of the property fund. Otherwise
he shall reject it The City Council may overrule
any rejection by the Director of Finance and order
the demand paid.
The Director of Finance shall transmit such de-
mand, with his approval or rejection thereof en-
dorsed thereon, to the City Manager. If a demand is
one for an item included within an approved budget
appropriation, it shall require the approval of the
City Manager, otherwise it shall require the approval
of the City Council, following the adoption by it of
an amendment to the budget authorizing such pay-
ment. Any person dissatisfied with the refusal of the
City Manager to approve any demand, in whole or
in part, may present the same to the City Council
which; after examining into the matter, may approve
or reject the demand in whole or in part (As
amended by amendments effective on January 20,
1959, and April 28, 1966)
Section 1115. Registering Demands.
Demands on the City which are not paid for lack
of funds shall be registered. All registered demands
shall be paid in the order of their registration when
funds therefor are available and shall bear interest
from the date of registration at such rate as shall be
fixed by the City Council by resolution. (As amend-
ed effective January 20, 1959)
(Section 1116, Actions Against City, repealed by
amendment effective April 28, 1966)
Section 1116. Independent Audit.
The City Council shall employ at the beginning
of each fiscal year, a qualified certified public ac-
countant who shall, at such time or times as may be
specified by the City Council, and at such other
times as he shall determine, examine the books,
records, inventories and reports of all officers and
employees who receive, handle or disburse public
funds and of all such other officers, employees or
departments as the City Council may direct As soon
as practicable after the end of the fiscal year, a final
audit and report shall be submitted by such accoun-
tant to the City Council, one copy thereof to be
distributed to each member, one to the City Manag-
er, Director of Finance and City Attorney, respec-
tively, and sufficient additional copies of the audit
shall be placed on file in the office of the City Clerk
where they shall be available for inspection by the
general public, and a copy of the financial statement
as of the close of the fiscal year shall be published
in the offrcial newspaper. (Section 1117 as amended
effective January 20, 1959, and renumbered by
amendment effective April 28, 1966)
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Article XU
Board of Education
Section 1200. State Law Governs.
The manner in which, the times at which, and the
terms for which the members of Boards of Educa-
tion shall be elected or appointed, their qualifica-
tions, compensation and removal and the number
which shall constitute any one of such boards shall
be as now or hereafter prescribed by the Education
Code of the State of California.
Section 1201. Effect of Charter.
The adoption of the Charter shall not have the
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effect of creating any new school district nor shall
the adoption of this Charter have any effect upon
the existence or boundaries of any present school
districts within the City or of which the City com-
prises a part, but such present school districts shall
continue in existence subject to the provisions of the
laws of the State of California as the same now
exists or hereafter may exist
Article XM
Franchises
Section 1300. Granting of Franchises.
Any person, firm or corporation furnishing the
City or its inhabitants with transportation, communi-
cation, terminal facilities, water, light, heat, electrid-
ty, gas, power, refrigeration, storage, or any other
public utility or service, or using the public streets,
ways, alleys or places for the operation of plants,
works or equipment for the furnishing thereof, or
traversing any portion of the City for the transmit-
ting or conveyance of any such service elsewhere,
may be required by ordinance to have a valid and
existing franchise therefor. The City Council is
empowered to grant such franchise to any person,
firm or corporation, whether operating under an
existing franchise or not, and to prescribe the terms
and conditions of any such grant It may also pro-
vide, by procedural ordinance, the method of proce-
dure and additional terms and conditions of such
grants, or the making thereof, all subject to the
provisions of this Charter.
Nothing in this Section, or elsewhere in this
Article, shall apply to the City, or to any department
thereof, when furnishing any such utility or service.
Section 1301. Resolution of Intention. Notice
and Public Hearing.
Before granting any franchise, the City Council
shall pass a resolution declaring its intention to grant
the same, stating the name of the proposed grantee,
the character of the franchise and the terms and
conditions upon which it is proposed to be granted.
Such resolution shall fix and set forth the day, hour
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Charter
and place when and where any persons having any
interest therein or any objection to the granting
thereof may appear before the City Council and be
heard thereon. It shall direct the City Clerk to pub-
lish said resolution at least once, within fifteen days
of the passage thereof, in the official newspaper.
Said notice shall be published at least ten days prior
to the date of hearing. '
At the time set for the hearing the City Council
shall proceed to hear and pass upon all protests and
its decision thereon shall be final and conclusive.
Thereafter it may by ordinance grant the franchise
on the terms and conditions specified in the resolu-
tion of intention to grant the same, subject to the
right of referendum of the people, or it may deny
the same. If the City Council shall determine that
changes should be made in the terms and conditions
upon which the franchise is proposed to be granted,
a new resolution of intention shall be adopted and
like proceedings had thereon.
Section 1302. Terms of Franchise.
Every franchise shall state the term for which it
is granted, which, unless it be indeterminate as
provided for herein, shall not exceed twenty-five
years.
A franchise grant may be indeterminate, that is
to say, it may provide that it shall endure in full
force and effect until the same, with the consent of
the Public Utilities Commission of the State of
California, shall be voluntarily surrendered or aban-
doned by its possessor, or until the State of Cali-
fornia, or some municipal or public corporation,.
thereunto duly authorized by law, shall purchase by
voluntary agreement or shall condemn and take,
under the power of eminent domain, all property
actually used and useful in the exercise of such
franchise and situate within the territorial limits of
the State, municipal or public corporation purchas-
ing or condemning such property, or until the fran-
chise shall be forfeited for noncompliance with its
terms by the possessor thereof.
Charter
Section 1303. Grant to be in Lieu of all
Other Franchises.
Any franchise granted by the City with respect to
any given utility service shall be in lieu of all other
franchises, rights or privileges owned by the grantee,
or by any successor of the grantee to any right
under such franchise, for the rendering of such
utility service within the limits of the City as they
now or may hereafter exist, except any franchise
derived under Section 19 of Article M of the Con-
stitution of California as said section existed prior
to the amendment thereof adopted October 10, 1911.
'lice acceptance of any franchise hereunder, shall
operate as an abandonment of all such franchises,
rights and privileges within the limits of the City as
such limits shall at any time exist, in lieu of which
such franchise shall be granted.
Any franchise granted hereunder shall not become
effective until written acceptance thereof shall have
been fled by the grantee thereof with the City
Clerk. Such acceptance shall be filed within ten
days after the adoption of the ordinance granting the
franchise, or any extension thereof granted by the
City Council, and when so filed, such acceptance
shall constitute a continuing agreement of such
grantee that if and when the City shall thereafter
annex, or consolidate with, additional territory, any
and all franchises, rights and privileges owned by
the grantee therein,, except a franchise derived under
said constitutional provision shall likewise be
deemed to be. abandoned within the limits of such
territory. No grant of any franchise may be trans-
ferred or assigned by the grantee except by consent
in writing of the City Council and unless the trans-
feree or assignees thereof shall covenant and agree
to. perform and. be bound by each and all of the
terms and conditions imposed in the grant or by
procedural ordinance and by this Charter.
Section 1304. Eminent Domain.
No franchise grant shall in any way, or to any
extent, impair or affect the right of the City to ac-
quire the property of the grantee thereof either by
purchase or through the exercise of right of eminent
domain, and nothing herein contained shall be con-
strued to contract away or to modify or to abridge,
either for a term or in perpetuity, the City's right of
eminent domain with respect to any public utility.
Section 1305. Duties of Grantees.
By its acceptance of any franchise hereunder, the
grantee shall covenant and agree to pdrform. and be
bound by each and all of the terms and conditions
imposed in the grant, or by procedural ordinance
and shall further agree to:
(a) Comply with all lawful ordinances, rules and
regulations theretofore or thereafter adopted by the
City Council in the exercise of its police power
governing the construction, maintenance and opera-
tion of its plants, works or equipment.
(b) Pay to the City on demand the cost of all
repairs to public property made-necessary by any of
the operations of the grantee under such franchise.
(c) Indemnify and hold harmless the City and its
officers from any and all liability for damages proxi-
mately resulting from any operations under such
franchise.
(d) Remove and relocate without expense to the
City any facilities installed, used and maintained
under the franchise if and when necessary by any
lawful change of grade, alignment or width of any
public street, way alley or place, including the con-
struction of any subway or viaduct, or if the public
health, comfort, welfare, convenience, or safety so
demands.
(e) Pay to the City doing the life of the fran-
chise a percentage, to be specified in the grant, of
the gross annual receipts of the grantee within the
limits of the City, or such other compensation as the
City Council may prescribe in the grant.
Section 1306• Exercising Rights Without
Franchise.
The exercise by any person, firm or corporation
of any privilege for_which a franchise is required,
without possessing a valid and existing franchise
therefor, shall be a misdemeanor and shall be pun-
ishable in the same manner as violations of this
Charter are punishable and each day that such con-
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dition continues to exist shall constitute a separate
violation.
Article XIV
Miscellaneous
Section 1400. Definitions.
Unless the provision or the context otherwise
requires, as used in this Charter.
(a) "Shall " is mandatory, and "may" is permis-
sive.
(b) "City" is the City of Newport Beach and "de-
partment," "board," "commission," "agency," "offi-
cer," or "employee," is a department, board, com-
mission, agency, officer or employee, as the case
may be, of the City of Newport Beach.
(c) "County" is the County of Orange.
(d) "State" is the State of California.
Section 1401. OR Well Drilling.
No drilling for, exploration work of any kind,
production or refining of, oil, gas or other hydr6car-
bon substances shall be permitted within that area
of the City of Newport Beach as such limits exist
as of the effective date of this Charter. The prohibi-
tions shall include the City of Newport Beach,
This Section shall not prohibit the drilling for,
production or refining of oil, gas or other hydrocar-
bon substances within any territory annexed to the
City after the effective date of this Charter if such
drilling, production or refining was being conducted
in such territory at the date of the annexation there-
of, but no such drilling, production or refitting shall
be permitted within any territory annexed to the
City after the effective date of this Charter if such
activities were not being conducted in such territory
at the date of the annexation thereof.
This Section shall not prohibit the continuance of
production of any well slant drilled under property
within the City from a location outside the City and
in existence at the time this Charter takes effect Nor
shall this section preclude the City Council from
permitting the slant drilling of wells under the sur-
face of property within the City from surface loca-
C -29
Charter
tions located either outside the City or within future
annexations to the City wherein the drilling for and
production of oil, gas and other hydrocarbon sub-
stances is permitted, provided that such slant drilling
shall first be approved by a majority of the electors
voting on such proposition at any special or general
municipal election, and provided further that all of
the following conditions shall be complied with:
(a) The holding of a public hearing upon any
application for a permit to conduct such drilling;
(b) The requiring of the removal of all derricks
and other surface structures used in the drilling of
such well upon completion or abandonment of such
well;
(c) The furnishing of a faithful performance
surety bond and the maintenance of public liability
and property damage insurance by the permittee in
amounts deemed adequate by the City Council;
(d) The screening by landscaping and the beauti-
fication of any production and maintenance facilities
used in the operation of any such well;
(e) Provisions for the payment to the City of
such amounts as in the sound discretion of the
Council are adequate amounts for the consideration
or granting of such permit, the holding of such
hearing, the making of initial and periodic inspec-
tions, the granting of easements under City property
and for royalties or rentals;
(f) The requirement that no such well shall tra-
verse any land under the area of the City wherein
drilling is prohibited at a vertical depth of less than
400 feet from the surface of the ground; and
(g) Such other conditions as the City Council
may Prescribe by ordinance. (As amended effective
April 23, 1958)
Section 1402. Water -front Property.
The City Council shall not sell or convey any
water -front or beach property, excepting to the State
or to the County for use as a public beach or park.
NotwithWnding any other provision of this Char-
ter, the City Council shall have the authority to
lease City -owned property, including tide and sub-
merged lands so long as the lease is limited to the
term permitted by State law. .
Charter
Nothing in this Section shall invalidate any lease
of such property in existence at the time of the
effective date of the Charter nor the future leasing
or re- leasing of any such property under lease at the
effective date of this Charter.
There shall be reserved forever to the people the
public use of a strip of bay front land above mean
high tide not less than eighty -five feet in depth of
the city -owned water front property bounded on the
west by the southeasterly line of Nineteenth Street
and bounded on the east by a line parallel thereto
lying 349.90 feet northwesterly of the northwesterly
line of Fifteenth Street, said frontage to be bay front
frontage. (As amended effective January 11, 1957,
and November 3, 1992)
Section 1402(a). Exception to Section 1402.
Notwithstanding the provisions of Section 1402,
the City Council may sell and convey that parcel of
City -owned property fronting on the Rivo Alto
Canal described as Lot 4, Block 434, Canal Section,
Newport Beach, as per map recorded in Book 4,
Page 98, Miscellaneous Maps, Records of Orange
County, California. (Added by amendment effective
January 25, 1961)
Section 1402(b). Exception to Section 1402.
Notwithstanding the provisions of Section 1402,
the City Council may sell and convey that parcel of
City -owned property fronting on Newport Bay de-
scribed as follows:
All of Lot 1, Block 223, as shown upon a map
of Section "A," Newport Beach, recorded in Book
4, Page 21, of Miscellaneous Maps, Records of
Orange County, California, and all that portion of
Block 222 of said Section "A" described as follows:
Beginning at the most northerly comer of said
Block 222; running thence south 46° 50' 30" East
along the Northeasterly line of said Block 222 to the
most northerly comer of Lot 1, Tract 814, as shown
upon a map recorded. in Book 24, page 36, Records
of said County; running thence southwesterly along
the Northwesterly line of said Lot 1, Tract 814, to
a point in the Southwesterly line of said Block 222;
thence Northwesterly along the Southwesterly line
of said Block 222 to the most Westerly corner of
said Block 222; thence Northeasterly along the
Northwesterly line of said Block 222 to the point of
beginning. (Added by amendment effective January
25, 1961)
Section 1402(c). Exceptions to Section 1402.
Notwithstanding the provisions of Section 1402,
the City Council may sell and convey that parcel of
City -owned real property described as follows, to-
wit
Lot 6, Block 218, as shown upon a map of Sec-
tion `B," Newport Beach, recorded in Miscellaneous
Maps, Book 4, page 27, Records of Orange County,
California, together with a portion of Lot 4, Section
33, Township 6 South, Range 10 West, S.B.B. &
M., bounded on the south by the northerly line of
said Lot 6, on the north of the easterly extension of
the northerly prolongation of the easterly line of
said Lot 6, and on the west by the easterly lines of
Lots 3 and 4 of said Block 218.
(Added by amendment effective May 4, 1964)
Section 1402(d). Exception to Section 1402.
Notwithstanding the provisions of Section 1402,
the City Council may sell and convey that parcel of
City -owned real property described as follows, to
wit:
That portion of Section Thirty -five (35) in Town-
ship Six (6) South, Range Ten (10) West, San
Bernardino Base & Meridian together with that
portion of Fractional Section Two (2), in Township
Seven (7) South, Range Ten' (10) West, San
Bernardino Base & Meridian shown as Parcel "A"
on the map recorded in Book 80, Page 48 of Record
of Surveys in the office of the County Recorder of
Orange County,_. California, and described as fol-
lows:
C -30
Beginning at the most westerly comer of Lot 8,
Block 22, Eastside Addition to Balboa Tract as
shown on the map *recorded in Book 4, Page 20 of
•
•
•
•
r1
LJ
•
Miscellaneous Maps in the office of the County
Recorder of said County; thence S 70° 10' 00" E.
3.78 feet to the True Point of Beginning; thence
continuing S 700 10' 10" E. 26.22 feet; thence N
19° 50' 00" E 9.46 feet; thence West 27.87 feet to
the True Point of Beginning.
(Added by amendment effective April 28, 1966)
Section 1402(e). Exception to Section 1402.
Notwithstanding the provisions of Section 1402,
the City Council may sell and convey that parcel of
City -owned property fronting on Newport Bay de-
scribed as follows:
That portion of Lot 2 in Section 33, Township 6
South, Range 10 West, of the San Bernardino me-
ridian, in the City of Newport Beach, County of
Orange, State of California, according to the official
plat of said land filed in the District Land Office,
August 4, 1890, lying northeasterly of the northeast-
erly line of Blocks 222 and 223 in Section A, New-
port Beach, as per map recorded in Book 4. page 21
of Miscellaneous Maps, in the office of the County
Recorder of said County and between the northeast-
erly prolongations of the northwesterly line of Lot
1 in Block 223 of said Tract and of the nortbwester-
ly line of Lot 1 of Tract No. 814, as per map re-
corded in Book 24, pages 35 and 36, of said Miscel-
laneous Maps.
(Added by amendment effective January 12, 1967)
Section 1402(8. Exception to Section 1402.
Notwithstanding the provisions of Section 1402,
the City Council may sell and convey that parcel of
City owned property fronting on the Rivo Alto with
the legal description as follows:
Lot 6, Block 242, Canal Section Tract filed in
Book 4, Page 98 of Miscellaneous Maps in the
Office of the Recorder of Orange County, Califor-
nia.
The proceeds of the sale of this property shall be
deposited in a special fund to be used solely for the
completion of the new central library.
Charter
(Added by amendment effective November 3, 1992)
Section 1403. Service and Utility Charges.
All service charges and charges for utilities fur-
nished by the City may be combined upon one or
more bills or invoices but each such charge shall be
separately stated. No service or utility furnished by
the City shall be separately stated. No service or
utility furnished by the City shall be discontinued
for failure to pay any other service or utility fur-
nished by the City.
Section 1404. Violations.
The violation of any provision of this Charter
shall be punishable by a fine of not exceeding One
Thousand Dollars ($1000) or by imprisonment for
a term of not exceeding six months or by both such
fine and imprisonment. (As amended effective June
6, 1974)
Section 1405. Validity.
If any provision of this Charter, or the application
thereof to any person or circumstance is held inval-
id, the remainder of the Charter, and the application
of such provisions to other persons or circumstanc-
es, shall not be affected thereby.
CERTIFICATE
WHEREAS, the City of Newport Beach, for
many years last past, has been and now is a city
containing more than three thousand five hundred
inhabitants, as ascertained by the last preceding
census taken under the authority of the Congress of
the United States or of the Legislature of the State
of California; and
C -31
W1iEREAS, on the 22nd day of December, 1953,
at a municipal election duly and regularly held on
that day in said City under and in accordance with
the provisions of Section• 8 of Article IU of the
Constitution of the State of California, the electors
of said City did duly choose and elect Marco P.
Anich, George M. Engelke, Lawrence B. Broering,
Tom W. Henderson, Robert E. Campbell, Marion C.
Charter
Forrest, C. Lester Jones, Wallace Calderhead, Ruth
S. Fleming, James D. Ray, Ruby Stevenson, J.
Leslie Steffensen, Henry K. Deister, Walter Gerhardt
and Roland Wright, who are all electors of said City
and eligible as candidates under said section, as a
Board of fifteen Freeholders to prepare a new Char-
ter for the government of said City; and
WHEREAS, the result of said election of Free-
holders was duly declared by the legislative body of
the City on the 29th day of December, 1953, and
said electors thereafter duly qualified as such Free-
holders in accordance with law;
Henry K. Deister •
George M. Engelke
Ruth S. Fleming
Marion C. Forrest
Walter Gerhardt
Tom W. Henderson
C. Lester Jones
James D. Ray
Roland Wright
Freeholders of the City of Newport Beach, Coun-
ty of Orange, State of California.
ATTEST
BE IT KNOWN that in pursuance of the provi- Ruby Stevenson
sions of said Constitution and within the period of
one year after the result of said election was so
declared, the said Board of Freeholders has prepared
and does now propose the foregoing Charter as the
Charter for the government of the City of Newport
Beach; and
BE IT FURTHER KNOWN that said Board of •
Freeholders hereby requests said legislative body of
the City of Newport Beach to cause the publication
of said proposed Charter as provided in said Consti-
tution and does hereby fix and designate Tuesday
the 8th day of June, 1954 as the date for the elec-
tion at which the proposed Charter shall be submit-
ted to the qualified electors of the City of Newport
Beach for their ratification and adoption;
IN WITNESS WHEREOF, we the undersigned
duly elected and _qualified Freeholders of the City
of Newport Beach, County of Orange, State of
California, have hereunto set our hands at the City
of Newport Beach, County of Orange, State of
California, this 29th day of March, 1954.
J. Leslie Steffensen, Chairman
Ruby Stevenson, Secretary
Marco P. Anich
Lawrence B. Broering
Wallace Calderhead
Robert Campbell •
C -32
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EXHIBIT NO. 18
Certified Copy of
Ordinance 85 -23
and 84-4
(BC and City)
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CERTIFICATE REGARDING CITY ORDINANCES
I hereby certify that attached are true, correct and complete copies of Ordinance No.
85 -23, adopted on August 26, 1985 and Ordinance No. 84 -4, adopted on February 13, 1984 of the
City of Newport Beach.
DOCSSCI:358317.3
Dated: August 24, 2005.
CITY OF NEWPORT BEACH
City Clerk
• ORDINANCE NO. 85 -23
• AN ORDINANCE OF THE CITY OF NEWPORT BEACH
AMENDING CHAPTER 3.26 TO PERMIT THE ISSUANCE
OF REVENUE BONDS FOR HOSPITALS AND
RECREATIONAL FACILITIES.
THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH DOES
ORDAIN AS FOLLOWS:
SECTION 1. Chapter 3.26 of the Newport Beach Municipal
Code is amended to read as follows:
HEALTH CARE AND RECREATION FACILITIES REVENUE BOND ORDINANCE -
0
Sections:
3.26.010
3.26.020
3.26.030
• 3.26.040
3.26.050
3.26.060
3.26.070
3.26.080
3.26.090
3.26.100
3.26.110
3.26.120
•
Short Title.
Purpose.
Definitions.
Powers.
Bonds.
Independent Validity of Bonds.
Liberal Construction.
Effective of Omission or Defect.
Authority.
Provisions of this Ordinance are
Corpplete, Alternative.
Inconsistency with Other Statutes.
Partial Invalidity.
3.26.010 Short Title. This chapter shall be known
as the "Health Care and Recreation Facilities Revenue Bond
Ordinance" of the City of Newport Beach. (Ord.).
• -1-
3.26.020 Purpose. The City Council finds that the
• ordinance codified in this Chapter is intended to establish a
procedure whereby the City provides assistance in the financing
of improvements to non - profit health care and recreation
• facilities located within the City of Newport Beach. By
providing such assistance, and in reducing the cost of financing
improvements, the City will enable non - profit health care,
recreational facilities to lower costs of those services, to
provide better and more efficient service than would otherwise be
available, and will enable non - profit recreation facilities to
provide sports or recreational opportunities that would otherwise
be unavailable to residents of the City,
The City Council also declares that the significant
public benefit that derives from the exercise of powers described
in this ordinance will not result in any adverse financial impact
on the City of Newport Beach, nor will the City take any action
which would create any debt or liability on the part of the City,
• or any obligation to levy or impose taxes or assessments or
otherwise affect the finances or credit of the City of Newport
Beach.
The City Council also declares that, in order to ensure
that the participation of the City in financing is for a public
purpose, the City may impose fees, charges or financial
commitments on the part of the participating institutions, as may
be necessary or appropriate to recover administrative costs and
expenses incurred in the exercise of the powers and duties
conferred by this ordinance or to defray certain costs annually
incurred by the City in providing emergency health care and
recreation facilities and programs. ,
i •
• -2-
3.26.030 Definitions. Unless the context otherwise
• requires, the terms defined in this ordinance shall have the
following meanings:
(a) "Bonds" means any bonds, notes, certificates,
• debentures or other obligations issued or entered into by the
City pursuant to this ordinance and payable exclusively from
revenues as in this ordinance defined and from any other funds
specified in this ordinance upon which such obligations may be
made a charge and from which they are made payable.
(b) "City" means the City of Newport Beach.
(c) "Cost" means the total of all costs Incurred by or
on behalf of a participating institution necessary or incident to
carrying out the purpose, as specified in subsection (a), (b) or
(c) Section 3.26.040; for which a series of bonds is issued, as
are approved by the City as reasonable and necessary for carrying
out all works and undertakings necessary or incident to such
purpose. "Cost," as applied to a project or portion thereof,
financed with the proceeds of any series of bonds issued
• hereunder means and includes, without limitation, all or any part
of the cost of construction and acquisition of all lands,
structures, real or personal property, rights, rights -of -way,
franchises, easements and interests acquired or used for such
project, the cost of demolishing or removing any buildings or
structures on land so acquired, including the cost of acquiring
any lands to which such buildings or structures may be moved, the
cost of all machinery and equipment, financing charges, reserves
for principal and interest and for extensions, enlargements,
additions, replacements, renovations and improvements, the cost
of engineering, reasonable financial and legal services, plans,
specifications, studies, surveys, estimates, administrative
expenses and other expenses necessary or incident to determining
the feasibility or constructing any such project or incident to
• determining the feasibility of constructing any such project or
incident to the construction or acquisition or financing
0 -3-
thereof. "Cost" also may include reimbursement of any such costs
• incurred by a participating institution prior to or after the
enactment of this ordinance or prior to or after the enactment of
a resolution of the Council with respect to the issuance of such
• series of bonds.
(d) "Council" means the City Council of the City of
Newport Beach.
(e) "Health facility" means any facility, place or
building which is maintained and operated for the diagnosis,
care, prevention or treatment of human illness, physical or
mental, including convalescence, rehabilitation or care during
and after pregnancy, or for any one or more of these services,
and which provides.to residents of the City health care services
designated as such in an agreement between the City and the
participating health institution providing or operating such
facility, place or building.
"Health facility" includes a portion of the above types
of facilities and includes facilities operated in conjunction
• with one of the above types of facilities and required or useful,
as determined by resolution of the Council, for the operation of
a health facility, including but not limited to: a laboratory, a
laundry, a nurses' or interns' residence, a housing facility for
patients, staff or employees and the families of any of them, an
administration building or buildings to house offices of the
participating health institution, a research, maintenance,
storage, utility or parking facility and all structures or
facilities related to any of the foregoing.
"Health facility" shall not include any building used or
to be used primarily for sectarian instruction or study or as a
place for devotional activities or religious worship.
(f) "Recreation facility" means any facility, place or
building which is maintained and operated by a non - profit
corporation for the purpose of providing facilities for sports
and recreational activities, as well as equipment and
• -4
comprehensive programs to improve . physical fitness, and which
• provides to all residents of the City such facilities and
programs as designated in an agreement between the City and the
participating recreation institution providing or operating such
• facility, place or building.
"Recreation facility" includes a portion of a recreation
facility and includes facilities operated in conjunction with a
recreation facility and required or useful, as determined by
resolution of the Council, for the operation of a recreation
facility, including but not limited to% an administration
building or buildings to house offices of the participating
recreation institution, a maintenance, storage, utility or
parking facility and all structures or facilities related to any -
of the foregoing. --
"Recreation facility" shall not include any building
used or to be used primarily for sectarian instruction or study
or as a place for devotional activities or religious worship.
(g) "Improvement of a health facility" shall include,
• without limitation, the additions to or replacement of a health
facility or the acquisition of equipment in connection with the
operation of such health facility.
(h) "Improvement of recreation facility" shall include,
without limitation, the additions to or replacement of a
recreation facility, or the acquisition of equipment in
connection with the operation of such a facility.
(i) "Participating health institution" means a private
nonprofit corporation or association authorized by the laws of
the State of California to provide or operate a health facility
as defined in this ordinance and which, pursuant to the
provisions of this ordinance, undertakes the financing of the
acquisition, construction or improvement of a health facility or
undertakes the refunding or refinancing of obligations incurred
• to finance the acquisition, construction or improvement of a
health facility, or any corporation which is a nonprofit
• -5-
corporation in California or a sister state of the United States
• of America which is the sole member of such a corporation or
association.
(j) "Participating recreation institution" means a
• private non - profit corporation or association authorized by the
laws of the State of California to provide or operate a
recreation facility as defined in this ordinance and which, `
pursuant to the provisions of this ordinance, undertakes the
financing of the acquisition, construction or improvement of a
recreation facility or undertakes the refunding or refinancing of
obligations incurred to finance the acquisition, construction or
improvement of a recreation facility, or any corporation which is
a non - profit corporation in California or a sister state of the -
United States of America which is the sole member of such a
corporation or association.
(k) "Participating institution" means a participating
health institution or a participating recreation institution.
(1) "Revenue" means amounts received by the City as
• repayment of principal, interest, and all other charges with
respect to a loan under this ordinance, any proceeds received by
the City from mortgage, hazard or other insurance on or with
respect to such a loan, all other rents, charges, fees, income
and receipts derived by the City from the financing or
refinancing of a health or recreation facility under this
ordinance, any amounts received by the City as investment
earnings on moneys deposited in a reserve fund or any similar
fund securing bonds, and such other moneys as the Council may, in
its discretion, lawfully designate as revenues. (Ord. 84 -4 S 2
(part), 1984).
3.26.040 Powers. The City Council shall, within the
context of this ordinance, have the following powers:
• (a) Loan For Health or Recreation Facility. The City
may make, purchase, or otherwise contract for the making of a
0 _a
secured or unsecured loan upon such terms and conditions as the
• City shall deem proper, to any participating institution for the
cost of acquiring, constructing, rehabilitating or improving a
health or recreation facility or financing thereof or of working
• capital therefor, including reimbursement to such participating
institution of costs already expended for such purpose.
(b) Loan to Refund or Refinance Health or Recreation
Facility. The City may make, purchase, or otherwise contract for
the making of a secured or unsecured loan, upon such terms and
conditions as the City shall deem proper, to any participating
institution or exchange its bonds in order to refund or refinance
outstanding obligations of such participating institution
incurred to finance the cost of acquiring, constructing,
rehabilitating or improving a health or recreation facility or
financing of working capital for such facility, whether such
obligations were incurred prior to or after the enactment of this
ordinance, if the City finds that such refunding or refinancing
is in the public interest and either alleviates a financial or
• operating hardship of such participating institution, or is in
connection with other financing by the City for such
participating institution or may be expected to result in lower
charges or containment of the rate of increase in hospital rates
and savings to third parties, including government, and to others
who must pay for care, or any combination thereof.
(c) Sale or Lease of Health or Recreation Facility by
City. The City may acquire, construct, enlarge, remodel,
renovate, alter, improve, furnish, equip, own or lease as lessee
a health or recreation facility for the purpose of selling or
leasing such facility to a participating institution and may
designate such participating institution as its agent to
undertake to construct, enlarge, remodel, renovate, alter,
Improve, furnish, and equip such facility.
• The City may sell or lease, upon such terms and
conditions as the City shall deem proper, to any such
• -7-
participating institution any health or recreation facility owned
• by the City under this ordinance, including a facility conveyed
to the City in connection with a financing under this ordinance
but not being financed or refinanced hereunder.
• (d) Recovery of Costs and Expenses by City. The City
may charge participating institutions application, commitment,
financing and other fees, to recover all administrative and other
costs and expenses incurred in the exercise of the powers and
duties conferred by this ordinance, or impose fees, charges or
other financial commitments to ensure, that the exercise of such
powers is in furtherance of the public health, safety and welfare
of the citizens of the City of Newport Beach. The City Council
is also specifically authorized to require the payment of such
fees as it deems appropriate in order to defray certain costs
annually incurred by the City in providing emergency health care
and recreation facilities and programs. .
(e) Insurance of Guarantee of Payment. The City may
obtain, or aid in obtaining, from any department or agency of the
• United States or of the State of California or any private
company, any insurance or guarantee as to, or of, or for the
payment or repayment of, interest or principal, or both, or any
part thereof, on any loan, lease or sale obligation or any
instrument evidencing or securing the same, made or entered into
pursuant to the provisions of this ordinance; and may accept
payment in such manner and form as provided therein in the event
of a default by a participating institution and may assign any
such insurance or guarantee as security for bonds. The City also
may provide for the maintenance of letters of credit or other
credit enhancement devices, for the guarantee of, or for the
payment or repayment of, interest or principal, or both, or any
part thereof, of any services of bonds issued pursuant to this
ordinance.
• (f) Fixing Rents, Fees, Rates, Etc. The City may fix
rents, payments, fees, charges and interest rates for financing
0 -8-
under this ordinance and may agree to revise from time to time
• such rents, payments, fees, charges and interest rates to reflect
changes in interest rates on bonds, losses due to defaults or -
changes in other expenses related to this ordinance, including
• City administrative expenses.
(g) Deeds of Trust or Mortages as Security. The City
may hold deeds of trust, mortgages or other security instruments
as security for loans under this ordinance and may pledge or
assign the same as security for repayment of bonds. Such deeds
of trust, mortgages or other security instruments may be assigned
to, and held on behalf of the City by, any bank or trust company
within any state of the United States of America appointed to act
as trustee by the City in any resolution or indenture providing -
for issuance of bonds under this ordinance.
(h) Employment of Experts and Consultants. The City
may employ such engineering, architectural, financial,
accounting, legal or other services as may be necessary in the
judgment of the City of the purposes of this ordinance.
(i) Do All Things Necessary and Convenient. In
• addition to all other powers specifically described in this
ordinance, the City may do all things necessary or convenient to
carry out the purposes of this ordinance provided, however, that
at no time shall the Council take any action which would:
1. Constitute a debt of liability of the City;
2. Constitute a pledge of the faith and /or credit of
the City;
3. Obligate the City, directly, indirectly or
contingently, to impose any form of taxation or assessment, or to
make any appropriation for the payment of any bonds or
indebtedness; or
4. Obligate the City to pledge or otherwise encumber
any of its assets. (Ord. 84 -4 S 2 (part), 1984).
•
• -9-
3.26.050 Bonds. the City may, from time to time,
issue bonds for any of the purposes specified in subsections (a),
(b) and (c) of Section 3.26.040. Bonds shall be negotiable
instruments for all purposes, subject only to the provisions of
• such bonds for registration.
1. Issuance of Limited Obligation Bonds. Every issue
of bonds shall be a limited obligation of the City payable solely
from all or any specified part of the revenues and the moneys and
assets authorized in this ordinance to be pledged or assigned to
secure payment of bonds. Such revenues, moneys or assets shall
be the sole source of repayment of such issue of bonds. Bonds
issued under the provisions of this ordinance shall not be deemed
to constitute a debt or liability of the City or pledge of the
faith and credit of the City but shall be payable solely from
specified revenues, moneys and assets. The issuance of bonds
shall not directly, indirectly, or contingently obligate the City
to levy or pledge any form of taxation or to make any
appropriation for their payment. All bonds shall contain on the
• face thereof a statement to the following effect:
Neither the faith and credit nor the taxing power of the
City of Newport Beach, the State of California, any political
subdivision thereof is pledged to the payment of the principal of
or premium or interest on this bond.
2. Amount of bonds. In determining the amount of
bonds to be issued, the City may include all costs of the
issuance of such bonds, reserves for debt service and for
repairs, replacement, additions and improvementa, and interest on
the bonds during the construction period and for such period
thereafter as the City may determine.
3. Type, Form and Sale of Bonds. Bonds may be issued
as serial bonds, term bonds, instal3ments bonds or pasathrough
certificates or any combination thereof. Bonds shall be
• authorized by resolution of the Council and shall bear such date
or dates, mature at such time or times, bear interest at such
0 -10-
fixed or variable rate or rates, be payable at such time or
• times, be in such denomination, be in such form, carry such
registration privileges, be executed in such manner, be payable
in lawful money of the United States of America at such place or
• places, be subject to such terms of redemption and have such
other terms and conditions as such resolution or any indenture
authorized by such resolution to be entered into by the City may
provide. Bonds may be sold at either a public or private sale
and for such prices as the City may determine. Pending
preparation of definitive bonds, the City may issue temporary
bonds, which shall be exchanged for such definitive bonds when
prepared.
4. Terms and Conditions of Bonds. Any resolution -
authorizing any bonds or any issue of bonds, or any indenture
authorized by such resolution to be entered into by the City, may
contain provisions respecting any of the following terms and
conditions, which shall be a part of the contract with the
holders of such bonds:
• (a) The terms, conditions and form of such bonds and
the interest and principal to be paid thereon;
(b) Limitations on the uses and purposes to which the
proceeds of sale of such bonds may be applied, and the pledge or
assignment of such proceeds to secure the payment of such bonds;
(c) Limitations on the issuance of additional parity
bonds, the terms upon which additional parity bonds may be issued
and secured, and the refunding of outstanding bonds;
(d) The setting aside of reserves, sinking funds, and
such other funds as are necessary and the regulation and
disposition thereof;
(e) The pledge or assignment of all or any part of the
revenues and the use and disposition' thereof, subject to such
agreements with.the holders of bonds as may then be outstanding;
• (f) Limitation on the use of revenues for expenditures
for operating, administration or other expenses of the City;
• -11-
(g) Specification of the acts or omissions to act which
• shall constitute a default in the duties of the City or a
participating instruction to holders of such bonds, and providing
the rights and remedies of such holders in the event of default,
• including any limitations on the right of action by individual
bondholders;
(h) The appointment of a corporate trustee to act on
behalf of the City and the holders of its bonds, the pledge or
assignment of loans, deeds of trust, mortgages and any contracts
or agreements to such trustee, and the rights of such trustee;
(i) The procedure, if any, by which the terms of any
contract with bondholders may be amended or abrogated, the amount
of such bonds the holders of which must consent thereto, and the -
manner in which such consent may be given; and
(j)
Any other provisions which the Council may deem
reasonable and proper for the purposes of this ordinance and the
security of the bondholders.
5. Pledge of Revenues. Any pledge of revenues, other
• moneys or assets, or any centralized pool of said revenues, shall
be valid and binding from the time such pledge is made.
Revenues, moneys and assets so pledged and thereafter received by
the City shall immediately be subject to the lien of such pledge
without any physical delivery thereof or further act, and the
lien of any such pledge shall be valid and binding as against all
parties having claims of any kind in tort, contract, or otherwise
against the City, irrespective of whether such parties have
notice thereof. Neither the resolution nor any indenture by
which a pledge is created need be filed or recorded except in the
records of the City.
6. Liability of Council and Officers. Neither the
members of the Council, the officers or employees of the City,
nor any person executing any bonds shall be liable personally on
• the bonds or be subject to any personal liability or
accountability by reason of the issuance thereof.
• -12-
7. Purchase of Bonds by City. The City shall have the
• power out of any funds available therefor to purchase its
bonds. The City may hold, pledge, cancel, or resell such bonds,
subject to and in accordance with agreements with the
• bondholders.
a. Compelling Performance. Any holder of bonds issued
under the provisions of this ordinance, and any trustee appointed
pursuant to any resolution authorizing the issuance of bonds,
except to the extent the rights thereof may be restricted by such
resolution or any indenture authorized thereby to be entered into
by the City may; either at law or in equity, by suit, action,
mandamus, or other proceedings, protect or enforce any and all
rights specified in law or in such resolution or indenture, and -
may enforce and compel the performance of all duties required by
this ordinance or by such resolution or indenture to be performed
by the City or by any officer, employee or agent thereof,
including the fixing, charging, and collecting of rates, fees,
interest, and charges authorized and required by the provisions
' of Such resolution or indenture to be fixed, charged, and
collected.
9•. Refunding Bonds - Use of Proceeds. The. City may
issue bonds for the purpose of refunding any bonds then
outstanding, including the payment of any redemption premiums
thereof and any interest accrued or to accrue to the earliest or
any subsequent date or dates or redemption, purchase or maturity
of such bonds.
(a) The proceeds of bonds issued for the purpose
of refunding any outstanding bonds may, in the discretion of the
City, be applied to the purchase or retirement at maturity or
redemption of such outstanding bonds, either at their earliest or
any subsequent redemption date or dates or upon the purchase or
retirement at the maturity thereof and may, pending such
•
• -13-
application, be placed in escrow, to be applied to such purchase
or retirement at maturity or redemption on such date or dates as
may be determined by the City.
(b) Pending use for purchase, retirement at
• maturity or redemption of outstanding bonds, any proceeds held in
escrow pursuant to subdivision (b) may be invested and reinvested
as provided in the resolution or indenture. Any interest or
other increment earned or realized on any such investment may be
applied to the payment of the outstanding bonds to be refunded or
to the payment of interest on the refunding bonds. After the
terms of the escrow have been fully satisfied and carried out,
any balance of such proceeds and any interest or increment earned
or realized on any-such investment thereof may be returned to the -
City to be used by it for any lawful purpose. '
(c) All bonds issued pursuant to this section
shall be subject to the provisions of this ordinance in the same
manner and to the same -extent as other bonds issued pursuant to
this ordinance.
• 3.26.060 Independent Validity of Bonds. The validity
of the authorization and issuance of any bonds is not dependent
on and shall not be affected in any way by the proceedings taken
by the City for the making of any 'loan or the entering,into of
.any agreement, or by the failure to make any loan or enter into
any agreement, for which bonds are authorized to be issued under
this ordinance. (Ord.84 -4 52 (part), 1984).
3.26.070 Liberal Construction. This ordinance,
being necessary for the welfare of the City and its inhabitants,
shall be liberally construed to effect its purposes. (Ord. 84 -4
S2 (part), 1964).
3.26.060 Hffec't of Omission or Defect. If the
• jurisdiction of the Council to order the proposed act is not
affected, any omission or any other defect in the proceedings
0 -14-
3.36.090 Authority. This chapter is full
• authority for the issuance of bonds by the City for the purposes
specified herein. (Ord. 84 -4 52 (part), 1984).
3.26.100 Provisions of this Ordinance are
Complete, Alternative. This ordinance shall be deemed to provide
a complete, additional, and alternative method for doing the
things authorized thereby, and shall be regarded as supplemental
and additional to the power conferred by other laws. The
issuance of bonds under the provisions of this ordinance need not -
comply with the requirements of any other law applicable to the
issuance of bonds. The purposes authorized hereby may be
effectuated and the bonds may be issued for any such purposes
under this ordinance notwithstanding that any other law may
provide for such purposes or for the issuance of bonds for like
purposes and without regard to the requirements, restrictions,
limitations or other provisions contained in any other law.
(Ord. 64 -4 52 (part), 1984).
3.26.110 Inconsistency with Other Statutes. To the
extent that the provisions of this ordinance are inconsistent
with the provisions of any general statute, a special act or
parts thereof, including the Newport Beach Municipal Code
provisions for Revenue Bonds, the provisions of this ordinance
shall be deemed controlling. (Ord. 84 -4 52 (part), 1984).
3.26.120 Partial Invalidity. If any section,
subsection, sentence, clause or phrase of this ordinance is for
any reason held to be invalid or unconstitutional by the decision
• of any court of competent jurisdiction, such decision shall not
affect the validity of the remaining portions of the ordinance.
• -15-
shall not
invalidate such
proceedings
or the
bonds issued
•
pursuant to
this ordinance.
(Ord. 84 -4 S2
(part),
1984).
3.36.090 Authority. This chapter is full
• authority for the issuance of bonds by the City for the purposes
specified herein. (Ord. 84 -4 52 (part), 1984).
3.26.100 Provisions of this Ordinance are
Complete, Alternative. This ordinance shall be deemed to provide
a complete, additional, and alternative method for doing the
things authorized thereby, and shall be regarded as supplemental
and additional to the power conferred by other laws. The
issuance of bonds under the provisions of this ordinance need not -
comply with the requirements of any other law applicable to the
issuance of bonds. The purposes authorized hereby may be
effectuated and the bonds may be issued for any such purposes
under this ordinance notwithstanding that any other law may
provide for such purposes or for the issuance of bonds for like
purposes and without regard to the requirements, restrictions,
limitations or other provisions contained in any other law.
(Ord. 64 -4 52 (part), 1984).
3.26.110 Inconsistency with Other Statutes. To the
extent that the provisions of this ordinance are inconsistent
with the provisions of any general statute, a special act or
parts thereof, including the Newport Beach Municipal Code
provisions for Revenue Bonds, the provisions of this ordinance
shall be deemed controlling. (Ord. 84 -4 52 (part), 1984).
3.26.120 Partial Invalidity. If any section,
subsection, sentence, clause or phrase of this ordinance is for
any reason held to be invalid or unconstitutional by the decision
• of any court of competent jurisdiction, such decision shall not
affect the validity of the remaining portions of the ordinance.
• -15-
The City Council hereby declares that it would have passed this
•
ordinance and each section,
subsection,
sentence, clause and
phrase thereof, irrespective
of the fact
that any one or more
sections, subsections, sentences,
clauses or phrases be declared
•
invalid or unconstitutional.
(Ord. 84 -4 S2
(part), 1984).
66-1
This Ordinance was introduced at a regular meeting of
the City Council of the City of Newport Beach held on the 12th
day of August, 1985, and was adopted on the 26th day
of August , 1985 by the following vote:
ATTEST:
n
City Clerk
AYES, COUNCIIAMMERS Agee, Cox, Hart,
Heather, Haurer, Plu er, Strauss
NOES, COUNC1IIdMERS
ABSENT COUNCIIAIMMERS
-1s-
0
ORDINANCE NO, 84 -4
• AN ORDINANCE OF THE CITY OF NEWPORT BEACH
AMENDING THE MUNICIPAL CODE BY ADDING THE
HEALTH FACILITIES REVENUE BOND LAW, (CHAPTER
3.26) THEREBY ESTABLISHING PROCEDURES WHEREBY
REVENUE BONDS MAY BE ISSUED BY THE CITY FOR
THE PURPOSE OF PROVIDING FINANCING TO
PARTICIPATING HEALTH CARE FACILITIES FOR
SPECIFIED PURPOSES
Section 1. The City Council of the City of Newport
Beach, finds and declares as follows:
The City Council of the City of Newport Beach is
empowered, pursuant to the provisions of Section 200 of Article
II of the Charter of the City of Newport Beach and the provisions
of Sections 3, 5 and 7 of Article XI of the Constitution of the
State of California, to authorize, issue and sell revenue bonds
for the purpose of providing financing, or refinancing, to
• certain health care facilities located within the corporate
boundaries of the City. of Newport Beach; and
The City Council, by the adoption of this ordinance,
intends to establish a procedure for the issuance and sale of
bonds for the purpose of providing financing to health care
institutions; and
The City Council, has determined that, in exercising
its powers under this ordinance, the City will, at no time, be
obligated, either directly or indirectly, to repay any money,
pledge or encumber any assets, or to levy any form of taxation or
assessment;
Because the exercise of powers under this ordinance
will have no financial impact the City Council finds that its
exercise of the powers specified will promote the health, safety
• and welfare of the residents of the City of Newport Beach and
County of Orange because City-assisted financing enables non-
profit health care facilities to borrow money at lower interest
• rates and those savings are then passed along to the public in
the form of lower costs and /or better medical care;
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• Section 2. The City Council does ordain as follows:
Chapter 3.26 is hereby added to the Municipal Code to
read as follows:
Chapter 3.26
HEALTH CARE FACILITY REVENUE BOND ORDINANCE
3.26.010
3.26.020
3.26.030
3,26.040
3.26.050
3.26.060
3.26.070
• 3.26.080
3.26.090
3.26.100
3.26.110
3.26.120
Short Title
Purpose
Definitions
Powers
Bonds
Purpose
Liberal Construction
Effect of Omission or Defect
Authority.
Provisions of this Ordinance are Complete,
Inconsistency with Other Statutes
Partial Invalidity
3.26.010 Short Title This chapter shall be known as
the "Bealth Care Facility Revenue Bond Ordinance" of the City of
Newport Beach.
3.26.020 Purpose The City Council finds that the
ordinance codified in this Chapter is intended to establish a
procedure whereby the City provides assistance in the financing
of improvements to non - profit health care facilities located
within the City of Newport Beach. By providing such assistance,
• and in reducing the cost of financing improvements, the City will
enable non- profit health care facilities to lower costs of
medical services and to provide better and more efficient service
• than would otherwise be available.
2
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• The City Council also declares that the significant
public benefit that derives from the exercise of powers described
in this ordinance will not result in any adverse financial impact
on the City of Newport Beach, nor will the City take any action
which would create any debt or liability on the part of the City,
any obligation to levy or impose taxes or assessments or
otherwise affect the finances or credit of the City of Newport
Beach.
The City Council also declares that, in order to ensure
that the participation of the City in financing is for a public
purpose, the City may impose fees, charges or financial
commitments on the part of the participating institution, as may
be necessary or appropriate to recover administrative costs and
- expenses incurred in the exercise of the powers and duties
• conferred by this ordinance or to defray certain costs annually
incurred by the City in providing emergency health care.
3.26.030 Definitions Unless the context otherwise
requires, the terms defined in this ordinance shall have the
following meanings:
(a) 'Bonds' means any bonds, notes, certificates,
debentures or other obligations issued or entered into by the
City pursuant to this ordinance and payable exclusively from
revenues as in this ordinance defined and from any other funds
specified in this ordinance upon which such obligations may be
made a charge and from which they are made payable.
(b) 'City' means the City of Newport Beach.
(c) 'Cost' means the total of all costs incurred by or
on behalf of a participating health institution necessary or
• incident to carrying out the purpose, as specified in sections
2 -1, 2 -2 and 2 -3, for which a series of bonds is issued, as are
approved by the City as reasonable and necessary for carrying out
• all works and undertakings necessary or incident to such
purpose. 'Cost,' as applied to a project or portion thereof
3
l�
u
•
•
•
financed with the proceeds of any series of bonds issued here-
under means and includes, without limitation, all or any part of
the cost of construction and acquisition of all lands,
structures, real or personal property, rights, rights -of -way,
franchises, easements and interests acquired or used for such
project, the cost of demolishing or removing any buildings or
structures on land so acquired, including the cost of acquiring
any lands to which such buildings or structures may be moved, the
cost of all machinery and equipment, financing charges, reserves -
for principal and interest and for extensions, enlargements,
additions, replacements, renovations and improvements, the cost
of engineering, reasonable financial and legal services, plans,
specifications, studies, surveys, estimates, administrative ex-
penses and other expenses necessary or incident to determining
the feasibility of constructing any such project or incident to
the construction or acquisition or financing thereof. 'Cost'
also may include reimbursement of any such costs incurred by the
participating health institution prior to or after the enactment
of this ordinance or prior to or after the enactment of a resolu-
tion of the Council with respect to the issuance of such series
of bonds.
(d) 'Council' means the City Council of the City of
Newport Beach.
(e) 'Health facility' means any facility, place or
building which is maintained and operated for the diagnosis,
care, prevention or treatment of human illness, physical or
mental, including convalescence, rehabilitation or care during
and after pregnancy, or for any one or more of these services,
and which provides to residents of the City health care services
designated as, such in an agreement between the City and the par-
ticipating health institution providing or operating such
facility, place or building.
4
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'Health facility' includes a portion of the above types
• of facilities and includes facilities opeated in conjunction with
one of the above types of faclities and required or useful, as
determined by resolution of the Council, for the operation of a
health facility, including but not limited to; a laboratory, a
laundry, a nurses' or interns' residence, a housing facility for
patients, staff or employees and the families of any of them, an
administration building or buildings to house offices of the
participating health institution, a research, maintenance,
storage, utility or parking facility and all structures or
facilities related to any of the foregoing.
'Health facility' shall not include any building used
or to be used primarily for sectarian instruction or study or as
a place for devotional activities or religious worship.
• (f) 'Improvement of a health facility' shall include,
without limitation, the additions to or replacement of a health
facility or the acquisition of equipment in connection with the
operation of such health facility.
(g) 'Participating health institution' means a private
nonprofit corporation or association authorized by the laws of
the State of California to provide or operate a health facility
as defined in this ordinance and which, pursuant to the
provisions of this ordinance, undertakes the financing of the
acquisition, construction or improvement of a health facility or
undertakes the refunding or refinancing of obligations incurred
to finance the acquisition, construction or improvement of a
health facility, or any corporation which is a nonprofit corpora-
tion in California or a sister state of the anited States of
•America which is the sole member of such a corporation,or
association.
(h) 'Revenue' means amounts received by the City as
• repayment of principal, interest, and all other charges with
respect to a loan under this ordinance, any proceeds received by
a
J
• the City from mortgage, hazard or other insurance on or with res-
pect to such a loan, all other rents, charges, fees, income and
receipts derived by the City from the financing or refinancing of
a health facility under this ordinance, any amounts received by
the .City as investment earnings on moneys deposited in a reserve
fund or any similar fund securing bonds, and such other moneys as
the Council may, in its discretion, lawfully designate as
revenues.
3.26.040 Powers
The City Council shall, within the context of this
ordinance, have the following powers:
(a) Loan For Health Facility
The City may make, purchase, or otherwise contract for
the making of, a secured or unsecured loans, upon such terms and
• conditions as the City shall deem proper,-to any participating
health institution for the cost of acquiring, constructing,
rehabilitating or improving a health facility or financing
thereof or of working capital therefor, including reimbursement
to such participating health institution of costs already
expended for such such purpose.
(b) Loan to Refund or Refinance Health Facility
The City may make, purchase, or otherwise contract for
the making of a secured or unsecured loan, upon such terms and
conditions as the City shall deem proper, to any participating
health institution or exchange its bonds in order to' refund or
refinance outstanding obligations of such participating health
institution incurred to finance the cost of acquiring, construct-
ing, rehabilitating or improving a health facility or financing
• of working capital for such health facility, whether such obliga-
tions were incurred prior to or after the enactment of this ordi-
nance, if the City finds that such refunding or refinancing is in
• the public interest and either alleviates a financial or operat-
ing hardship of such participating health institution, or is in
6
0
connection with other financing by the City for such participat-
ing health institution or may be expected to result in lower
charges or containment of the rate of increase in hospital rates
and savings to third parties, including government, and to others
who must pay for care, or any combination thereof.
(c) Sale or Lease of Health Faclity by City
The City may acquire, construct, enlarge, remodel,
renovate, alter, improve, furnish, equip, own or lease as lessee
a health facility for the purpose of selling or leasing such
health facility to a participating health institution and may
designate such participating health institution as its agent to
undertake to construct; enlarge, remodel, renovate, alter,
improve, furnish, and equip such health facility. .
The City may sell or lease, upon such terms and condi-
tions as the City shall deem proper, to any such participating
health institution any health facility owned by the City under
this ordinance, including a health facility conveyed to the City
in connection with a financing under this ordinance but not being
financed or refinanced hereunder.
(d) Recovery of Costs and Expenses by City
The City may charge participating health institutions
application, commitment, financing and other fees, to recover all
administrative and other costs and expenses incurred in the
exercise of the powers and duties conferred by this ordinance, or
impose fees, charges or other financial commitments to ensure,
that the exercise of such powers is in furtherance of the public
health, safety and welfare of the citizens of the City of Newport
Beach. The City Council is also specifically authorized to
• require the payment of such fees as it deems appropriate in order
to defray certain costs annually incurred by the City in
providing emergency health care.
•
7
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(e) Insurance or Guarantee of Payment
The City may obtain, or aid in obtaining, from any
department or agency-of the United States or of the State of
California or any private company, any insurance or guarantee as
to, or of, or for the payment or repayment of, interest or
principal, or both, or any part thereof, on any loan, lease or
sale obligation or any instrument evidencing or securing the
same, made or entered into pursuant to the provisions of this
ordinance= and may accept payment in such manner and form as
provided therein in the event of a default by a participating
health institution and may assign any such insurance or guarantee
as security for bonds. The City also may provide for the
maintenance of letters of credit or other credit enhancement
devices, for the guarantee of, or for the payment or repayment
• of, interest or principal; or both, or any part thereof, of any
series of bonds issued pursuant to this ordinance.
(f) Fixing Rents, Fees, Rates, Etc.
The City may fix rents, payments,,fees, charges and
interest rates for financing under this ordinance and may agree
to revise from time to time such rents, payments, fees, charges
and interest rates to reflect changes in interest rates on bonds,
losses due to defaults or changes in other expenses related to
this ordinance, including City administrative expenses.
(g) Deeds of Trust or Mortgages as Security
The City may hold deeds of trust, mortgages or other
security instruments as security for loans under this ordinance
and may pledge or assign the same as security for repayment of
bonds. Such deeds of trust, mortgages or other security instru-
ments may be assigned to, and held on behalf of the City by, any
bank or trust'company within any state of the United States of
America appointed to act as
trustee
by
the City in any resolution
•
or indenture providing for
issuance
of
bonds.
(h) Employment of Experts and Consultants
The City may employ such engineering, architectural,
financial, accounting, legal or other services as may be
necessary in the judgment of the City for the pruposes of this
ordinance.
(i) Do All Things Necessary and Convenient
In addition to all other powers specifically described
in this ordinance, the City may do all things necessary or
convenient to carry out the purposes of this ordinance provided,
however, that at no time shall the City Council take any action
which would%
1. Constitute a debt of liability of the City;
2. Constitute a pledge of the faith and /or credit of
the City;
3.. Obligate the City, directly, indirectly or
contingently, to impose any form of taxation or assessment, or to
make any appropriation for the payment of any bonds or
indebtedness; or
4. Obligate the City to pledge or otherwise encumber
any of its assets.
3.26.050 Bonds The City may, from time -to -time, issue
bonds for any of the purposes specified in subsections a, b or c
of section 3.26.040. Bonds shall be negotiable instruments for
all purposes, subject only to the provisions of such bonds for
registration.
1. Issuance of Limited Obligation Bonds
Every issue of bonds shall be a limited obligation of
the City payable solely from all or any specified part of the
-� revenues and the moneys and assets authorized in this ordinance
to be pledged or assigned to secure payment of bonds. Such revs-
nues, moneys or assets shall be the sole source of repayment of
• such issue of bonds. Bonds issued under the provisions of this
ordinance shall not be deemed_ to constitute a debt or liability
9
0
of the City or a pledge of the faith and credit of the City.but
• shall be payable solely from specified revenues, moneys and
assets. The issuance of bonds shall not directly, indirectly, or
contingently obligate the City to levy or pledge any form of
taxation or to make any appropriation for their payment. All
bonds shall contain on the face thereof a statement to the
following effect:
Neither the faith and credit nor the taxing power of
the City of Newport Beach, the State of California, nor any
political subdivision thereof is pledged to the payment of the
principal of or premium or interest on this bond.
2. Amount of Bonds.
In determining the amount of bonds to be issued, the
City may include all costs of the issuance of such bonds,
reserves for debt service and for repairs, replacement, additions
• and improvements, and interest on the bonds during the
construction period and for such period thereafter as the City
may determine.
3. Type, Form and Sale of Bonds.
Bonds may be issued as serial bonds, term bonds,
installment bonds or passtbrough certificates or any combination
thereof. Bonds shall be authorized by resolution of the Council
and shall bear such date or dates, mature at such time or times,
bear interest at such fixed or variable rate or rates, be payable
at such time or times, be in such denomination, be in such form,
carry such registration privileges, he executed in such manner,
be payable in lawful money of the 0nited States of America at
such place or places, be subject to such terms of redemption and
• have such other terms and conditions as such resolutions or any
indenture authorized by such resolution to be entered into by the
City may provide. Bonds may be sold at either a public or
private sale and for such prices as the City shall determine.
• Pending prepartion of definitive bonds, the City may issue
10
F
0
temporary bonds, which shall be exchanged for such definitive
• bonds when prepared.
4. Terms and Conditions of Bonds.
Any resolution authorizing any bonds or any issue of
bonds, or any indenture authorized by such resolution to be
entered into by the City, may contain provisions respecting any
of the following terms and conditions, which shall be a part of
the contract with the holders of such bonds:
(a) The terms, conditions and form of such bonds
and the interest and principal to be paid
thereon;
(b) Limitations on the uses and purposes to which
the proceeds of sale of such bonds may be
applied, and the pledge or assignment of such
proceeds to secure the payment of such bonds,
• (c) Limitations on the issuance of additional
parity bonds, the terms upon which additional
parity bonds may be issued and secured, and
the refunding of outstanding bonds;
(d) The setting aside of reserves, sinking funds,
and such other funds as are necessary and the
regulation and disposition therof;
(e) The pledge or assignment of all or any part of
the revenues and the use and disposition
therof, subject to such agreements with the
holders of bonds as may then be.outstanding,
(f) Limitation on the use.of revenues for
expenditures for operating, administration or
• other expenses of the City,
(g) Specification of the acts or omissions to act
which shall constitute a default in the duties
of the city, a participating health
• institution to holders of such bonds, and
11
0
providing the rights and remedies of such
• holders in the event of default, including any
limitations on the right of action by
individual bondholders;
(h) The appointment of a corporate trustee to act
on behalf of the City and the Holders of its
bonds, the pledge or assignment of loans,
deeds of trust, mortgages and any contracts or
agreements to such trustee, and the rights of
such trustee;
(i) The procedure, if any, by which the terms of
any contract with bondholders may be amended
or abrogated, the amount of such bonds the
holders of which must consent thereto, and the
manner in which such consent may he given; and
• (j) Any other provisions which the Council may
deem reasonable and proper for the purposes of
this ordinance and the security of the
bondholders.
5. Pledge of Revenues.
Any pledge of revenues, other moneys or assets, or any
centralized pool of said revenues, shall be valid and binding
from the time such pledge is made. Revenues, moneys and assets
so pledged and thereafter received by the City shall immediately
be subject to the lien of such pledge without any physicial
delivery thereof or further act, and the lien of any such pledge
shall be valid and binding as against all parties having claims
of any kind in tort, contract, or otherwise against the City,
•irrespective of whether such parties have notice thereof.
Neither the resolution nor any indenture by which a pledge is
created need be filed or recorded ezept in the records of the
• City.
12
6. Liability of Council and Officers.
• Neither the members of the Council, the officers or
employees of the City, nor any person executing any bonds shall
be liable personally on the bonds or be subject to any personal
liability or accountability by reason of the issuance thereof.
7. Purchase of Bonds by City.
The City shall have the power out of any funds available
therefor to purchase its bonds. The City may hold, pledge,
cancel, or resell such bonds, subject to and in accordance with
agreements with the bondholders.
B. Compelling Performance.
Any holder of bonds issued under the provisions of this
ordinance, and any trustee appointed pursuant to any resolution
authorizing the issuance of bonds, except to the extent the
rights thereof may be restricted by such resolution or any
• indenture authorized thereby to be entered into by the City may,
either at law or in equity, by suit, action, mandamus, or other
proceedings, protect or enforce any and all rights specified in
law or in such resolution or indenture, and may enforce and
compel the performance of all duties required by this ordinance
or by such resolution or indenture to be performed by the City or
by,any officer, employee or agent thereof, including the fixing,
charging, and collecting of rates, fees, interest, and charges
authorized and required by the provisions of such resolution or
indenture to be fixed, charged, and collected.
9. Refunding Bonds--Use of Proceeds.
The City may issue bonds for the purpose of refunding
any bonds then outstanding, including the payment of any
• redemption premiums thereof and any interest accrued or to accrue
to the earliest or any subsequent date or dates of redemption,
purchase or maturity of such bonds.
• (a) The proceeds of bonds issured for the purpose
of refunding any outstanding bonds may, in the
13
•
•
•
•
discretion of the City, be applied to the
purchase or retirement at maturity or
redemption of such outstanding bonds, either
at their earliest or any subsequent redemption
date or dates or upon the purchase or
retirement at the maturity thereof and may,
pending such application, be placed in escrow,
to be applied to such purchase or retirement
at maturity or redemption on such date or
dates as may be determined by the City.
(b) Pending use for purchase, retirement at
maturity or redemption of outstanding bonds,
any proceeds held in escrow pursuant to
subdivision (b) may be invested and reinvested
as provided in the resolution or indenture.
Any interest or other increment earned or
realized on any such investment may be applied
to the payment of the outstanding bonds to be
refunded or to the payment of interest on the
refunding bonds. After the terms of the
escrow have been fully satisfied and.carried
out, any balance of such proceeds and any
interest or increment earned on such proceeds
and any interest or increment earned or
realized from the investment thereof may be
returned to the City to be used by it for any
lawful purpose.
(c) All bonds issued pursuant to this section
shall be subject to the provisions of this
ordinance in the same manner and to the same
extent as other bonds issued pursuant to this
ordinance.
14
T
•
10. Independent Validity of Bonds.
• The validity of the authorisation and issuance of any
bonds is not dependent on and shall not be affected in any way by
any proceedings taken by the City for the making of any loan or
the entering into of any agreement, or by the failure to make any
loan or enter into any agreement, for which bonds are authorised
to be issued under this ordinance.
Section 3.26.070 Liberal Construction
This ordinance, being necessary for the welfare of the
City and its inhabitants, shall be liberally construed to effect
its purposes.
Section 3.26.080 Effect of Omission or Defect. If the
jurisdiction of the Council to order the proposed act is not
affected, any omission or any other defect in the proceedings
• shall not invalidate such proceedings or the bonds issued pur-
suant to this ordinance.
Section 3.26.090 Authority. This ordinance is full
authority for the issuance of bonds by the City for the purposes
specified herein.
Section 3.26.100 Provisions of this Ordinance are
Complete, Alternative. This ordinance shall be deemed to provide
a complete, additional, and alternative method for doing the
things authorised thereby; and shall be regarded as Supplemental
and additional to the power conferred by other laws. The is-
suance of bonds under the provisions of this ordinance need not
comply with the requirements of any other law applicable to the
issuance of bonds. The purposes authorised hereby may be
effectuated and the bonds may be issued for any such purposes
•under this ordinance notwithstanding that any other law may pro-
vide for such purposes or for the issuance of bonds for like
purposes and without regard to the requirements, restrictions,
• )limitations or other provisions contained in any other law.
is
C,
•
Section 3.26.110 Inconsistency with Other Statutes.
• To the extent that the provisions of this ordinance are
inconsistent with the provisions of any general statute,.a
special act or parts thereof, including the Newport Beach
Municipal Code provisions for Revenue Bonds, the provisions of
this ordinance shall be deemed controlling.
Section 3.26.120 Partial Invalidity. If any section,
subsection, sentence, clause or phrase of this ordinance is for
any reason held to be invalid or unconstitutional by the decision
of any court of competent jurisdiction, such decision shall not
affect the validity of the remaining portions of the ordinance.
The City Council hereby declares that it would have passed this
ordinance and each section, subsection, sentence, clause and
Phrase thereof, irrespective of the fact that any one or more
• sections, subsections, sentences, clauses or phrases be declared
invalid or unconstitutional.
This Ordinance was introduced at a regular meeting of
the City Council of the City of Newport Beach held on
the 23rd day of January 1984, and was adopted
on the 13th day of February 1984 by the following
vote, to wit:
AYES, COONCILMiMERS Hart, Maurer, Cox,
Heather, Strauss, Plu®er, Agee
NOES, coaNCILMEMBERS None
ABSENT COONCILMEMBERS None
• ATT T: _/"0&46(,U�
City Clerk
• ORP/BOnds
16
EXHIBIT NO. 19
Certificate of the City
pursuant to
Section 3(e)(7) of the
Bond Purchase
Contract, together with a
certified copy of the
Resolution of the City
relating to the issuance
and sale of the Bonds
(BQ
CERTIFICATE OF THE CITY
The undersigned Mayor and City Clerk of the City of Newport Beach (the "City")
hereby certify that they are the duly qualified offictpx of the City, holding the offices set forth
opposite their respective names and that the signatures set forth are their genuine signatures.
.- The undersigned further certify that the Mayor and City Clerk of the City, were duly
authorized by the City to execute, on behalf of the City, the City's Insured Revenue Bonds (Hoag
Memorial Hospital Presbyterian), Series 2005 A, 2005B and 2005C (collectively, the "Bonds "),
dated as of the date hereof, in the aggregate principal amount of $200,000,000, and that pursuant to
such authority the Bonds have been executed by the facsimile signature of the Mayor of the City,
whose signature is hereby confirmed as genuine by the undersigned.
The undersigned further certify that the facsimile seal printed upon each of the
Bonds is the legally adopted and official seal of the City, and was duly attested on each of the Bonds
by the facsimile signature of the City Clerk, whose signature is hereby confirmed as genuine by the
undersigned.
The undersigned further certify that they were duly authorized by the City to execute
this Certificate on behalf of the City in connection with the delivery of the following documents:
(a) Bond Indenture, dated as of August 1, 2005 (the `Bond Indenture "), between
• the City and Wells Fargo Bank, National Association, as bond trustee (the "Bond Trustee ") for the
Bonds;
(b) Loan Agreement, dated as of August 1, 2005 (the "Loan Agreement "),
between the City and Hoag Memorial Hospital Presbyterian (the "Corporation');
(c) Official Statement relating to the Bonds, dated August 12, 2005 (the
"Official Statement ");
(d) Bond Purchase Contract, dated August 22, 2005 (the "Bond Purchase
Contract "), executed by Citigroup Global Markets Inc. (the "Underwriter "), accepted and agreed to
by the City and approved by the Corporation; and
(e) Tax Certificate and Agreement, dated August 24, 2005 (the "Tax
Agreement ") between the City and the Corporation.
The undersigned further certify that attached hereto as Exhibit A is a full, true and
correct copy of Resolution No. 2005 -39, which was duly adopted at a meeting of the City duly and
regularly held on July 26, 2005, of which meeting all of the members of the City had due notice and
at which a majority. of the members thereof were present. The undersigned City Clerk further
certifies that she has carefully compared the copies of said Resolution attached hereto with the
original minutes of said meeting on file and of record in her office, that said copy is a true, correct
and complete copy of the original Resolution duly adopted by the City at said meeting; and that said
• Resolution has not been amended, modified, or rescinded in any manner except as set forth thereiin
since the date of its adoption, and the same is now in full force and effect as of the date hereof.
DOCSSCI.358317.5
The undersigned further certify that to the best knowledge of the undersigned no
• litigation is pending or threatened against the City:
1. to restrain or enjoin the issuance or delivery of any of the Bonds or the
collection of the Revenues (as defined in the Bond Indenture) pledged under the Bond Indenture;
2. in any way contesting or affecting the authority for the issuance of the
Bonds or the validity of the Bonds, the Bond Indenture, the Loan Agreement, the Auction Agent
Agreement, the Broker- Dealer Agreement, the Insurance Policy or the Bond Purchase Contract; or
3. in any way contesting the existence or powers of the City; and
4. no event affecting the City or its functions, duties and responsibilities has
occurred since the date of the Official Statement that would cause as of the Closing Date any
statement or information concerning the City or its functions, duties and responsibilities contained
in the Official Statement under the captions "THE CITY" and "LITIGATION — The City" to
contain any untrue statement of a material fact or omit to state a material fact necessary in order to
make the statements made concerning the City or its functions, duties and responsibilities contained
under such caption not misleading in the light of the circumstances under which they were made.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Bond Purchase Contract.
• [Remainder of Page Intentionally Left Blank]
•
DOCSSC1:358317.5 2
0
•
0
Each of the undersigned by his or her signature confirms that the other signature set
forth below is genuine.
Dated: August 24, 2005.
Name
John Heffernan
LaVonne Harkless
DOCSSC 1:358317.3
Office Signature
Mayor 4d07b City Clerk %.
• RESOLUTION NO. 2005- 39
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH AUTHORIZING THE ISSUANCE OF NOT TO EXCEED
$200,000,000 AGGREGATE PRINCIPAL AMOUNT OF THE CITY OF
NEWPORT BEACH INSURED REVENUE BONDS (HOAG MEMORIAL
HOSPITAL PRESBYTERIAN), SERIES 2005
WHEREAS, the City of Newport Beach (the "City") is a municipal corporation and
charter city duly organized and existing under a freeholders' charter pursuant to which the City has
the right and power to make and enforce all laws and regulations in respect of municipal affairs and
certain other matters in accordance with and as more particularly provided in Sections 31 5 aiRd 7 of
Article XI of the Constitution of the State of California and Section 200 of Article II of the Charter
of the City (the "Charter "); and
WHEREAS, the City Council of the City, acting under and pursuant to the powers
reserved to the City under Sections, 3, 5, and 7 of Article XI of the Constitution of the State of
California and Section 200 of Article II of the Charter, has found that the public interest and
necessity require the establishment of a program for the authorization, issuance and sale of revenue
bonds or notes by the City for the purposes of making loans such as those described herein; and
•WHEREAS, the City pursuant to Ordinance No. 85 -23 and 84-4, has adopted the
Health Care and Recreation Facilities Revenue Bond Ordinance of the City of Newport Beach (the
"Law D to establish procedures for the authorization, issuance and sale of such revenue bonds or
notes; and
WHEREAS, Hoag Memorial Hospital Presbyterian, a California nonprofit public
benefit corporation ( the "Corporation's has requested that the City issue its Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian), Series 2005, in one or more series (the `Bonds' for the
purpose of. (1) financing the acquisition and construction of certain additions and improvements to,
and equipment for, health facilities (collectively, the "Health Facilities' located at the campus of
Hoag Memorial Hospital Presbyterian, One Hoag Drive, Newport Beach, California; and (2)
providing for the payment of bond issuance expenses; and
WHEREAS, the Corporation is a "participating health institution" and operates a
"health facility" as those terms are defined in the Law; and
WHEREAS, the loan to be made with the proceeds of said bonds will promote the
purposes of the Law by providing funds to pay the cost of acquiring, constructing, rehabilitating or
improving health facilities and reimbursing the Corporation for certain expenses incurred for the
purposes of acquiring, constructing, rehabilitating or improving the health facilities; and .
WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986
(the "Code "), the Bonds are required to be approved, following a public hearing, by an elected
• representative of the City, as the governmental party issuing the Bonds, and an elected
• representative of the governmental unit or units having jurisdiction over the area in which the
Health Facilities are located; and
WHEREAS, the Health Facilities are located wholly within the City, and
WHEREAS, the City Council of the City is the elected legislative body of the City
and is the applicable elected representative required to approve the issuance of the Bonds within the
meaning of Section 147(f) of the Code; and
WHEREAS, pursuant to Section 147(f) of the Code, the City Council of the City
has, following notice duly given, held a public hearing regarding the issuance, execution and
delivery of the Bonds, and now desires to approve the issuance of the Bonds; and
WHEREAS, there have been presented to this meeting the following:
(1) Proposed form of Loan Agreement (the "Loan Agreement ") between the
City and the Corporation;
(2) Proposed form of Bond Indenture (the `Bond Indenture ") between the City
and Wells Fargo Bank, National Association (or such other financial institution acceptable
to the City and the Corporation), as bond trustee (the `Bond Trustee', providing for the
authorization and issuance of the Bonds;
• (3) Proposed form of the Official Statement to be used in connection with the
sale of the Bonds (the "Official Statement"); and
(4) Proposed form of Bond Purchase Contract (the `Bond Purchase Contract's
between the City and Citigroup Global Markets Inc. (the "Underwriter").
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Newport Beach, California, as follows:
Section 1. The form, terms and provisions of the Loan Agreement be and they
hereby are approved and the Mayor or the Mayor's designee is hereby authorized and empowered to
execute, and the City Clerk or the City Clerk's designee is hereby authorized and empowered to
attest and deliver, the Loan Agreement, in substantially the form presented to and considered at this
meeting with such changes as the official executing the same shall deem appropriate and in the best
interests of the City, as conclusively evidenced by execution thereof
Section 2. The form, terms and provisions of the Bond Indenture be and they hereby
are approved, and the Mayor or the Mayor's designee is hereby authorized and empowered to
execute and the City Clerk or the City Clerk's designee is hereby authorized and empowered to
attest and deliver to the Bond Trustee, the Bond Indenture, in substantially the form presented to and
considered at this meeting with such changes as may be approved by the official executing the
same, such approval to be conclusively evidenced by execution thereof.
•
• Section 3. Pursuant to Section 147(f) of the Internal Revenue Code of 1986, this
City Council approves the issuance of the Bonds in an aggregate principal amount not to exceed
$200,000,000. It is the purpose and intent of the Council that this Resolution constitute approval of
the issuance of the Bonds by the applicable elected representative of the issuer and the applicable
elected representative of the governmental unit having jurisdiction over the area in which the Health
Facilities are located, in accordance with said Section 147(f). Payment of the principal of and the
redemption premium and the interest on the Bonds shall be made solely from the revenues to be
received by the City pursuant to the Loan Agreement, and said Bonds shall not be deemed to
constitute a debt or liability of the City.
Section 4. The issuance, sale and delivery. of the Bonds in one or more series
pursuant to the Bond Indenture in an aggregate principal amount of not to exceed $200,000,000 is
hereby authorized and approved.
Section S. The Official Statement in the form presented to this meeting be and the
same hereby is approved for use by the Underwriter in connection with the public offering of the
Bonds with such changes.as may be approved by one or more officers of the City, and the Mayor or
the Mayor's designee is authorized to execute the final Official Statement relating to the Bonds. The
Underwriter is hereby authorized to distribute the Official Statement in preliminary form to
potential purchasers of the Bonds, and the Official Statement in final form to actual purchasers of
the Bonds.
• Section 6. The Mayor and the City Clerk (each of whom may sign by facsimile
signature) are hereby authorized and directed to execute, in the name and on behalf of the City, the
Bonds and to cause the Bonds to be delivered to the Bond Trustee for authentication and delivery to
the Underwriter.
Section 7. The Bond Purchase Contract is hereby approved, and the Mayor or the
Mayor's designee and the City Clerk or the City Clerk's designee be and hereby are authorized and
empowered to execute and deliver the Bond Purchase Contract, in substantially the form presented
to and considered at this meeting, with such changes as the officials executing the same shall deem
appropriate and in the best interests of the City as conclusively evidenced by their execution thereof.
Section 8. The Mayor or the Mayor's designee and the City Clerk or the City
Clerk's designee are hereby authorized and directed, jointly and severally, to do any and all things,
and to execute and deliver any and all documents which they may deem necessary or advisable, in
order to consummate the issuance of the Bonds, including to modify the provisions of the Loan
Agreement, the Bond Indenture, the Official Statement and the Bond Purchase Contract to conform
to any requirements of a bond insurer selected by the Corporation and otherwise to carry out give
effect to and comply with the terms and intent of this Resolution and the documents referred to
herein.
Section 9. The Bonds authorized to be issued pursuant to this Resolution shall be
issued in strict compliance with the provisions of the Law. The City Clerk shall certify to the
passage of this resolution by the City Council of the City of Newport Beach, and it shall thereupon
take effect.
LJ
•I hereby certify that the foregoing resolution was adopted by the City Council of the
City of Newport Beach at its meeting of July 26, 2005, by the following vote:
•
AYES: Councilmembers:
NOES: Councilmembers:
ABSTAIN: Councilmembers:
ABSENT: Councilmembers:
City Clerk
Selich, Rosansky, Webb, Ridgeway,
Daigle, Nichols„ Mayor Heffernan
yor
STATE OF CALIFORNIA }
•COUNTY OF ORANGE } ss.
CITY OF NEWPORT BEACH }
I, LaVonne M. Harkless, City Clerk of the City of Newport Beach, California, do
hereby certify that the whole number of members of the City Council is seven; that, the foregoing
resolution, being Resolution No. 2005 -39 was duly and regularly introduced before and adopted by
the City Council of said City at a regular meeting of said Council, duly and regularly held on the
26th day of July 2005, and that the same was so passed and adopted by the following vote, to wit:
Ayes: Selich, Rosansky, Webb, Ridgeway, Daigle, Nichols, Mayor Heffernan
Noes: None
Absent: None
Abstain: None
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
official seal of said City this 27th day of July 2005.
•
(Seal)
City Clerk
Newport Beach, California
EXHIBIT NO. 20
Affidavit of Publication
of Notice of
Public Hearing
(BC)
Authorized to Publish Advertisements of all kinds including public notices by
Decree of the Superior Court of Orange County, California. Number A -6214,
September 29, 1961, and A -24831 June 11, 1963.
• PROOF OF PUBLICATION
STATE OF CALIFORNIA)
) ss.
COUNTY OF ORANGE )
I am a Citizen of the United States and a
resident of the County aforesaid; I am
over the age of eighteen years, and not a
party to or interested in the below entitled
matter. I am a principal clerk of the
NEWPORT BEACH - COSTA MESA
DAILY PILOT, a newspaper of general
circulation, printed and published in the
City of Costa Mesa, County of Orange,
State of California, and that attached
Notice is a true and complete copy as
4 s printed and published on the
lowing dates:
JULY 11,2005
I declare, under penalty of perjury, that
the foregoing is true and correct.
Executed on JULY 11:2005
at Costa Mesa, California.
Signature
Authorized to Publish Advertisements of all kinds including public oolices by
Decree of the Superior Court of Orange County, California. Number A -6214,
September 29, 1961, and A -24831 June 11, 1963.
• PROOF OF PUBLICATION
STATE OF CALIFORNIA)
) ss.
COUNTY OF ORANGE )
I am a Citizen of the United States and a
resident of the County aforesaid; I am
over the age of eighteen years, and not a
parry to or interested in the below entitled
matter. I am a principal clerk of the
NEWPORT BEACH - COSTA MESA
DAILY PILOT, a newspaper of general
circulation, printed and published in the
City of Costa Mesa, County of Orange,
State of California, and that attached
Notice is a true and complete copy as
s printed and published on the
lowing dates:
JULY 11,2005
I declare, under penalty of perjury, that
the foregoing is true and correct.
Executed on JULY 11;2005
at Costa Mesa, California.
MOWER
Signature
EXHIBIT NO. 21
Request of the City
pursuant to Section 3.01
of the Indenture
(executed by Executive Director)
(BC)
E
Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Bond Indenture.
DOCSSCI:358317.3
Dated: August 24, 2005
CITY OF NEWPORT BEACH
By: �t U -v
Mayor
EXHIBIT NO. 22
Internal Revenue Service
Form 8038
(executed by the City)
(BC)
•
•
Form 8038
(Rev. January 2002)
Oapartlned d tie Treasury
Intemal Reverse Sconce
Reporting Authority
Information Return for Tax - Exempt
Private Activity Bond Issues
(Under Internal Revenue Code section 149(e))
► see separate instructions.
OMB No. 1545-6720.. .
Check if Amended Return ► ❑
1 Issuer's name
2 Issuer's employer idenefrcation number
City of Newport Beach
95 :6000751
3 Number and street (or P.O. box if mail is not delivered to street address)
Roomrsuite
4 Report number
3300 Newport Beach
S 200, 000, 000.00
2005-
5 city. town. or post once. state. and LP code
.Newport Beach, CA 92658
6 Oate of issue ,
August 24, 2005
7 Name of issue City of Newport Beach Insured Revenue Bonds
8 CUSIPnumber
(Hoag Memorial Hospital Presbyterian), Series 2005 A, B 6 C
6s178Ax3
9 Name and title of officer or legal representative whom the IRS may call for more information
10 Tdephae rmgdw d officer a legd replesentalhx
Dennis Danner, Treasurer
( 949 ) 764 -4437
Type of Issue (check the applicable box(es) and enter the issue price for each)
Issue Price
11 Exempt facility bond:
a ❑ Airport (sections 142(a)(1) and 142(c)) . . . . . . . . . . . . . . .
11a
b El Docks and wharves (sections 142(a)(2) and 142(c)) . . . . . . . . . . . . . . .
11D
c ❑ Water furnishing facilities (sections 142(a)(4) and 142(e)) . . . . . . . . . . .
11c
d ❑ Sewage facilities (section 142(a)(5)) . . . . . . . . . . . . . . . . . .
11d
e El waste disposal facilities (section 142(a)(6)) . . . . . . . . .
11e
f El Qualified residential rental projects (sections 142(a)(7) and 142(d)), as follows:. . . . . .
11f
Meeting 20-50 test (section 142(d)(1)(A)) . . . . . . . . . . . ❑
Meeting 40 -60 test (section . . . . . . . . . ❑
only) (section
Meeting 25 -60 test (NYC only) (section 142(d)(6)) ❑
/
Has an election been made for deep rent skewing (section 142(d)(4)(B))? ❑ Yes ❑ No
g ❑ Facilities for the local furnishing of electric energy or gas (sections 142(a)(8) and 142(f))
11
11h
h ❑ Facilities allowed under a transitional rule of the Tax Reform Act of 1986 (see instructions)
Facilitytype ............................................................. ...............................
1966 Act section ....................................................... ...............................
i ❑ Qualified enterprise zone facility bonds (section 1394) (see instructions) . . . . . . . .
11i
11
j ❑ Qualified empowerment zone facility bonds (section 1394(0) (see instructions) . . . .
11k
k ❑ District of Columbia Enterprise Zone facility bonds (section 1400A) (see instructions) . .
.
❑ Qualified public educational facility bonds (sections 142(a)(13) and 142(k)) . . . . . . .
111
11m
m ❑ Other. Describe (see instructions) If .................................. ......................... . . . . ..
12
12 ❑ Qualified mortgage bond (section 143(a)) . . . . . . . . . . . . . . . . . .
13
13 ❑ Qualified veterans' mortgage bond (section 143(b)) . . . . . . . . . . . . . . ►
Check the box if you elect to rebate arbitrage profits to the United States . . . ❑
14 ❑ Qualified small issue bond (section 144(a)) (see instructions) . . . . _ . . . . . . ►
14
Check the box for $10 million small issue exemption . . . . . . . . . . . . ❑
W111
EME 11WIl
15 ❑ Qualified student loan bond (section 144(b)) . . . . . . . . . . . . . . . . .
15
16 ❑ Qualified redevelopment bond (section 144(c)) . . . . . . . . . . . . . .
16
. .
17 ❑ Qualified hospital bond (section 145(c)) (attach schedule —see instructions) . . . . . .
17
18 ❑ Qualified 501(c)(3) nonhospital bond (section 145(b)) (attach schedule —see instructions)
18
$200,000,000.00
Check box if 95% Or more Of net proceeds will be used only for capital expenditures ►
19 ❑ Nongovernmental output property bond (treated as private activity bond) (section 141(d)) .
20 ❑ Other. Describe (see instructions) ►
19
20
FOM Description of Bonds (Complete for the entire issue for which this form is being filed.)
For Paperwork Reduction Act Notice, see page 4 of the separate instructions. Cat No. 49973K Fort 8038 (Rev. 1 -2002)
(a) Final maturity date
(b) Issue price
(c) stated redemption
price at maturity
(d) Weighted
average maturity
(e) Yield
21
December 1, 2040
S 200, 000, 000.00
$200,000,000.00
24.697 years
Variable%
For Paperwork Reduction Act Notice, see page 4 of the separate instructions. Cat No. 49973K Fort 8038 (Rev. 1 -2002)
Fonn 8038 (Rev. 1 -2002)
3
33 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . . . ► N /Ayears
34 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . . . ► N/A years
35 Enter the last date on which the refunded bonds will be called . . . . . . . ►
'49 FntPr the rtatpW the rPhmrlpri hnnrk wprP iCq,,Pri 11� N/A
•37 Name of governmental unit(s) approving issue (see the instructions) ►trey of Newport teach
July 27, 200s Rearing Date: July 26, 2005 _
38 Check the box if you have designated any issue under section 265(b)(3)(B)()(III) . ► ❑
39 Check the box if you have elected to pay a penalty in lieu of arbitrage rebate . . . . . . . . ► ❑
40 Check the box if you have identified a hedge (see Instructions) . . . . . . . . . . . . . ► ❑
41 Check the box if the issue is comprised of qualified redevelopment, qualified small issue, or exempt
facilities bonds and provide name and EIN of the primary private user . . . . . . . . . . ► ❑
Name ► EIN
42
t Uses of Proceeds of Issue (including underwriters' discounti
I Amount
22
•23
24
25
26
27
28
29
30
Proceeds used for accrued interest . . . . . . . . . . . . . .
Issue price of entire issue (enter amount from line 21, column (b)) . .
Proceeds used for bond issuance costs (including underwriters' discount) 24 $1,263 , 900.00
Proceeds used for credit enhancement . 25 Sz,slo,o$0.00
Proceeds allocated to reasonably required reserve or replacement fund 26 $0.00
Proceeds used to currently refund prior issue (complete Part VI) 27 $0.00
Proceeds used to advance refund prior issue (complete Part VI) 28 So.00
Add lines 24 through 28
Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) .
?2 $0.00 -
23 $200,000,000.00
25.15
Z!2
3$4. es
Amount of issue not subject to the unified state volume cap or other volume limitations:
Description of Property Financed by Nonrefunding Proceeds
Caution: The total of lines 31a through a below must equal line 30 above.
bonds, qualified mortgage bonds, or qualified veterans' mortgage bonds.
Do not complete for qualified student loan
31
a
to
c
d
e
Typb of Property Financed by Nonrefunding Proceeds:
Land . . . . . . . . . . . . . . . . . . . . .
Buildings and structures . . . . . . . . . .
Equipment with recovery period of more than 5 years . . . . . . . . . .
Equipment with recovery period of 5 years or less . . . . . . . . .
Other (describe)
.
. . . . .
. . . . .
Amount
31a
$0.00
31b
$158,231,s23.00
31c
$39, 985, 355.00
31d
$I,_000,000000
Me
44C
32
North American Industry Classification System (NAICS) of the pT0J2PS financed b
nonrefundin roceeds.
NAICS Code
Amount of nonrefunding proceetl5
Act of 1986) . . . . . . . . . . . . . . . . . . . . . . . .
NAICS Code
Amours[ of nonefunding proceeds
a
62211
$196,226,009.65
d
b
Enter the state limit on qualified veterans' mortgage bonds . . . . . . . . . . . . .
E '
33 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . . . ► N /Ayears
34 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . . . ► N/A years
35 Enter the last date on which the refunded bonds will be called . . . . . . . ►
'49 FntPr the rtatpW the rPhmrlpri hnnrk wprP iCq,,Pri 11� N/A
•37 Name of governmental unit(s) approving issue (see the instructions) ►trey of Newport teach
July 27, 200s Rearing Date: July 26, 2005 _
38 Check the box if you have designated any issue under section 265(b)(3)(B)()(III) . ► ❑
39 Check the box if you have elected to pay a penalty in lieu of arbitrage rebate . . . . . . . . ► ❑
40 Check the box if you have identified a hedge (see Instructions) . . . . . . . . . . . . . ► ❑
41 Check the box if the issue is comprised of qualified redevelopment, qualified small issue, or exempt
facilities bonds and provide name and EIN of the primary private user . . . . . . . . . . ► ❑
Name ► EIN
42
Amount of state volume cap allocated to the issuer. Attach copy of state certification . . .
42
43
Amount of issue subject to the unified state volume cap . . . . . . . . . . . .
43
44
Amount of issue not subject to the unified state volume cap or other volume limitations:
44
a
Of bonds for governmentally owned solid waste facilities, airports, docks, wharves, environmental
enhancements of hydroelectric generating facilities, or high -speed intercity rail facilities . . .
44a
b
Under a carryforward election. Attach a copy of Form 8328 to this return . . . . . . . .
44b
c
Under transitional rules of the Tax Reform Act of 1986. Enter Act section ► .. .... ... ...... ...... . ..
44C
d
Under the exception for current refunding (section 146(1) and section 1313(a) of the Tax Reform
Act of 1986) . . . . . . . . . . . . . . . . . . . . . . . .
44d
45a
Amount of issue of qualified veterans' mortgage bonds . . . . . . . . .
45a
b
Enter the state limit on qualified veterans' mortgage bonds . . . . . . . . . . . . .
45b
46a
Amount of section 1394(f) volume rap allocated to issuer. Attach copy of local government certification
b
Name of empowerment zone ► ------------------ ----------------------- ------- --------------------- --°
Under penalties of pegury, I declare that I have examined this morn, and accompanying schedules
and belief, they ar e, coned and con PI
Sign
Here ,
Sgna W oldcer
Dennis Danner
statements, and to the best of my
August 24, 2005
Treasurer
Tide of ofn= (type w pring
Form 8038 (Rev. i -zooz)
•
Line 18
•
•
Schedule I to 8038 for
City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, B & C
501(c)(3) Organization
Hoag Memorial Hospital
Presbyterian
DOCSSC1:359866.1
EIN
95- 1643327
Amount of Bonds
$200,000,000
Amount of all other
nonhosnital bonds
Gff
EXHIBIT NO, 23
DTC Blanket City Letter
of Representations
(copy)
(executed by the City and DTC)
(BC)
•
•
Blanket Issuer Letter of Representations
Erb be c vwted by L%Uftl
CITY OF NEWPORT BEACH'
July 7,1995
Attention: Undenvriting Department — E$gclbilitf
The Depository Taut Company
55 %Vater Street 50th Floor
\ea• York NY 10041 -0099
Ladies and Gentlemen:
This letter sets forth our undemanding with respect to all issues (the `SS ties-) that Issuer
shall request be made eligible for a -posit by The Depository Tr= Company ('DTC').
To induce DTC to accept the Semrities as eligible for deposit at DTC; and to act In ac=dmxe
with DTCs Rules with respect to the Setmities Lauer mprments to DTC that Isiver wilL omply
«ith the mquiremefrts stated im DTCs Opez=wral Ansragements. as they mrq be amended from
time to time.
'tote.
44*dule A'tcnains stamments that DTC belic is
wcuiuch describe DM the mobod of eerie bmb-
entn• erairfeas af'secvrides disLiixaed tluougJ+ DTG sal
certiun icla nnGas
THE DEPOSII'ORYTRUSTCQ
$Y
t'ery trtrIy }ours,
City of Newport Beach
trmrc+
t :. Wvirxiaeu cwocerss¢vasvN
Dennis Danner
Director_of Finance
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92660
(714) 644 -3123
EXHIBIT NO, 24
Preliminary and Final
CDIAC Reports
(BC)
REPORT OF PROPOSED DEBT ISSUANCE
California Debt and Investment Advisory Commission For Office Use Only
915 Capitol Mall, Room 400, Sacramento, CA 95814
P.O. Box 942809, Sacramento, CA 94209 -0001 CDIAC NO.:
T<L: (916) 653 -3269 FAX: (916) 6547440 _
•Completion and timely submittal of this form to the California Debt and Investment Advisory Commission
(CDIAC) at the above address will assure your compliance with existing California State law and will assist in
the maintenance of a complete database of public debt in California. Thank you for your cooperation.' - -- - - - . -
ISSUER NAME: City of Newnon Beach
ISSUE NAME: Insured Rev s Bttrd1s (Hoag Memorial Hospital Presbyterian). Series 20056 Series 2005B Series 2005C and Series 2005D
Please specify type /name of project: Insured Re e e Roads
PROPOSED SALE DATE: &=9 1-6 2QQ5 PRINCIPAL TO BE SOLD: 5200,000.000
IS ANY PORTION OF THE DEBT FOR REFUNDING ?a
N No ❑ Yes, proposed amount for refunding
Issuer Contact:
Name: Dennis Danner
Tide: Treasurer
Address: 3300 Newpott Center Drive Newoort� each California 92658
Phone: 949 -644 -3123 _ Issuer Located In Opp County
Filing Contact: Name of Individual (representing N Bond Counsel, ❑ Issuer, ❑ Financial Advisor, or ❑ Lead Underwriter) who
completed this form and maybe contacted for information:
Name: Diane Potter Fsq.
• Firm / Agcncy:
Address: 400 Capitol Mall Suite 3000 Sacramento. CA 95814
Phone: 916- 329 -7963 E -mail: dpotterQorrick.com
Send acknowledgement /copies to: Melissa Warr. Project Manama
FINANCING PARTICIPANTS:
BOND COUNSEL: Orrick Hemagson & Sutcliffe I LP
FINANCIAL ADVISOR:
UNDERWRITER \PURCHASER: U!Jjaoup�Qlobal Mgtrkets l c
IS THE INTEREST ON THE DEBT TAXABLE?
Under State law. N NO (tax-exempt) ❑ YES (taxable)
Under Federal law: N NO (tax-exempt) ❑ YES (taxable) - - -
If the issue is federally tax - exempt, is interest a specific preference
item fur the purpose of alternative minimum tax?
❑ Yes, preference item N No, not a preference item
TYPE OF SALE: ❑ Competitive N Negotiated
/ o /'r/e G'gomiu C rmsew Code iux, r(artypmpokd.pwbGr drb/ arwr /o yrr ariwrt so4r of //x pmparrd %uk 01/x CDIAC ea /akr /hart 30
dry, p,i /0 /lx m/,. Uukr Cabjom i, Coumm w Gil, Senior M737(i), 'The lnm ofany ww pxb& db/ israe rbalg rta/ kaer Ml s di days ulcer /he tigrtirtg of /he bond pamAue
•mrt /rraa in o negMiukd nrp,ieak fwmirtg, orafkr /lx aarpramr of a but in a rompeadn offe,ing, rxbmi/ a ,eparr offiwlrak artd officio! rlakme/a to the rommirrion. Tle Commiuiort
may ,eywim i irmurinrt /o br rrbmilkdirt 1/x ,rpa-1 ojfnal mle /bal &,m idrrd appmp,iak. "
2 Se aim 33583(r)(2)(li) of 1/x Qdjorsia Cm,m ./ Code rtyuiw /bar arty kcal ag sg kllirtg mjJ ding h,. di as p,iro/e mk or as a sgafiakd ba,ir sbad rend a Wilkrt t"Ms/,
of //n'rt /an arek, afkr /hv bnsdc urr mld ra !be CDIAC e%pbdxiq dx ffww olry dx ka'd agertry d/ermintd ra ttd dx bond[ al priwk sak or ort a mgcdakd ban* inrktd f a/
pubbr rule.
DOCSSCl:357884.1
CDIAO Report of Proposed Debt Issuance Pave 2
TYPE OF DEBT INSTRUMENT
NOTE
❑ Bond anticipation (BAN)
❑ Grant obligation (GAN)
❑ Other note (Please specify below) (OTHN)
❑ Revenue anticipation (RAN)
❑ Tax allocation (TALK
❑ Tax and revenue anticipation (IRAN)
❑ Tax anticipation (TAN)
❑ Commercial paper (CP)
❑ Certificates of participation /leases (COPL)
❑ Other (Please specify below.) (OTH)
Please specify if "Other note /Other bond /Other' was checked:
SOURCE(S) OF REPAYMENT
❑ Bond proceeds (BDPR)
❑ General fund of issuing jurisdiction (GNFD)
❑ Grants (GRNT)
❑ Intergovernmental transfers other than grants (ITGV)
❑ Local obligations (LOB)
® Private obligor payments (POP)
❑ Other (Please specify.) (OTHS):
PURPOSE(S) OF FINANCING
❑ Cash Flow, interim financing (CFIF)
❑ Project, interim financing (PM
❑ College /university, housing (CUH)
❑ Multifamily housing (MFH)s
❑ Single - family housing (SFH)s
❑ Health care facilities (HCF)
ED Hospital (HOSP)
❑ Other /multiple health cue purposes (equipment,
etc.)(OMHC)
❑ College /university facility (CUF)
❑ K -12 school facility (KSCI -t)
❑ Other /multiple education uses (equipment, etc.)(OMED)
❑ Student loans (SLC)
❑ Redevelopment, multiple uses (RD)
❑ Commercial development (CMDV)
❑ Industrial development (INDV)
❑ Pollution control (PC)
Please Specify type /name of project if different from above:
BOND •
® Conduit revenue (Private obligor) (CRB)
❑ General obligation (GOB)
❑ Limited tax obligation (LTOB)
❑ Other bond (Please specify below) (OTHB)
❑ Public lease revenue (PLRB)
❑ Revenue (Pool) (RB)
❑ Revenue (Public enterprise) (PERB)
❑ Sales tax revenue (STRB)
❑ Special assessment (SAB) '
❑ Tax allocation (TAB)
❑ Property tax revenues (PRTX)
❑ Public enterprise revenues (PER)
❑ Sales tax revenues (SATE)
❑ Special assessments (SA)
❑ Special tax revenues (SITE) _
❑ Tax - increment (TI)
❑ Airport (APRT)
❑ Bridges and highways (BRHI)
❑ Convention center (CCIR)
❑ Equipment (EQUP)
❑ Flood control /storm drainage (FLDS)
❑ Multiple capital improvements and public works (MCAP)
❑ Other capital improvements and public works (OCAP)
❑ Puking (PRKG)
❑ Puks /open space (PRKO)
❑ Ports and marinas (PRTS)
❑ Power generation /transmission(PWR)
❑ Prisons /jails /correctional facilities (PRSI)
❑ Public building (PB)
❑ Public transit (PTE)
❑ Recreation and sports facilities (RCSP)
❑ Seismic safety improvements /repair (SSI)
❑ Solid waste recovery facilities (SWST)
❑ Street construction and improvements (SCI)
❑ Wastewater collection and treatment (WSTW)
❑ Water supply/ storage/ distribution(WIR)
❑ Insurance /pension funds (IPF)
❑ Other than listed above (OTH)s
r Cermin laml goamment irtaea of ho ,% bond, an required to obtain a mtifeadon fmnr the Stale Tr vnr alkrting to their mgfi,, a oath the Sink hoadng nPordng ngainn.nk
prior to inuanm of the band, to fawn. dng4- ar mukifami[y houdng.
DOCSSC 1357884.1
C I
1I 11
u
STATE OF CALIFORNIA
CALIFORNIA DEBT AND Ib
•915 CAPITOL MALL, ROOM 900
P.O. BOX 992809
SACRAMENTO, CA 99209 -0001
TELEPHONE: (916) 653 -3269
FAX: (916) 659 -7990
Phil Angelides
State Treasurer and Chair
ADVISORY COMMISSION
TO: Melissa Warr
Orrick Herrington & Sutcliffe
900 Capitol Mall Ste 3000
Sacramento, CA 95819
FROM: Executive Director
RE: ACKNOWLEDGEMENT OF REPORT OF PROPOSED DEBT ISSUANCE _
July 22, 2005
Section 8855(k) of the California Government Code requires written notice to be
given to the California Debt and Investment Advisory Commission (CDIAC) no later
than 30 days prior to the proposed sale of any public agency debt issue.
The Commission acknowledges your written notice of the following proposed debt
issuance:
CDIAC Nbr:
• Issuer:
Project:
Proposed Amount:
Proposed Sale Date:
Date Notice Received:
•
2005 -1387
Newport Beach
Hoag Memorial Presbyterian Series A -D
$200,000,000.00
August 16, 2005
July 22, 2005
Please submit the Report of Final Sale and the Official Statement (or offering
circular) on this issue within 95 days of sale date. Any questions regarding
reporting requirements may be directed to the CDIAC staff at (916) 653 -3269.
Cc: Dennis Danner
Treasurer
REPORT OF FINAL SALE
Califamia Debt and Investment Advisory Commission
915 Capitol Mall, Room 400, Sacramento, CA 95814
P.O. Box 942809, Sacramento, CA 94209 -0001
•TeL: (916) 653 -3269 FAX: (916) 654 -7440
Under Calif nnia Govemment Code Section 88550, "Me issuer of any new public debt issue shall, not
later than 45 days after the signing of the bond purchase contract in a negotiated or private financing, or
after the acceptance of a bid in a competitive offering, submit a report of final sale and official statement to
the Commission. The Commission may require information to be subnutted in the report of final Sale that
is considered appropriate."
ISSUER NAME: City of N mTprt Beach
(If pool bond, Est participants)
For Office Use Only
CDIAC NO #: 2005 -1387
ISSUE NAME: Insured-Revenue Bonds (Hoag Mem vial Hospital P esb eria Series 2005-0 2005B and 2005C
IF THIS IS A POOLED FINANCING, WHICH ISSUANCE STATUTE IS IT AUTHORIZED UNDER?
❑1) Marks -Roos Local Bond Pooling Act ❑2) JPA Law ❑3) Installment Sales Agreement, Lease ❑4) Housing Revenue Bond
Law & Industrial Development Bond Law ❑5) Other
WILL A VALIDATION ACTION BE PURSUED? Z No ❑ Yes ❑ Unknown
ACTUAL SALE DATE: August 22, 2005 PRINCIPAL SOLD: $200.000-000 -
IS ANY PORTION OF THE DEBT FOR REFUNDING ?'
®No ❑ Yes, refunding amount (including costs)
Issuer Contact:
Name: Dennis Danner
40de: Treasurer
Address: 3300 Newport Boulevard Newport Beach Califoinia 92658
Phone: 949- 644 -3123 ISSUER LOCATED IN Orange COUNTY
Filing Contact:: Name of Individual (representing: ® Bond Counsel, ❑ Issuer, ❑ Financial Advisor, or ❑ Lead Underwriter) who
completed this form and may be contacted for information:
Name: Diane Potter Esq.
Firm /Agency: Orrick Herrington & Sutcliffe LLP
Address: 400 Capitol Mall. Ste 3000 Sacramento- CA 95814
Phone: 916- 329 -7963 E -mail: dapotterflQuickmal
Send acknowledgement /copies to: Melissa Warr. Project Manager mwa rr(@.orrick.com
Name of individual to whom an invoice for the CDIAC issue fee should be senor
Address: 444 South Flower Street. 27th Floor Los A g les California 90071
Phone: 213 -486 -8923
t Section 53583(c)(2) (B) of the Cakforua Government Code requires that any local agen y selling nfundrng bonds at private sale or on a negotiated basis shall send a
written statement, within two weeks after the bonds are sold to the CDIAC explaining the reasons wby the local agency determined to sell the bonds at private sale or
on a negotiated basis instead of at public sale.
This fee it authorized by Section 8856 of the California Government Code and is charged to the lead underwriter or purchaser of the issue. The fee ti administratively
set by the Commission. The mrrent fee schedule may be obtained from CDIAC.
DOCSSC1:359089.1
CDIAC' Report of Final Sale Page 2
FINANCING PARTICIPANTS (Firm Name)
FINANCIAI. ADVISOR: s
LEAD UNDERWRITER /PURCHASER: Citierouu. GlobalGlobal
BOND COUNSEL: Orrick- Herrington & Sutcliffe LLP
TRUSTEE/PAYING AGENT: Wells Fareo Bank, National
Association
MATURITY SCHEDULE
❑ Attached ® Included in Official Statement
MATURITY STRUCTURE
❑ Serial (S) ® Term (T)
❑ Serial and term bonds or two or more term (B)
FINAL MATURITY DATE: December L 2040
FIRST OPTIONAL CALL DATE: December 1 2016
SENIOR /SUBORDINATE STRUCTURE ❑ Yes ® No
OFFICIAL STATEMENT /OFFERING MEMORANDUM:
® Enclosed ❑ None prepared
WAS THE ISSUE INSURED OR GUARANTEED?
❑ No
® Bond Insurance (I)
El Utter of Credit (L)
❑ State Intercept Program (T)
❑ Other (0)
GUARANTOR: Financial Guaranty Insurance Como
ENHANCEMENT EXPIRATION DATE: December 1 ') 40
INDICATE CREDIT RATING:
(For example, "AAA" or "Aaa"
❑ Not Rated
® Rated
Standard & Poor's: AAA
Fitch:
Moody's: An
Other.
REASON FOR NEGOTIATED REFUNDINGS
If the issue is a negotiated refunding, indicate the mason(s) why the
bonds were issued at a private or negotiated versus a competitive
sale.
❑ (1) Timing of the sale provided more Flexibility than a public sale
❑ (2) More cost savings were expected to be realized than a public sale
❑ (3) More Flexibiliry in debt structure was available than a public tale
❑ (4) Issuer able in work with participants familiar with i.�ue /r than a public
sale
® (5) All of the above
❑ (6) Other (please .pecify)
DOCSBCt359OB9.1
OFFICE LOCATION (City /State)
Los Angeles CA •
Sacramento California
Los Aneeles. California
IS THE INTEREST ON THE DEBT TAXABLE?
Under State Law: ® No (tax - exempt) ❑ Yes (taxable)
Under Federal law: ® No (tax- exempt) ❑ Yes (taxable)
If the issue is federally tax- exempt, is interest a specific preference
item for the purpose of alternative minimum tax? ❑ Yes ® No
INTEREST TYPE: ❑ NIC ❑ TIC ® Variable
INTEREST
CAPITAL APPRECIATION BOND- ❑ Yes ® No
ISSUANCE COSTS AND FEES
A) Management Fee
36�y be obtained '
B) Total Takedown
$from Issuer
C) Underwriter Expenses
$
Underwriter Spread or Discount
S
D) Bond Counsel
$ •
E) Disclosure Counsel
$
F) Financial Advisor
$
G) Rating Agency
$
1-1) Credit Enhancement
$
I) Trustee Fee
$
J) Other Expenses
$
Total Issuance Costs
$
I) ORIGINAL ISSUE PREMIUM $
L) ORIGINAL ISSUE DISCOUNT $
M) NET ORIGINAL ISSUE
DISCOUNT /PREMIUM $
FOR OFFICE USE ONLY
FEE: $
•
EXHIBIT NO, 25
Certificate and
Agreement Regarding
Community Service
Obligation
(executed by the City and the
Corporation)
(BC)
• CALIFORNIA HEALTH FACILITIES FINANCING AUTHORITY
CERTIFICATION AND AGREEMENT REGARDING
COMMUNITY SERVICE OBLIGATION
PARTICIPATING HEALTH INSTITUTION ( "Corporation ")
Hoag Memorial Hospital Presbyterian
NAME AND ADDRESS OF FINANCED FACILITY ( "Facilities ")
Hoag Memorial Hospital Presbyterian
One Hoag Drive
Newport Beach, Califomia 92658
MEDI -CAL CONTRACT ❑ YES O NO
NAME OF BOND ISSUE OR OTHER FINANCING ( "Bonds ")
RE: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, Series 2005B and Series 20050
• 1. General Assurance
Pursuant to Section 15459 of the Califomia Government Code, the Corporation hereby
certifies that the services of the Facilities will be made available to all persons residing or employed
in the area served by the Facilities.
2. Compliance Requirements
As part of its assurance under Section 15459 of the Califomia Government Code, the
Corporation agrees to the following conditions:
(a) To advise each person seeking services at the Facility as to the person's potential
eligibility for Medi -Cal and Medicare benefits or benefits from other governmental third party
payers.
(b) To make available to the Califomia Health Facilities Financing Authority and to any
interested person a list of physicians with staff privileges at the Facilities, which includes all of the
following:
(1) Name
(2) Specialty
(3) Language spoken
• (4) Whether the physician takes Medi -Cal and Medicare patients
DOCSSC I :359317.4
• (5) Business address and phone number
(c) To inform in writing on a periodic basis all practitioners of the healing arts having
staff privileges in any Facilities as to the existence of the Corporation's community service
obligation. Such notice to practitioners shall contain a statement, as follows:
"This Facility has agreed to provide a community service and to accept Medi -Cal and
Medicare patients. The administration and enforcement of this agreement is the
responsibility of the California Health Facilities Financing Authority and this Facility."
(d) To post notices in the following form, which shall be multilingual where the
Borrower serves a multilingual community, in appropriate areas within the Facilities, including but
not limited to, admissions offices, emergency rooms and business offices:
"NOTICE OF COMMUNITY SERVICE OBLIGATION"
"This Facility has agreed to make its services available to all persons residing or employed
in this area. This Facility is prohibited by law from discriminating against Medi -Cal and Medicare
patients. Should you believe you may be eligible for Medi -Cal or Medicare, you should contact our
business office [or designated person or office] for assistance in applying. You should also contact
our business office [or designated person or office] if you are in need of a physician to provide you
with services at this Facility. If you believe that you have been refused services at this Facility in
violation of the community service obligation you should inform [designated person or office] and
. the California Health Facilities Financing Authority."
(e) To provide copies of the notice specified in paragraph (d) for posting to all welfare
offices in the county where the Facilities are located.
3. Medi -Cal Exceptions
All references to Medi -Cal shall be deemed deleted from Section 2 above if and to the
extent any of the following conditions exist:
(a) the Facilities are of a type and in a geographic area subject to Medi -Cal contracting
and, following good faith negotiations, the Corporation has not been awarded a Medi -Cal contract
by the California Medi -Cal Assistance Commission;
(b) the Facilities are not of a type which provide services for which Medi -Cal payments
are available; or
(c) the Facilities are, or are a part of, a multi -level facility and the health facility
component of the Facilities are of a size and type designed primarily to serve the health care needs
of the residents of the multi -level facility.
DOCSSCl:356469.1 2
• Notwithstanding the foregoing, nothing in this Section 3 shall relieve the Corporation of its
obligations, if any, under Section 1317 of the California Health and Safety Code (relating to the
provision of emergency service).
4. Compliance Reports
The Corporation agrees to make available to the Authority and to the public upon request an
annual report substantiating compliance with the requirements of Section 15459 of the California
Government Code. The annual report shall set forth sufficient information and verification therefor
to indicate the Corporation's compliance. The report shall include at least the following:
(a) By category for inpatient admissions, emergency admissions, and, where the
Facilities have a separate identifiable outpatient service, outpatient services:
(1) the total number of patients receiving services.
(2) the total number of Medi -Cal patients served.
(3) the total number of Medicare patients served.
(4) the total number of patients who had no financial sponsor at the time of
service.
(5) the dollar volume of services provided to each patient category listed in
paragraphs (1), (2) and (3).
• (b) Any other information which the Authority may reasonably require.
5. Notices
•
Notices to the Authority required or permitted by this Agreement shall be given to the
Authority addressed as follows: California Health Facilities Financing Authority, 915 Capitol Mall,
Suite 590. Sacramento. California 95814. or at such other or additional address as may be specified
in writing by the Authority.
6. Term of Agreement
This Agreement shall terminate when the Bonds are no longer Outstanding under the terms
of the Indenture securing the Bonds.
DOCSSC 1:356469.1 3
7. Counterparts
This Agreement may be executed in counterparts each of which shall be an original and all
of which shall constitute one instrument.
July_, 2005.
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
By:
Authorized Representative
RECEIVED AND ACKNOWLEDGED:
CALIFORNIA HEALTH FACILITIES
FINANCING AUTHORITY
Executiv� Director
DOCSSCI:356469.1 4
EXHIBIT NO, 26
Signature and
Incumbency Certificate
of Corporation
(CC)
r-1
LA
r 1
LJ
•
INCUMBENCY AND SIGNATURE CERTIFICATE OF THE CORPORATION
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, 2005B and 2005C
The undersigned Peter M. Foulke and Jennifer C. Mitzner, hereby certify that they
are the Executive Vice President and Vice President Finance and Chief Financial Officer,
respectively, of Hoag Memorial Hospital Presbyterian, a nonprofit public benefit corporation duly
organized and existing under the laws of the State of California (the "Corporation "), and that they
are now, and at all times since January 1, 2005 have been, duly elected or appointed and qualified
officers of the Corporation holding the offices set forth opposite their respective names below and
that the signatures set forth opposite their respective names and offices are their genuine signatures.
Each of the undersigned by his signature confirms that the other signatures set forth
below are genuine.
Dated: August 24, 2005.
Name
Peter M. Foulke
Jennifer C. Mitzner
DOCSSCie59317.5
Title of Office
Executive Vice President
Vice President Finance and
Chief Financial Officer
Suture
�-� ,rte. -�
EXHIBIT NO. 27
Officer's Certificate
(BC) with the following
exhibits:
(a) Articles of Incorporation (certified
by the Secretary of State within 15
days of the closing date). (CC)
(b) Bylaws. (CC)
(c) Authorizing Resolution relating to
the financing. (CC)
(d) Evidence of 501(c)(3) status for
the Corporation. (CC)
(e) Certificate of Good Standing
(issued by the Secretary of State).
(CC)
(f) Certificate of Good Standing
(issued by the Franchise Tax
Board). (CC)
OFFICER'S CERTIFICATE
• I, Jennifer Mitzner, hereby certify that I am the Vice President Finance and Chief
Financial Officer of Hoag Memorial Hospital Presbyterian (the "Corporation "), a nonprofit public
benefit corporation duly organized and existing under the laws of the State of California and that, as
such, I am authorized to execute this certificate on behalf of the members of the Obligated Group
(each, an "Obligated Group Member" and collectively, the "Obligated Group Members" or the
"Obligated Group ") under the Master Indenture dated as of October 1, 1984, as supplemented and
amended, by and among the Corporation, the other Obligated Group Members and Wells Fargo
Bank, National Association, as successor master trustee.
1. Attached hereto as Exhibit A is a true, correct and complete copy of the
Articles of Incorporation of the Corporation as certified by the Secretary of State of the State of
California.
2. Attached hereto as Exhibit B is a true, correct and complete copy of the
Bylaws of the Corporation which are in full force and effect on the date hereof. -
3. Attached hereto as Exhibit C is a true, correct and complete copy of the
resolution authorizing the execution and delivery of the Loan Agreement, that certain tax certificate
and agreement, dated August 24, 2005 (the "Tax Agreement'), between the City and the
Corporation, that certain corporation letter of representation, dated August 22, 2005,
(the "Corporation Letter of Representation "), executed by the Corporation and accepted by the City,
Citigroup Global Markets Inc., as underwriter (the "Underwriter "), that certain broker - dealer
• agreement, dated as of August 1, 2005 (the "Broker- Dealer Agreement') among the Corporation,
Wells Fargo Bank, National Association (the "Auction Agent') and Citigroup Global Markets Inc.,
as broker- dealer (the "Broker- Dealer "), that certain auction agent agreement, dated as of
August 1, 2005 (the "Auction Agent Agreement') executed by the Auction Agent and the Bond
Trustee with certain obligations thereunder acknowledged by the Corporation, that certain bond
purchase contract, dated August 22, 2005 (the "Purchase Contract'), executed by the Underwriter
and accepted and agreed to by the City and approved by the Corporation, that certain official
statement, dated August 12, 2005 (the "Official Statement "), executed by the City and approved by
the Corporation, that certain Supplemental Master Indenture for Obligation No. 14, dated as of
August 1, 2005 ( "Supplement No. 14 "), between the Corporation and Wells Fargo Bank, National
Association, and the respective Obligations thereunder. Such resolution has not been modified,
amended or rescinded and remains in full force and effect as of the date hereof.
4. Attached hereto as Exhibit D is a true, correct and complete copy of a letter
evidencing that the Corporation is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code "). Said exemption has not been rescinded or
revoked as of the date hereof.
5. Attached hereto as Exhibit E is a Certificate of Good Standing issued by the
Secretary of State of the State of California.
6. Attached hereto as Exhibit F is a Certificate of Good Standing issued by the
• Franchise Tax Board of the State of California.
DOCSSCl:358317.5
7. Since August 31, 2004, no material and adverse change has occurred in
• the financial position or results of operation of the Corporation which is not described in the
Official Statement prepared in connection with the issuance of the Bonds or which has not been
described in writing delivered by the Corporation to the City and the Underwriter.
8. The Corporation has not, since August 31, 2004, incurred any material
liabilities other than in the ordinary course of business which are not described in or
contemplated by the Official Statement or in writing delivered by the Corporation to the.City and
the Underwriter.
9. No proceedings are pending. or threatened in any way contesting or
affecting the Corporation's status as an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986 (the "Code "), as amended, or which would subject any income of
any Member of the Obligated Group to federal income taxation.
10. No event affecting the Corporation has occurred since the date of the Official
Statement which (i) makes untrue or incorrect in any material respect as of the date hereof, or at
such earlier or later time or date as shall be agreed by the City and the Underwriter, any statement or
information contained in the Official Statement or (ii) is not reflected in the Official Statement but
should be reflected therein in order to make the statements and information therein not misleading
in any material respect.
11, The representations and warranties made by the Corporation in the Letter of
Representation delivered by the Corporation in connection with the execution of the Bond Purchase
• Contract related to the bonds, are true and correct as of the date hereof as if made on the date hereof.
•
DOCSSC1:358317.5 2
0
Cj
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Purchase Contract or, if not in the Purchase Contract, in the Bond
Indenture.
DOCSSCI:358317.3
Dated: August 24, 2005
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
By:
Nice Pre O ent Finance and
Chief Financial Officer
•
•
DOCSSC1:358317.3
Exhibit A
Articles of Incorporation Attached
State of California
Secretary of State
I, BRUCE McPHERSON, Secretary of State of the State of
California, hereby certify:
That the attached transcript of ? page(s) was prepared by and
411 in this office from the record on file, of which it purports to be a copy, and
that it is full, true and correct.
•
SedState Form CE -108 (REV 0331105)
IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal of the
State of California this day of
AUG 1 0 2005
BRUCE McPHERSON
Secretary of State
^;CTC,
A380551 FILED
M Rw ofrc of du Sc.way d Sole
of On SbN of cQuomw
JAN 4 '9 °0
RESTATED ARTICLES OF INCORPORATION KVCH FON ^a EU. Jccre cf tate
OF
THE HOAG MEMORIAL HOSPITAL PRESBYTERIAN,
a California Nonprofit Public Benefit Corporation
Guy K. Claire and L. George Elias certify that:
1. They are the Chairman of the Board and Secretary,
respectively, of The Hoag Memorial Hospital Presbyterian, a
California Nonprofit Public Benefit Corporation ( "Corporation ").
2. The Articles of Incorporation of this Corporation are
amended and restated to read as follows:
I
The name of this Corporation is Hoag Memorial Hospital
Presbyterian.
II.
A. This Corporation is a non - profit ,public benefit
corporation and is not organized for the private gain of any
person. It is organized under the Nonprofit Public Benefit
Corporation Law for charitable and public purposes.
B. The specific purpose of this Corporation is to
promote the public welfare and engage in other activities as may
qualify for exemption from Federal Income Tax under Section 501(c)
(3) of the Internal Revenue Code of 1954, as amended, and from
California Income Tax pursuant to California Revenue and Taxation
Code 23701(d); Such purposes shall include, but not be limited
to, the following:
To organize, conduct, operate and maintain a general
hospital, conforming in all respects.to the standards and require-
ments of the American Hospital Association, the American Medical
Association, the Joint Commission on Accreditation of Health Care
Organizations, and the American College of Surgeons; such Hospital
to serve Orange County, California and neighboring communities by
contributing to the protection and conservation of the health and
well -being of the people residing therein; through furnishing
t facilities for medical, surgical, nursing, laboratory, clinical,
radiological, dietetic, physiotherapeutic and all other related
scientific and technical services for the treatment of persons
t requiring medical and surgical attention; to establish and main-
tain a training school or training schools for nurses, to estab-
lish and maintain a pharmacy or pharmacies, to establish and
maintain a dispensary or dispensaries; to establish and maintain a
r �
�J
1 of 3
.1:vYxrv� +9$.YJ In *liD4 :• •.Y*L'�[�%.`�,s+a:.++ss.s:..h'�
• clinic or clinics; to establish and maintain a branch hospital or
branch hospitals or other branch health care facilities; to
establish and maintain a rest home or rest homes; and to establish
and maintain a sanitarium or sanitariums.
This Corporation shall have and exercise all powers
necessary or convenient to effect any and all of the purposes for
which this Corporation is organized.
C. This Corporation is organized and operated exclusive-
ly for charitable purposes within the meaning of Section 501(c)(3)
of the Internal Revenue Code. Notwithstanding, any of the above
statements of purposes and powers, this Corporation shall not
engage in any activities or exercise any powers that are not in
furtherance of the specific purposes of this Corporation, and
shall not carry on any activities not permitted to be carried on
(a) by a corporation exempt from federal income tax under Section
501(c)(3) of the Internal Revenue Code or (b) by a - corporation
contributions to which are deductible under Section 170(c)(2) of
the Internal Revenue Code.
D. No substantial part of the activities of this Corpor-
ation shall consist of carrying on propaganda, or otherwise
attempting to influence legislation, except in the event the
Corporation elects pursuant to Section 501(h) of the Internal
• Revenue Code, in which cast the corporation may carry on activi-
ties to the exte'at permitted by that Section, and the Corporation
shall not participate or intervene in any political campaign
(including the publishing or distribution of statements) on behalf
of any candidates for public office.
III.
The property of thin Corporation is irrevocably dedicated
to charitable purposes, and no part of the net .income or assets of
this Corporation shall ever inure to the benefit of any director,
officer or Member thereof or to the benefit of any private person.
Upon the dissolution or winding up of the Corporation, its assets
remaining after payment, or provision for payment, of all debts
and liabilities of this Corporation shall be distributed to a
non - profit fund, foundation or corporation which is organized and
operated exclusively for charitable purposes and which has estab-
lished its tax - exempt status under Section 501(c)(3) of the
Internal Revenue Code.
IV.
This Corporation elects to be governed by all of the
provisions of the Nonprofit Corrperation Law of 1980 not otherwise
applicable to it under Part 5 thereof.
2 of 3
..'
• 3. The foregoing amendment and restatement of the
Articles of Incorporation has been duly approved by the Board of
Directors.
•
•
4. The foregoing amendment and restatement of the
Articles of Incorporation. has been duly approved by the requ_red
vote of the Members of the Corporation.
We further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this
Certificate are true and correct of our own knowledge.
Approved by the Board of Directors on September 5, 1989.
Approved by the Aembers of the Corporation on November 6, 1989.
3 of 3
•
•
•
DOCSSC1:358317.3
Exhibit B
Bylaws Attached
0
CORPORATE BYLAWS
HOAG MEMORIAL HOSPITAL
0
Date: April 12, 2005
PRESBYTERIAN
OW
• Adjournment; Notice of Adjournment, Board of Directors ...............
11
Affiliated Organizations, Article X ............................
26
Allied Health Professionals . ...............................
24
Amendments, Article XII .. ...............................
29
Annual Meetings of Members ...............................
5
Annual Organizational Meeting of the Board of Directors ...............
10
Appointment of Committees . ...............................
18
Appointment of President and Chief Executive Officer .................
20
Attendance, Board of Directors ..............................
11
Attendance, Committees ...... .............................19
Authority and Responsibility of President and Chief Executive Officer .......
20
Authority of Committees ... ........................ ........
18
Auxiliary ............ ...............................
26
Bank Accounts ......... ...............................
16
Board of Directors, Article IV ...............................
8
Bylaws, Affiliated Organizations .............................
27
Bylaws, Amendments ...... ...............................
29
Bylaws, Medical Staff ..... ...............................
22
Bylaws, Review of ....... ...............................
30
Certification and Inspection of Bylaws .........................
17
• Chair .............. ...............................
mm
Chairmanship, Committees .................................
14
Charitable Organizations ... ...............................
2
Checks and Drafts ....... ...............................
16
Chief Executive Officer, Appointment of .........................
20
Clinical Privileges, Medical Staff ..............................
22
Committees, Article VII ... ...............................
18
Compensation, Board of Directors .............................
12
Compensation, Officers ...................................
14
Composition, Authority and Responsibilities of Committees .............
18
Conflict of Interest, Article XIV .............................
31
Contracts ............ ...............................
16
Contractual Arrangements, Physicians with .......................
23
Contractual Obligations, Bank Accounts and Miscellaneous, Article VI ......
16
Contractual Waiver of Liability of Members .......................
16
Controlling Bylaw and Special Contract, Article XVI ................
33
Corporate Objectives, Article I ...............................
1
Corporate Seal ......... ...............................
17
"Corporation", Use of Word . ...............................
1
Delegation of Authority ... ...............................
21
Deposits............... .............................16
• Dues and Assessments, Members .............................. 4
-35-
. Place of Meeting, Board of Directors ............................10
-36-
Education, Board of Directors ...............................
12
Election, Inspectors of ..... ...............................
6.. .
•
Election, Officers ........ ...............................
14
Election, Board of Directors .. ...............................
9
Entry of Notice, Board of Directors ............. .......
11
Entry of Notice, Members ... ...............................
6
Executive Committee ..... ...............................
18
Expulsion, Membership ..... ...............................
4
Fiscal Year, Article XI .... ...............................
28
Forfeiture of Membership ... ...............................
4
`
Giving Consents, Record Date for ............... .........
6
Hoag Hospital Foundation .. ...............................
26
Indemnification, Board of Directors ............................
12
Inspection of Bylaws ..... ...............................
17
Inspectors of Election, Meetings of Members .......................
6
Liability of Members, Contractual Waiver of .......................
16
Loans............... ...............................
16
Management, Article VIII ................. ..............
20
Medical Staff, Article IX ... ...............................
22
Medical Staff Bylaws ...... ...............................
22
Meeting Frequency, Committees ..............................
18
Meetings of Members, Article III ..............................
5
•
Member Action by Written Ballot Without a Meeting ..................
Member Notice, Record Date for ..............................
6
6
Members and Qualifications .. ...............................
3
Membership, Article II .... ...............................
3
Membership and Clinical Privileges, Medical Staff ...................
22
Mission............... ..............................1
Nominating Committees .... ...............................
9
Non- discrimination ....... ...............................
2
Notice of Adjournment, Board of Directors ........................
11
Notice of Meetings of Members ...............................
5
Number and Qualifications of Directors ..........................
8
Number and Qualifications of Officers ..........................
14
Objectives, Corporate .................... .. ...........
1
Officers, Article V ...... ...............................
14
Organization, Medical Staff .. ...............................
22
Organizational Meeting, Board of Directors .........:.............
10
Orientation, Board of Directors ...............................
11
Parliamentary Authority, Article XVII ..........................
34
Performance Evaluation, Board of Directors .......................
12
Performance Review, President ..............................
21
Physicians with Contractual.Arrangements .......................
23
. Place of Meeting, Board of Directors ............................10
-36-
-37-
Place of Meeting, Members .. ...............................
5
Policies and Procedures, Board of Directors .......................
11-
•
Power of Members to Amend Bylaws ..........................
29
Power of Directors to Amend Bylaws ..........................
29
Powers, Board of Directors ... ...............................
8
President and Chief Executive Officer, Appointment of ................
20
Provisions Contrary to Law, Article XV .........................
32
Qualifications, Board of Directors ...............................
8
Qualifications, Members ....................................
3
Qualifications, Officers .... ...............................
14
Qualifications, President and Chief Executive Officer ..................
21
Quality of Professional Services, Medical Staff ......................
23
Quorum, Board of Directors . ...............................
11
Quorum, Members ....... ...............................
5
Record Date for Member Notice, Voting and Giving Consents .............
6
Record of Amendment or New Bylaws .................. _ ......
29
Regular Meetings, Board of Directors ...........................
10
Removal of Directors ..... ...............................
12
Removal of Officers ...... ...............................
14
Resignation of Membership .. ...............................
4
Responsibilities of Committees ...............................
18.
Review of Bylaws, Article XIII .............................
30
Rights and Interests, Members ...............................
Secretary ........ . .
3
14
Special Committees ...... ...............................
19.
Special Meetings, Board of Directors ............................10
Special Meetings, Members .. ...............................
5
Subordinate Officers ...... ...............................
14
Tenure of Office, Officers ... ...............................
14
Term of Office, Board of Directors .................. .......
9
Termination of Membership, Effect of ...........................
4
Transfer of Membership .... ...............................
4
Treasurer............ ...............................
15
Use of Word "Corporation' .. ...............................
1
Vacancies, Board of Directors . ...............................
9
Vacancies, Members .....................................
4
Vice - Chair .............. .............................14
Voting Rights, Members .... ...............................
5
Voting, Record Date .....................................
6
Waiver of Notice, Board of Directors ...........................
11
Waiver of Notice, Members .. ...............................
5
Withdrawal of Membership .. ...............................
4
Written Ballot, Member Action by .............................
6
.
Year, Fiscal ............................... . ..........
28
-37-
BYLAWS OF HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
TABLE OF CONTENTS
Article I, Corporate Objectives
Section 1, Use of Word "Corporation' ....................... 1
Section 2, Mission ..... ............................... 1
Section 3, Objectives .... ..............................1
Section 4, Charitable Organizations ......................... 2
Section 5, Non - discrimination ............................ 2
Article II, Membership
Section 1, Members and Qualifications ....................... 3
Section 2, Rights and Interests ............................ 3
Section 3, Transfer of Membership ........... .............. 4
• Section 4, Resignation, Withdrawal, Expulsion or Forfeiture .......... 4
Section 5, Effect of Termination of Membership .................. 4
Section 6, Vacancies ... ............................... 4
Section 7, Dues and Assessments .......................... 4
Article III, Meetings of Members
Section 1, Place of Meeting .............................. 5
Section 2, Annual Meetings ............................. 5
Section 3, Special Meetings .............................. 5
Section 4, Notice of Meetings ............................ 5
Section 5, Waiver of Notice ............................. 5
Section 6, Voting Rights ............................... 5
Section 7, Quorum .... ............................... 5
Section 8, Entry of Notice .............................. 6
Section 9, Member Action by Written Ballot Without a Meeting ........ 6
Section 10, Record Date for Member Notice, Voting and
Giving Consents ............................ 6
Section 11, Inspectors of Election .......................... 6
•
Article V, Officers
Section 1, Number and Qualifications ....................... 14
Section 2, Election and Tenure of Office ...................... 14
Section 3, Subordinate Officers ........................... 14
Section 4, Removal .... ............................... 14
Section 5, Compensation .............................. 14
Section 6, Chair .......................... `.......... 14
Section 7, Vice -Chair . ............................... 14
Section 8, Secretary .. ............................... 14
Section 9, Treasurer .. ............................... 15
Article VI, Contractual Obligations, Bank Accounts and Miscellaneous
Section 1, Contracts .. ............................... 16
Section 2, Loans .... ..................... ........... 16
Section 3, Contractual Waiver of Liability of Members ............. 16
Section 4, Checks and Drafts ............................ 16
Section 5, Deposits ... ............................... 16
Article IV, Board of Directors
Section 1, Powers .... ...............................
8
Section 2, Number and Qualifications of Directors ................
8
Section 3, Election and Term of Office .......................
9
Section 4, Vacancies .. ...............................
9
Section 5, Place of Meeting .............................
10
Section 6, Regular Meetings ..........................:..10
Section 7, Special Meetings .............................
10
Section 8, Annual Organizational Meeting ....................
10
Section 9, Notice of Adjournment .........................
11
Section 10, Entry of Notice .............................
11
Section 11, Waiver of Notice ............................
11
Section 12, Adjournment ..............................
11
Section 13, Attendance .................... :..........
11
Section 14, Quorum .. ...............................
11
Section 15, Policies and Procedures ................ .........
11
Section 16, Orientation ... .............................11
Section 17, Education . ...............................
12
Section 18, Performance Evaluation ........................
12
Section 19, Compensation ..............................
12
Section 20, Removal of Directors ..........................
12
•
Section 21, Indemnification .............................
12
Article V, Officers
Section 1, Number and Qualifications ....................... 14
Section 2, Election and Tenure of Office ...................... 14
Section 3, Subordinate Officers ........................... 14
Section 4, Removal .... ............................... 14
Section 5, Compensation .............................. 14
Section 6, Chair .......................... `.......... 14
Section 7, Vice -Chair . ............................... 14
Section 8, Secretary .. ............................... 14
Section 9, Treasurer .. ............................... 15
Article VI, Contractual Obligations, Bank Accounts and Miscellaneous
Section 1, Contracts .. ............................... 16
Section 2, Loans .... ..................... ........... 16
Section 3, Contractual Waiver of Liability of Members ............. 16
Section 4, Checks and Drafts ............................ 16
Section 5, Deposits ... ............................... 16
• Section 6, Corporate Seal .......................... . 17
Section 7, Certification and Inspection of Bylaws ............ • • • 17
Article VII, Committees
Section 1, Appointment ............................... 18
Section 2, Composition, Authority and Responsibilities ............. 18
Section 2 (b), Executive Committee ........................ 18
Section 3, Chairmanship .............................. 18
Section 4, Meeting Frequency ........................... 18
Section 5, Attendance . ............................... 19
Section 6, Special Committees ........................... 19
Article VIII; Management
Section 1, Appointment of President and Chief Executive Officer ........ 20
Section 2, Authority and Responsibility .............. ......... 20
Section 3, Qualifications ............................... 21
Section 4, Performance Review .......................... 21
• Article IX, Medical Staff
Section 1, Organization ............................... 22
Section 2, Medical Staff Bylaws ........................... 22
Section 3, Medical Staff Membership and Clinical Privileges .......... 22
Section 4, Physicians with Contractual Arrangements ............. 23
Section 5, Quality of Professional Services .................... 23
Section 6, Allied Health Professionals ....................... 24
Article X, Affiliated Organizations
Section 1, Auxiliary .. ............................... 26
Section 2, Hoag Hospital Foundation ....................... 26
Section 3, Other Affiliated Organizations ..................... 27
Article XI, Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 28
Article XII, Amendments
Section 1, Power of Members ............................ 29
Section 2, Powers of Directors ........................... 29
• Section 3, Record of Amendment or New Bylaws ............... 29
• Article XIII, Review of Bylaws . . . . . . . . . . . . . . . . . . . . 30
Article XIV, Conflict of Interest . . . . . . . . . . . . . . . . ... . . 31
Article XV, Provisions Contrary to Law . . . . . . . . . . . . . . . . 32
Article XVI, Controlling Bylaw and Special Contract . . . . . . . 33
Article XVII, Parliamentary Authority . . . . . . . . . . . . . . . . . 34
40
• BYLAWS
OF
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
ARTICLE I
CORPORATE OBJECTIVES
Section 1. Use of Word "Corporation." The name of this Corporation shall be Hoag
Memorial Hospital Presbyterian. Whenever or wherever in these Bylaws or in any amendment
or additions thereto, or in the Articles of Incorporation, or in any amendment thereto, or in the
minutes of any meeting, or in the written assent of the Members or Directors, or in any written
contracts or other documents entered into, or in any rules or regulations prescribed by the said
Hoag Memorial Hospital Presbyterian, or by any of the persons hereinabove in this Section
mentioned, for and on behalf of the said Hoag Memorial Hospital Presbyterian, the words "the
Corporation' are used, the same shall be and shall be deemed, except if otherwise provided or
noted in or appears from the context in which the said words are used, to be synonymous and
to refer to and they shall be held to mean, Hoag Memorial Hospital Presbyterian, a non -profit
Public Benefit Corporation, incorporated and organized on the 22nd day of May, 1944, under
and by virtue of the Laws of the State of California.
• Section 2. Mission. The Mission of Hoag Memorial Hospital Presbyterian is to .
support the founding principle that all community residents have access to needed healthcare
services, and to continuously improve the quality of the services provided to patients, their
families, physicians, payors, employees and the communities Hoag Memorial Hospital
Presbyterian serves.
Section 3. O 'ectives.
(a) To approach all matters concerning Hoag Memorial Hospital
Presbyterian with a human concern, seeking God's guidance in each.
(b) To formulate programs which meet the total needs of each patient, with
full concern for the treatment of the "whole person ", assuring each patient and his or her family
access to all the resources needed for his or her physical, emotional and spiritual recovery and
health.
(c) To research, design and implement innovative approaches to improving
the health status of the service area population, and to engage in activities which better position
the Corporation in the pursuit of its fundamental mission of providing high quality hospital -
based care.
(d) To support and promote the private practice of medicine and to provide
• appropriate means whereby physicians may participate in management.
ME
• (e) To establish and maintain an institution(s) with permanent facilities
including inpatient beds and to provide diagnostic and therapeutic medical treatment services.
These services shall include, but are not limited to: specialized inpatient and outpatient medical
diagnostic and treatment functions, general outpatient services, home care and extended care
programs.
(f) To provide a safe physical environment for patients, staff and visitors.
(g) To maintain the Corporations financial solvency by encouraging efficient
and cost - effective management and adopting medical techniques that promote improved
patient care, thereby encouraging continued physician participation in the facility.
(h) To establish and maintain a posture of leadership in the hospital
community of the County of Orange and the State of California.
(i) To establish and conduct educational programs related to the delivery of
health care and to the promotion of the public health.
(j) To conduct scientific and management research activities where such
activity is appropriate and within the resources of the Corporation.
Section 4. Charitable Organizations. This Corporation is organized exclusively for
charitable, scientific and educational purposes as a nonprofit Public Benefit Corporation; and its
• activities shall be conducted for the aforesaid purposes in such a manner that no part of its net
earnings shall inure to the benefit of any Member, director, officer, or individual. Upon
dissolution of the Corporation and after payment of just debts and liabilities, all remaining
assets shall be distributed to organizations enjoying an exempt status under Section 501(c)(3) of
the Internal Revenue Code of 1954, as amended, or successor provisions.
•
Section 5. Non- discriTnination. No member of the Corporation, Board of Directors
or Hospital staff shall discriminate against the Hospital's patients, employees or medical staff
on the basis of sex, creed, color or national origin or on the basis of any other criterion lacking
professional justification.
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• ARTICLE II
MEMBERSHIP
Section 1. Members and Qualifications of Members.
(a) The Members of the Corporation shall be fifty (50) in number and shall be
divided equally between the George Hoag Family Foundation and the constituent churches of
the Los Ranchos Presbytery of the Presbyterian Church (USA), as represented by, and
hereinafter referred to as, the Association of Presbyterian Members.
(b) The Members of the Corporation shall be appointed as hereinafter set
forth in this paragraph (b):
(1) The George Hoag Family Foundation shall be entitled to appoint
Members to twenty-five (25) Memberships. The George Hoag Family Foundation shall
appoint itself as a Member to fill one of such twenty-five (25) Memberships but shall not
be required to appoint a Member or Members to fill any or all of such remaining twenty -
four (24) Memberships. No salaried employee of the Corporation shall be eligible for
Membership pursuant to this subsection. The George Hoag Family Foundation shall,
within thirty (30) days prior to the regular Annual Meeting of the Members every year,
submit to the Secretary of the Corporation the names and addresses of Members the
George Hoag Family Foundation has appointed pursuant to this Subsection.
• (2) The Association of Presbyterian Members shall be entitled to
appoint Members to twenty-five (25) Memberships. The Association of Presbyterian
Members shall appoint itself as a Member to fill one of such twenty-five (25)
Memberships. but shall not be required to appoint a Member or Members to fill any or
all of such remaining twenty-four (24) Memberships. No salaried employee of the
Corporation shall be eligible for Membership pursuant to this subsection. The
Association of Presbyterian Members shall, within thirty (30) days prior to the regular
Annual Meeting of the Members every year, submit to the secretary of the Corporation
the names and addresses of Members the Association of Presbyterian Members has
appointed pursuant to this Subsection.
Section 2. Rights and Interests.
(a) Except as otherwise provided in paragraphs (b) and (c) of this Section 2,
each Member shall be entitled to one vote at all meetings of the Corporation, and with reference
to all matters as to which Members thereof may be required or entitled to vote, assent, or
otherwise act.
(b) The George Hoag Family Foundation, as a Member of this Corporation,
shall be entitled to one vote and to the number of additional votes calculated as follows:
Twenty-five (25) less the number of then acting Members of the
• Corporation appointed by the George Hoag Family Foundation,
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• including itself, pursuant to Subsection (1) of paragraph (b) of
Section 1 of this Article II.
(c) The Association of Presbyterian Members, as a Member of this
Corporation, shall be entitled to one vote and to the number of additional votes calculated as
follows:
Twenty -five (25) less the number of then acting Members of the
Corporation appointed by the Association of Presbyterian
Members, including itself, pursuant to Subsection (2) of paragraph
(b) of Section 1 of this Article H.
Section 3. Transfer of Membership. No Membership may be assigned or transferred
in any manner by a Member to any other person, firm or corporation, public or private, nor
shall a purchaser at execution sale, or any other person who may succeed, by operation of law
or otherwise to the property interests of any person who is a Member of the Corporation, be
entitled to membership in or to become a Member of the Corporation by virtue 6f such transfer.
Section 4. Resignation, Withdrawal, Expulsion or Forfeiture. A Member may resign
or withdraw from the Corporation at any time.
The Members shall have the power, by a two-thirds vote, to expel or forfeit the
Membership of any Member for conduct which might tend to injure the welfare or character of
• the Corporation, or to impede the attainment of the aims for which the Corporation was
organized, or for any violation of these Bylaws. Prior to any final action to terminate a
Membership, the affected Member shall (1) be given fifteen (15) days' prior notice of such
action, and (2) have the opportunity to be heard orally and /or in writing, which shall be
communicated to the Secretary of the Corporation and provided by the Secretary to the entire
Membership not less than five (5) days before the effective date of the expulsion, suspension or
termination.
•
Section 5. Effect of Termination of Membership. Upon the death or other
termination of a Member, all rights in the Corporation, voting or otherwise, of such Member
shall cease and terminate.
Section 6. Vacancies. Any vacancy in that portion of the Membership of the
Corporation allotted to the Presbyterian Church (USA), Orange County, California, shall be
filled by the Association of Presbyterian Members after receiving notice of such vacancy.
Vacancies in that portion of the Membership allotted to the George Hoag Family Foundation
may be filled by such Foundation after receiving notice of such vacancy or vacancies pursuant
to the provisions of Subsection (1) of paragraph (b) of Section 1 of this Article H.
Section 7. Dues and Assessments.. No admission. fees, dues or assessments shall be
levied upon any Member of the Corporation.
SE
• ARTICLE III
MEETINGS OF MEMBERS
Section 1. Place of Meetings. All meetings of the Members of the Corporation shall
be held at its office and principal place of business or at such other place as may be designated
by the Board of Directors.
Section 2. Annual Meetings. The Regular Annual Meeting of the Members shall be
held on the first (1st) Tuesday of November in each year, or any other convenient day within
sixty (60) days thereof, at which time the Members shall elect by majority vote a Board of
Directors, consider reports of the affairs of the Corporation, and transact such other business as
may properly be put before the meeting.
Section 3. Special Meetings. Special meetings of Members for any purpose or
purposes may be held at any time upon the order of the Chair, or; in his or her absence, upon
the order of the Vice - Chair, or upon the order of the Board of Directors, or upon call of any
three Members of the Corporation.
Section 4. Notice of Meetings. Except where by Law or by these Bylaws it is
otherwise provided, notices of meetings of Members, Annual or special, shall be delivered or
mailed to each Member at his or her post office address as the same appears on the books of the
Corporation, and if it does not so appear, then at the principal place of business of the
• Corporation, such notice to be deposited in the United States Post Office in the place in which
the principal office of the Corporation is located, postage thereon prepaid, at least ten (10) days
but not more than ninety (90) days preceding the day of such meeting. No other notice of
meetings need be given. Notices of meetings shall specify the place, day and hour of meetings,
the general nature of business to be transacted, and those matters which the Board at the time of
the notice intends to present for action by the Members.
When a meeting is adjourned for thirty (30) or more days, notice of adjourned meeting
shall be given as in the case of the meeting adjourned.
Section 5. Waiver of Notice. The transaction of any meeting of Members, however
called and noticed, shall be as valid as though had at a meeting duly held after regular call and
notice, if all of the Members be present or if a quorum be present and if, either before or after
the meeting, each of the Members signs a written waiver of notice or a consent to the holding of
such meeting or an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 6. Voting Rights. Every person designated as and deemed a Member under
and pursuant to the provisions of Article II of these Bylaws shall have the rights to one vote.
Section 7. Quorum. At any meeting of the Members, the majority of the Members
shall constitute a quorum, provided, however, that no fewer than six (6) of whom shall be
present in person. If, however, such majority shall not be present at any meeting, the Members
• shall have the power to adjourn the meeting from time to time until the requisite number of
Members shall be present, such adjournment and the reasons therefor being recorded in the
I&V
• minutes of the meeting. At such adjourned meetings at which the requisite number of Members
entitled to vote shall be present, any business may be transacted which might have been
transacted at the meeting as originally called or noted. Members may continue to conduct
business at a meeting despite the withdrawal of such Members as will leave an insufficient
number of Members to form a quorum.
Section 8. Entry of Notice. Whenever any Member has been absent from any
meeting of Members, whether Annual or special, an entry in the minutes to the effect that notice
has been duly given shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to such Member as required by Law and by the Bylaws of the Corporation.
Section 9. Member Action by Written Ballot Without a Meeting. Any action which
may be taken at any Annual, regular or special meeting (including the election of Directors)
may be taken without a meeting if (1) the written ballot of every Member is solicited, (2) the
number of ballots cast within the time period specified in the solicitation equals or exceeds the
quorum otherwise required to be present at a meeting authorizing the action, and (3) the
number of approvals of the action equals or exceeds the number of votes that would otherwise
be required to approve the action at a meeting at which the total number of votes cast was the
same as the number of ballots cast.
Ballots shall be solicited in a manner consistent with the requirements of Sections 4, 5, 6,
8 and 10 of this Article III. All such solicitations shall state (1) the number of responses needed
to meet the quorum requirement of Section 7 of this Article III, (2) the percentage of approvals
• necessary to pass the measure submitted, and (3) the time by which the ballot must be received
in order to be counted.
The form of written ballot shall afford an opportunity on the ballot to specify a choice
between approval and disapproval of each matter and shall also contain an appropriate space
marked "abstain,' whereby the Member may indicate a desire to abstain from voting on the
proposal.
Any member casting a ballot may revoke the ballot, or substitute another, only by a
writing received by the Corporation prior to the time specified in the solicitation by which a
ballot must be received to be counted. Such revocation is effective upon its receipt by the
Secretary of the Corporation.
Section 10. Record Date for Member Notice, Voting and Giving Consents. For
purposes of determining the Members entitled to notice of any meeting of Members, or entitled
to vote at any meeting of Members, or entitled to cast written ballots or otherwise exercise any
rights in respect of any other lawful action, the record date for such determination shall be the
thirtieth (30th) day next preceding the date of the meeting or the mailing of ballots or the date on
which any other lawful action is to be taken, as the case may be.
Section.11. Inspectors of Election. Before any meeting of Members, the Board of
Directors may appoint any persons other than nominees for office to act as inspectors of election
at the meeting or its adjournment. If no inspectors of election are so appointed, the chair of the
• meeting may, and on the request of any Member, appoint inspectors of election at the meeting.
The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a
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• meeting on the request of one or more Members, the majority of Members represented shall
determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed
as inspector fails to appear or fails or refuses to act, the chair of the meeting may, and upon the
request of any Member, appoint a person to fill that vacancy.
E
U
These inspectors shall:
(a) Determine the number of Memberships outstanding and the voting
power of each, the number represented at the meeting, and the e)dstence of a quorum;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the results; and
(g) Do any other acts that may proper to conduct the election or vote with
fairness to all Members.
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ARTICLE IV
•
BOARD OF DIRECTORS
Section 1. Powers. The powers of the Corporation shall be vested in and exercised
by its Board of Directors. The Board of Directors shall have power:
(a) To select and remove at its pleasure all the other officers, agents and
employees of the Corporation, and prescribe the duties for them as may not be inconsistent with
these Bylaws, the Articles of Incorporation, and the Laws of the State of California, and fix their
compensation.
(b) To conduct, manage, and control the affairs and business of the
Corporation, and to make such rules and regulations as it may deem best therefor, not
inconsistent with these Bylaws and the Laws of the State of California.
(c) To fix and locate from time to time the office of the Corporation, and to
adopt, make and use a corporate seal, and to alter the form of such seal, from time to time, as in
its judgment it may deem best.
(d) To borrow money and incur indebtedness for the purpose of the
Corporation, and to cause to be executed and delivered therefor, and in corporate name, notes,
bills, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations and other
• evidences of debt and securities therefor; all as hereinafter by these Bylaws provided.
(e) To approve bylaws and all other matters done in connection with the
organization of the Medical Staff of Hoag Memorial Hospital Presbyterian, and to provide a
medical staff of physicians andXother approved practitioners in the manner to be outlined in
Article lX of these Bylaws.
(f) To review and approve the bylaws of all auxiliary organizations, such as
the Auxiliary, the Hoag Hospital Foundation, and other affiliated organizations that may be
formed from time to time.
(g) To amend these Bylaws to retain or abolish existing standing or special
committees and appoint new standing or special committees.
(h) Generally to do and perform every act and thing whatsoever that may
pertain to the office and powers of Directors and which may be requisite for carrying on the
business and affairs of the Corporation.
Section 2. Number and Qualifications of Directors.
,(a) The Board of Directors shall consist of nineteen (19) Directors, consisting
of five (5) members nominated by the George Hoag Family Foundation; five (5) members
representing the community-at- large; five (5) members representing the Association of
• Presbyterian Members; three (3) members nominated from the Medical Staff of Hoag Memorial
Hospital; and the Chief Executive Officer. They shall be elected by the Membership at the
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• Annual Meeting as provided for in Article III, Section Z of the Bylaws of this Corporatiort
Membership in the Corporation shall not be a requirement for selection as a Director thereof;
provided, however, that, with the exception of the Chief Executive Officer, no salaried
employee of said Corporation shall serve as a Director.
•
U
(b) Their qualifications shall include but not be limited to the following
willingness to accept responsibility for governance; availability to participate actively in Board
activities related to the Hospital; interest and expertise in hospital - related matters such as health
care, finance, construction, legislation and the law, fund- raising, and personnel administration;
and experience in organizational and community activities.
Section 3. Election and Term of Office.
(a) The Directors shall be elected at the Annual Meeting of the Members; but
if such Annual Meeting is not duly held or the Directors are not elected thereat, the Directors
may be elected at any special meeting of the Members called for that purpose. Each Director
shall hold office for a term of three (3) years, and until his or her successor shall have been
elected and qualified, or until he shall have been removed or resigned and his or her removal or
resignation shall have become effective.
(b) Nominating Committees: There shall be four categories of nominating
committees which shall submit names to the Annual Meeting:
GEORGE HOAG Shall submit a sufficient number of names to fill any
FAMILY FOUNDATION: expired term.
ASSOCIATION OF Shall submit a sufficient number of names to fill any
PRESBYTERIAN MEMBERS: expired term.
COMMUNITY -AT- LARGE: A committee shall be appointed by the Board of Directors
to submit a sufficient number of names from the
Community to fill any expired term.
MEDICAL STAFF: Shall submit a sufficient number of names to fill any
expired term
The nominating committees shall submit to the Secretary of the Corporation their
nominees, accompanied by a short biographical sketch of each, at least sixty (60) days prior to
the Annual Meeting of the Corporation. The Secretary of the Corporation shall submit the
complete slate, including the biographical sketches, to the Membership of the Corporation at
least fourteen (14) days prior to said Annual Meeting.
Section 4. Vacancies. Vacancies on the Board of Directors as hereinafter defined
shall be filled by the Board by a majority of the Directors then in office, at any regular meeting
or special meeting thereof called for that purpose. Each Director so elected shall hold office for
the whole or unexpired term of the vacant directorship to which he or she is so elected.
Recommendations should be requested from the category in which the vacancy occurs and the
SIM
name or names submitted to the Board of Directors for appointment by the Board to fill the
• vacancy.
A vacancy or vacancies on the Board of Directors shall be deemed to exist in case of the
death, resignation, removal, or if the authorized number of Directors be increased, or if the
Members fail, at any Annual or special meeting of such Members in which any Director or
Directors are elected, to elect the full authorized number of Directors to be voted for at that
meeting.
If the resignation of a Director be tendered to take effect at a future time, the Directors of
the Corporation shall have the power to elect a successor to take office when the resignation is
to become effective, but such resignation shall be effective and complete upon the date it was to
take effect even though such resignation has not been accepted or acted upon by the Directors
of the Corporation, or entered in its books, or a successor has not been elected. No reduction of
the number of Directors shall have the effect of removing any Director prior to the expiration of
his or her term of office.
Section 5. Place of Meeting. All meetings of the Board of Directors shall be held at
the office and principal place of business of the Corporation or at any other place which may be
designated by resolution of the Board or by written consent of a majority of the Board.
Section 6. Regular Meetings. Regular meetings of the. Board of Directors shall be
held at least eight (8) times a year. Such meetings shall be held each month at a day and at an
• hour to be fixed from time to time by action of the Board of Directors; provided, however, that
should such day fall upon a legal holiday, then said meetings shall be held at the same time on
the next day thereafter ensuing which is not a legal holiday. Notice of all such regular meetings
of the Board of Directors is hereby dispensed with, and no notice whatsoever need be given.
Section 7. Special Meetings. Special meetings of the Board of Directors for any
purpose or purposes may be called at any time by the Chair, or if he or she is absent or unable
or refuses to act, by the Vice Chair, or by any two Directors.
Special meetings of the Board shall be held upon four days' written notice to the
Directors by first -class mail or 48 hours' notice to the Directors, delivered personally or by
telephone, including a voice messaging system or other system or technology designed to
record and communicate messages, telegraph, facsimile, electronic mail or other electronic
means.
Alternatively, such notice may be given to each Director by telephone within a
reasonable time prior to such Special Meeting.
Section 8. Annual Organizational Meeting. Immediately following each Annual
Meeting of Members at which Directors shall have been elected, the Board of Directors shall
meet for the purpose of organization, the election of officers, and the transaction of other
business. Notice of such meeting is hereby dispensed with. Such meeting may be held at a later
time, but in no event later than three (3) days after any Annual Meeting, which later time shall
• be specified in a notice as hereinabove provided for special meetings of the Board.
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• Section 9. Notice of Adjournment. Notice of the time and place of holding a
meeting previously adjourned will be given to absent Directors.
Section 10. Entry_ of Notice. Whenever any Director has been absent from any special
meeting of the Board of Directors, an entry in the minutes to the effect that the Director was
absent and that notice has been duly given shall be conclusive and incontrovertible evidence
that due notice of such special meetings was given to such Director, as required by Law and the
Bylaws of the Corporation
Section 11. Waiver of Notice. The transaction of any meetings of the Board of
Directors, however called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if all the Directors be present or if a quorum be
present and if, either before or after the meeting, each of the Directors signs a written waiver of
notice or consent to hold such meeting or an approval of the minutes thereof. Any such waiver,
consent or approval shall be filed with the Corporate records or made a part of the minutes of
the meeting.
Section 12. Adjournment. A quorum of the Directors may adjourn any Directors'
meeting to meet again at a stated day and hour. A meeting held pursuant to such adjournment
may transact any business that might have been transacted at the meeting so adjourned.
Section 13. Attendance. Directors must attend at least fifty percent (50 %) of the
meetings of the Board of Directors annually and must not miss more than three (3) meetings in
• succession. The above requirement may be waived by obtaining prior excuse of absence from
the Chair or his or her designee. Failure to comply with this requirement may result in removal
from the Board.
Section 14. Quorum. A majority of the authorized number of Directors shall be
necessary to constitute a quorum for the transaction of business, except to adjourn as
hereinabove provided. Every act or decision done or made by a majority of the Directors
present at a meeting held at which a quorum is present shall be regarded as the act of the Board
of Directors, unless a greater number be required by Law or the Articles of Incorporation or
these Bylaws.
Section 15. Policies and Procedures. The Board of Directors shall establish and
maintain a policy & procedures manual containing the following:
(a) a listing of Board- appointed standing and special committees which shall
set forth the committees' functions and duties;
(b) statements of policy in compliance with the requirements of the joint
Commission on Accreditation of Healthcare Organizations and other applicable regulatory
agencies; and
(c) any other policies and procedures adopted by the Board.
• Section 16. Orientation. As soon as possible after election to the Board of Directors,
each new member will attend an orientation session to be conducted by representatives of the
rre
Board and Hospital Management. An opportunity for a tour of the Hospital and a review of the
previous year's minutes of the meetings of the Board of Directors will also be afforded new
members.
Section 17. Education. In order to keep current on trustee- related developments, all.
members of the Board of Directors will be provided with subscriptions to related publications
and will be afforded the opportunity to attend seminars and conferences sponsored by local and
national hospital associations and educational institutions. Documentation of attendance at
such seminars and conferences shall be maintained in the Hospital's Executive Offices.
Section 18. Performance Evaluation. The Board of Directors shall annually conduct
an evaluation of its own performance, measured against the hospital's Mission Statement and
Objectives listed in Article I, Section 2, hereinabove.
Section 19. Compensation. Directors shall not receive any salaries, wages, bonuses,
dividends or any other compensation from the Corporation for their services as a Director.
Reimbursements associated with the execution of duties as a Director do not constitute
compensation. For purposes of this Section 19, "compensation' shall not be deemed to include
the receipt of healthcare coverage and benefits, as it is important for the Corporation to promote
the receipt of health care for its Directors and their dependents.
Section 20. Removal of Directors. Any Director may be removed from office, with or
without cause, by a majority vote of the Members of the Corporation. Any Director may be
• removed from office by reason of failure to meet the requirements of Section 13 of this Article
IV, or for the reasons given in Section 5221 of the California Nonprofit Public Benefit
Corporation Law, by a two-thirds vote of the members of the Board. In the case of the Chief
Executive Officer of the Hospital, he shall be automatically removed from office upon
termination of his or her employment.
Section 21. Indemnification.
(a) Directors and Officers. The Corporation shall indemnify its Directors and Officers
who are or were parties or who are threatened to be made parties to any proceeding against
expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding to the maximum extent permitted by the California Nonprofit
Public Benefit Corporation Law. Such Directors and Officers shall be presumed to have met the
relevant standards of conduct, if any, required by said Law for indemnification, unless the
Board of Directors by a majority vote of a quorum thereof consisting of Directors who were not
parties to such proceeding determine that the Director or Officer has not met such standards of
conduct.
(b) Other Persons. The Corporation shall have the power on a case by case basis to
indemnify its employees and agents who are or were parties or who are threatened to be made
parties to any, proceeding against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceeding to the maximum extent
permitted by said Law.
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• (c) Insurance. Subject to the provisions of said Law, the Corporation shall have the
power to purchase and maintain insurance on behalf of its Directors, Officers, employees and
agents against any liability asserted against or incurred by them in their capacity as such
Director, Officer, employee or agent or arising out of their status as such, whether or not the
Corporation would have the power to indemnify against such liability.
•
•
(d) Indemnity Agreements. The Corporation shall have the power to enter into
indemnity agreements with any of its Directors, Officers, employees or agents to the maximum
extent permitted by said Law.
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• ARTICLE V
OFFICERS
Section 1. Number and Qualifications. The Officers of the Corporation shall be a
Chair, a Vice - Chair, a Secretary and a Treasurer, each of whom shall be a member of. the Board
of Directors; and such other.officers as may be appointed, in accordance with the provisions of
Section 3 of this Article V, who may be, but need not be, such member. Any number of offices
may be held by the same person, except neither the Secretary nor the Treasurer may serve
concurrently as the Chair of the Board.
Section 2. Election and Tenure of Office. The Officers of the Corporation shall be
elected annually by the Board of Directors, and each shall continue in office until his or her
successor shall have been duly elected and qualified in his or her stead, or until he shall have
resigned, or until he shall have been removed in the manner hereinafter provided.
Section 3. Subordinate Officers. The Board of Directors. may appoint such other
officers and agents as it may deem necessary, including one or more additional Vice - Chairs, one
or more Assistant Secretaries, and one or more Assistant Treasurers, each of whom shall have
such authority and perform such duties as are provided in these Bylaws, or as the Board of
Directors may from time to time determine. The Board of Directors may delegate to any officer
the power to appoint and to prescribe the authority and duties of any subordinate officer or
agents.
• 'Section 4. Removal. Any officer or agent may be removed, either with or without
cause, by the Board of Directors at any regular or special meeting thereof, or by any superior
officer upon whom such power of removal may have been conferred by the Board of Directors.
Section 5. Compensation Officers shall not receive any salaries, wages, bonuses,
dividends, or any other compensation from the Corporation for their services, unless
specifically disclosed and approved by the Board of Directors.
Section 6. Chair. The Chair shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and affairs of the Corporation
He or she shall preside at all meetings of the Members and the Board of Directors. He or she
shall be ex- officio a member of all the standing committees, if any, and shall have the general
powers and duties of management usually vested in the office of chair of a corporation, and
shall have such other powers and duties as may be prescribed by the Board of Directors or by
the Bylaws. '
Section 7. Vice - Chair. In case of the absence or disability of the Chair, the Vice -
Chair shall take the place of and perform the duties of the Chair. If there be more than one
Vice - Chair, the Vice - Chairs who are members of the Board of Directors shall, in the order of
their rank as fixed by the Board of Directors, in case of absence or disability of the Chair, take
his or her place and perform his or her duties.
. Section 8. Secretary. The Secretary shall keep, or cause to be kept, a book of
minutes of all meetings of Directors and Members, with the time and place of holding, whether
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• regular or special, and if special, how authorized, the notice thereof given, and the names of
those present at each meeting.
The Secretary shall keep a membership record containing the name and address of each
member and the date when he or she became a member.
The Secretary shall give, or cause to be given, notice of all meetings of the Members and
of the Board of Directors required by the Bylaws or by Law to be given; he or she shall keep the
seal of the Corporation and affix said seal to all documents requiring such seal; he or she shall
keep all other books, records and papers of the Corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.
In case of the absence, inability, refusal or neglect of the Secretary to make service or
publication of any notices, then such notices may be served and published by the Chair, a Vice -
Chair, or by any person thereto generally or specially authorized by them, or by the Board of
Directors, or, if the notice be of a meeting, by the persons duly ordering such meeting.
Section 9. Treasurer.
The Treasurer shall serve as Chair of the Finance Committee of the Board of Directors
and, as such, shall render a statement of the condition of the finances of the Corporation at all
regular meetings of the Board of Directors, and a full financial report at the Annual Meeting of
the Members.
• The Treasurer shall serve as liaison between the Board of Directors and the Chief
Financial Officer of the Hospital.
•
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• ARTICLE VI
CONTRACTUAL OBLIGATIONS, BANK ACCOUNTS
AND MISCELLANEOUS
Section 1. Contracts. The Board of Directors, except as in these Bylaws otherwise
provided, may authorize any officer or officers or agent or agents of the Corporation to enter
into any contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authority may be general or confined to specific instances, so authorized
by the power of authority to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable pecuniarily for the purpose or to any amount.
Section 2. Loans. No loan shall be contracted on behalf of the Corporation, and no
negotiable paper shall be issued in its name unless authorized by the Board of Directors. When
so authorized, any officer or agent of the Corporation may effect loans and advances at any time
for the Corporation from any bank, trust company, or other institution, or from any firm,
corporation or individual, and may make, execute and deliver promissory notes or other
evidences of the indebtedness of the Corporation for such loans and advances; and when
authorized as aforesaid, may mortgage, pledge, hypothecate or transfer any real or personal
property at any time held by the Corporation and to that end execute deeds of trust, mortgages,
or otherwise pledge or transfer such property as security for the payment of any and all loans,
advances, indebtedness and liabilities of the Corporation. Such authority may be general or
confined to specific instances.
• Section 3. Contractual Waiver of Liability of Members. The business and affairs of
the Corporation shall be conducted to the end and in the view that no personal liability for any
debts, liabilities or obligations of the Corporation, or otherwise, will be incurred, directly or
indirectly, by the Members or Directors of the Corporation as such, as a result of,. or through,
such conduct. Any contracts, loans or other obligations, written or oral, entered into by, in the
name of, or on behalf of the Corporation, shall be entered into upon the express condition that
none of the Members or Directors of the Corporation as such shall be in any way personally
liable for the performance of any of the conditions, covenants or promises therein contained, or
the payment of any of the sums therein provided or debts therein incurred. No contract, loan,
or other obligations shall be entered into by the Corporation providing for, or involving the
payment or the incurring of a debt, by the Corporation, of a sum in excess of five hundred
dollars ($500.00) unless the same be in writing.
Section 4. Checks and Drafts. All checks, drafts, or other orders for the payment of
moneys, notes or other evidences of indebtedness issued in the name of the Corporation shall be
signed by such person or persons and in such manner as shall, from time to time, be determined
by resolution of the Board of Directors.
Section 5. Del2osits. All funds of the Corporation shall be deposited to the credit of
the Corporation under such conditions and in such banks, trust companies or other depositaries
as the Board of Directors may designate or as may be designated by any officer or officers or
agent or agents of the Corporation to whom such power may, from time to time, be delegated
• by the Board of Directors, and for the purposes of such deposit any person or persons to whom
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• such power is so delegated may endorse, assign and deliver checks, drafts and other orders for
the payment of money which are payable to the order of the Corporation.
11
•
Section 6. Corporate Seal. The corporate seal shall be circular in form and shall
have inscribed thereon the name of the Corporation, the date of its incorporation, and the word
"California."
Section 7. Certification and Inspection of Bylaws. The Corporation shall keep in its
principal office of the transaction of business, the original or a copy of the Bylaws, as amended
or otherwise altered to date, certified by the Secretary, which shall be open to inspection by the
Members of the Corporation or members of the Board of Directors at all reasonable times
during business hours.
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• ARTICLE VII
COMNIITTEES
Section 1. Appointment. Subject to any inconsistencies with the Laws of the State of
California, or the standards adopted by the Joint Commission on Accreditation of Healthcare
Organizations, the Board of Directors shall, from time to time as deemed to be in the best
interest of the Corporation, appoint, abolish and /or modify standing committees and such
special committees as may be required to carry on the business of the Corporation. The chair
and each member of a standing committee and special committee shall serve until the next
annual election of Directors and until his or her successor is appointed or until such committee
is sooner terminated, or until he or she is removed, resigns or otherwise ceases to qualify as a
chair or member, as the case may be, of such committee.
Section 2. Composition, Authority and Responsibilities.
(a) Each committee shall have three or more members, with at least one a
member of the Board. The entire membership of a committee need not be confined to persons
who are members of the Board of Directors or Corporation. If such committees are comprised
solely of Directors, such committees may be delegated any of the powers and authority of the
Board, except the power and authority to 'adopt, amend or repeal these Bylaws, or such other
powers as may be prohibited by Law. . Such committees shall have power to act only in
intervals between meetings of the Board and shall at all times be subject to the control of the
•Board. Any committee composed of persons, one or more of whom are not Directors, may act
solely in an advisory capacity to the Board. No act of a committee shall be valid unless
approved by the vote or written consent of a majority of its members. Standing committees
shall perform their responsibilities in accordance with a written work plan to be adopted and
reviewed at least annually by the committee. Committees shall keep regular minutes of
proceedings and report the same to the Board from time to time as the Board of Directors may
require. Committee meetings shall be governed by the provisions of these Bylaws applicable to
Board meetings.
(b) An Executive Committee shall be appointed comprised of the Chair of the
Board, the Vice Chair, the Secretary, the Treasurer and such other members as are appropriate,
all of whom shall be members of the Board of Directors. The Executive Committee shall have
the power to transact all regular business of the Hospital during the interim between the
meetings of the Board of Directors, provided any action taken shall not conflict with the policies
and expressed wishes of the Board of Directors, and that it shall refer all matters of major
importance to the Board of Directors.
Section 3. Ch9 man.chiV. One member of each committee shall be designated as the
chair by the Chairman of the Board of Directors and be subject to the control of the Board of
Directors. When necessary, a vice -chair may be appointed, who, when fulfilling the duties and
responsibilities of chair, is also subject to the control of the Board.
• Section 4. Meeting Frequency. Each committee shall detemune the number and
frequency of meetings necessary to accomplish its purpose.
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Section 5. Attendance. Committee members shall attend at least 50% of the total
• number of meetings scheduled during their term of membership.
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Section 6. Special Committees. Special committees may be appointed by the Chair
of the Board of Directors, with the concurrence of the Board of Directors, for special tasks as
circumstances warrant. A special committee shall limit its activities to such tasks and shall not
have the power to act except as specifically conferred by action of the Board of Directors.
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ARTICLE VIII
• MANAGEMENT
Section 1. Appointment of President and Chief Executive Officer. The Board of
Directors shall select and appoint a Chief Executive Officer, whose title shall be President. Prior
to selection or appointment, the Board shall develop criteria upon which the process for
selection of the Chief Executive Officer shall be based. The President shall be the representative
of the Board of Directors in the management of the Hospital and shall be given the necessary
authority and responsibility to operate the Hospital in all its activities and departments. He or
she shall serve as a voting member of the Board of Directors and shall act as its duly authorized
representative in all matters in which the Board of Directors has not formally designated some
other person to so act.
Section 2. Authority and Responsibility.
(a) Policy:
(1) Carry out all policies established by the Board of Directors and
advise on the formation of the policies.
(2) Recommend to the Board of Directors policies appropriate to the
proper and legal management of the Corporations responsibilities.
• (b) Corporate Objectives: Implement the corporate objectives stated herein
that are not the sole responsibility of the Board of Directors.
•
(c) Management:
(1) Develop and submit to the Board of Directors for approval a plan
of organization for the conduct of Hospital operation, and recommend changes when
necessary.
(2) Maintain all necessary and appropriate functions to assure an
effective level of operations.
(d) Financial: Implement sound financial operating principles, including a
continuing assessment and periodic report to the Board of Directors as to the Hospital's
financial position.
(e) Planning: Formulate periodic reports to the Board of Directors projecting
the impact of future events on the operation of the Hospital.
(f) Environmental Safety: Maintain a safety management program that will
provide a physical environment free of hazards, and implement programs to reduce the risk of
injury to patients, personnel and visitors.
t'NIZ
• (g) External Relations: Assess the hospital's external relationships with other
healthcare providers and professional associations, participate in organizations representing
hospital interests, and monitor legislative activities that may affect the hospital industry.
•
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(h) Delegation of Authority: During an absence of the President, the
Executive Vice - President, or should both occur concurrently, the designated Senior Vice -
President or Vice - President, is hereby vested with the executive authority granted by the Board
of Directors to the President, subject to the terms and limitations set forth in Hospital Policy
#2.1, "Administrative Coverage/ Delegation of Authority."
Section 3. Qualifications. The qualifications and specific responsibilities of the Chief
Executive Officer shall be delineated in a formal description of authority and responsibility that
shall be reviewed and approved annually by the Board of Directors upon the recommendation
of the Executive Committee.
Section 4. Performance Review. A committee of the Board of Directors so
designated shall annually review the performance of the President according to goals and
objectives set for him by the Board of Directors. Upon concurrence of the full Board of
Directors, the designated committee shall recommend any disciplinary and /or compensatory
actions to be taken. Such review and subsequent actions shall be conveyed to the President in
writing.
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•
•
ARTICLE IX
MEDICAL STAFF
Section 1. Oreanization.
(a) The Board of Directors shall approve an organization of the physician,
dental, and pediatric staff and other practitioners granted privileges in the Hospital puisuant to
the Medical Staff Bylaws.
(b) The Board of Directors shall consider and act upon each Medical Staff
appointment recommendation as set forth in these Bylaws and the Medical Staff Bylaws.
(c) Each member of the Medical Staff shall have appropriate authority and
responsibility for the care of his or her patients, subject to the provisions of these Bylaws and
any limitations that may be imposed by the Medical Staff.
(d) Only members of the Medical Staff with clinical privileges may admit
patients to the Hospital, and those practitioners shall be directly responsible for each patient' s
diagnosis and treatment within the scope of his or her privileges. Delegation by the Medical
Staff of the performance of these practices shall be specified by the Medical Staff and ratified by
the Board of Directors.
(e) All elected Department Chairs shall be appointed by the Board of
Directors upon recommendation of the Medical Staff. Duties and responsibilities of the
Department Chairs shall be set forth in the Medical Staff Bylaws.
Section 2. Medical Staff Bylaws.
(a) The Medical Staff shall be responsible for the development, adoption and
periodic review of its Bylaws, rules and regulations, and /or amendments thereto, which shall
set forth its organization and government. Proposed Bylaws, rules and regulations shall be
recommended by the Medical Staff, subject to approval by the Board of Directors, which
approval shall not be unreasonably withheld and shall be deemed approved if not acted upon
within sixty (60) days of submittal to the Board.
(b) The Board of Directors shall review the Medical Staff Bylaws, rules and
regulations annually.
Section 3. Medical Staff Membership and Clinical Privileges.
(a) Delegation to the Medical Staff. The Board of Directors shall delegate to
the Medical Staff the responsibility and authority to investigate and evaluate all matters relating
to medical staff membership status, clinical privileges and corrective action, and shall require
that the staff adopt and forward to it specific written recommendations with appropriate
supporting documentation that will allow the Board to take informed action.
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(b) Terms and Conditions of Staff Membership and Clinical Privileges. The
• terms and conditions of membership status in the Medical Staff, and of the exercise of clinical
privileges, shall be as specified in the Medical Staff Bylaws or as more specifically defined in the
notice of individual appointment.
(c) Procedure. The procedure to be followed by the Medical. Staff and the
Board of Directors in acting on matters of membership status, clinical privileges, and corrective
action and the due process rights for applicants or members following • adverse
recommendations concerning applications or membership and clinical privileges shall be
specified in the Medical Staff Bylaws.
Section 4. Physicians with Contractual Arrangements.
(a) Physicians who contract either full-time or part -time with the Hospital
and whose duties are administrative or medico - administrative in nature must be members of
the Medical Staff and shall meet all qualifications and specifications of membership a stipulated
for other Medical Staff members.
(b) Termination: If the action involves questions of an administrative nature,
the Board of Directors shall follow pre - established Hospital personnel practices, and /or terms
of the employment contract, whichever is applicable. Termination, if a contractual agreement
with the Hospital, .shall not include termination of Medical Staff privileges. Medical Staff
privileges shall be accorded due process as defined in the Medical Staff Bylaws.
• Section 5. Quality of Professional Services.
(a) Board of Directors Responsibility. The Board of Directors shall require:
U
(1) That the Medical Staff and Administration prepare and maintain
adequate and accurate medical records for all patients;
(2) That the person responsible for each basic and supplemental
medical service cause written policies and procedures to be developed and maintained
and that such policies be approved by the Board, and
(3) That each member of the Medical Staff observe all the ethical
principles of his or her profession.
The Board of Directors shall further require, after considering the recommendations of
the Medical Staff, the conduct of specific review and evaluation activities to assess, preserve and
improve the overall quality and efficiency of patient care in the hospital. The Board of
Directors, through the President, shall provide whatever administrative assistance is reasonably
necessary to support and facilitate the implementation and the ongoing operation of these
review and evaluation activities.
(b) Accountability to the Board of Directors. The Medical Staff shall conduct
and be accountable to the Board for conducting activities that contribute to the preservation and
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improvement of the quality and efficiency of patient care provided in the Hospital. These
•
activities shall include:
(1) The conduct of periodic meetings at regular intervals to review
and evaluate the quality of patient care through a valid and reliable patient care
evaluation procedure based upon review of patient medical records and other available
data sources.
(2) Ongoing monitoring of patient care practices through the defined
functions of the Medical Staff, the other professional services, and the Hospital
Administration.
(3) , Definition of the clinical privileges which may.be appropriately
granted within the hospital and within each department, delineation of clinical
privileges for members of the Medical Staff commensurate with individual credentials
and demonstrated ability and judgment, and assignment of patient care responsibilities
to other specified health care professionals consistent with individual licensure
qualifications and demonstrated ability.
(4) Provision of continuing professional education, shaped primarily
by the needs identified through the review and evaluation activities.
(5) Review of utilization of the Hospital's medical resources to
is provide for their allocation to meet the needs of the patients.
(6) Such other measures as the Board of Directors may, after
considering the advice of the Medical Staff, the other professional services and the
Hospital Senior Executive Management, deem necessary for the preservation and
improvement of the quality and efficiency of patient care.
(7) The Medical Staff, with Senior Executive Management, shall
prepare and review annually a plan to insure the comprehensiveness and integration of
the Quality Improvement program.
(c) Documentation. The Board of Directors shall require, receive, consider
and act upon the findings and recommendations emanating from the activities required by
Section (b) above. All such findings and recommendations shall be in writing, signed by the
persons responsible for conducting the review activities and supported and accompanied by
appropriate documentation upon which the Board of Directors can take informed action.
(d) Whenever the Board of Directors does not concur in a Medical Staff
recommendation as specified above, the recommendation in question must be reviewed by the
Joint Conference Committee, composed of representatives of the Medical Staff and the Board of
Directors, prior to its presentation to the Board of Directors for final decision.
Section 6. Allied Health Professionals. The Board of Directors shall delegate to the
. Medical Staff the responsibility and authority to investigate and evaluate each application by an
Allied Health Professional for specified services, department affiliation, and modification in the
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services such Allied Health Professional may perform, and shall require that the staff or a "
• designated component thereof make recommendation to it or to its designee thereon. Allied
Health Professional means an individual, other than a licensed physician, dentist or podiatrist,
who exercised independent judgment within the areas of his or her professional competence
and who is qualified to render direct or indirect medical, dental or podiatric service or
supportive care under the supervision of a licensed physician, dentist or podiatrist who has
been granted Medical Staff membership and accorded privileges to provide such care in the
Hospital.
•
•
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• ARTICLE X
AFFILIATED ORGANIZATIONS
Section 1. Auxiliary.
(a) Purpose: To further the best interest of Hoag Memorial Hospital
Presbyterian and to assist in the promotion of its activities through the use of Volunteer
personnel.
(b) Limitations: The policies and Bylaws of the Auxiliary and its affiliated
chapters shall in no way conflict with the policies and provisions of the Corporation stated
herein.
(c) Responsibilities:
(1) The Auxiliary shall establish its own Bylaws and governing
organization within the limitations and provisions of these Corporate Bylaws and
subject to approval by the Board of Directors of the Hospital.
(2) The President of the Auxiliary shall provide a copy of any
proposed Bylaws and amendments thereto to the Board of Directors of the Hospital
prior to their submission to the full Auxiliary membership for approval.
• (3) Election of all officers of the Auxiliary shall be subject to the
approval of the Hospital Board of Directors.
(4) The Auxiliary shall engage in those activities designed to promote
fund raising, social or assistive measures consistent with the purpose of the Auxiliary
under its Bylaws and under the general auspices,of the Hospital Board of Directors.
(d) Authority and Review: The Board of Directors of the Hospital shall
review the Auxiliary Bylaws annually.
Section 2. Hoag Hospital Foundation. The Hoag Hospital Foundation is a nonprofit
public benefit corporation organized for the solicitation, receipt and administration of charitable
donations of funds and property for the sole benefit of Hoag Memorial Hospital Presbyterian.
Income disbursed from said funds or property is restricted to the following purposes: a) capital
expenditures, b) renovation of the Hospital buildings, c) equipment purchases, d) medical or
other professional healthcare education, e) community health education, f) medical research,
and g) charity care, including, without limitation, patient assistance.
(a) Corporate Members. The corporate members of the Foundation shall be
limited to those individuals from time to time serving as members of the Board of Directors of
the Hospital. The corporate members shall have the right to vote on the election of directors,
the disposition of the Foundations assets, on any merger involving the Foundation, and on any
• election to dissolve the Foundation.
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(b) Board of Directors. Subject to applicable laws and the Articles of
•
Incorporation, the activities and affairs of the Foundation shall be managed by its Board of
Directors, including, but not limited to, borrowing money and incurring indebtedness on behalf
of the Foundation. The Board shall consist of at least eleven (11) but no more than nineteen (19)
Directors.
(1) Committees. The Foundation Board of Directors, subject to the
provisions of the Foundation Bylaws, may create one or more committees to serve at the
pleasure of the Board.
(2) Officers. Officers of the Foundation shall be a chair, a vice- chair, a
secretary, a chief financial officer, an executive director, an assistant secretary, and such
other officers as may be. elected or appointed in accordance with the Foundation's
Bylaws.
(3) Records and Reports. Written records of the proceedings of the
Foundations Members, Board and committee meetings shall be kept and maintained in
the Foundations offices. An annual report shall be prepared and submitted to the
members and Board of Directors within one hundred twenty (120) days after the end of
the Foundations fiscal year.
(c) Bylaws. The Bylaws of the Hoag Hospital Foundation may not be
adopted, amended or repealed without the approval of its Corporate Members, and said
• Bylaws shall be reviewed annually by the Board of Directors of the Hospital.
Section 3. Other Affiliated Organizations. From time to time other affiliated
organizations may be formed in accordance with the following:
(a) Purpose: To further the best interest of Hoag Memorial Hospital
Presbyterian and to assist in the promotion of its activities.
(b) Limitations: The policies and Bylaws shall in no way conflict with the
policies and provisions of the Corporation stated herein.
(c) Authority and Review: The Board of Directors of the Hospital shall
annually review the bylaws of all other affiliated organizations except those of the committees
and support organizations of the Hoag Hospital Foundation, which shall be reviewed and
approved by the Board of the Foundation.
•
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• ARTICLE M
FISCAL YEAR
•
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The fiscal year of the Corporation shall provide for twelve accounting periods,
corresponding with the twelve (12) calendar months of each year, and shall commence on the
first (1st) day of September in each year.
MCC
• ARTICLE XII
AMENDN ENTS
Section 1. Power of Members. These Bylaws may be repealed or amended, or any
new Bylaws may be adopted, at the Annual Meeting or at any other meeting of the Members
called for that purpose, by a majority vote of the Members, except with regard -to amending
these Bylaws to retain or abolish existing standing or special committees of the Board of
Directors and appoint new standing or special committees of the Board of Directors as provided
in Article VII of these Bylaws.
Section 2. Powers of Directors. The power to repeal and amend the Bylaws and
adopt new Bylaws, including the power to change the authorized number of Directors, is
hereby granted to the Board of Directors, subject to the power of the Members to approve,
amend, or repeal such Bylaws, except with regard to the power to amend these Bylaws to retain
or abolish existing standing or special committees and appoint new standing or special
committees as provided in Article VII of these Bylaws, which shall not require approval by the
Members.
Section 3. Record of Amendment or New Bylaws. Whenever any amendment or
new Bylaws are adopted, they must be copied in the Book of Bylaws with the original Bylaws,
and immediately after them. If any Bylaw is repealed, the fact of repeal, with the date of the
meeting at which the repeal was enacted, must be stated in said Book.
• The provisions of this Article XH are subject to the provisions of Articles XV and XVI of
these Bylaws.
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• ARTICLE x111
REVIEW OF BYLAWS
•
•
These Bylaws shall be reviewed at least annually by the Board of Directors.
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ARTICLE XIV
• CONFLICT OF INTEREST
•
E
The Board of Directors, through a committee designated for that purpose, shall require
not less frequently than once a year a statement from each Director setting forth all business and
other affiliations which relate in any way to the business of the Corporation. Each Director shall
be responsible for disclosing to the Corporation any matter which would constitute such
Director an "interested Director" within the meaning of Section 5233 of the California Nonprofit
Public Benefit Corporation Law.
The Board of Directors shall establish conflict -of- interest resolution procedures in a
written policy adopted by the Board.
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•
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ARTICLE XV
PROVISIONS CONTRARY TO LAW
If any section, subsection, sentence, clause or phrase of these Bylaws, or any amendment
or addition thereto are, or are held to be contrary to Law, and null and void, such portions of
the Bylaws, or amendments or additions thereto, as are, or are declared null and void, shall be,
and shall be deemed separable from the remaining portions of the Bylaws, amendments and
additions thereto, and such fact or decisions shall in no way affect the validity of the said
remaining portions. The Members and Directors of the Corporation do, by their adoption of
these Bylaws, and the amendments and additions thereto, thereby declare that they would have
adopted the same, and each section, subsection, sentence, clause and phrase thereof,
irrespective of the fact that any one or more other sections, subsections, sentences, clauses or
phrases were, or were declared, contrary to Law and null and void.
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• ARTICLE XVI
CONTROLLING BYLAW AND SPECIAL CONTRACT
All of the Members and Directors of this Corporation agree with and between each other
and the Corporation that all of the activities of the Corporation shall be directed toward the
fulfillment and furtherance of the purposes of the Corporation set forth in the Articles of
Incorporation, and any amendments thereto, and that all of the contributions, assets and
earnings of the Corporation, if any, shall be expended for, dedicated and devoted to the
advancement of said purposes, and no Member or Director of the Corporation, as such, shall
ever be entitled to receive any part thereof, either before or after dissolution of the Corporation
It is further understood and agreed by and between all of the Members and Directors of.the
Corporation, and each other and the Corporation, that no Member or Director as such will
withdraw, claim or use any right or interest he might have in or to the Corporation, its property
or assets, but that the same be devoted to the advancement of its purposes as aforesaid. The
understanding and agreement herein set forth shall bind each and every future Member and
Director of the Corporation to the same extent and in the same manner as present Members and
Directors are and shall be bound thereby.
These Bylaws, and any amendments or additions, thereto, and the Articles of
Incorporation of the. Corporation, and any amendments thereof, and any provisions, terms,
covenants or agreements therein contained, shall be and shall constitute a valid and binding
contract by and between each of the respective Members and Directors of the Corporation and
• each of the other of the Members and Directors, and by and between each of the Members and
Directors and the Corporation, which contract shall become effective as to each Member upon
his or her signing or adopting these Bylaws, and such signing and adoption shall be considered
as having been done in consideration of, and for the purpose of inducing, the signing or
adopting the same by each of the other Members and Directors.
WME
• ARTICLE XVII
•
•
PARLIAMENTARY AUTHORITY
The rules contained in Robert's Rules of Order, Revised, shall govern the Members and
Directors of this Corporation in all cases to which they are applicable, and in which they are not
inconsistent with the Bylaws or special rules of the Corporation
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•
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DOCSSC1:3583173
Exhibit C
Authorizing Resolution Attached
• RESOLUTION AUTHORIZING TAX - EXEMPT FINANCING
WHEREAS, Hoag Memorial Hospital Presbyterian (the "Corporation ") is currently
obligated with respect to the City of Newport Beach Variable Rate Demand Revenue Bonds (Hoag
Memorial Hospital Presbyterian Project) Series 1992, the City of Newport Beach Variable Rate
Demand Revenue Bonds (Hoag Memorial Hospital Presbyterian Project) 1996 Series A,, B and C and
the City of Newport Beach Variable Rate Demand Revenue Bonds (Hoag Memorial Hospital
Presbyterian Project) 1999 Series A, B and C (the "Existing Indebtedness';
WHEREAS, the Corporation desires to: (a) refinance certain prior expenditures for
capital equipment and for the remodeling of portions of the Health Facilities owned and operated by
the Corporation (the "Facilities'D, (b) finance certain capital costs of construction, furnishing and
equipping of improvements to certain of the Facilities, and (c) finance the renovation and remodeling
of certain portions of and the acquisition of certain equipment for the Facilities as presented to this
meeting, a copy of which the Secretary of the Corporation has been instructed to include with the
minutes of this meeting (the "Project ");
WHEREAS, the Corporation desires to induce the City of Newport Beach (the
"City") (1) to issue and sell up to $200,000,000 in aggregate principal amount of its 2005 multi-
modal bonds (the "Bonds') and (2) to loan the proceeds from the sale of the Bonds (the "Proceeds ")
to the Corporation for the purpose described above and to pay certain costs of issuing the Bonds;
WHEREAS, the Corporation's Board of Directors has considered the following
• proposed agreements and other documents in connection with the proposed issuance of the Bonds;
(1) . Proposed Bond Indenture (the `Bond Indenture ") by and between the City
and the bond trustee identified therein, in the form presented at this meeting, a copy of which the
Secretary of the Corporation has been instructed to include with the minutes of this meeting as
Exhibit A;
(2) One or more proposed Supplemental Master Trust Indentures of the
Corporation (and appendices and instruments included therein), by and between the Corporation and
the master trustee identified therein, in the forms presented at this meeting, a copy of each of which
the secretary of the Corporation has been instructed to include with the minutes of this meeting as
Exhibit B;
(3) Proposed Loan Agreement by and between the City and the Corporation, in
the form presented at this meeting, a copy of which the Secretary of the Corporation has been
instructed to include with the minutes of this meeting as Exhibit C;
(4) Proposed Purchase Contract (the `Bond Purchase Contract ") by and between
the Corporation, the City and Citigroup Global Markets, Inc. (the "Underwriter"), in the form
presented at this meeting, a copy of which the Secretary of the Corporation has been instructed to'
include with the, minutes of this meeting as Exhibit D;
(5) Proposed Official Statement (the "Official Statement") to be used in
• connection with the offer and sale of the Bonds, in the form presented at this meeting, a copy of
DOCSOC 1113910x5/22936 -0004
which the Secretary of the Corporation has been instructed to include With the minutes of this
• meeting as Exhibit E
WHEREAS, it is anticipated that the documents regarding the Bonds (other than
Exhibits D and E included with the minutes of this meeting) considered at this meeting will be dated
as of August 1, 2005, for identification purposes;
WHEREAS, this Board has previously adopted its Resolution dated February 8, 2005
(the "Prior Resolution "), which based on the stage of the financing at the time, includes elements
which had not been fully considered upon advice of counsel and the financing team;
WHEREAS, the Board has been advised of the restrictions of Section 148 of the
Internal Revenue Code of 1986, as amended (the "Code "), with respect to the Bonds and understands
that the Bonds must generally be expected to be repaid from current revenues of the Corporation (not
including investment earnings);
NOW, THEREFORE, BE IT RESOLVED, that the Project is hereby authorized and
approved with such changes as the Authorized Agents (as defined below) may authorize.
RESOLVED FURTHER, the Corporation hereby approves the sale of the Bonds by
the City in accordance with the Bond Purchase Contract in an aggregate principal amount not to
exceed $200,000,000 and hereby authorizes the Authorized Agents, for and in the name and on
behalf of the Corporation to approve the final terms of such sale as set forth in the Bond Purchase
Contract.
• RESOLVED FURTHER, that the terms and provisions of the above - referenced
Agreements and Official Statement, and each of them, substantially in the forms presented at this
meeting, are approved in all respects; provided, that the Authorized Agents (as defined below) may
authorize the inclusion of any additions, deletions, or changes to such documents as may be
necessary and appropriate to effectuate the issuance of the Bonds provided that the aggregate
principal amount of the Bonds shall not exceed $200,000,000.
•
RESOLVED FURTHER, that Richard M. Ortwein, Chairman; Max W. Hampton,
Secretary; Michael D. Stephens, President; Peter M. Foulke, Executive Vice President; and
Jennifer C. Mitzner, Chief Financial Officer, and each of them, whose appointment as agents for the
Corporation hereby is approved, ratified, and confirmed (individually or collectively, the
"Authorized Agents'), acting jointly or individually, are hereby authorized and directed for and on
behalf of the Corporation to approve the Bond Indenture, the Official Statement and the use and
distribution of the Official Statement by the City and the Underwriter, and to execute, approve, and
deliver the Supplemental Master Indentures, Obligations issued pursuant to such Supplements, the
Loan Agreement and the Bond Purchase Contract, with such changes as the Authorized Agents
executing and delivering the same deem necessary or desirable to effectuate the issuance of the
Bonds, their execution thereof to be conclusive evidence of the approval of the Authorized Agents
and of the Board of Directors.
RESOLVED FURTHER, that part C of the Prior Resolution is hereby rescinded and
shall be of no force and effect and nothing in this Resolution or the Prior Resolution shall affect or be
interpreted to affect the investment policy of the Corporation or the administration of investments in
DOCSOG 1 113910x5/22936 -0004 xl
accordance with existing policies and procedures of the Corporation and its Investment Management
• Committee.
RESOLVED FURTHER, the Corporation shall take all necessary actions to ensure
that the provisions of the Tax Certificate, executed with respect to the Bonds, are complied with and
the Corporation expects, and covenants to pay debt service on the Bonds from current revenues that
are not investment earnings i.e., revenues received within the last year from the applicable debt
service payment date) other than as specifically permitted by the Tax Certificate;
RESOLVED FURTHER, that the Authorized Agents are authorized to provide for an
initial interest rate on the Bonds, computed at the Auction or ARS Rate (as set forth in the Bond
Indenture) for up to four (4) initial series of bonds, to be separately identified in any respective
principal amount, provided the aggregate principal amount shall not exceed the maximum amount
authorized herein.
RESOLVED FURTHER, that it may be desirable and in the best interest of the
Corporation that the Bonds be qualified or registered for sale in various states; any Authorized Agent
is hereby authorized to determine the states in which appropriate action shall be taken to qualify or
register for sale all or such part of the Bonds as said Agents may deem advisable; that said Agents are
hereby authorized to perform on behalf of the Corporation any and all such acts as they may deem
necessary or advisable in order to comply with the applicable laws of any such states, and in
connection therewith to execute and file all requisite papers and documents, including, but not
limited to, applications, reports, surety bonds, irrevocable consents and appointments or attorneys for
service of process and the execution by such officers of any such paper or document or the doing by
• them of any act in connection with the foregoing matters shall conclusively establish their authority
therefore from the Corporation and the approval and ratification by the Corporation of the papers and
documents so executed and the action taken.
•
RESOLVED FURTHER, that the Authorized Agents are authorized to take such
other and further action as such Authorized Agents may deem necessary or desirable, in order to
accomplish the purposes and intent of the foregoing resolutions, including but not limited to the
negotiation, execution and delivery or any farther instruments, certificates and documents (including,
without limitation, a Tax Certificate and Agreement, a Broker - Dealer Agreement for appointing
Citigroup Global Markets, Inc. as Broker - Dealer for the Bonds, and any agreements with Financial
Guaranty Insurance Company, doing business in California as FGIC Insurance Company, relative to
obtaining its municipal bond insurance policy with respect to the Bonds), the payment of all fees and
expenses incurred on behalf of the Corporation in connection therewith, the authorization of the
distribution of the Official Statement and the use of the proceeds of the Bonds as generally
contemplated by the Official Statement.
RESOLVED FURTHER, that all acts heretofore taken by a director, officer,
employee or other agent of the Corporation in conformity with the purposes and intent of the
foregoing resolutions, including but not limited to the negotiation of any and all of the documents
and agreements in the forms presented to this meeting, copies of which the Secretary of the
Corporation have been instructed to include with the minutes of this meeting attached as Exhibits A
through E, and each of them is ratified in all respects, including (without limitation) applying to the
City for its assistance as issuer of the Bonds.
DOCSOC/I 11391 Ov5/2293b -0004
- a9-
The undersigned, Secretary of the Corporation, hereby certifies that
• the foregoing is a full, true and correct copy of the Resolution of the
Board of Directors of said Corporation duly adopted at a meeting
thereof held on July 12, 2005, and that said Resolution has not been
amended, modified or revoked by said Board of Directors.
C�
•
DOCSOGI 1 13910vSM936.0004 p
is
•
J
DOCSSCI :358317.3
Exhibit D
Evidence of 501(c)(3) Status Attached
•
11
DEPARTMENT OF THE TREASURY
0 INTERNAL REVENUE SERVICE
PHILADELPHIA. PA 19255
CERTIFICATION
PROGRAM
Date: 10/01/2004
Taxpayer: HOAG MEMORIAL HOSPITAL PRESBYTERIAN
TIN: 95- 1643327
Tax Year: 2004
I certify that, to the best of our knowledge, the above -named entity is an exempt
organization under section 501(c) (3) of the U.S. Internal Revenue Code, or a religious or
apostolic organization under section 501(d), which is exempt from U.S. taxation under
section 501(a), and is a resident of the United States of America for purposes of U.S.
taxation.
Wed for France
Form 61661 Ra , 0 -20041
C310" N..0er 43 10 V
Daniel J. Nally
Field Director, Philadelphia Accounts Management Center
HOAGHoag Memorial Hospital Presbyterian
HOSPITAL 301 Newport Boulevartl, P.O. Box 6100
�\ Newport Beach, California 9.658 -6100
Phone 7141645 -8600
Jennifer C. Mitmer
Vice President Finance
Hoag Memorial Hospital Presbyterian
One Hoag Drive Box 6100
Newport Beach, CA 926sa
September 8, 1997
To Whom It May Concern:
Please be advised that Hoag Memorial Hospital Presbyterian is a non - profit, tax- exempt hcalthcare facility
under IRS Code Section 501 c 3.
Sincerely,
ifer C. Mitater
• Vice President Finance
•
.A VON - PROFIT LOXIWD91TT HOSPITAL ACCREDITED BY THE IOINT COMMMSEON ON ACCREDITATION OF HEALTHCARE ORGANIZATIONS irY��
OFF'C[ OF
• COMMISSIONER OF INTERNAL REVENUE
...RESS REPLY T.
COM MIS SIGNER OF.N R"LRW.W
AND P.M. TO
T:S:EO 1
AiG
•
U. S. TREASURY DEPARTMENT
WASHINGTON S
MR? I Un 1954
J
The Hoag Memorial - Hospital - Presbyterian
100 Beacon Street) P.O. Box #335
Newport Eeach, California
Gentlemen:
It is the opinion of this office, based upon the evidence
presented, that you are exempt from Federal income tax under the
provisions of section 101(6) of the Internal Revenue Code.as it
is shown that you are organized and operated exclusively for
charitable purposes.
Accordingly, you are not required to file income tax
returns unless you change the character of your organization,
the purposes for which you were organized, or your method of
operation. Any such changes should be reported immediately tp
the Director of Internal Revenue for your district in order
that their effect upon your exempt status may be determined.
Contributions made to you are deductible by the donors in
computing their taxable net income in the manner and to the
extent provided by section 23(o) and (q) of the Code.
Bequests, legacies, devises or transfers, to or for your use
are deductible in computing the value of the net estate of a
decedent for estate tax purposes in the manner and to the extent
provided by sections 812(d) and 861(a)(3) of the Code. Gifts of
property to you are deductible in computing net gifts for gift
tax purposes in the manner and to the extent provided in section
1004(a)(2)(B) and 1004(b)(2) and (3) of the Code.
It will not be necessary for you to file the annual return
of information, Form 990A, generally required of organizations
exempt under section 101(6) of the Internal Revenue Code, as you
come within the specific exceptions contained in sec)ion 54(f)
of the Code.
Form 699-
(Re.. Aug. 393 eH- yapg -s .Pe
•
2
The Hoag P?enorial Hospital — Presbyterian
• In the event you have not filed a waiver of exemption
certificate in accordance with the provisions of section 1426(1)
of the Code, no liability is incurred by you for the taxes imposed
under the Federal Insurance Contributions Act. Tax liability
is not incurred by you under the Federal Unemployment Tax Act`
by virtue of the provisions of section 1607(c)(8).of such Act.
The Director of Internal Revenue for your district is being
advised of this action.
This ruling is also applicable to you under your former
name, The Community Presbyterian Hospital of Laguna Beach, California,
and The Presbyterian Hospital of Orange County, California,
Very truly yours,
• Norman A. Sugarman
Assistant Commissioner
By k—
Chief, C Fxempt Organization Branch
Division Tax Rulings
Ebr 6": :-7
(Rev. Aug. 10 2) 16 -6,01 3 e•o
•
Exhibit E
•
Certificate of Good Standing Issued by the Secretary of State of California
Attached
•
LJ
DOCSSCI:358317.3
State of California
• Secretary of State
CERTIFICATE OF STATUS
DOMESTIC CORPORATION
I, BRUCE McPHERSON, Secretary of State of the State of California, hereby
certify:
That on the 22nd day of May, 1944, HOAG MEMORIAL HOSPITAL
PRESBYTERIAN became incorporated under the laws of the State of California
by filing its Articles of Incorporation in this office; and
That said corporation's corporate powers, rights and privileges are not suspended
on the records of this office; and
That according to the records of this office, the said corporation is authorized to
exercise all its corporate powers, rights and privileges and is in good legal
• standing in the State of California: and
That no information is available in this office on the financial condition, business
activity or practices of this corporation.
NP -25 (REV QMMS)
IN WITNESS WHEREOF, I execute
this certificate and affix the Great Seal
of the State of California this day of
August 10, 2005.
BRUCE MCPHERSON
Secretary of State
sk
•
•
•
Exhibit F
Certificate of Good Standing Issued by the Franchise Tax Board of the State of California
Attached
oocssCI :358317.3
STATE OF CALIFORNIA
FRANCHISE TAX BOARD
�e PO BOX 942857
SACRAMENTO, CA 94257 -0540 In Reply Refer To: 657br
Date : 08(04(05
•
ENTITY STATUS
Note: This letter does not
reflect the entity's status
With any other agency.
Entity Name : HOAG MEMORIAL HOSPITAL PRESBYTERIAN
Entity Number :0194920
® 1. The above entity is in good standing with this agency.
® 2. The above entity is currently exempt from tax under Revenue and Taxation Code Section 23701!1.
❑ 3. Our records indicate the above entity is not incorporated, qualified, organized, or registered through the
Secretary of State to transact business in California.
❑ 4. The above entity was incorporated, qualified, organized, or registered through the Secretary of State
on
5. The above entity has an unpaid liability of $_ for account period(s) ending
❑ 6. Our records do not show that the above entity filed returns for account period(s) ending
❑ 7. The above entity was — effective _
El 8. The above entity's current address on record with this agency is:
❑ 9. We do not have current information about the above entity.
Comments:
-9 REPRESS TI,d t
ASSISTANCE
Telephone assistance Is available year -round from 7 a.m. until 8 p.m. Monday through Friday. From January through June, assistance
Is also available from 8 a.m. until 5 p.m. on Saturdays. We may modify these hours without notice to meet operational needs.
From within the United States, call .. ............................... (800) 852 -5711
From outside the United States, call (not toll -free) ............. (916) 845 -6500
Website at: www.ftb.ca.gov
Sistance for person with disabilities: We comply with the Americans with Disabilities Act. Persons with hearing or speech
impairments please call TTY/TDD (800) 822 -6268.
FT6 4263A (REV 042002)
EXHIBIT NO. 28
Officer's Certificate
pursuant to Section 105
of the Master Indenture
for Obligation No. 14
(BC)
OFFICER'S CERTIFICATE PURSUANT TO
• SECTION 2.05 OF THE MASTER INDENTURE
The undersigned hereby certifies as follows:
1. I am an Authorized Representative of Hoag Memorial Hospital Presbyterian
(the "Corporation ") and am authorized to execute and deliver this Officer's Certificate pursuant to
the Master Indenture of Trust, dated as of October 1, 1984 amended through the date hereof
(the "Master Indenture "), between the Corporation and Wells Fargo Bank, National Association, as
successor master trustee (the "Master Trustee ").
2. I have read Sections 2.05 and 5.07 of the Master Indenture, relating to the
issuance of Indenture Indebtedness under the Master Indenture and the limitations on incurrence
of Additional Indebtedness, and the definitions in the Master Indenture related thereto. I have
examined the audited financial statements of the Corporation as of August 31, 2004, and caused
calculations to be made based on such financial statements to determine compliance with the
provisions of the Master Indenture identified above. In my opinion, I have made or caused to be
made such examination or investigation as is necessary to enable me to express an informed
opinion concerning the matters described in this Officer's Certificate.
3. In my opinion, the provisions of the Master Indenture relating to the
issuance of Obligation No. 14 have been complied with and all requirements and conditions to
the issuance of Obligation No. 14 contained in the Supplemental Master Indenture for Obligation
• No. 14, dated as of August 1, 2005, by and between the Corporation and the Master Trustee have
been complied with and satisfied.
•
4. No Event of Default has occurred and is continuing under the Master
Indenture and no event has occurred which the lapse of time or the giving of notice, or both, shall
constitute an Event of Default under the Master Indenture.
The Long -Term Debt Service Coverage Ratio of the Obligated Group is not less
that 1.25 (computed on the basis of Aggregate. Income Available for Debt Service for the full
Fiscal Year immediately preceding the date hereof and Maximum Annual Debt Service
immediately after giving effect to the issuance of Obligation No. 14).
For purposes of this determination, I have computed Maximum Annual Debt
Service for Balloon Long -Term Indebtedness at an interest rate at which the Corporation could
reasonably expect to borrow the same amount of Balloon Long -Term Indebtedness for the term
of such Balloon Long -Term Indebtedness and I have computed Maximum Annual Debt Service
for Long -Term Indebtedness providing for a variable rate of interest (namely, the 1992 and 2005
indebtedness) at a rate not less than the average rate of interest which was payable or would have
been payable with respect to such indebtedness for the 12 -month period ended on the last day of
the month preceding such determination, all as required pursuant to the Master Indenture. In
each case, such rates have been certified to me by Citigroup Global Markets Inc., namely 0.94%
and 1.66% per annum, respectively a schedule; of such Maximum Annual Debt Service is
attached hereto as Exhibit A.
DOCSSC1:356317.5
. All capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Master Indenture.
•
Dated: August 24, 2005
DOCSSC I :358317.3
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
Y
UAuthorked Representative
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• Appendix
1. Rate used for Series 1992 is 0.94 %. In accordance ith Indenture, rate used is the average annual rate of
interest hich as papble for such Long -Term Indebtedness for the 12 month period immediatellprior to the date
of determination of MAIDS.
SERIES 1992 f91M
City otNeprt Beach
Noag Memorial Hospital
pnesbytsrian)
Remarlit'ar. Merrill Unch
.. 1 2005. j
. ,,,Jnt.. %' . ..
SEP
0.89%
OCT
0.83%
NOV
1.03%
DEC
0.98%
AN
0.84%
FEB
0.85%
MAR
0.91%
APR
0.98%
MAY
0.98%
81
0.98%
IU
6.94
AO
1.10%
Average 0.94%
2. Rate used for Series 1996 is 4.66 %. In accordance ith Indenture, rate used is the rate at hich the obligor
could reasonablAxpect to borroAhe same amount for such term for Long -Term Indebtedness structured as a
balloon paptent. For Series 1996, level debt service as calculated based upon the fixed interest rate for the
bullet maturiNn 2026.
• 2. Rate used for Series 1996114.75%. In accordance ith Indenture, rate used is the rate at hich the obligor
could reasonablpxpect to borroAhe same amount for such term for Long -Term Indebtedness structured as a
balloon paptent. For Series 1999, level debt service ae calculated based upon the fixed interest rate for the
bullet maturityn 2029.
4. Rate used for Series 2005 is 1.66 %. In accordance ifh Indenture, rate used is the average annual rate of
interest Rich auld have been papble if such Long -Term Indebtedness had been outstanding throughout 12
month period immediateWrior to the date of determination of MAIDS.
SERIES 2003AdB
ABA(lhance Autbrity br
NonproR Corporations
Pl rp HealtBare)
Da ARS
Date
Int. %
8/112004
1.07%
911/2004
1.14%
1011/2004
1.35%
11/112004
1.50%
12/1/2004
1.50%
1/1/2005
1.48%
2/1/2005
1.59%
3/1/2005
1.56%
4/1/2005
2.09%
511/2005
2.55%
611/2005
2.07%
7/1/2005
1.97%
Average 1.66%
•
EXHIBIT NO. 29
Requisition No. I —
Costs of Issuance Funds
(executed by the Corporation)
(BC)
• REQUISITION NO. I - COSTS OF ISSUANCE FUND
To: Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, California 90017
Attn: Corporate Trust Services
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian), Series 2005A, 2005B and 2005C
The undersigned on behalf of Hoag Memorial Hospital Presbyterian
(the "Corporation ") hereby requests Wells Fargo Bank, National Association, as bond trustee
(the "Bond Trustee ") under that certain bond indenture, dated as of August 1, 2005 (the "Bond
Indenture "), between the City of Newport Beach (the "City ") and the Bond Trustee, relating to the
City's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005A, 2005B and
2005C to pay to the Persons listed on Schedule I attached hereto the amounts shown for the
purposes indicated from the Costs of Issuance Fund established pursuant to the Bond Indenture.
The undersigned hereby certifies that each obligation set forth on Schedule I has
been properly incurred and is a proper charge against the Cost of Issuance Fund, and each item for
which payment is requested is or was necessary in connection with the issuance of the Bonds. None
• of the items for which payment is requested has been reimbursed previously from the Costs of
Issuance Fund.
C,
J
Dated: August 24, 2005
DOCSSCI:358317.3
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
By:
Au orized Representative
SCHEDULEITO
• REQUISITION NO. 1— COSTS OF ISSUANCE FUND
Payee
Wells Fargo Bank, National
Association
Purpose
Bond Trustee Fee
Amount
$11,800.00
Orrick, Herrington & Sutcliffe LLP Bond Counsel and Disclosure $150,000.00
Counsel Fee
Standard & Poor's Rating Agency Fee $57,500.00
Image Master Printing Fee $4,295.70
City of Newport Beach Issuer Fee $200,000.00
• Stradling Yocca Carlson & Rauth Corporation Counsel Fee $80,000.00
Wire or mailing instructions for payment can be found on the invoices or other information
attached.
•
DOCSSC1 :3583175
EXHIBIT NO. 30
Requisition No. I —
Project Fund
(executed by the Corporation)
(BC)
0 REQUISITION NO. I - PROJECT FUND
•
0
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian) Series 2005A, 2005B and 2005C
Hoag Memorial Hospital Presbyterian (the "Corporation ") hereby requests Wells
Fargo Bank, National Association (the "Bond Trustee "), as trustee under that certain bond
indenture between the City of Newport Beach (the "City ") and the Bond Trustee, dated as of
August 1, 2005, relating to the City of Newport Beach Insured Revenue Bonds (Hoag Memorial
Hospital Presbyterian), Series 2005A, 2005B and 2005C (the "Bonds "), to pay the amounts set
forth on Schedule I from the Project Fund:
The Corporation hereby certifies that obligations in the amounts stated above
have been incurred by the Corporation and are presently due and payable, and that each item is a
proper charge against the indicated fund and has not been previously paid from said fund or from
the proceeds of the Bonds.
Dated: August 24, 2005
DOCSSC 1:358317.5
HOAG MEMORIAL HOSPITAL
PRESBYTERIAN
II mull
0
•
•
DOCSSC1:356317.5
SCHEDULEITO
REQUISMON NO. I - PROJECT FUND
E
•
•
DOCSSC1:358317.5
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EXHIBIT NO. 31
Certificate of the
Bond Trustee, together
with authorizing
resolution or bylaws
(executed by the Bond Trustee)
(BC; Trustee)
CERTIFICATE OF BOND TRUSTEE
• The undersigned, on behalf of Wells Fargo Bank, National Association, as bond
trustee (the "Bond Trustee ") hereby states and certifies as follows:
1. This Certificate is being provided in connection with the City of Newport
Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005A, 2005B and
2005C (collectively, the "Bonds ") issued pursuant to that certain bond indenture, dated as of
August 1, 2005 (the `Bond Indenture "), between the City of Newport Beach (the "City ") and the
Bond Trustee.
2. The undersigned is an authorized officer of the Bond Trustee as evidenced
by the authorizing documentation attached hereto, and the Bond Trustee is a national banking
association duly organized and validly existing under the laws of the United States of America,
which has all requisite power, including trust powers, and authority to accept, execute, deliver, and
perform all of its obligations as Bond Trustee under and pursuant to the Bond Indenture and to take
all actions required of it under the Bond Indenture.
3. Each of the Bond Indenture and the Auction Agent Agreement dated as of
August 1, 2005 between the Bond Trustee, Wells Fargo Bank, National Association (the "Auction
Agent Agreement "), has been duly executed and delivered by an officer of the Bond Trustee duly
authorized to execute and deliver such document as evidenced by the authorizing documentation
attached hereto, and the execution, delivery and performance of each of the Bond Indenture and the
• Auction Agent Agreement has been duly authorized by all necessary action of the Bond Trustee.
4. The Bond Trustee has duly accepted the trusts created pursuant to the Bond
Indenture; and such acceptance and performance by the Bond Trustee of its obligations under the
Bond Indenture or the Auction Agent Agreement will not contravene the Articles of Association or
Bylaws of the Bond Trustee or conflict with or constitute a breach of or a default under any law,
administrative or governmental regulation, consent, decree, order, indenture, contract or other
agreement or instrument to which the Bond Trustee is subject or bound or by which any of its assets
is bound, and the performance of the obligations of the Bond Trustee under the Bond Indenture the
Auction Agent Agreement has been duly authorized by all necessary corporate action.
5. To the knowledge of the undersigned officer, the execution and delivery of
each of the Bond Indenture and the Auction Agent Agreement and compliance with the provisions
on the Bond Trustee's part contained therein, will not conflict with or constitute a breach of or
default under any law, administrative regulation, judgment, or decree (except that no representation,
warranty or agreement is made with respect to any federal or state securities or Blue Sky laws or
regulations), nor will any such execution, delivery or compliance result in the creation or imposition
or any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of
the properties or assets held by the Bond Trustee pursuant to the lien created by the Bond Indenture
under the terms of any such law, administrative regulation, judgment, or decree, except as provided
in the Bond Indenture.
6. To the knowledge of the undersigned officer, there is no action, suit,
• proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental
agency, public board or body, pending or threatened against the Bond Trustee affecting the
DOCSSCI:358317.5
existence of the Bond Trustee or the entitlement of its officers to their respective offices, or seeking -
• to prohibit, restrain or enjoin the execution and delivery of the Bond Indenture and the Auction
Agent Agreement or the collection of revenues pledged or to be pledged to pay the principal,
premium, if any, and interest on the Bonds or the pledge thereof, or in any way contesting or
affecting the validity or enforceability of the Bond Indenture or the Bonds, or contesting the power
of authority of the Bond Trustee to enter into, adopt or perform its obligations under any of the
foregoing, wherein an unfavorable decision, ruling or finding would materially adversely affect the
validity or enforceability of the Bond Indenture, the Auction Agent Agreement or the Bonds.
•
•
7. The undersigned acknowledges receipt of Obligation No. 14, dated and
authenticated August 24, 2005, in the amount of $200,000,000, as issued pursuant to the
Supplemental Master Indenture for Obligation No. 14, dated as of August 1, 2005, between Hoag
Memorial Hospital Presbyterian and Wells Fargo Bank, National Association.
[Remainder of Page Intentionally Left Blank]
DOCSSC1:7587175 2
• Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Bond Indenture.
U
DOCSSC1:358317.3
Dated: August 24, 2005
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Bond Trustee
By: 1446�
Authorized Representative
r-I
LJ
•
WELLS FARGO BANK, NATIONAL ASSOCIATION
ASSISTANT SECRETARY'S CERTIFICATE
I, Karen T. Mitani, hereby certify that I am an Assistant Secretary of Wells Fargo
Bank, National Association, a national banking association, (the "Bank', and I hereby further
certify as follows:
1. The following is a true and correct extract from resolutions duly adopted by
the Board of Directors of the Bank on November 25, 2003, and no modification, amendment,
rescission or revocation of such resolutions has occurred affecting such extract as of the date of
this certificate.
RESOLVED, that for the purposes of these resolutions, "Executive
O`ficer" shall mean any person specifically designated as an Executive Officer of the --
Bank by resolution of the Board of Directors, and "Signing Officer" shall mean the
Chairman of the Board, the President, any Vice Chairman, any Executive Vice President,
any Senior Vice President, the Treasurer, any Vice President, any Assistant Vice -
President, any person whose title includes the word "Officer"- ,(e.g.; Commercial B_ anking
Officer, Personal Banking Officer, Trust Officer), or any other person whose title has
been or is hereafter designated by the Board of Directors as a title for an officer of the
Bank, and such officers are hereby authorized to sign agreements, instruments and
other documents on behalf of the Bank in accordance with the signing authorities
conferred in Parts A, B and C of these resolutions;
C.- Signing Officers
FURTHER RESOLVED, that any Signing Officer, acting alone, may
execute on behalf of the Bank, whether acting for its own account or In a fiduciary or
other representative capacity:
Trust indentures, declarations of trust, trust and agency agreements,
pooling and servicing agreements, fiscal and paying agency agreements,
acceptances thereof, consents thereto and any similar agreements,
however denominated, to which.the Bank is a party in a fiduciary or other
representative capacity; certificates of authentication or other.indicia of, -...;
.valid issuance with respect to bonds, notes, debentures and other. .. .
securities or obligations issued under any indenture, mortgage, trust or
other agreement; certificates for securities deposited, interim certificates
and other certificates for and on behalf of the Bank as depository or
agent; countersignatures of stocks, bonds, notes, debentures, voting
trust certificates, participation certificates and other certificates,
Instruments, obligations or other securities on behalf of the Bank as
1
U
0
trustee, fiscal and paying agent, transfer agent, registrar or in another
similar capacity; and certificates of cancellation and cremation of stocks,
bonds, debentures or other securities.
2. The following named persons are Signing Officers of the Bank as of the
date hereof, and their correct titles and genuine signatures appear beside their names:
Name Title
Brian A. Buchanan Vice President
Sandy Chan Vice President
Maddy Hall Assistant Vice President
Jeanie Mar Vice President
Dania Samai Assistant Vice President
Robert Schneider Vice President
Arnetta Lee Theus Assistant Vice President
Johanna M. Torres Vice President
Kathryn Valdivia Vice President
Kimberly A. Vann Assistant Vice President
Regina Vergara Assistant Vice President
Grace Yang Vice President
Signature
i
/� IN WITNESS WHEREOF, I have hereunto set my hand this d-4�
t„ wi Us T- 2001— -
Kar itani
Assistant Secretary
-2-
of
EXHIBIT NO. 32
Certificate of the
Master Trustee, together
with certified
authorizing bylaws
(executed by the Master Trustee)
(BC; Master Trustee)
•
•
CERTIFICATE OF THE MASTER TRUSTEE
The undersigned, on behalf of Wells Fargo Bank, National Association, as successor
master trustee under that certain Master Indenture of Trust between Hoag Memorial Hospital
Presbyterian and the undersigned, originally dated as of October 1, 1984 (the "Master Indenture'),
and as further supplemented by a certain supplemental master indenture for Obligation No. 14
(the "Obligation "), dated as of August 1, 2005 (the "Supplement "), hereby certifies as follows:
1. The Master Indenture has been duly executed and delivered by an authorized
officer of Wells Fargo Bank, National Association.
2. The undersigned is an authorized officer of Wells Fargo Bank, National
Association, duly authorized to execute the Supplement and to authenticate the Obligation pursuant
to said Supplement.
3. The undersigned certifies that the Supplement was duly executed and the
Obligation was duly authenticated.
4. Attached hereto as Exhibit A is a certified copy of authorizing
documentation adopted by the Board of Directors of Wells Fargo Bank, National Association,
respecting signing authority of officers and others.
DOCSSC1:358317.5
• Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Bond Indenture.
11
Dated: August 24, 2005 WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Master Trustee
By: Q.A&W---j
Authorized Representative
DOCSSC 1:358317.3 . 2
0
•
LJ
WELLS FARGO BANK, NATIONAL ASSOCIATION
ASSISTANT SECRETARY'S CERTIFICATE
. I, Karen T. Mitani, hereby certify that I am an Assistant Secretary of Wells Fargo
Bank, National Association, a national banking association, (the "Bank'), and I hereby further
certify as follows:
1. The following is a true and correct extract from resolutions duly adopted by.
the Board of Directors of the Bank on November 25, 2003, and no modification, amendment,
rescission or revocation of such resolutions has occurred affecting such extract as of the date of
this certificate.
RESOLVED, that for the purposes of these resolutions, "Executive -
Officer" shall mean any person specifically designated as an Executive Officer of the - -.__ ..
Bank by resolution of the Board of Directors, and "Signing Officer" shall mean the
Chairman of the Board, the President, any Vice Chairman, any Executive Vice President,
any Senior Vice President, the Treasurer, any Vice President, any Assistant Vice
President, any person whose title includes the word . "Officer - .(e.g.I Commercial B_ a .1 i..
Officer, Personal Banking Officer, Trust Officer), or any other person whose title has,
been or is hereafter designated by the Board of Directors as a title for an officer of the
Bank, and such officers are hereby authorized to sign agreements, instruments and
other documents on behalf of the Bank in accordance with the signing authorities
conferred in Parts A, B and C of these resolutions; .
C.- Signing Officers
FURTHER RESOLVED, that any Signing Officer, acting alone, may
execute on behalf of the Bank, whether acting for its own account or in a fiduciary or
other representative capacity:
Trust indentures, declarations of trust, trust and agency agreements,
pooling and servicing agreements, fiscal and paying agency agreements,
acceptances thereof, consents thereto and any similar agreements,
however denominated, to which the Bank is a party in a fiduciary or other
representative capacity; certificates of authentication or other indicia of
.valid issuance with respect to bonds, notes, debentures and other
securities or obligations issued under any indenture, mortgage, trust or
other agreement; certificates for securities deposited, interim certificates
and other certificates for and on behalf of the Bank as depository or
agent; countersignatures of stocks, bonds, notes, debentures, voting
trust certificates, participation certificates and other certificates,
instruments, obligations or other securities on behalf of the Bank as
• trustee, fiscal and paying agent, transfer agent, registrar or in another
similar capacity; and certificates of cancellation and cremation of stocks,
bonds, debentures or other securities.
0
2. The following named persons are Signing Officers of the Bank as of the
date hereof, and their correct titles and genuine signatures appear beside their names:
Name Title
Brian A. Buchanan Vice President
Sandy Chan Vice President
Maddy Hall Assistant Vice President
Jeanie Mar Vice President
Dania Samai Assistant Vice President
Robert Schneider Vice President
Arnetta Lee Theus Assistant Vice President
Johanna M. Torres Vice President
Kathryn Valdivia Vice President
Kimberly A. Vann Assistant Vice President
Regina Vergara Assistant Vice President
Grace Yang Vice President
Signature
f.
i
IN WITNESS WHEREOF, I have hereunto set n
u t' 200
t rektM,6ni
Assistant Secretary
WE
EXHIBIT NO. 33
Certificate of the
Auction Agent, together
with authorizing
resolution or bylaws
(executed by the Auction Agent)
(BC; Auction Agent)
CERTIFICATE OF AUCTION AGENT
• PURSUANT TO BOND PURCHASE CONTRACT
•
RE: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A. 2005B and 2005C
The undersigned, an authorized representative of Wells Fargo Bank, National
Association (the "Auction Agent "), hereby certifies, pursuant to Section 3(e)(10) the Bond Purchase
Contract, dated August 22, 2005 (the "Bond Purchase Contract") relating to the above - captioned
Bonds executed by Citigroup Global Markets Inc., accepted and agreed to by the City of Newport
Beach and approved by Hoag Memorial Hospital Presbyterian, that:
(A) the undersigned is duly authorized to execute and deliver the Auction Agent
Agreement and Broker - Dealer Agreement;
(B) the undersigned duly executed and delivered the Auction Agent Agreement
and Broker - Dealer Agreement;
(C) attached hereto as Exhibit A are the certified bylaws, or such other
authorizing documentation, of the Auction Agent authorizing the undersigned to execute and deliver
the Auction Agent Agreement and Broker - Dealer Agreement; and
(D) the Auction Agent is registered as a transfer agent and registrar in
accordance with the applicable provisions of the Securities Exchange Act of 1934.
DOCSSCI:358317.5
[REMAINDER OF PAGE INTENTIONALLY BLANK]
• Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Bond Indenture.
0
•
Dated: August 24, 2005
DOCSSCI:358317.3
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Auction Agent
UM
Representative
Wells Fargo Bank, N.A. Certified Copy of General Signature
Corporate Trust Services Resolution Relating to Execution
of Written Instruments
I, Lisa D'Angelo, an Assistant Secretary of Wells Fargo Bank, National Association, a national banking association
organized under the laws of the United States of America (the "Bank "), hereby certify that:
The following is a true and correct extract from resolutions duly adopted by the Board of Directors of the Bank on November
25, 2003, and that no modification, amendment, rescission or revocation of such resolutions has occurred affecting such
extract as of the date of this certificate, and that the resolutions remain in full force and effect on the date hereof:
RESOLVED, that agreements, instruments, or other documents, including amendments and
modifications thereto, relating to or affecting the property or business and affairs of the Bank, whether acting for its
own account or in a fiduciary or other representative capacity, may be executed in its name by the persons
hereinafter authorized;
FURTHER RESOLVED, that for the purposes of these resolutions, "Executive Officer" shall mean
any person specifically designated as an Executive Officer of the Bank by resolution of the Board of Directors, and
"Signing Officer" shall mean the Chairman of the Board, the President, any Vice Chairman, any Executive Vice
President, any Senior Vice President, the Treasurer, any Vice President, any Assistant Vice President, any person
whose title includes the word "Officer" (e.g., Commercial Banking Officer, Personal Banking Officer, Trust Officer),
or any other person whose title has been or is hereafter designated by the Board of Directors as a title for an officer
of the Bank, and such officers are hereby authorized to sign agreements, instruments and other documents on behalf
of the Bank in accordance with the signing authorities conferred in Parts A, B and C of these resolutions;
• A. Executive Officers
FURTHER RESOLVED, that the Chairman, the President, any Vice Chairman, any Executive Vice
President and any Executive Officer of the Bank, acting alone, may execute agreements, guaranties, instruments or
other documents which such officer may deem necessary, proper or expedient to the conduct of the business of the
Bank;
B. Vice Presidents and Above
FURTHER RESOLVED, that the Chairman, the President, any Vice Chairman, any Executive Vice
President, any Senior Vice President and any Vice President, acting alone, may execute on behalf of the Bank:
Deeds, leases, assignments, bills of sale, purchase agreements and other instruments of
conveyance to purchase, sell, lease or sublease to or from a third party real property, or any
interest therein, for the Bank's own account; provided, however, that such agreements, instruments
and other documents may also be signed as hereinafter provided with respect to real property
acquired by the Bank in connection with collateral for a loan.
Bonds of indemnity and powers of attomey; provided, however, that proxies to vote stock in a
corporation or to vote other interests in other legal entities and stock and bond powers may also be
signed as hereinafter provided.
C. Signing Officers
FURTHER RESOLVED, that any Signing Officer, acting alone, may execute on behalf of the Bank,
whether acting for its own account or in a fiduciary or other representative capacity:
•MM
• Receipts for any funds or other property paid or delivered to the Bank.
Guaranties of signatures, whether appearing as endorsements of bonds, certificates of stock, or
other securities, including without limitation medallion guaranties provided in connection with a
• medallion stamp, or otherwise.
MM+
Agreements and proposals to provide services to or receive services from third parties.
+ ++
Trust indentures, declarations of trust, trust and agency agreements, pooling and servicing
agreements, fiscal and paying agency agreements, acceptances thereof, consents thereto and any
similar agreements, however denominated, to which the Bank is a party in a fiduciary or other
representative capacity; certificates of authentication or other indicia of valid issuance with respect
to bands, notes, debentures and other securities or obligations issued under any indenture,
mortgage, trust or other agreement; certificates for securities deposited, interim certificates and
other certificates for and on behalf of the Bank as depository or agent; countersignatures of stocks,
bonds, notes, debentures, voting trust certificates, participation certificates and other certificates,
instruments, obligations or other securities on behalf of the Bank as trustee, fiscal and paying
agent, transfer agent, registrar or in another similar capacity; and certificates of cancellation and
cremation of stocks, bonds, debentures or other securities.
FURTHER RESOLVED, that the signature of the Secretary or of any Assistant Secretary of the
Bank shall be required to certify any resolution adopted by the Board of Directors of the Bank or any committee
thereof, the incumbency, title or signature of any officer of the Bank and any designation of authority under these
resolutions or otherwise, and the Secretary or any Assistant Secretary of the Bank may also certify any records or
other documents created in the ordinary course of the business of the Bank.
I further certify that on August 24, 2005, the following named person is /was a duly appointed, qualified and acting Signing
isOfficer of Wells Fargo Bank, N.A., that their correct title and genuine signature appears beside their name, and that on said
date they were duly authorized to act on behalf of the Bank as set forth in the foregoing resolution:
Name
Title
Signature
Joseph Panspinto
Vice President
IN WITNESS WHEREOF, I have hereunto signed my name this August 24, 2005.
Redacted [Indicates portions of the resolutions have intentionally been omitted because the sections are not relevant
to the transaction for which this certification has been requested.]
January 2004
BY -LAWS
• OF
WELLS FARGO BANK, NATIONAL ASSOCIATION
(As amended May 24, 2005)
ARTICLE I
Meetings of Shareholders
Section 1.1 Annual Meeting. The regular annual meeting of the shareholders for
the election of directors and the transaction of whatever other business may properly
come before the meeting shall be held at the main office of the Association in Sioux
Falls, South Dakota, or such other place as the Board of Directors may designate, at 2:00
p.m., on the second Thursday of January in each year. If for any cause the annual meeting
of shareholders for the election of directors is not held on the date fixed in this by -law,
such meeting may be held at some other time designated by the Board of Directors, notice
thereof having been given in accordance with the requirements of 12 U.S.C. §7S, and the
meeting conducted according to the provisions of these by -laws.
Section 1.2 Special Meetings. Except as otherwise specifically provided by
statute, special meetings of shareholders may be called for any purpose at any time by the
Board of Directors, the Chairman of the Board, if any, the President, or any one or more
. shareholders owning in the aggregate not less than twenty -five percent of the then
outstanding shares, as provided in Article IV of the Articles of Association.
Section 1.3 Notice of Meetings. A notice of each annual or special shareholders'
meeting, setting forth the time, place, and purpose of the meeting, shall be given, by first -
class mail, postage prepaid, to each shareholder of record at least ten days prior to the
date on which such meeting is to be held; but any failure to mail such notice of any
annual meeting, or any irregularity therein, shall not affect the validity of such annual
meeting or of any of the proceedings thereat. Notwithstanding anything in these by -laws
to the contrary, a valid shareholders' meeting may be held without notice whenever notice
thereof shall be waived in writing by all shareholders, or whenever all shareholders shall
be present or represented at the meeting.
Section 1.4 Ouorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of business,
and may transact any business except such as may, under the provisions of law, the
Articles of Association, or these by -laws, require the vote of holders of a greater number
of shares. If, however, such majority shall not be present or represented at any meeting of
the shareholders, the shareholders entitled to vote thereat, present in person or by proxy,
shall have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of voting stock shall be present.
At any such adjourned meeting at which the requisite amount of voting stock shall be
represented, any business may be transacted which might have been transacted at the
• meeting as originally called.
Section 1.5 Proxies and Voting Rights. At each meeting of the shareholders,
each shareholder having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such shareholder, which proxy shall
be valid for that meeting or any adjournments thereof, shall be dated, and shall be filed
with the records of the meeting. No officer or employee of this Association may act as
proxy. Each shareholder shall have one vote for each share of stock having voting power
which is registered in his name on the books of the Association. Voting for the election
of directors and voting upon any other matter which may be brought before any
shareholders' meeting may, but need not, be by ballot, unless voting by ballot be
requested by a shareholder present at the meeting.
Section 1.6 Proceedings and Record. The Chairman of the Board, if any, shall
preside at all meetings of the shareholders or, in case of his absence or inability to act, the
President or, in case of the absence or inability to act of both of them, any Vice President
may preside at any such meeting. The presiding officer shall appoint a person to act as
secretary of each shareholders' meeting; provided, however, that the shareholders may
appoint some other person to preside at their meetings or to act as secretary thereof. A
record of all business transacted shall be made of each shareholders' meeting showing,
among other things, the names of the shareholders present and the number of shares of
• stock held by each, the names of the shareholders represented by proxy and the number of
shares held by each, the names of the proxies, the number of shares voted on each motion
or resolution and the number of shares voted for each candidate for director. This record
shall be entered in the minute book of the Association and shall be subscribed by the
secretary of the meeting.
Section 1.7 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the shareholders of the Association may be taken without a meeting
by written action signed by all of the shareholders entitled to vote on that action.
ARTICLE II
Directors
Section 2.1 Board of Directors. The Board of Directors (hereinafter referred to as
the "Board ") shall have power to manage and administer the business and affairs of the
Association. Except as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by the Board.
Section 2.2 Number and Oualifications. The Board shall consist of not less than
five nor more than twenty -five persons, the exact number within such minimum and
• maximum limits to be fixed and determined from time to time by resolution of a majority
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of the full Board or by resolution of the shareholders at any meeting thereof; provided,
• however, that a majority of the full Board may not increase the number of directors to a
number which (i) exceeds by more than two the number of directors last elected by
shareholders where such number was fifteen or less; and (ii) exceeds by more than four
the number of directors last elected by shareholders where such number was sixteen or
more, but in no event shall the number of directors exceed twenty-five.
Each director shall, during the full term of his directorship, be a citizen of the
United States. Each director, during the full term of his directorship, shall own a
minimum of $1,000 par value of stock of this Association or an equivalent interest, as
determined by the Comptroller of the Currency, in any company which has control over
this Association within the meaning of Section 2 of the Bank Holding Company Act of
1956, as amended.
Section 2.3 Organization Meeting. A meeting of the newly elected Board shall be
held, without notice, immediately following the adjournment of the annual meeting of the
shareholders, or at such other time and at such place to which said meeting may be
adjourned. No business shall be transacted at any such meeting until a majority of the
directors elected shall have taken an oath of office as prescribed by law, and no director
elected shall participate in the business transacted at any such meeting of the Board until
he shall have taken said oath. If at any such meeting there is not a quorum of the
directors present who shall have taken the oath of office, the members present may
• adjourn the meeting from time to time until a quorum is secured. At such meeting of the
newly elected Board, if a quorum is present, the directors may elect officers for the
ensuing year and transact any and all business which may be brought before them.
Section 2.4 Regular Meetings. The regular meetings of the Board may be held at
such time and place as shall from time to time be determined by the Board. When any
regular meeting of the Board falls upon a holiday, the meeting shall be held on the next
banking business day.
Section 2.5 Svecial Meetings. Special meetings of the Board may be called by
the Chairman of the Board, the President or the Secretary, and shall be called at the
request of one -third or more of the directors.
Section 2.6 Notice of Meetings. Each member of the Board shall be given not
less than one day's notice by telephone, facsimile, letter, electronic mail or in person,
stating the time and place of any regular or special meeting; such notice may, but need
not, state the purpose of said meeting. Notwithstanding anything in these by -laws to the
contrary, a valid directors' meeting may be held without notice whenever notice thereof
shall be waived in writing by all of the directors, or whenever all of the directors are
present at the meeting.
Section 2.7 Ouorurn and Voting. A majority of the directors shall constitute a
• quorum at all directors' meetings. Except where the vote of a greater number of directors
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is required by the Articles of Association, these by -laws or under provisions of law, the
• vote of a majority of the directors at a meeting at which a quorum is present shall be
sufficient to transact business.
Section 2.8 Proceedings and Record. The Chairman of the Board, if such officer
shall have been designated by the Board, shall preside at all meetings thereof, and in his
absence or inability to act (or if there shall be no Chairman of the Board) the President,
and in his absence or inability to act any other director appointed chairman of the meeting
pro tempore, shall preside at meetings of the directors. The Secretary, or any other person
appointed by the Board, shall act as secretary of the Board and shall keep accurate
minutes of all meetings.
Section 2.9 Electronic Communications. A conference among directors by any
means of communication through which the directors may simultaneously hear each other
during the conference constitutes a Board meeting, if the same notice is given of the
conference as would be required for a meeting, and if the number of directors
participating in the conference would be sufficient to constitute a quorum at a meeting. A
director may participate in a regular or special Board meeting by any means of
communication through which the director, other directors so participating and all
directors physically present at the meeting may simultaneously hear each other during the
meeting. Participation in a meeting by any means referred to in this Section 2.9
constitutes presence in person at the meeting.
• Section 2.10 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the Board of the Association may be taken without a meeting by
written action signed by all of the directors.
Section 2.11 Vacancies. Any vacancy in the Board may be filled by appointment
at any regular or special meeting of the Board by the remaining directors in accordance
with the laws of the United States or by action of the shareholders in accordance with
Article I of these by -laws. Any director so appointed shall hold his place until the next
election.
ARTICLE III
Committees of the Board
Section 3.1 Executive Committee. The Board may appoint annually or more
often an Executive Committee consisting of two or more directors. In the event an
Executive Committee is appointed, the Executive Committee shall have the power to
approve, review, and delegate authority to make loans and otherwise extend credit and to
purchase and sell bills, notes, bonds, debentures and other legal investments and to
establish and review general loan and investment policies. In addition, when the Board is
• not in session, the Executive Committee shall have the power to exercise all powers of
4-
the Board, except those that cannot legally be delegated by the Board. The Executive
• Committee shall keep minutes of its meetings, and such minutes shall be submitted at the
next regular meeting of the Board at which a quorum is present.
Section 3.2 Trust Committees. The Board shall appoint a Trust Audit Committee
which shall, at least once during each calendar year, make suitable audits of the Trust
Department or cause suitable audits to be made by auditors responsible only to the Board
and at such time shall ascertain and report to the Board whether said Department has been
administered in accordance with applicable laws and regulations and sound fiduciary
principles. Every report to the Board under this section, together with the action taken
thereon, shall be noted in the minutes of the Board. The Board shall from time to time
appoint such other committees of such membership and with such powers and duties as it
is required to appoint under the provisions of Regulation 9 issued by the Comptroller of
the Currency relating to the trust powers of national banks, or any amendments thereto,
and may appoint such other committees of such membership and with such powers and
duties as the Board may provide and as are permitted by said Regulation 9, or any
amendments thereto.
Section 3.3 Other Committees. The Board, by a majority vote of the
whole Board, may create from its own members or (to the extent permitted by applicable
law) a combination of its own members and/or officers or employees of the Association
or such other persons as the Board may designate or solely from persons who are not
• members of the Board such other committees as the Board may from time to time deem
necessary or appropriate, and the Board may designate the name and term of existence of
any such committee and prescribe the duties thereof.
Section 3.4 Proceedings and Record. Each committee appointed by the Board
may hold regular meetings at such time or times as may be fixed by the Board or by the
committee itself. Special meetings of any committee may be called by the chairman or
vice chairman or any two members thereof. The Board may, at the time of the
appointment of any committee, designate alternate or advisory members, designate its
chairman, vice chairman, and secretary, or any one or more thereof, and the committee
itself may appoint such of said officers as have not been so designated by the Board if
they deem such appointment necessary or advisable. The secretary may but need not be a
member of the committee. The Board may at any time prescribe or change the number of
members whose presence is required to constitute a quorum at any or all meetings of a
committee. The quorum so prescribed need not be a majority of the members of the
committee. If no quorum is prescribed by the Board, the presence of a majority of the
members of the committee shall be required to constitute a quorum. Each committee
shall keep such records of its meetings and proceedings as may be required by law or
applicable regulations and may keep such additional records of its meetings and
proceedings as it deems necessary or advisable, and each committee may make such rules
of procedure for the conduct of its own meetings and the method of discharge of its duties
• as it deems advisable. Each committee appointed by the Board may appoint
subcommittees composed of its own members or other persons and may rely on
-5-
information furnished to it by such subcommittees or by statistical or other fact-finding
• departments or employees of this Association, provided that final action shall be taken in
each case by the committee. Any action required or permitted to be taken at a meeting of
any such committee or subcommittee may be taken without a meeting by written action
signed by all of the members of such committee or subcommittee.
ARTICLE IV
Officers and Employees
Section 4.1 ADDointment of Officers. The Board shall appoint a President, one or
more Vice Presidents and a Secretary and may appoint a Chairman of the Board and such
other officers as from time to time may appear to the Board to be required or desirable to
transact the business of the Association. Only directors shall be eligible for appointment
as President or Chairman of the Board. If a director other than the President is appointed
Chairman of the Board, the Board shall designate either of these two officers as the chief
executive officer of this Association. Any officer designated by the Director of Human
Resources as the head of a business or staff group may appoint officers at the rank of
Senior Vice President, Managing Director or below, and any such designated officer may
delegate this authority to another officer.
• Section 4.2 Tenure of Office. Officers shall hold their respective offices for the
current year for which they are appointed unless they resign, become disqualified or are
removed. Any officer appointed by the Board may be removed at any time by the
affirmative vote of a majority of the full Board or in accordance with authority granted by
the Board. Any officer appointed by another officer may be removed at any time by the
filing of a written notice by the appointing officer with the Secretary. During the year
between its organization meetings, the Board may appoint additional officers and shall
promptly fill any vacancy occurring in any office required to be filled.
Section 4.3 Chief Executive Officer. The chief executive officer shall supervise
the carrying out of policies adopted or approved by the Board, shall have general
executive powers as well as the specific powers conferred by these by-laws, and shall also
have and may exercise such further powers and duties as from time to time may be
conferred upon or assigned to him or her by the Board.
Section 4.4 Secretary. The Secretary shall attend to the giving of all notices
required by these by -laws to be given; shall be custodian of the corporate seal, records,
documents and papers of the Association; shall provide for the keeping of proper records
of all transactions of the Association; shall have and may exercise any and all other
powers and duties pertaining by law, regulation or practice, to the office of Secretary, or
imposed by these by -laws; and shall also perform such other duties as may be assigned
• from time to time by the Board.
0
• Section 4.5 General Authority and Duties. Officers shall have the general powers
and duties customarily vested in the office of such officers of a corporation and shall also
exercise such powers and perform such duties as may be prescribed by the Articles of
Association, by these by -laws, or by the laws or regulations governing the conduct of the
business of national banking associations, and shall exercise such other powers and
perform such other duties not inconsistent with the Articles of Association, these by -laws
or laws or regulations as may be conferred upon or assigned to them by the Board or the
chief executive officer.
Section 4.6 Employees and Agents. Subject to the authority of the Board, the
chief executive officer, or any other officer of the Association authorized by him or by the
Board, may appoint or dismiss all or any employees and agents and prescribe their duties
and the conditions of their employment, and from time to time fix their compensation.
Section 4.7 Bonds of Officers and Employees. The officers and employees of
this Association shall give bond with security to be approved by the Board in such penal
sum as the Board shall require, as a condition for the faithful and honest discharge of their
respective duties and for the faithful application and accounting of all monies, funds and
other property which may come into their possession or may be entrusted to their care or
placed in their hands. In the discretion of the Board in lieu of having individual bonds for
each officer and employee, there may be substituted for the bonds provided for herein a
blanket bond covering all officers and employees providing coverage in such amounts
• and containing such conditions and stipulations as shall be approved by the chief
executive officer of this Association or his delegate but subject to the supervision and
control of the Board.
ARTICLE V
Stock and Stock Certificates
Section 5.1 Transfers. Shares of stock shall be transferable only on the books of
the Association upon surrender of the certificate for cancellation, and a transfer book
shall be kept in which all transfers of stock shall be recorded.
Section 5.2 Stock Certificates. Certificates of stock shall be signed by the
Chairman of the Board, if any, the President or a Vice President and the Secretary or any
other officer appointed by the Board for that purpose, and shall be sealed with the
corporate seal. Each certificate shall recite on its face that the stock represented thereby
is transferable only upon the books of the Association properly endorsed, and shall meet
the requirements of 12 U.S.C. §52, as amended.
Section 5.3 Dividends. Transfers of stock shall not be suspended preparatory to
• the declaration of dividends and, unless an agreement to the contrary shall be expressed in
the assignments, dividends shall be paid to the shareholders in whose name the stock
-7-
shall stand at the time of the declaration of the dividends or on such record date as may be
• fixed by the Board.
Section 5.4 Lost Certificates. In the event of loss or destruction of a certificate of
stock, a new certificate may be issued in its place upon proof of such loss or destruction
and upon receipt of an acceptable bond or agreement of indemnity as may be required by
the Board.
ARTICLE VI
Corporate Seal
Section 6.1 Form. The corporate seal of the Association shall have inscribed
thereon the name of the Association.
Section 6.2 Authority to Impress. The Chairman of the Board, if any, the
President, the Secretary, any Assistant Secretary or other officer designated by the Board
shall have authority to impress or affix the corporate seal to any document requiring such
seal, and to attest the same.
• ARTICLE VII
Miscellaneous Provisions
Section 7.1 Banking Hours. The days and hours during which this Association
shall be open for business shall be fixed from time to time by the Board, the Chairman of
the Board, if any, or the President, consistent with national and state laws governing
banking and business transactions.
Section 7.2 Execution of Written Instruments. The execution, acknowledgement,
verification, delivery or acceptance on behalf of this Association of agreements,
instruments, and other documents relating to or affecting the property or business and
affairs of this Association, or of this Association when acting in any representative or
fiduciary capacity, shall be binding upon this Association if signed on its behalf by (i) any
two of the following officers: the Chairman of the Board, if any, the President, any Vice
Chairman, any Executive Vice President or any Senior Managing Director or (ii) any one
of the foregoing officers signing jointly with any Managing Director or any Senior Vice
President. Whenever any other officer or person shall be authorized to execute any
agreement, instrument or other document by resolution of the Board of Directors, or by
the chief executive officer, or by any officer or committee designated by the chief
executive officer, or by any two of the officers identified in the immediately preceding
• sentence, such execution by such other officer or person shall be equally binding upon
this Association.
-8-
• Section 7.3 Records. The Articles of Association, these by -laws, and any
amendments thereto, and the proceedings of all regular and special meetings of the
directors and of the shareholders shall be recorded in appropriate minute books provided
for the purpose. The minutes of each meeting shall be signed by the person appointed to
act as secretary of the meeting.
Section 7.4 Fiscal Year. The fiscal year of the Association shall be the calendar
year.
Section 7.5 Cornorate Governance Procedures. In accordance with 12 C.F.R.
Section 7.2000, to the extent not inconsistent with applicable federal banking statutes or
regulations or bank safety and soundness, this Association designates and elects to follow
the corporate governance procedures of the Delaware General Corporation Law, as
amended from time to time.
Section 7.6 Indemnification. The Association may make or agree to make
indemnification payments to an institution - affiliated party, as defined at 12 U.S.C.
Section 1813(u), for an administrative proceeding or civil action initiated by any federal
banking agency, that are reasonable and consistent with the requirements of 12 U.S.C.
Section 1828(k) and its implementing regulations.
The Association may indemnify an institution - affiliated party for damages and
expenses, including the advancement of expenses and legal fees, in cases involving an
administrative proceeding or civil action not initiated by a federal banking agency, in
accordance with the provisions set forth in the Association's Articles of Association,
which provisions are in accordance with the Delaware General Corporation Law,
provided such payments are consistent with safe and sound banking practices.
Section 7.7. Ownershiu Interests in Other Entities. With respect to any
corporation, limited liability company, partnership or any other legal entity in which the
Bank has or may acquire an ownership interest, the Chairman of the Board, if any, the
President, the Chief Financial Officer or the Treasurer, acting alone, or any other officer
or officers appointed from time to time by the Board of Directors or the Executive
Committee thereof, may (a) personally authorize, sign and deliver on behalf of the Bank
or authorize another person to sign and deliver on behalf of the Bank (i) any proxy,
written consent, ballot or other similar instrument solicited by the entity from its owners,
(ii) any stock power, assignment, bill of sale or other instrument transferring all or any
part of the Bank's ownership of the entity or any agreement, instrument or other
document relating thereto, (iii) any purchase of stock or other ownership interest in or
contribution to the capital of such entity or any agreement, instrument or other document
authorizing or evidencing the same and (iv) any agreement, consent, waiver or other
document or instrument sought by the entity or an owner from the owners of the entity
• and (b) without limiting the generality of the foregoing, personally take, or authorize
another person to take, any other action on behalf of the Bank as an owner of such entity.
•
0
ARTICLE VIII
By -Laws
Section 8.1 InsDectio n. A copy of these by -laws, with all amendments thereto,
shall at all times be kept in a convenient place at the main office of the Association, and
shall be open for inspection to all shareholders during banking hours.
Section 8.2 Amendments. These by -laws may be changed or amended at any
regular or special meeting of the Board by a vote of a majority of the full Board or at any
regular or special meeting of shareholders by the vote of the holders of a majority of the
stock issued and outstanding and entitled to vote thereat.
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EXHIBIT NO, 34
Receipt for
Purchase Price
(executed by the Bond Trustee)
1 M
•
l J
•
RECEIPT FOR PURCHASE PRICE
The undersigned, authorized representative of Wells Fargo Bank, National
Association, as bond trustee under that certain indenture, dated as of August 1, 2005 (the "Bond
Indenture "), between the City of Newport Beach (the "City ") and the undersigned, hereby
acknowledges receipt from Citigroup Global Markets Inc., as underwriter (the "Underwriter ") of the
sum of $196,879,904.85 in full payment of the purchase price for the City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005A, 2005B and 2005C,
in the aggregate principal amount of $200,000,000, said purchase price being computed as follows:
Principal amount of Bonds............
Less Underwriter's discount .........
Less Bond Insurance Premium
Total Amount Received Today
DOCSSC I :356317.5
Dated: August 24, 2005
$200,000,000.00
(610,000.00)
(2,510,095.15)
$196,879,904.85
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Bond Trustee
By: QU/y
Authorized Representative
EXHIBIT NO. 35
Receipt for the Bonds
(executed by the Underwriter)
(BC)
0
RECEIPT FOR BONDS
The undersigned authorized representative of Citigroup Global Markets Inc., as
underwriter (the "Underwriter "), hereby acknowledges receipt from Wells Fargo Bank, National
Association, as bond trustee (the `Bond Trustee ") of the City of Newport Beach Insured Revenue
Bonds (Hoag Memorial Hospital Presbyterian), Series 2005A, 2005B and 2005C, in the aggregate
principal amount of $200,000,000. The undersigned hereby further acknowledges the receipt of, or
waives the requirement for, each opinion, document and certificate contemplated by [Section 3(h)]
of the Bond Purchase Contract, dated August 22, 2005, executed by the Underwriter and accepted
and agreed to by the City of Newport Beach and approved by Hoag Memorial Hospital Presbyterian
and acknowledges that each such opinion, document, and certificate received, is satisfactory to the
Underwriter as to form and substance.
DOCSSC1:358317.5
Dated: August 24, 2005
CITIGROUP GLOBAL MARKETS INC.,
as Underwriter
By: �---
Authorized epresentative
EXHIBIT NO. 36
Specimen Bonds
(BC)
0
•
•
R -1
CITY OF NEWPORT BEACH
•i. r .u•
$65,000,000
INSURED REVENUE BOND
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005A
MATURITY DATE INTEREST RAT D CUSIP NUMBER
December 1, 2040 SP�'� jt p , 2005 651785AHO
REGISTERED HOLDER: Cede & Co.
CITY OF NEWPORT BEACH, a municipal corporation and charter city
duly organized and existing under a freeholder's charter under the Constitution and the
laws of the State of California, (the "City "), for value received, hereby promises to pay
(but only out of the Revenues and other assets pledged therefor as hereinafter mentioned)
to the Registered Holder specified above or registered assigns, on the Maturity Date
specified above (unless this Bond shall have been previously called for redemption in
whole or in part and payment of the Redemption Price (as hereinafter provided) shall
have been duly made), the Principal Amount specified above, in lawful money of the
United States of America; and to pay interest thereon (but only from said Revenues and
other assets pledged therefor) in like lawful money from the date hereof until payment of
such principal sum shall be discharged as provided in the Bond Indenture hereinafter
mentioned, at the.rates per annum determined as set forth below, payable on each Interest
Payment Date (as defined below). The principal (or Redemption Price) hereof is payable
at the designated corporate trust office of Wells Fargo Bank, National Association
(together with any successor Bond Trustee as provided in the Bond Indenture, as defined
below, the "Bond Trustee "). Interest hereon is payable by check mailed on each Interest
Payment Date to the Holder hereof as of the close of business on the Record Date (as
hereinafter defined) at the address appearing on the bond registration books maintained
by the Bond Trustee; provided, however, that in the case of Bonds bearing interest at
Bond Interest Term Rates (as hereinafter described), or Bonds bearing interest other than
at a Bond Interest Term Rate for a Holder who o aggregate principal amount in
excess of $1,000,000 of Bonds as shown tion books maintained by the
Bond Trustee and who, prior to th receding any Interest Payment
Date, shall have provide T written wire transfer instructions, in
accordance with such instructions and the Bond Indenture, provided
that while the Bonds int est at Bond Interest Term Rates, except for Bonds
registered in the name the Securities Depository (as defined in the Bond Indenture),
interest payable hereon is payable only upon presentation hereof to the Bond Trustee, at
its Principal Office (hereinafter identified).
DOCSSC1:358964.1
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF -
• THE CITY OF NEWPORT BEACH, THE STATE OF CALIFORNIA OR ANY
POLITICAL SUBDIVISION THEREOF IS PLEDGE TO THE PAYMENT OF THE
PRINCIPAL OF OR PREMIUM OR INTEREST ON THIS BOND.
The Record Date means (i) with respect to any Bonds bearing interest at a
Weekly Interest Rate (as hereinafter described) or a Bond Interest Term Rate (as
hereinafter described) (each a "Record Date "), the Business Day (as hereinafter
described) immediately preceding the related Intereat.Pawnent Date, (ii) with respect to
any Bonds bearing interest at a Sena the 15th day of the calendar
month immediately pre i such Interest Payment Date
falls or, in the event th e shall occur less than 15 days after the
first day of a Serial Bo est ate Period, such first day and (iii) with respect to any
Bonds which are ARS, the second Business Day next preceding each ARS Interest
Payment Date. If available funds are insufficient on any Interest Payment Date to pay the
interest then due, such interest shall continue to accrue thereon but shall cease to be
payable to the Holders shown on the registration books of the Bond Trustee as of the
related Record Date. If sufficient funds for the payment of the overdue interest thereafter
become available, the Bond Trustee shall establish a special interest payment date (any
such date being herein referred to as a "Special Interest Payment Date ") on which such
overdue interest shall be paid and a special record date for determining the Bondholders
entitled to such payments (any such date shall be a Business Day and shall be referred to
as a "Special Record Date "), shall mail a notice of each such date to each Holder at least
• ten days prior to the Special Record Date, but not more than thirty days prior to the
Special Interest Payment Date, and shall pay the overdue interest to the Holders on the
Special Interest Payment Date.
This Bond is issuable in denominations of $100,000 or any integral
multiple of $5,000 in excess of $100,000 for Bonds during the Short-Term Interest Rate
Period or Weekly Interest Rate Period. During the Serial Bond Interest Rate Period, this
Bond shall be issuable in denominations of $5,000 or any integral multiple thereof.
During any ARS Interest Rate Period, this Bond is issuable in denominations of $25,000
or any integral multiple thereof. .� & I
This Bond is one �eof bonds of the City .
designated as "City ofNewpo onds (Hoag Memorial Hospital
Presbyterian), Series 2005A" ( rierv0 A Bonds', limited in aggregate principal
amount to $65,000,000, and issued pursuant to the provisions of Ordinance No. 85 -23
and 84 -4 of the City (the "Law") and a bond indenture, dated as of August 1, 20052
between the City and the Bond Trustee (the "Bond Indenture "). The Series 2005A Bonds
are issued under the Bond Indenture on a parity with bonds of the City designated as
"City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005B" (the "Series 2005B Bonds') and the "City of Newport Beach Insured
Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005C" (the "Series
2005C Bonds'). The Series 2005A Bonds, Series 2005B Bonds and the Series 2005C
Bonds are collectively referred to as the "Bonds." The Bonds are issued for the purpose
• of making a. loan to Hoag Memorial Hospital Presbyterian, a California nonprofit public
DOCSSC1:358964.1 2
benefit corporation (the "Corporation'), pursuant to a loan agreement, dated as of
• August 1, 2005 (the "Loan Agreement'), between the City and the Corporation, for the
purposes and on the terms and conditions set forth therein.
Reference is hereby made to the Bond Indenture (a copy of which is on
file at said designated corporate trust office of the Bond Trustee) and all indentures
supplemental thereto, to the Loan Agreement (a c of which is on file at said
designated corporate trust office of the Bo the Law for a description of
the rights thereunder of the Ho a and extent of the security,
of the rights, duties and stee and of the rights and obligations
of the City thereunder, rovisions of which Bond Indenture and Loan
Agreement the Holder s Bond, by acceptance hereof, assents and agrees.
Capitalized terms not otherwise defined herein have the meanings set forth in the Bond
Indenture.
The Bonds and the interest thereon are payable from Revenues (as that
term is defined in 'the Bond Indenture) and are secured by a pledge and assignment of
said Revenues and of amounts held in the funds and accounts established pursuant to the
Bond Indenture (other than the Bond Purchase Fund and the Rebate Fund), subject only
to the provisions of the Bond Indenture permitting the application thereof for the
purposes and on the terms and conditions set forth in the Bond Indenture. The Bonds are
further secured by an assignment of the right, title and interest of the City in the Loan
Agreement (to the extent and as more particularly described in the Bond Indenture) and
in Obligation No. 14, dated as of the date of initial delivery of the Bonds, and issued by
• the Corporation, pursuant to the terms of a master indenture, dated as of October 1, 1984,
as supplemented or amended (the "Master Indenture "), between the Corporation and
Wells Fargo Bank, National Association, as successor Master Trustee (herein called the
"Master Trustee ") and a supplemental master indenture, dated as of August 1, 2005,
between the Corporation and the Master Trustee.
The term of the Series 2005A Bonds will be divided into consecutive
Interest Rate Periods during each of which the Series 2005A Bonds shall bear interest at a
Weekly Interest Rate (a "Weekly Interest Rate Period "), a Serial Bond Interest Rate (a
"Serial Bond Interest Rate Period "), Bond Interest Term Rates for one or more
consecutive Bond Interest Terms (a "Short-Term Interest Rate Period ") or an ARS
Interest Rate (an "ARS Interest Rate Period "). The Interest Rat d on the Series
2005A Bonds thereafter may be adjusted from tim y Interest Rate
Period, a Short-Term Interest Rate P o od or an ARS
Interest Rate Period and thereafter ag a Bond Indenture. As
hereinafter described, the Series 2005 ssubject to mandatory purchase on the
first day of any Interest Rate Period.
During any Weekly Interest Rate Period for the Series 2005A Bonds,
interest on the Series 2005A Bonds shall be payable on each Interest Payment Date for
the period commencing on the immediately preceding Interest Accrual Date (or, if any
Interest Payment Date is not a Wednesday, commencing on the second preceding Interest
• Accrual Date) and ending on the Tuesday immediately preceding the Interest Payment
DOCSSC1:358964.1 3
Date (or, if sooner, the last day of the Weekly Interest Rate Period). During any Short-
Term Interest Rate Period, Serial Bond Interest Rate Period or ARS Interest Rate Period,
interest on this Bond shall be payable on each Interest Payment Date for the period
commencing on the immediately preceding Interest Accrual Date and ending on the day
immediately preceding such Interest Payment Date. In any event, interest on this Bond
shall be payable for the final Interest Rate Period to the date on which this Bond shall
have been paid in full. Interest shall be computed, in the case of a Serial Bond Interest
Rate Period; on the basis of a 360 -day year consisting of twelve 30 -day months, in the
case of an ARS Interest Rate Period, on the basis of a 360 -day year for actual days
elapsed, and in the case of any other Interest Rate Period, on the basis of a 365- or 366 -
day year, as the case may be, for the actual numbeLofgdays elapsed.
The term 'cln ��s (i) with respect to any Weekly
Interest Rate Perio , ereafter, the first Wednesday of each
calendar month d RIjE e terest Rate Period (whether or not a Business
Day), (ii) with respelk4 any Auction Period within an ARS Interest Rate Period, the first
day thereof, (iii) with respect to any Serial Bond Interest Rate Period, the fast day thereof
and, thereafter, each Interest Payment Date in respect thereof, other than the last such
Interest Payment Date, and (iv) with respect to each Bond Interest Term within a Short-
Term Interest Rate Period, the first day thereof. The term "Interest Payment Date" means
(i) with respect to any Weekly Interest Rate Period, the first Wednesday of each calendar
month or, if such first Wednesday shall not be a Business Day, the next succeeding
Business Day, (ii) with respect to any Serial Bond Interest Rate Period, each June 1 and
• December 1, provided that if any such June 1 or December 1 is not a Business Day, the
next succeeding Business Day, (iii) with respect to any Bond Interest Tenn, the day next
succeeding the last day thereof (iv) with respect to each ARS Interest Rate Period, the
Business Day immediately. following each Auction Period and (v) with respect to any
Interest Rate Period that is different than the immediately preceding Interest Rate Period,
the fast day thereof. The term "Business Day" means any day on which banks located in
New York, New York and the city in which the Principal Office of the Bond Trustee are
located are not required or authorized to close and on which the New York Stock
Exchange is open.
The interest rate on the Series 2005A Bonds shall be determined as
follows:
(1) Weekly Interest Rate. During each Weekly Interest Rate Period,
this Bond shall bear interest at the Weekly Interest Rate, which shall be determined by
the Remarketing Agent by no later than 5:00 p.m., New Yo k n Tuesday of
each week during such Weekly Intere#ato be a Business
Day, then on the next succeeding Bus s Rate for each
Weekly Interest Rate Period shall b prior to the first day of such
Weekly Interest Rate Period and shall e period c ommencing on the first day of
such Weekly Interest Rate Period and ending on the next succeeding Tuesday (whether or
not a Business Day). Thereafter, each Weekly Interest Rate shall apply to the period
commencing on the first Wednesday on or after the date of determination thereof
• (whether or not a Business Day) and ending on the next succeeding Tuesday (whether or
DOCSSCI:356964.1 4
not a Business Day), unless such Weekly Interest Rate Period shall end on a day other
• than a Tuesday, in which event the last Weekly Interest Rate for such Weekly Interest
Rate Period shall apply to the period commencing on the Wednesday (whether or not a
Business Day) preceding the last day of such Weekly Interest Rate Period and ending on
the last day of such Weekly Interest Rate Period. The Weekly Interest Rate shall be the
rate of interest per annum determined by the Remarketing Agent to be the minimum
interest rate which, if home by the Series 2005A Bonds, would enable the Remarketing
Agent to sell the Series 2005A Bonds oii h effective date and at the time of•such
determination at a price (without r d interest) equal to the principal amount
thereof. In the event th ails to establish a Weekly Interest Rate
for any week ate for such week shall be the same as the
Weekly Intere o ediately preceding week if the Weekly Interest Rate for
such precedin was determined by the Remarketing Agent. In the event that the
Weekly Interest Rate for the immediately preceding week was not determined by the
Remarketing Agent, or in the event that the Weekly Interest Rate determined by the
Remarketing Agent shall be held to be invalid or unenforceable by a court of law, then
the interest rate for such week shall be equal to 110% of the BMA Index on the day such
Weekly Interest Rate would otherwise be determined as provided in the Bond Indenture
for such Weekly Interest Rate Period.
(2) Serial Bond Interest Rate. During each Serial Bond Interest Rate
Period, this Bond shall bear interest at the Serial Bond Interest Rate. The Serial Bond
Interest Rate shall be determined by the Remarketing Agent on a Business Day no later
• than the effective date of such Serial Bond Interest Rate Period. Subject to the detailed
provisions set forth in the Bond Indenture the Serial Bond Interest Rate shall be the rate
of interest per annum determined by the Remarketing Agent to be the minimum interest
rate which, if home by the Series 2005A Bonds, would enable the Remarketing Agent to
sell the Series 2005A Bonds on the date and at the time of such determination at a price
equal to the principal amount thereof (or at a discount below or premium above par if
Bond Counsel (as defined in the Bond Indenture) delivers a Favorable Opinion of Bond
Counsel (as defined in the Bond Indenture) to the Bond Trustee). If, for any reason, the
Serial Bond Interest Rate is not so determined for the Serial Bond Interest Rate Period by
the Remarketing Agent on or prior to the first day of such Serial Bond Interest Rate
Period, then the Series 2005A Bonds shall bear interest at the Weekly Interest Rate and
shall continue to bear interest at a Weekly Interest Rate until suc as the interest rate
on such Bonds shall have been adjusted to Bond s, a Serial Bond
Interest Rate or an ARS Interest Rate, a es 2005A Bonds
shall be subject to mandatory purcha��
(3) Bond Interest 1Vfii Rates. During each Short-Term Interest Rate
Period, this Bond shall bear interest during each Bond Interest Term at the Bond Interest
Term Rate. The Bond Interest Term and the Bond Interest Term Rate need not be the
same for any two Bonds, even if determined on the same date. Each of such Bond
Interest Terms and Bond Interest Term Rates for each Bond shall be determined by the
Remarketing Agent no later than the first day of each Bond Interest Tern. Each Bond
Interest Term shall be for a period of days within the range or ranges announced as
• possible Bond Interest Terms no later than 9:30 am., New York City time, on the first
DOCSSCI:358964.1 5
day of each Bond Interest Term by the Remarketing Agent. Each Bond Interest Term for
• each Bond shall be a period of not more than one hundred eighty (180) days, determined
by the Remarketing Agent to be the period which, together with all other Bond Interest
Terms for all Series 2005A Bonds then Outstanding, will result in the lowest overall
interest expense on the Series 2005A Bonds over the next succeeding one hundred eighty
(180) days. If, for any reason, a Bond Interest Term for any Bond cannot be so
determined by the Remarketing Agent, or if the determination of such Bond Interest
Term is held by a court of law to be invalid or unenforceable, then such Bond Interest
Term shall be thirty (30) days, but if the 1 t�o determined shall not be a day
immediately preceding a Business s e first day immediately preceding
the Business Day next i uch last day would be after the day
immediately prec end on the day immediately preceding the
Maturity Date. E nd rest Term shall end on either a day which immediately
precedes a Busines ay or on the day immediately preceding the Maturity Date for the
Series 2005A Bonds. No Bond Interest Term shall be set to end on a day later than the
fifth day preceding the expiration of any Liquidity Facility applicable to the subject
Bonds. The Bond Interest Tenn Rate shall be the rate of interest per annum determined
by the Remarketing Agent to be the minimum interest rate which, if borne by this Bond,
would enable the Remarketing Agent to sell this Bond on the date and at the time of such
determination at a price equal to the principal amount thereof. If, for any reason, a Bond
Interest Term Rate'for any Bond is not so established by the Remarketing Agent for any
Bond Interest Term, or such Bond Interest Term Rate is determined by a court of law to
be invalid or unenforceable, then the Bond Interest Term Rate for such Bond Interest
• Term shall be the rate per annum equal to 110% of the BMA Index on the first day of
such Bond Interest Term.
(4) ARS Interest Rates. During each ARS Interest Rate Period, this
Bond shall bear interest at a rate determined by the periodic application of the Auction
Procedures, as provided in the Bond Indenture.
The Bond Trustee shall give notice by fast class mail of an adjustment in
the Interest Rate Period not less than thirty (30) days prior to the proposed effective date
of such Interest Rate Period. If notice of such adjustment has been mailed to the Holders
of the Series 2005A Bonds and Bond Counsel fails to deliver a Favorable Opinion of
Bond Counsel (as that tern is defined in the Bond Indenture), if required pursuant to the
Bond Indenture, or if other conditions precedent toj6pJLViustinent have not been
satisfied, the Series 2005A Bonds shall con ' to mandatory tender for
purchase (as described herein) on the e effective date of such
adjustment unless the Bonds terest at an ARS Interest Rate. If
this Bond was previously be RK r an ARS Interest Rate, this Bond shall not be
subject to mandatory tender ase and shall bear interest as provided in the Bond
Indenture.
Optional Purchase of Bonds-During Weekly Interest Rate Period. During
any Weekly Interest Rate Period with respect to this Bond, this Bond shall be purchased
at the option of the Holder on any Business Day at a purchase price equal to the Purchase
is Price (as defined in the Bond Indenture), payable in immediately available funds, upon
DOCSSC1:358964.1 6
delivery to the Tender Agent at its Principal Office for delivery of notices and to the
• Remarketing Agent of an irrevocable written notice which states the name of this Bond,
the principal amount of this Bond and the date on which the same shall be purchased,
which date shall be a Business Day not prior to the seventh day next succeeding the date
of the delivery of such notice to the Tender Agent. Any notice delivered to the Tender
Agent after 4:00 p.m., New York City time, shall be deemed to have been received on the
next succeeding Business Day. For payment of such P e Price on the date specified
in such notice, this Bond must be odele 10:00 a.m., New York,.City
time, on the date specifie ent at its Principal Office,
accompanied by an ins m form satisfactory to the Tender
Agent executed in blank Hof or the Holder's duly authorized attorney,
with such signature guaranteed by a commercial bank, trust company or member firm of
the New York Stock Exchange. The giving of notice by a Holder of this Bond that such
Holder elects to have this Bond purchased during a Weekly Interest Rate Period as
described above shall constitute the irrevocable tender for purchase of this Bond with
respect to which such notice shall have been given irrespective of whether this Bond shall
be delivered to the Tender Agent for purchase.
Mandatory Tender for Purchase on Day Next Succeeding the Last Day of
Each Bond Interest Term. On the day next succeeding the last day of each Bond Interest
Term for this Bond while in a Short-Term Interest Rate Period, unless such day is the
first day of a new Interest Rate Period, this Bond shall be purchased from its Holder at a
purchase price equal to the principal amount hereof plus accrued interest to but not
including the Purchase Date (as defined in the Bond Indenture), payable in immediately
• available funds, if this Bond is delivered to the Tender Agent not later than 10:00 a.m.,
New York City time, on such day or, if delivered after 10:00 a.m., New York City time,
payable on the next succeeding Business Day; provided, however, that in any event this
Bond will not bear interest at the Bond Interest Term Rate after the last day of each Bond
Interest Term. The Purchase Price of any Bond so purchased shall be payable only upon
surrender of such Bond to the Tender Agent at its Principal Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank
by the Holder thereof or by the Holder's duly authorized attorney, with such signature
guaranteed by a commercial bank, trust company or member firm of the New York Stock
Exchange.
Mandatorv_Tender for Purchase on First Dav of Each Interest Rate Period.
This Bond shall be subject to mandatory tender for purchase the first day of each
Interest Rate Period, or on the day which would hav st day of an Interest
Rate Period in the event that one of the c adjustment to a new
Interest Rate Period shall not c ' and Indenture (unless the
Bonds were previously be _e - Rate, in which case there is no
mandatory tender), at the Pur rice, payable in immediately available funds in
accordance with the Bond Indenture. The Purchase Price of any Bond so purchased shall
be payable only upon surrender of such Bond to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer thereof, in form satisfactory to the Tender
Agent, executed in blank by the Holder thereof or by the Holder's duly authorized
• attorney, with such signature guaranteed by a commercial bank, trust company or
DOCSSC1:358964.1 7
member firm of the New York Stock Exchange, at or prior to 10:00 a.m., New York City
• time, on the date specified for such delivery in this paragraph or in the notice of
adjustment to a new Interest Rate Period provided to the Holders by the Bond Trustee.
Mandatory Tender Upon Termination or Expiration of Liquidity Facility
or Delivery of an Alternate Liquidity Facility (If Liquidity Facility Provided). If a
Liquidity Facility (as that term is defined in the Ilond Indenture) securing the Series
2005A Bonds is delivered to the Ten le discretion of the Corporation in
accordance with the provis nt, this Bond shall be subject to
mandatory tender o ced Termination Date (as that term is
defined in the Bon ! Expiration Date (as that term is defined in the Bond
Indenture) for the L drty Facility, and upon delivery of an Alternate Liquidity Facility
(as that term is defined in the Bond Indenture) at a Purchase Price, payable in
immediately available funds, equal to the principal amount plus accrued interest, if any.
The Purchase Price of any Bond so purchased shall be payable only upon surrender of
such Bond to the Tender Agent at its Principal Office, accompanied by an instrument of
transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the
Holder thereof or by the Holder's duly authorized attorney, with -such signature
guaranteed by a commercial bank, trust company or member firm of the New York Stock
Exchange, at or prior to 10:00 a.m., New York City time, on the date specified for such
delivery in a notice provided to the Holders by the Bond Trustee. The Liquidity Facility
is expected to provide that it may immediately terminate upon the occurrence of certain
events of default specified in the Liquidity Facility without notice or mandatory tender.
• The Tender Agent may refuse to accept delivery of any Bond for which a
proper instrument of transfer has not been provided; such refusal, however, shall not
affect the validity of the purchase of such Bond as herein described. In the event that any
Holder of a Bond who shall have given notice of such Holder's election to have this Bond
purchased during a Weekly Interest Rate Period hereof or any Holder of a Bond subject
to mandatory tender shall fail to deliver such Bond to the Tender Agent at the place and
on the applicable date and time specified, or shall fail to deliver such Bond properly
endorsed, such Bond shall constitute an "Undelivered Bond." If funds in the amount of
the Purchase Price of any Undelivered Bond are available fo ent to the Holder
thereof on the date and at the time specified in t nd Indenture, then
from and after the date and time of that Undelivered Bond
shall be deemed to be purchased a^ e to be Outstanding under
the Bond Indenture; (ii) interest 1 crue thereon; and (iii) funds in the
amount of the Purchase Price of ndeliver Bond shall be held by the Tender
Agent for the benefit of the Holder thereof, to be paid upon delivery (and proper
endorsement) of the Undelivered Bond to the Tender Agent at its Principal Office. Any
such funds held by the Tender Agent for the purchase of Undelivered Bonds shall be held
uninvested.
•
Docsscr:358964.1 8
BY ACCEPTANCE OF THIS BOND, EACH HOLDER
• IRREVOCABLY AGREES THAT, IF THIS BOND (OR ANY PORTION HEREOF) IS
TO BE PURCHASED ON ANY DATE AND SUFFICIENT FUNDS ARE ON
DEPOSIT WITH THE BOND TRUSTEE FOR ALL PURCHASES TO BE MADE ON
SUCH DATE AS AFORESAID, THIS BOND (OR THE PORTION TO BE
PURCHASED) SHALL BE DEEMED TO HAI
YE BEEN PURCHASED FOR ALL
PURPOSES HEREUNDER BOND INDENTURE AND,
THEREAFTER, WENT-UVRE E NO FURTHER 'RIGHTS
HEREUNDER WITH RESPECT TO THIS
BOND (OR SU T Q,CEIT TO RECEIVE THE PURCHASE PRICE FOR
THIS BOND (OUCH PORTION) FROM THE FUNDS SO DEPOSITED UPON
SURRENDER HEREOF AS AFORESAID.
The obligation to purchase Bonds upon optional or mandatory tender is
not initially supported by a Liquidity Facility or a covenant of the Corporation to
maintain levels of liquid assets, although the Bond Indenture provides that the
Corporation may deliver a Liquidity Facility to the Tender Agent at any time, in the sole
discretion of the Corporation, to provide a source of funds for the purchase of Bonds.
While any Weekly Interest Rate is in effect with respect to the Series
2005A Bonds, the Series 2005A Bonds are subject to redemption prior to their stated
maturity, at the option of the City (which option shall be exercised upon Request of the
Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least
• twenty-five (25) days prior to the date fixed for redemption) in whole or in part on any
date at a redemption price equal to the principal amount of such Bonds to be redeemed,
plus accrued interest thereon (if any) to the date fixed for redemption, without premium.
•
While any Serial Bond Interest Rate is in effect with respect to the Series
2005A Bonds, the Series 2005A Bonds are subject to redemption prior to their stated
maturity at the option of the City (which option shall be exercised upon Request of the
Corporation given to the Bond Trustee (unless waived by the Bon Trustee) at least forty-
five (45) days prior to the date fixed for redemption), in part, on the first day
following such Serial' Bond Interest Rate price equal to the
principal amount of such Bonds t nterest thereon (if any) to
the date fixed for redemption, , and thereafter, during the periods
specified below (or, if approve Bond Counsel, during the periods and at the
redemption prices specified in a notice of the Corporation to the Bond Trustee) in whole
or in part on any date, at the redemption prices (expressed as a percentage of principal
amount) hereinafter indicated or specified in the notice of the Corporation to the Bond
Trustee, plus accrued interest thereon (if any) to the date fixed for redemption:
nocssCi:358%4.1 9
Length of Serial Bond
• Interest Rate Period
(expressed in years) Redemption Prices
greater than 20 after 10 years at 102% declining by I% every
year to
less than 02% declining by 1 % every
and Brea 0100%
less than or equal to 15 after 5 years at 102% declining by I% every
and greater than 10 year to 100%
less than or equal to 10 not subject to optional redemption
The foregoing notwithstanding, if the Corporation delivers to the Bond
Trustee, the Remarketing Agent and the City prior to any Conversion Date to the Serial
Bond Interest Rate a notice containing an alternative redemption schedule setting forth
different dates on which, or different redemption prices at which, the Bonds maybe
redeemed while the Serial Bond Interest Rate is in effect and a Favorable Opinion of
Bond Counsel, then during such Serial Bond Interest Rate Period such alternative
redemption schedule shall apply to the redemption of the Bonds.
While any Bond Interest Term Rate is in effect, the Series 2005A Bonds
subject to such Bond Interest Tenn Rate are also subject to redemption prior to their
stated maturity, at the option of the City (which option shall be exercised upon Request of
the Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least
twenty-five (25) days prior to the date fixed for redemption) in whole or in part, on the
day succeeding the last day of such Bond Interest Term at a Redemption Price equal to
the principal amount of Series 2005A Bonds called for redemption, plus accrued interest
thereon (if any) to the date fixed for redemption, without premium.
While any ARS Interest Rate is in effect, the Series 2005A Bonds are also
subject to redemption prior to their stated maturity at the option of the City (which
option shall be exercised upon Reoate on given to the Bond Trustee
(unless waived by the Bond Trust days prior to the date fixed for
redemption), in whole or in M
st Payment Date at a Redemption
Price equal to the I C, 005A Bonds called for redemption, plus
accrued interest there for redemption, without premium.
The BonMare subject to redemption prior to their stated maturity, at the
option of the City (which option shall be exercised upon Request of the Corporation in
accordance with the Bond Indenture) in whole or in part, on any date, from hazard
insurance or condemnation proceeds received with respect to the facilities of any of the
Members and deposited in the Special Redemption Account, at a redemption Price equal
to the principal amount thereof, plus accrued interest thereon (if any) to the date fixed for
• redemption, without premium.
DOCSSCl358964.1 10
In addition, the Bonds are also subject to redemption prior to maturity at
• the option of the City (which option shall be exercised upon Request of the Corporation
in accordance with the Bond Indenture) as a whole (but not in part) on any date at the
principal amount thereof and interest accrued thereon (if any) to the date fixed for
redemption, without premium, if as a re changes in the Constitution of the
United States of America or administrative action or inaction by
the United States g cy or political subdivision thereof,
or by reason of i and there is a good faith determination by any
Member that (a) th er denture has become void or unenforceable or impossible to
perform or (b) unreasonable burdens or excessive liabilities have been imposed on such
Member, including without limitation, federal, state or other ad valorem property, income
or other taxes not being imposed on the Date of Issuance.
The Series 2005A Bonds are also subject to mandatory redemption prior
to the Maturity Date, in part, from Sinking Fund Installments payable on December 1
(subject to adjustment in accordance with the Bond Indenture) of each year set forth
below (provided, that if the Series 2005A Bonds are in a Weekly Interest Rate Period, a
Short-Term Interest Rate Period or a Serial Bond Interest Rate Period, and any such
December 1 is not a Business Day, the applicable Sinking Fund Installment shall be paid
on the next succeeding Business Day; and provided further, that if the Series 2005A
Bonds are in an ARS Interest Rate Period and any such December 1 is not an ARS
Interest Payment Date, the applicable Sinking Fund Installment shall be paid on the next
succeeding ARS Interest Payment Date), in the amount set forth below, at a redemption
• price equal to 100% of the principal amount to be redeemed, plus accrued interest thereon
(if any) to the date fixed for redemption, without premium:
•
DOCSSC1:358964.1 11
Sinking Fund
• Installment Date
(December It) Sinking Fund Installments
2016 $1,850,000
2017 1,900,000
2018 1,950,000
2019 2,000,000
2020 2,025,000
2021 2,125,000
2022 2,175,000
2023 2,225,000
2024 2,300,000
2025 ®�n 2,325,000
2026 daft 1� 2,425,000
2027 Oft 2,475,000
2028 2,550,000
2029 2,625,000
2030 2,700,000
2031 2,750,000
2032 2,850,000
2033 2,925,000
2034 3,000,000
2035 3,075,000
2036 3,175,000
2037 3,250,000
2038 3,350,000
2039 3,450,000
2040* 3,525,000
t Subject to adjustment as provided in the Bond Indenture.
* Final maturity.
Any redemption of this Bond shall be made as provided in the Bond
Indenture upon not less than thirty (30) days' nor more than sixty (60) days' notice
(except in the case of redemption of Bonds that bear interest aLa eekly Interest Rate, or
at a Bond Interest Term Rate which shall be upon not 1 (10) days' notice and
except in the case of redemption. of Bonds th t t ARS Interest Rate
which shall be upon not less than twenty- by mailing a copy of the
redemption notice postage prepai at the address shown on the bond
registration books of the Bond ded, however, that failure by the Bond
Trustee to mail any notice or any erein or in the mailing thereof, as it affects any
particular Bond, shall not affect the validity of the proceedings for redemption of any
other Bonds.
Any notice of redemption given in accordance with the provisions of the
Bond Indenture may be rescinded by written notice given to the Bond Trustee by the
• Corporation no later than five Business Days prior to the date specified for redemption.
DOCSSC1:358964.1 12
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Bond Indenture, interest shall cease to accrue hereon from and after the date fixed
for redemption.
If an Event of Default (as that term is defined in the Bond Indenture) shall
occur, the principal of all Bonds may be declared due and payable upon the conditions, in
the manner and with the effect provided ' and Indenture. The Bond Indenture
provides that in certain events�cj its consequences may be rescinded.
t "WR and upon payment of the charges, if any,
provided in th d e, Series 2005A Bonds may. be exchanged, at the
designated core a trust office of the and
Trustee, for a like aggregate principal
amount of Series 2005A Bonds of other authorized denominations.
This Bond is transferable by the Holder hereof, in person or by such
Person's attorney duly authorized in writing, at the designated corporate trust office of
the Bond Trustee, but only in the manner, subject to the limitations and upon payment of
the charges, if any, provided in the Bond Indenture, and upon surrender and cancellation
of this Bond. Upon such transfer a Series 2005A Bond or Bonds, of authorized
denomination or denominations and for the same aggregate principal amount, will be
issued to the transferee in exchange herefor.
The City and the Bond Trustee shall treat the Holder hereof as the absolute
owner hereof for all purposes, and the City and the Bond Trustee shall not be affected by
. any notice to the contrary.
The Bond Indenture and the rights and obligations of the City and of the
Holders of the Bonds and of the Bond Trustee may be modified or amended from time to
time and at any time in the manner, to the extent, and upon the terms provided in the
Bond Indenture; provided that no such modification or amendment shall (i) extend the
stated maturity of this Bond, or reduce the amount of principal hereof, or extend the time
of payment, or change the method of computing the rate of interest hereon, or extend the
time of payment of interest hereon, or reduce any premium payable upon the redemption
hereof or change the Purchase Price to be paid upon tender ke!t t the consent of
the Holder hereof, or (ii) reduce tWwith WeBond the Holders of
which is required to effect any suc the creation of
any lien on the Revenues and oth pi n denture as security
for the Bonds prior to or on a p ien created b y the Bond Indenture, or
deprive the Holders of the Bonds of the lien created by the Bond Indenture on such
Revenues and other assets (except as expressly provided in the Bond Indenture), without
the consent of the Holders of all Bonds then outstanding, all as more fully set forth in the
Bond Indenture.
DMSSCI:358964.1 13
It is hereby certified and recited that and all acts, conditions and things
• required to exist, to have happened and to hav erformed precedent to and in the
issuance of this Bond do exist, have h ve been performed in due time,
form and manner as required by e Law and by the Constitution and
laws of the State of Califo aum .th oust of this Bond, together with all other
indebtedness of the ceed any limit prescribed by the Law or the
Constitution and law t. St a of California, and is not in excess of the amount of
Bonds permitted to be under the Bond Indenture.
•
•
This Bond shall not be entitled to any benefit under the Bond Indenture, or
become valid or obligatory for any purpose, until the certificate of authentication and
registration hereon endorsed shall have been signed by the Bond Trustee.
DMSSC1:358964.1 14
IN WITNESS WHEREOF, CITY OF NEWPORT BEACH has caused
• this Bond to be executed in its name and on its behalf by the facsimile signature of its
Mayor and its sea] to be reproduced hereon by facsimile and attested by the facsimile
signature of its City Clerk, all as of the date set forth above.
Attest:
By: /�i/7IJLI/Y1/
• City Clerk
•
DOCSSC1:358964.1 15
CITY OF NEWPOR
By:
Mayor
• BOND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
AND REGISTRATION
•
u
This is one of the Bonds described in the within mentioned Bond
Indenture, which has been registered on the date set forth below.
Dated: August 24, 2005.
DOCSSC1359964.1 16
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
as Bond Trustee
By:
Authorized Officer
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer
unto the within mentioned Bond and hereby irrevocably
constitute(s) and appoint(s) , attorney, to transfer the same on the
books of the within named Bond Trustee, with full power of substitution in the premises.
Dated: By:
Pe on this Assignment
and with the name as it
s on the face of the within Bond in
every particular, without alteration or
enlargement or any change whatsoever.
Social Security Number, Taxpayer
Identification Number or other Identifying
Number of Assignee:
Signature Guaranteed By:
•
NOTICE: Signature must be guaranteed by
an eligible guarantor institution.
•
DMSC1:359964.1 17
STATEMENT OF INSURANCE
• Financial Guaranty Insurance Company, doing business in California as FGIC
Insurance Company ( "Financial Guaran ' has issued a policy containing the following
provisions with respect to thOB
licy being on file at the principal office of
Wells Fargo Bank, Natio� ing agent (the "Paying Agent "):
Finarfcial G nconditionally and irrevocably agrees to pay for
disbursement to thndholders that portion of the principal or accreted value (if
applicable) of and interest on the Bonds which is then due for payment and which the
issuer of the Bonds (the "Issuer") shall have failed to provide. Due for payment means,
with respect to principal or accreted value (if applicable), the stated maturity date thereof,
or the date on which the same shall have been duly called for mandatory sinking fund
redemption and does not refer to any earlier date on which the payment of principal or
accreted value (if applicable) of the Bonds is due by reason of call for redemption (other
than mandatory sinking fund redemption), acceleration or other advancement of maturity,
and with respect to interest, the stated date for payment of such interest.
Upon receipt of telephonic or telegraphic notice, subsequently confirmed in
writing, or written notice by registered or certified mail, from a Bondholder or the Paying
Agent to Financial Guaranty that the required payment of principal, accreted value or
interest (as applicable) has not been made by the Issuer the Paying Agent, Financial
Guaranty on the due date of such payment or business day after receipt of
• notice of such nonpayment, whichev i a deposit of funds, in an
account with U.S. Bank Trust or its successor as its agent
(the "Fiscal Agent"), suf onion of such payment not paid by the
Issuer. Upon presentati Vsquch cal Agent of evidence satisfactory to it of the
Bondholder's right to payment and any appropriate. instruments of
assignment required to vest all of such Bondholder's right to such payment in Financial
Guaranty, the Fiscal Agent will disburse such amount to the Bondholder.
u
As used herein the term `Bondholder" means the person other than the Issuer or
the borrower(s) of bond proceeds who at the time of nonpayment of a Bond is entitled
under the terms of such Bond to payment thereof.
The policy is non - cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
DOCSSC1:358964.1 18
• NUMBER
R -1
112 4107\ (�III�YI
CITY OF NEWPORT BEACH
INSURED REVENUE BOND
(HOAG MEMORIAL HOSPITAL PRESBYTERIAN)
SERIES 2005B
$65,000,000
MATURITY DATE INTERES � rED CUSIP NUMBER
December I, 2040 August 24, 2005 651785AJ6
P�
REGISTERED HOL�: Cede & Co.
CITY OF NEWPORT BEACH, a municipal corporation and - charter city
duly organized and existing under a freeholder's charter under the Constitution and the
laws of the State of California, (the "City"), for value received, hereby promises to pay
(but only out of the Revenues and other assets pledged therefor as hereinafter mentioned)
to the Registered Holder specified above or registered assigns, on the Maturity Date
specified above (unless this Bond shall have been previously called for redemption in
whole or in part and payment of the Redemption Price (as hereinafter provided) shall
have been duly made), the Principal Amount specified above, in lawful money of the
• United States of America; and to pay interest thereon (but only from said Revenues and
other assets pledged therefor) in like lawful money from the date hereof until payment of
such principal sum shall be discharged as provided in the Bond Indenture hereinafter
mentioned, at the rates per annum determined as set forth below, payable on each Interest
Payment Date (as defined below). The principal. (or Redemption Price) hereof is payable
at the designated corporate trust office of Wells Fargo Bank, National Association
(together with any successor Bond Trustee as provided in the Bond Indenture, as defined
below, the "Bond Trustee'). Interest hereon is payable by check mailed on each Interest
Payment Date to the Holder hereof as of the close of business on the Record Date (as
hereinafter defined) at the address appearing on the bond registra ' oks maintained
by the Bond Trustee; provided, however, that in the case o g interest at
Bond Interest Term Rates (as hereinafter described), Brest other than
at a Bond Interest Term Rate for a Holder wh a principal amount in
excess of $1,000,000 of Bonds as sho on books maintained by the
Bond Trustee and who, prior to the R at xt preceding any Interest Payment
Date, shall have provided the Bond T -th written wire transfer instructions, in
accordance with such written wire transfer instructions and the Bond Indenture, provided
that while the Bonds bear interest at Bond Interest Term Rates, except for Bonds
registered in the name of the Securities Depository (as defined in the Bond Indenture),
interest payable hereon is payable only upon presentation hereof to the Bond Trustee, at
its Principal Office (hereinafter identified).
•
DOCSSC1:358972.1
NEITHER THE FAITH AND CREDIT NOR THE TAX NG POWER OF
• THE CITY OF NEWPORT BEACH, THE STATE OF CALIFORNIA OR ANY
POLITICAL SUBDIVISION THEREOF IS PLEDGE TO THE PAYMENT OF THE
PRINCIPAL OF OR PREMIUM OR INTEREST ON THIS BOND.
The Record Date means (i) with respect to any Bonds bearing interest at a
Weekly Interest Rate (as hereinafter described) or a Bond Interest Term Rate (as
hereinafter described) (each a "Record Date'), the Bus' s Day (as hereinafter
described) immediately precedin e, (ii) with respect to
any Bonds bearing interest at to Ouch day of the calendar
month immediately preceding �kd Interest Payment Date
falls or, in the event that an Interest Payment Date shall occur less than 15 days after the
first day of a Serial Bond Interest Rate Period, such first day and (iii) with respect to any
Bonds which are ARS, the second Business Day next preceding each ARS Interest
Payment Date. If available funds are insufficient on any Interest Payment Date to pay the
interest then due, such interest shall continue to accrue thereon but shall cease to be
payable to the Holders shown on the registration books of the Bond Trustee as of the
related Record Date. If sufficient funds for the payment of the overdue interest thereafter
become available, the Bond Trustee shall establish a special interest payment date (any
such date being herein referred to as a "Special Interest Payment Date'D on which such
overdue interest shall be paid and a special record date for determining the Bondholders
entitled to such payments (any such date shall be a Business Day and shall be referred to
as a "Special Record Date'), shall mail a notice of each such date to each Holder at least
• ten days prior to the Special Record Date, but not more than thirty days prior to the
Special Interest Payment Date, and shall pay the overdue interest to the Holders on the
Special Interest Payment Date.
This Bond is issuable in denominations of $100,000 or any integral
multiple of $5,000 in excess of $100,000 for Bonds during the Short-Term Interest Rate
Period or Weekly Interest Rate Period. During the Serial Bond interest Rate Period, this
Bond shall be issuable in denominations of $5,000 or any integral multiple thereof.
During any ARS Interest Rate Period, this Bond is issuable in denominations of $25,000
or any integral multiple thereof.
This Bond is one of a duly uthorized issu fis of the Ci Y tY
designated as "City of Newport Beach Insured Reve mortal Hospital
Presbyterian), Series 200513" (the "Series egate principal
amount to $65,000,000, and issued of Ordinance No. 85 -23
and 844 of the City (the "Law) nd enture, dated as of August 1, 2005,
between the City and the Bond Trustee a "Bond Indenture "). The Series 2005B Bonds
are issued under the Bond Indenture on a parity with bonds of the City designated as
"City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005A" (the "Series 2005A Bonds ") and the "City of Newport Beach Insured
Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series 2005C" (the "Series
2005C Bonds "). The Series 2005A Bonds, Series 2005B Bonds and the Series 2005C
Bonds are collectively referred to as the "Bonds." The Bonds are issued for the purpose
• of making a loan to Hoag Memorial Hospital Presbyterian, a California nonprofit public
DDCSSC1:358972.1 2
benefit corporation (the "Corporation'), pursuant to a loan agreement, dated as of
• August 1, 2005 (the "Loan Agreement "), between the City and the Corporation, for the
purposes and on the terms and conditions set forth therein.
Reference is hereby made to the Bond Indenture (a copy of which is on
file at said designated corporate trust off a of the Bond Trustee) and all indentures
supplemental thereto, to the Lo ent (a copy of which is on file at said
designated corporate trust o rustee) and to the Law for a description of
the rights thereunde onds, of the nature and extent of the security,
of the rights►1 oNthe Bond Trustee and of the rights and obligations
of the Cit all the provisions of which Bond Indenture and Loan
Ag -01kolder of this Bond, by acceptance hereof, assents and agrees.
Capitalized terms not otherwise defined herein have the meanings set forth in the Bond
Indenture.
The Bonds and the interest thereon are payable from Revenues (as that
term is defined in the Bond Indenture) and are secured by a pledge and assignment of
said Revenues and of amounts held in the funds and accounts established - pursuant to the
Bond Indenture (other than the Bond Purchase Fund and the Rebate Fund), subject only
to the provisions of the Bond Indenture permitting the application thereof for the
purposes and on the terms and conditions set forth in the Bond Indenture. The Bonds are
further secured by an assignment of the right, title and interest of the City in the Loan
Agreement (to the extent and as more particularly described in the Bond Indenture) and
• in Obligation No. 14, dated as of the date of initial delivery of the Bonds, and issued by
the Corporation, pursuant to the terms of a master indenture, dated . as of October 1, 1984,
as supplemented or amended (the "Master Indenture "), between the Corporation and
Wells Fargo Bank, National Association, as successor Master Trustee (herein called the
"Master Trustee ") and a supplemental master indenture, dated as of August 1, 2005,
between the Corporation and the Master Trustee.
The term of the Series 2005B Bonds will be divided into consecutive
Interest Rate Periods during each of which the Series 2005B Bonds shall bear interest at a
Weekly Interest Rate (a "Weekly Interest Rate Period "), a Serial Bond Interest Rate (a
"Serial Bond Interest Rate Period'), Bond Interest Term Rates for one or more
consecutive Bond Interest Terms (a "Short-Term Interest Rate Period ") or an ARS
Interest Rate (an "ARS Interest Rate Period "). nte t Period on the Series
2005B Bonds thereafter may be adjusted fra!fte.tIj Weekly Interest Rate
Period, a Short-Term Interest Rate Perio Rate Period or an ARS
Interest Rate Period and thereaft n ed in the Bond Indenture. As
hereinafter described, the Series are suject to mandatory purchase on the
first day of any Interest Rate Peri
During any Weekly Interest Rate Period for the Series 2005B Bonds,
interest on the Series 2005B Bonds shall be payable on each Interest Payment Date for
the period commencing on the immediately preceding Interest Accrual Date (or, if any
Interest Payment Date is not a Wednesday, commencing on the second preceding Interest
• Accrual Date) and ending on the Tuesday immediately preceding the Interest Payment
DOCSSC1:356972.1 3
Date (or, if sooner, the last day of the Weekly Interest Rate Period). During any Short-
Term Interest Rate Period, Serial Bond Interest Rate Period or ARS Interest Rate Period,
interest on this Bond shall be payable on each Interest Payment Date for the period
commencing on the immediately preceding Interest Accrual Date and ending on the day
immediately preceding such Interest Payment Date. In any event, interest on this Bond
shall be payable for the final Interest Rate Period to the date on which this Bond shall
have been paid in full. Interest shall be comp d 'n the case of a Serial Bond Interest.
Rate Period, on the basis of a 3 - g of twelve 30 -day months, in the
case of an ARS 1 of a 360 -day year for actual days
elapsed, and in t ate Period, on the basis of a 365- or 366 -
day year, as the c b , or the actual number of days elapsed.
The, term "Interest Accrual Date" means (i) with respect to any Weekly
Interest Rate Period, the first day thereof and, thereafter, the first Wednesday of each
calendar month during such Weekly Interest Rate Period (whether or not a Business
Day), (ii) with respect to any Auction Period within an ARS Interest Rate Period, the first
day thereof, (iii) with respect to any Serial Bond Interest Rate Period, the firsi day thereof
and, thereafter, each Interest Payment Date in respect thereof, other than the last such
Interest Payment Date, and (iv) with respect to each Bond Interest Term within a Short -
Term Interest Rate Period, the first day thereof. The term "Interest Payment Date" means
(i) with respect to any Weekly Interest Rate Period, the first Wednesday of each calendar
month or, if such first Wednesday shall not be a Business Day, the next succeeding
Business Day, (ii) with respect to any Serial Bond Interest Rate Period, each June I and
• December 1, provided that if any such June 1 or December I is not a Business Day, the
next succeeding Business Day, (iii) with respect to any Bond Interest Term, the day next
succeeding the last day thereof (iv) with respect to each ARS Interest Rate Period, the
Business Day immediately following each Auction Period and (v) with respect to any
Interest Rate Period that is different than the immediately preceding Interest Rate Period;
the first day thereof. The term "Business Day" means any day on which banks located in
New York, New York and the city in which the Principal Office of the Bond Trustee are
located are not required or authorized to close and on which the New York Stock
Exchange is open. .
The interest rate on the Series 2005B Bonds shall be detwifti&d as
follows:
(1) Weekly Interest Rate. $M terest Rate Period,
this Bond shall bear interest at the Wee ch shall be determined by
the Remarketing Agent by no later than 5: ew York City time, on Tuesday of
each week during such Weekly Interest Rate eriod or if such day shall not be a Business
Day, then on the next succeeding Business Day. The first Weekly Interest Rate for each
Weekly Interest Rate Period shall be determined on or prior to. the first day of such
Weekly Interest Rate Period and shall apply to the period commencing on the first day of
such Weekly Interest Rate Period and ending on the next succeeding Tuesday (whether or
not a Business Day).. Thereafter, each Weekly Interest Rate shall apply to the period
commencing on the first Wednesday on or after the date of determination thereof
• (whether or not a Business Day) and ending on the next succeeding Tuesday (whether or
DOCSSC1:358972.1 4
not a Business Day), unless such Weekly Interest Rate Period shall end on a day other
• than a Tuesday, in which event the last Weekly Interest Rate for such Weekly Interest
Rate Period shall apply to the period commencing on the Wednesday (whether or not a
Business Day) preceding the last day of such Weekly Interest Rate Period and ending on
the last day of such Weekly Interest Rate Period. The Weekly Interest Rate shall be the
rate of interest per annum determine Ot emarketing Agent to be the minimum
interest rate which, if bo Bonds, would enable the Remarketing
Agent to sel 0 ff ective date and at the time of such
determinatio and to accrued interest) equal to the principal amount
thereof. In th t tha the Remarketing Agent fails to establish a Weekly Interest Rate
for any week, then the Weekly Interest Rate for such week shall be the same as the
Weekly Interest Rate for the immediately preceding week if the Weekly Interest Rate for
such preceding week was determined by the Remarketing Agent. In the event that the
Weekly Interest Rate for the immediately preceding week was not determined by the
Remarketing Agent, or in the event that the Weekly Interest Rate determined by the
Remarketing Agent shall be held to be invalid or unenforceable by a court of law, then
the interest rate for such week shall be equal to 110% of the BMA Index on the day such
Weekly Interest Rate would otherwise be determined as provided in the Bond Indenture
for such Weekly Interest Rate Period.
(2) Serial Bond Interest Rate. During each Serial Bond Interest Rate
Period, this Bond shall bear interest at the Serial Bond Interest Rate. The Serial Bond
Interest Rate shall be determined by the Remarketing Agent on a Business Day no later
than the effective date of such Serial Bond Interest Rate Period. Subject to the detailed
• provisions set forth in the Bond Indenture the Serial Bond Interest Rate shall be the rate
of interest per annum determined by the Remarketing Agent to be the minimum interest
rate which, if home by the Series 2005B Bonds, would enable the Remarketing Agent to
sell the Series 2005B Bonds on the date and at the time of such determination at a price
equal to the principal amount thereof (or at a discount below or premium above par if
Bond Counsel (as defined in the Bond Indenture) delivers a Favorable Opinion of Bond
Counsel (as defined in the Bond Indenture) to the Bond Trustee). If, for any reason, the
Serial Bond Interest Rate is not so determined for the Serial Bond Interest Rate Period by
the Remarketing Agent on or prior to the first day of such Serial Bond Interest Rate
Period, then the Series 2005B Bonds shall bear interest at the Weekly Ipterest Rate and
shall continue to bear interest at a Weekly Interest Rate until s lme interest rate
on such Bonds shall have been adjusted to Bond Serial Bond
Interest Rate or an ARS Interest Rate, as p em es 2005B Bonds
shall be subject to mandatory purchase.
(3) Bond Interest TernWafes. During each Short-Term Interest Rate
Period, this Bond shall bear interest during each Bond Interest Term at the Bond Interest
Term Rate. The Bond Interest Term and the Bond Interest Term Rate need not be the
same for any two Bonds, even if determined on the same date. Each of such Bond
Interest Terms and Bond Interest Term Rates for each Bond shall be determined by the
Remarketing Agent no later than the first day of each Bond Interest Term. Each Bond
Interest Term shall be for a period of days within the range or ranges announced as
• possible Bond Interest Terms no later than 9:30 a.m., New York City time, on the first
DOCSSC1:358972.1 5
day of each Bond Interest Term by the Remarketing Agent. Each Bond Interest Term for
• each Bond shall be a period of not more than one hundred eighty (180) days, determined
by the Remarketing Agent to be the period which, together with all other Bond Interest
Terms for all Series 2005B Bonds then Outstanding, will result in the lowest overall
interest expense on the Series 2005B Bonds over the next succeeding one hundred eighty
(180) days. If, for any reason, a Bond Interest Term for any Bond cannot be so
determined by the Remarketing Agent or if the determination of such Bond Interest
Term is held by a court - or unenforceable, then such Bond Interest
Term sh ) %e t day so determined shall not be a day
immediate ay, shall end on the first day immediately preceding
the Busingg� n succeeding such last day, or if such last day would be after the day
immediately preceding the Maturity Date, shall end on the day immediately preceding the
Maturity Date. Each Bond Interest Term shall end on either a day which immediately
precedes a Business Day or on the day immediately preceding the Maturity Date for the
Series 2005B Bonds. No Bond Interest Term shall be set to end on a day later than the
fifth day preceding the expiration of any Liquidity Facility applicable to the subject
Bonds. The Bond Interest Term Rate shall be the rate of interest per annum determined
by the Remarketing Agent to be the minimum interest rate which, if home by this Bond,
would enable the Remarketing Agent to sell this Bond on the date and at the time of such
determination at a price equal to the principal amount thereof. If, for any, reason, a Bond
Interest Term Rate for any Bond is not so established by the Remarketing Agent for any
Bond Interest Term, or such Bond Interest Term Rate is determined by a court of law to
be invalid or unenforceable, then the Bond Interest Term Rate for such Bond Interest
• Term shall be the rate per annum equal to 110% of the BMA Index on the first day of
such Bond Interest Term.
(4) ARS Interest Rates. During each ARS Interest Rate Period, this
Bond shall bear interest at a rate determined by the periodic application of the Auction
Procedures, as provided in the Bond Indenture.
The Bond Trustee shall give notice by first class mail of an adjustment in
the Interest Rate Period not less than thirty (30) days prior to the proposed effective date
of such Interest Rate Period. If notice of such adjustment has been mailed to the Holders
of the Series 2005B Bonds and Bond Counsel fails to deliver a Favorable Opinion of
Bond Counsel (as that term is defined in the Bond Indenture), if required pursuant to the
Bond Indenture, or if other conditions precedent to such adjustment have not been
satisfied, the Series 2005B Bonds shall continue to be subject to mandator, tender for
purchase (as described herein) on the date that would have been e . to of such
adjustment unless the Bonds were previously bearing ' Rate. If
this Bond was previously bearing interest at t nd shall not be
subject to mandatory tender for purchas e as provided in the Bond
Indenture.
Optional Purchase of Bonds During Weekly Interest Rate Period. During
any Weekly Interest Rate Period with respect to this Bond, this Bond shall be purchased
at the option of the Holder on any Business Day at a purchase price equal to the Purchase
• Price (as defined in the Bond Indenture), payable in immediately available funds, upon
Docssc1:358972.1 6
delivery to the Tender Agent at its Principal Office for delivery of notices and to the
• Remarketing Agent of an irrevocable written notice which states the name of this Bond,
the principal amount of this Bond and the date on which the same shall be purchased,
which date shall be a Business Day not prior to the seventh day next succeeding the date
of the delivery of such notice to the Tender A e t. Any notice delivered to the Tender
Agent after 4:00 p.m., New York City ' emed to have been received on the
next succeeding Business Da s urchase Price on the date specified
in such notice, this or prior to 10:00 a.m., New York,City
time, on the date otice, to the Tender Agent at its Principal Office,
accompanied by ent of transfer hereof, in form satisfactory to the Tender
Agent executed in blank by the Holder hereof or the Holder's duly authorized attorney,
with such signature guaranteed by a commercial bank, trust company or member firm of
the New York Stock Exchange. The giving of notice by a Holder of this Bond that such
Holder elects to have this Bond purchased during a Weekly Interest Rate Period as
described above shall constitute the irrevocable tender for purchase of this Bond with
respect to which such notice shall have been given irrespective of whether this Bond shall
be delivered to the Tender Agent for purchase.
Mandatory Tender for Purchase on Day Next Succeeding the Last Day of
Each Bond Interest Term. On the day next succeeding the last day of each Bond Interest
Terra for this Bond while in a Short-Term Interest Rate Period, unless such day is the
first day of a new Interest Rate Period, this Bond shall be purchased from its Holder at a
purchase price equal to the principal amount hereof plus accrued interest to but not
• including the Purchase Date (as defined in the Bond Indenture), payable in immediately
available funds, if this Bond is delivered to the Tender Agent not later than 10:00 a.m.,
New York City time, on such day or, if delivered after 10:00 am., New York City time,
payable on the next succeeding Business Day; provided, however, that in any event this
Bond will not bear interest at the Bond Interest Term Rate after the last day of each Bond
Interest Term. The Purchase Price of any Bond so purchased shall be payable only upon
surrender of such Bond to the Tender Agent at its Principal Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank
by the Holder thereof or by the Holder's duly authorized attorney, with such signature
guaranteed by a commercial bank, trust company of member firm of the New York Stock
Exchange.
This Bond shall o subject h mandatory tender fo "��IWday day of each
Interest Rate Period, or on the day which day of an Interest
Rate Period in the event that one of the co to the adjustment to a new
Interest Rate Period shall not be met as d i d m the Bond Indenture (unless the
Bonds were previously bearing an ARS Interest Rate, in which case there is no
mandatory tender), at the Purchase Price, payable in immediately available funds in
accordance with the Bond Indenture. The Purchase Price of any Bond so purchased shall
be payable only upon surrender of such Bond to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer thereof, in form satisfactory to the Tender
Agent, executed in blank by the Holder thereof or. by the Holder's duly authorized
•attorney, with such signature guaranteed by a commercial bank, trust company or
DOCSSC1:3599n.1 7
member firm of the New York Stock Exchange, at or prior to 10:00 a.m., New York City
• time, on the date specified for such delivery in this paragraph or in the notice of
adjustment to a new Interest Rate Period provided to the Holders by the Bond Trustee.
Mandatory Tender Upon Termination or Expiration of Liquidity Facility
or Delivery of an Alternate Liquidity Facility (If Liquidity Facility Provided). If a
Liquidity Facility (as that term is defined in the Bond Indenture) securing the Series
2005B Bonds is delivered to the Tender Agent in the sole discretion of the Corporation in
accordance with the provisions of the ement, this Bond shall be subject to
mandatory ten4iied ointhe d Termination Date (as that term is
defined in the ate (as that term is defined in the Bond
Indenture) for d upon delivery of an Alternate Liquidity Facility
(as that term Bond Indenture) at a Purchase Price, payable in
immediately available funds, equal to the principal amount plus accrued interest, if any.
The Purchase Price of any Bond so purchased shall be payable only upon surrender of
such Bond to the Tender Agent at its Principal Office, accompanied by an instrument of
transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the
Holder thereof or by the Holder's duly authorized attorney, with -such signature
guaranteed by a commercial bank, trust company or member firm of the New York Stock
Exchange, at or prior to 10:00 a.m., New York City time, on the date specified for such
delivery in a notice provided to the Holders by the Bond Trustee. The Liquidity Facility
is expected to, provide that it may immediately terminate upon the occurrence of certain
events of default specified in the Liquidity Facility without notice or mandatory tender.
• The Tender Agent may refuse to accept delivery of any Bond for which a
proper instrument of transfer has not been provided; such refusal, however, shall not
affect the validity of the purchase of such Bond as herein described. In the event that any
Holder of a Bond who shall have given notice of such Holder's election to have this Bond
purchased during a Weekly Interest Rate Period hereof or any Holder of a Bond subject
to mandatory tender shall fail to deliver such Bond to the Tender Agent at the place and
on the applicable date and time specified, or shall fail to deliver such Bond properly
endorsed, such Bond shall constitute an "Undelivered Bond." If funds in the amount of
the Purchase Price of any Undelivered Bond are available for payment to the Holder
thereof on the date and at the time specified in accordance wiwbeheld "theTender
from and after the date and time of that required delive ,
shall be deemed to be purchased and shall no longer
the Bond Indenture; (ii) interest shall no longer ac
amount of the Purchase Price of such Undelivered s
Agent for the benefit of the Holder thereof, to be paid upon delivery (and proper
endorsement) of the Undelivered Bond to the Tender Agent at its Principal Office. Any
such funds held by the Tender Agent for the purchase of Undelivered Bonds shall be held
uninvested.
DOCSSC1:358972.1 8
BY ACCEPTANCE OF THIS BOND, EACH HOLDER
• IRREVOCABLY AGREES THAT, IF THIS BOND (OR ANY PORTION HEREOF) IS
TO BE PURCHASED ON ANY DATE AND SUFFICIENT FUNDS ARE ON
DEPOSIT WITH THE BOND TRUSTEE FOR ALL PURCHASES TO BE MADE ON
SUCH DATE AS AFORESAID, THIS BOND (OR THE PORTION TO BE
PURCHASED) SHALL BE DEEMED TO HAVE BEEN PURCHASED FOR ALL
PURPOSES HEREUNDER AND LJqVR THE BOND INDENTURE AND,
THEREAFTER, THE H L HAVE NO FURTHER RIGHTS
HEREUNDER O ENTURE WITH RESPECT TO THIS
BOND (D101i���E TO RECEIVE THE PURCHASE PRICE FOR
THIS BO ORTION) FROM THE FUNDS SO DEPOSITED UPON
SURRE REOF AS AFORESAID.
The obligation to purchase Bonds upon optional or mandatory tender is
not initially supported by a Liquidity Facility or a covenant of the Corporation to
maintain levels of liquid assets, although the Bond Indenture provides that the
Corporation may deliver a Liquidity Facility to the Tender Agent at any time, in the sole
discretion of the Corporation, to provide a source of funds for the purchase of Bonds.
While any Weekly Interest Rate is in effect with respect to the Series
2005B Bonds, the Series 2005B Bonds are subject to redemption prior to their stated
maturity, at the option of the City (which option shall be exercised upon Request of the
Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least
twenty-five (25) days prior to the date fixed for redemption) in whole or in part on any
. date at a redemption price equal to the principal amount of such Bonds to be redeemed,
plus accrued interest thereon (if any) to the date fixed for redemption, without premium.
•
While any Serial Bond Interest Rate is in effect with respect to the Series
2005B Bonds, the Series 2005B Bonds are subject to redemption prior to their stated
maturity at the option of the City (which option shall be exercisedwipon Request of the
Corporation given to the Bond Trustee (unless waived stee) at least forty -
five (45) days prior to the date..fixed for red , on the first day
following such Serial Bond Intere ption price equal to the
principal amount of such Bonds t s accrued interest. thereon (if any) to
the date fixed for redemption, premium, and thereafter, during the periods
specified below (or, if approved by Bond Counsel, during the periods and at the
redemption prices specified in a notice of the Corporation to the Bond Trustee) in whole
or in part on any date, at the redemption prices (expressed as a percentage of principal
amount) hereinafter indicated or specified in the notice of the Corporation to the Bond
Trustee, plus accrued interest thereon (if any) to the date fixed for redemption:
DOCSSC1:358972.1 9
Length of Serial Bond
• Interest Rate Period
(expressed in years)
greater than 20
Redemption Prices
after 10 years at 102° declining by 1% every
year to 100% 40 UX
less than or equal to 20 %declining by I% every
and greater than 15 t
less than or eq 19 er 5 years at 102% declining by 1% every
and greater than year to 100%
less than or equal to 10 not subject to optional redemption
The foregoing notwithstanding, if the Corporation delivers to the Bond
Trustee, the Remarketing Agent and the City prior to any Conversion Date to the Serial
Bond Interest Rate a notice containing an alternative redemption schedule setting forth
different dates on which, or different redemption prices at which, the Bonds may be
redeemed while the Serial Bond Interest Rate is in effect and a Favorable Opinion of
Bond Counsel, then during such Serial Bond Interest Rate Period such alternative
redemption schedule shall apply to the redemption of the Bonds.
While any Bond Interest Term Rate is in effect, the Series 2005B Bonds
• subject to such Bond Interest Term Rate are also subject to redemption prior to their
stated maturity, at the option of the City (which option shall be exercised upon Request of
the Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least
twenty-five (25) days prior to the date fixed for redemption) in whole or in part, on the
day succeeding the last day of such Bond Interest Term at a Redemption Price equal to
the principal amount of Series 2005B Bonds called for redemption, plus accrued interest
thereon (if any) to the date fixed for redemption, without premium.
While any ARS Interest Rate is in effect, the Series 2005B Bonds are also
subject to redemption prior to their stated maturity, at the e City (which
option shall be exercised upon Requjof Bond Trustee
(unless waived by the Bond Trustee) 0) a date fixed for
redemption), in whole or in part, on ent Date at a Redemption
Price equal to the principal amount. of Bonds called for redemption, plus
accrued interest thereon (if any) to the date fixed for redemption, without premium.
The Bonds are subject to redemption prior to their stated maturity, at the
option of the City (which option shall be exercised upon Request of the Corporation in
accordance with the Bond Indenture) in whole or in part, on any date, from hazard
insurance or condemnation proceeds received with respect to the facilities of any of the
Members and deposited in the Special Redemption Account, at a redemption Price equal
to the principal amount thereof, plus accrued interest thereon (if any) to the date fixed for
• redemption, without premium
DOCSSC1:358972.1 10
In addition, the Bonds are also subject to redemption prior to maturity at
the option of the City (which option shall be exercised upon Request of the Corporation
• in accordance with the Bond Indenture) as a whole i t not in part) on any date at the
principal amount thereof and interest accru if any) to the date fixed for
redemption, without premium, if as a r es in the Constitution of the
United States of America or an r 'nistrative action or inaction by
the United States of y agency or political subdivision thereof,
or by reason of any ju ' ec s and there is a good faith determination by any
Member that (a) the M enture has become void or unenforceable or impossible to
perform or (b) unreasonable burdens or excessive liabilities have been imposed on such
Member, including without limitation, federal, state or other ad valorem property, income
or other taxes not being imposed on the Date of Issuance.
The Series 2005B Bonds are also subject to mandatory redemption prior to
the Maturity Date, in part, from Sinking Fund Installments payable on December I
(subject to adjustment in accordance with the Bond Indenture) of each year set forth
below (provided, that if the Series 2005B Bonds are in a Weekly Interest Rate Period, a
Short-Term Interest Rate Period or a Serial Bond Interest Rate Period, and any such
December I is not a Business Day, the applicable Sinking Fund Installment shall be paid
on the next succeeding Business Day; and provided further, that if the Series 2005B
Bonds are in an ARS Interest Rate Period and any such December I is not an ARS
Interest Payment Date, the applicable Sinking Fund Installment shall be paid on the next
succeeding ARS Interest Payment Date), in the amount set forth below, at a redemption
price equal to 100% of the principal amount to be redeemed, plus accrued interest thereon
is (if any) to the date fixed for redemption, without premium:
0
DOCSSC1:358972.1 I I
Sinking Fund
• Installment Date
(December It)
2016
2017
2018
2019
2020
•
2021
2022
2023
OV
2 2 �J
2 7
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040"
Sinking Fund Installments
$1,850,000
1,900,000
t Subject to adjustment as provided in the Bond Indenture.
" Final maturity.
1,950,000
2,000,000
2,025,000
2,125,000
2,175,000
2,225,000
2,300,000
2,325,000
2,425,000
2,475,000
2,550,000
2,625,000
2,700,000
2,750,000
2,850,000
2,925,000
3,000,000
3,075,000
3,175,000
3,250,000
3,350,000
3,450,000
3,525,000
Any redemption of this Bond shall be made as provided in the Bond
Indenture upon not less than thirty (30) days' nor more than sixty (60) days' notice
(except in the case of redemption of Bonds that bear interest at a Weekly Interest Rate, or
at a Bond Interest Term Rate which shall be upon not less than ten (10) days' notice and
except in the case of redemption of Bonds that bear inte est at an ARS Interest Rate
which shall be upon not less than twenty -five (25 ? 'ce) by mailing a copy of the
redemption notice postage prepaid to the 14 address shown on the bond
registration books of the Bond T ver, that failure by the Bond
Trustee to mail any notice in the mailing thereof, as it affects any
particular Bond shall no i ity of the proceedings for redemption of any
other Bonds.
Any notice. of redemption given in accordance with the provisions of the
Bond Indenture may be rescinded by written notice given to the Bond Trustee by the
Corporation no later than five Business Days prior to the date specified for redemption.
DDCSSC1:358972.1
12
•
•
•
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Bond Indenture, interest shall cease to accrue hereon from and after the date fixed
for redemption.
If an Event of Default (as that tern is defined in the Bond Indenture) shall
occur, the principal of all Bonds may be declared due iie'riture. able upon the conditions, in
the manner and with the effect provided in the B The Bond Indenture
provides that in certain events such declaragQa uences may be rescinded.
Subject to the Ypbn payment of the charges, if any,
provided in the Bond 2 05B Bonds may be exchanged, at the
designated corporate tru or the Bond Trustee, for a like aggregate principal
amount of Series 2005B Bo s of other authorized denominations.
This Bond is transferable by the Holder hereof, in person or by such
Person's attorney duly authorized in writing, at the designated corporate trust office of
the Bond Trustee, but only in the manner, subject to the limitations and upon payment of
the charges, if any, provided in the Bond Indenture, and upon surrender and cancellation
of this Bond. Upon such transfer a Series 2005B Bond or Bonds, of authorized
denomination or denominations and for the same aggregate principal amount, will be
issued to the transferee in exchange herefor.
The City and the Bond Trustee shall treat the Holder hereof as the absolute
owner hereof for all purposes, and the City and the Bond Trustee shall not be affected by
any notice to the contrary.
The Bond Indenture and the rights and obligations of the City and of the
Holders of the Bonds and of the Bond Trustee may be modified or amended from time to
time and at any time in the manner, to the extent, and upon the terns provided in the
nendmenI (i) extend the
al tend the time
,.or extend the
upon the redemption
ereof, without the consent of
the consent of the Holders of
Bond Indenture; provided that no such modification or
stated maturity of this Bond, or reduce the amount of pri
of payment, or change the method of computing the r
time of payment of interest hereon, or reduce ii
hereof or change the Purchase Price to b
the Holder hereof, or (ii) reduce the pe o on
which is required to effect any such modi 'on or amendment, or permit the creation of
any lien on the Revenues and other assets pledged under the Bond Indenture as security
for the Bonds prior to or on a panty with the lien created by the Bond Indenture, or
deprive the Holders of the Bonds of the lien created by the Bond Indenture on such
Revenues and other assets (except as expressly provided in the Bond Indenture), without
the consent of the Holders of all Bonds then outstanding, all as more fully set forth in the
Bond Indenture.
DocssCi:358972.1 13
It is hereby certified and recited that 9na all acts, conditions and things -
• required to exist, to have happened and to ei o'Ved precedent to and in the
issuance of this Bond do exist, have been performed in due time,
form and manner as required e Law and by the Constitution and
laws of the State of Califqfft,%W amount of this Bond, together with all other
indebtedness of the City, of exceed any limit prescribed by the Law or the
Constitution and laws of th tate of California, and is not in excess of the amount of
Bonds permitted to be issued under the Bond Indenture.
•
•
This Bond shall not be entitled to any benefit under the Bond Indenture, or
become valid or obligatory for any purpose, until the certificate of authentication and
registration hereon endorsed shall have been signed by the Bond Trustee.
nocssC1:358972.1 14
•
E
0
IN WITNESS WHEREOF, CITY OF NEWPORT BEACH has caused
this Bond to be executed in its name and on its behalf by the
Mayor and its seal to be reproduced hereon by facsimile and
signature of its City Clerk all as of the date set forth ab
PQ VL
0,
DOCSSC1:358972.1
15
ove.
facsimile signature of its
attested by the facsimile
• • ��
Mayor
• BOND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
AND REGISTRATION
•
This is one of the Bonds described in the within mentioned Bond
Indenture, which has been registered on the date set forth below.
Dated: August 24, 2005.
DMSSC 1:358972.1 16
WELLS FARGO BANK,
NATIONAL ATI
as Bond Trustee
Authorized Officer
ASSIGNMENT
• For value received, the undersigned do(es) hereby sell, assign and transfer
unto the within mentioned Bond and hereby irrevocably
constitute(s) and appoint(s) , attorney, to transfer the same on the
books of the within named Bond Trustee, with full power of substitution in the &r%pises.
Dated:
Notice: Th s Assignment
must a name as it
appe a Me of the within Bond in
every cular, without alteration or
enlargement or any change whatsoever.
Social Security Number, Taxpayer
Identification Number or other Identifying
Number of Assignee:
Signature Guaranteed By:
•
•
NOTICE: Signature must be guaranteed by
an eligible guarantor institution.
DOCSSCl:358972.1 17
STATEMENT OF INSURANCE
• Financial Guaranty Insurance Company, doing business in California as FGIC
Insurance Company ( "Financial Guaranty"), has I'Rsifd a policy containing the following
provisions with respect to the Bonds, suc g on file at the principal office of
Wells Fargo Bank, National AssoSjA f1V"V Pht (the "Paying Agent"
Financial Gi jh&Nditionally and irrevocably agrees to pay for
disbursement to th ' o that portion of the principal or accreted value (if
applicable) of and s on the Bonds which is then due for payment and which the
issuer of the Bonds (the "Issuer ") shall have failed to provide. Due for payment means,
with respect to principal or accreted value (if applicable), the stated maturity date thereof,
or the date on which the same shall have been duly called for mandatory sinking fund
redemption and does not refer to any earlier date on which the payment of principal or
accreted value (if applicable) of the Bonds is due by reason of call for redemption (other
than mandatory sinking fund redemption), acceleration or other advancement of maturity,
and with respect to interest, the stated date for payment of such interest.
Upon receipt of telephonic or telegraphic notice, subsequently confirmed in
writing, or written notice by registered or certified mail, from a Bondholder or the Paying
Agent to Financial Guaranty that the required payment of principal, accreted value or
interest (as applicable) has not been made by the Issuer to the Paying Agent, Financial
Guaranty on the due date of such payment or within one business. day after receipt of
• notice of such nonpayment, whichever is later, will ma jc " a . It of funds, in an
account with U.S. Bank Trust National A s ssor as its agent
(the "Fiscal Agent "), sufficient to m o ayment not paid by the
Issuer. Upon presentation to th evidence satisfactory to it of the
Bondholder's right to receive yment and any appropriate instruments of
assignment required to vest all of suc Bondholder's right to such payment in Financial
Guaranty, the Fiscal Agent will disburse such amount to the Bondholder.
u
As used herein the term `Bondholder" means the person other than the Issuer or
the borrower(s) of bond proceeds, who at the time of nonpayment of a Bond is entitled
under the terms of.such Bond to payment thereof.
The policy is non - cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
DOCSSC1:358972.1 18
• NUMBER
R -1
CITY OF NEWPORT
INSURED REVENJO
(HOAG MEMORIAL HO.WIM
MATURITY DATE
December 1, 2040
REGISTERED HOLDER: Cede & Co.
DATED
August 24, 2005
PRINCIPAL AMOUNT
$70,000,000
CUSIP NUMBER
651785AK3
CITY OF NEWPORT BEACH, a municipal corporation and - charter city
duly organized and existing under a freeholder's charter under the Constitution and the
laws of the State of California, (the "City"), for value received, hereby promises to pay
(but only out of the Revenues and other assets pledged therefor as hereinafter mentioned)
to the Registered Holder specified above or registered assigns, on the Maturity Date
specified above (unless this Bond shall have been previously called for redemption in
whole or in part and payment of the Redemption Price (as hereinafter provided) shall
have been duly made), the Principal Amount specified above, in lawful money of the
• United States of America; and to pay interest thereon (but only from said Revenues and
other assets pledged therefor) in like lawful money from the date hereof until payment of
such principal sum shall be discharged as provided in the Bond Indenture hereinafter
mentioned, at the rates per annum determined as set forth below, payable on each Interest
Payment Date (as defined below). The principal (or Redemption Price) hereof is payable
at the designated corporate trust office of Wells Fargo Bank, N i al Association
(together with any successor Bond Trustee as provided in the B e, as defined
below, the "Bond Trustee "). Interest hereon is p0of neach Interest
Payment Date to the Holder hereof as of the clo a Record Date (as
hereinaft er defined) at the address appearing on tion books maintained
by the Bond Trustee; provided, however Bonds bearing interest at
Bond Interest Term Rates (as hereinafter bearing interest other than
at a Bond Interest Term Rate for a Holder owns an aggregate principal amount in
excess of $1,000,000 of Bonds as shown on the registration books maintained by the
Bond Trustee and who, prior to the Record Date next preceding any Interest Payment
Date, shall have provided the Bond Trustee with written wire transfer instructions, in
accordance with such written wire transfer instructions and the Bond Indenture, provided
that while the Bonds bear interest at Bond Interest Term Rates, except for Bonds
registered in the name of the Securities Depository (as defined in the Bond Indenture),
interest payable hereon is payable only upon presentation hereof to the Bond Trustee, at
its Principal Office (hereinafter identified).
•
DOCSSC1:358973.1
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF
• THE CITY OF NEWPORT BEACH, THE STATE OF CALIFORNIA OR ANY
POLITICAL SUBDIVISION THEREOF IS PLEDGE TO THE PAYMENT OF THE
PRINCIPAL OF OR PREMIUM OR INTEREST ON THIS BOND.
The Record Date means (i) with resnect tqgany Bonds bearing interest at a
Weekly Interest Rate (as hereinafter d and Interest Term Rate (as
hereinafter described) a siness Day (as hereinafter
described) immediate) AMstPayment Date, (ii) with respect to
any Bonds bearing inte%v& a qffral Bond Interest Rate, the 15th day of the calendar
month immediately preceding the calendar month in which such Interest Payment Date
falls or, in the event that an Interest Payment Date shall occur less than 15 days after the
first day of a Serial Bond Interest Rate Period, such first day and (iii) with respect to any
Bonds which are ARS, the second Business Day next preceding each ARS Interest
Payment Date. If available funds are insufficient on any Interest Payment Date to pay the
interest then due, such interest shall continue to accrue thereon but shall cease to be
payable to the Holders shown on the registration books of the Bond Trustee as of the
related Record Date. If sufficient funds for the payment of the overdue interest thereafter
become available, the Bond Trustee shall establish a special interest payment date (any
such date being herein referred to as a "Special Interest Payment Date ") on which such
overdue interest shall be paid and a special record date for determining the Bondholders
entitled to such payments (any such date shall be a Business Day and shall be referred to
as a "Special Record Date "), shall mail a notice of each such date to each Holder at least
• ten days prior to the Special Record Date, but not more than thirty days prior to the
Special Interest Payment Date, and shall pay the overdue interest to the Holders on the
Special Interest Payment Date.
This Bond is issuable in denominations of $100,000 or any integral
multiple of $5,000 in excess of $100,000 for Bonds during the Short-Term Interest Rate
Period or Weekly Interest Rate Period. During the Serial Bond Interest Rate Period, this
Bond. shall be issuable in denominations of $5,000 or any integral multiple thereof.
During any ARS Interest Rate Period, this Bond is issuable in denominations of $25,000
or any integral multiple thereof.
This Bond is one of a duly authorized issue of konds of the City
designated as "City of Newport Beach Insured Reven emorial Hospital
Presbyterian), Series 2005C" (the "Seri gregate principal
amount to $70,000,000, and issue dinance No. 85 23
and 94-4 of the City (the "Law) bo P re, dated as of August 1, 2005,
between the City and the Bond Trustee (the "Bond Indenture "). The Series 2005C Bonds
are issued under the Bond Indenture on a parity with bonds of the City designated as
"City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005A" (the "Series 2005A Bonds ") and. the "City of Newport Beach Insured
Revenue Bonds (Hoag Memorial Hospital Presbyterian); Series 2005B" (the "Series
2005B Bonds "). The Series 2005A Bonds, Series 2005B Bonds and the Series 2005C
Bonds are collectively referred to as the "Bonds." The Bonds are issued for the purpose
of making a loan to Hoag Memorial Hospital Presbyterian, a California nonprofit public
DOCSSCl:358973.1 2
benefit corporation (the "Corporation "), pursuant to a loan agreement, dated as of
• August 1, 2005 (the "Loan Agreement'), between the City and the Corporation, for the
purposes and on the terms and conditions set forth therein.
Reference is hereby made to the Bond Indenture (a copy of which is on
file at said designated corporate trust office of the Bond Trustee) and all indentures
supplemental thereto, to the Loan Agreement (a copy of which is on file at said
designated corporate trust office of the Bond Trustee) and to the Law for a description of
the rights thereunder of the Holders of the Bonds, of the nature and extent of the security,
of the rights, duties and immunities of the Bon and of the rights and obligations
of the City thereunder, to all th Wemnhave h Bond Indenture and Loan
Agreement the Holde n ce hereof, assents and agrees.
Capitalized terms not the meanings set forth in the Bond My Indenture.
The Bonds and the interest thereon are payable from Revenues (as that
term is defined in the Bond Indenture) and are secured by a pledge and assignment of
said Revenues and of amounts held in the funds and accounts established-pursuant to the
Bond Indenture (other than the Bond Purchase Fund and the Rebate Fund), subject only
to the provisions of the Bond Indenture permitting the application thereof for the
purposes and on the terms and conditions set forth in the Bond Indenture. The Bonds are
further secured by an assignment of the right, title and interest of the City in the Loan
Agreement (to the extent and as more particularly described in the Bond Indenture) and
in Obligation No. 14, dated as of the date of initial delivery of the Bonds, and issued by
• the Corporation, pursuant to the terms of a master indenture, dated as of October 1, 1984,
as supplemented or amended (the "Master Indenture'), between the Corporation and
Well Fargo Bank, National Association, as successor Master Trustee (herein called the
"Master Trustee ") and a supplemental master indenture, dated as of August I, 2005,
between the Corporation and the Master Trustee.
The term of the Series 2005C Bonds will be divided into consecutive
Interest Rate Periods during each of which the Series 2005C Bonds shall bear interest at a
Weekly Interest Rate (a "Weekly Interest Rate Period'), a Serial Bond Interest Rate (a
"Serial Bond Interest Rate Period'), Bond Interest Term Rates for one or more
consecutive Bond Interest Terms (a "Short-Term Interest Rate Period ") or an ARS
Interest Rate (an "ARS Interest Rate Period "). The Interest Rat on the Series
2005C Bonds thereafter may be adjusted fr om time Interest Rate
Period, a Short-Term Interest Rate Period n od or an ARS
Interest Rate Period and thereafter ag a Bond Indenture. As
hereinafter described, the Series 2005 ject to mandatory purchase on the
first day of any Interest Rate Period.
During any Weekly Interest Rate Period for the Series 2005C Bonds,
interest on the Series 2005C Bonds shall be payable on each Interest Payment Date for
the period commencing on the immediately preceding Interest Accrual Date (or, if any
Interest Payment Date is not a Wednesday, commencing on the second preceding Interest
• Accrual Date) and ending on the Tuesday immediately preceding the Interest Payment
DOCSSC1:358973.1 3
Date (or, if sooner, the last day of the Weekly Interest Rate Period). During any Short-
Term Interest Rate Period, Serial Bond Interest Rate Period or ARS Interest Rate Period,
interest on this Bond shall be payable on each Interest Payment Date for the period
commencing on the immediately preceding Interest Accrual Date and ending -on the day
immediately preceding such Interest Payment Date. In any event, interest on this Bond
shall be payable for the final Interest Rate Period to the date on which this Bond shall
have been paid in full. Interest shall be computed, in the case of a Serial Bond Interest
Rate Period, on the basis of a 360 -day year consisting of twelve 30 -day months, in the
case of an ARS Interest Rate Period, on of a 360 -day year for actual days
j
elapsed, and in the case of any q od, on the basis of a 365- or 366 -
day year, as the case maybM$b o days elapsed.
ThftVj1jw1r&V&7AccruaI Date" means (i) with respect to any Weekly
Interest Rate Peri first day thereof and, thereafter, the first Wednesday of each
calendar month during such Weekly Interest Rate Period (whether or not a Business
Day), (ii) with respect to any Auction Period within an ARS Interest Rate Period, the first
day thereof, (iii) with respect to any Serial Bond Interest Rate Period, the first day thereof
and, thereafter, each 1riterest Payment Date in respect thereof, other than the last such
Interest Payment Date, and (iv) with respect to each Bond Interest Term within a Short-
Term Interest Rate Period, the first day thereof. The term "Interest Payment Date" means
(i) with respect to any Weekly Interest Rate Period, the first Wednesday of each calendar
month or, if such first Wednesday shall not be a Business Day, the next succeeding
Business Day, (ii) with respect to any Serial Bond Interest Rate Period, each June I and
December I, provided that if any such June I or December I is not a Business Day, the
• next succeeding Business Day, (iii) with respect to any Bond Interest Term, the day next
succeeding the last day thereof (iv) with respect to each ARS Interest Rate Period, the
Business Day immediately following each Auction Period and (v) with respect to any
Interest Rate Period that is different than the immediately preceding Interest Rate Period,
the first day thereof. The term "Business Day" means any day on which banks located in
New York, New York and the city in which the Principal Office of the Bond Trustee are
located are not required or authorized to close and on which the New York Stock
Exchange is open.
The interest rate on the Series 2005C Bonds shall be determined as
follows:
(I) Weekly Interest Rate. During each Weekly Interest Rate Period,
this Bond shall bear interest at the Weekly Interest Rate, which I e determined by
the Remarketing Agent by no later than 5:00 p.m., N o on Tuesday of
each week during such Weekly Interest Rate P t be a Business
Day, then on the next succeeding Bus y Interest Rate for each
Weekly Interest Rate Period shall b� or prior to the first day of such
Weekly Interest Rate Period and shall o the period commencing on the first day of
such Weekly Interest Rate Period and ending on the next succeeding Tuesday (whether or
not a Business Day). Thereafter, each Weekly Interest Rate shall apply to the period
commencing on the first Wednesday on or after the date of determination thereof
• (whether or not a Business Day) and ending on the next succeeding Tuesday (whether or
DOCSSC1:358973.1 4
not a Business Day), unless such Weekly Interest Rate Period shall end on a day other
• than a Tuesday, in which event the last Weekly Interest Rate for such Weekly Interest
Rate Period shall apply to the period commencing on the Wednesday (whether or not a
Business Day) preceding the last day of such Weekly Interest Rate Period and ending on
the last day of such Weekly Interest Rate Period. The Weekly Interest Rate shall be the
rate of interest per annum determined by the Remarketing Agent to be the minimum
interest rate which, if borne by the Series 2005C Bonds, would enable the Remarketing
Agent to sell the Series 2005C Bonds on the effecive date and at the time of -such
determination at a price (without regard t pst) equal to the principal amount
thereof. In the event that the establish a Weekly Interest Rate
for any week, then er Vqch week shall be the same as the
Weekly Interest Rat ly preceding week if the Weekly Interest Rate for
such preceding week - etennined by the Remarketing Agent. In the event that the
Weekly Interest Rate for the immediately preceding week was not determined by the
Remarketing Agent, or in the event that the Weekly Interest Rate determined by the
Remarketing Agent shall be held to be invalid or unenforceable by a court of law, then
the interest rate for such week shall be equal to 110% of the BMA Index on the day such
Weekly Interest Rate would otherwise be determined as provided in the Bond Indenture
for such Weekly Interest Rate Period.
(2) Serial Bond Interest Rate. During each Serial Bond Interest Rate
Period, this Bond shall bear interest at the Serial Bond Interest Rate. The Serial Bond
Interest Rate shall be determined by the Remarketing Agent on a Business Day no later
than the effective date of such Serial Bond Interest Rate Period. Subject to the detailed
• provisions set forth in the Bond Indenture the Serial Bond Interest Rate shall be the rate
of interest per annum determined by the Remarketing Agent to be the minimum interest
rate which, if borne by the Series 2005C Bonds, would enable the Remarketing Agent to
sell the Series 2005C Bonds on the date and at the time of such determination at a price
equal to the principal amount thereof (or at a discount below or premium above par if
Bond Counsel (as defined in the Bond Indenture) delivers a Favorable Opinion of Bond
Counsel (as defined in the Bond Indenture) to the Bond Trustee). If, for any reason, the
Serial Bond Interest Rate is not so determined for the Serial Bond Interest Rate Period by
the Remarketing Agent on or prior to the first day of such Serial Bond Interest Rate
Period, then the Series 2005C Bonds shall bear interest at the Weekly terest Rate and
shall continue to bear interest at a Weekly Interest Rate until s he interest rate
on such Bonds shall have been adjusted to Bul Serial Bond
Interest Rate or an ARS Interest Rate, e enes 2005C Bonds
shall be subject to mandatory purchase.
(3) Bond Interest Term—Rates. During each Short-Term Interest Rate
Period, this Bond shall bear interest during each Bond Interest Term at the Bond Interest
Term Rate. The Bond Interest Term and the Bond Interest Term Rate need not be the
same for any two Bonds, even if determined: on the same date. Each of such Bond
Interest Terms and Bond Interest Term Rates for each Bond shall be determined by the
Remarketing Agent no later than the first day of each Bond Interest Term. Each Bond
Interest Term shall be for a period of days within the range or ranges announced as
• possible Bond Interest Terms no later than 9:30 am., New York City time, on the first
DOCSSC1:358973.1 5
day of each Bond Interest Term by the Remarketing Agent. Each Bond Interest Term for
• each Bond shall be a period of not more than one hundred eighty (180) days, determined
by the Remarketing Agent to be the period which, together with all other Bond Interest
Terms for all Series 2005C Bonds then Outstanding, will result in the lowest overall
interest expense on the Series 2005C Bonds over the next succeeding one hundred eighty
(180) days. If, for any reason, a Bond Interest Term for any Bond cannot be so
determined by the Remarketing Agent, or if the, determination of such Bond Interest
Term is held by a court of law to b ' enforceable, then such Bond Interest
Term shall be thirty (30) so determined shall not be a day
immediately prec ss end on the fast day immediately preceding
the Business Da uc last day, or if such last day would be after the day .
immediately prec he aturity Date, shall end on the day immediately preceding the
Maturity Date. Each Bond Interest Term shall end on either a day which immediately
precedes a Business Day or on the day immediately preceding the Maturity Date for the
Series 2005C Bonds. No Bond Interest Term shall be set to end on a day later than the
fifth day preceding the expiration of any Liquidity Facility applicable to the subject
Bonds. The Bond Interest Term Rate shall be the rate of interest. per annum determined
by the Remarketing Agent to be the minimum interest rate which, if home by this Bond,
would enable the Remarketing Agent to sell this Bond on the date and at the time of such
determination at a price equal to the principal amount thereof. If, for any reason, a Bond
Interest Term Rate for any Bond is not so established by the Remarketing Agent for any
Bond Interest Term, or such Bond Interest Tenn Rate is determined by a court of law to
be invalid or unenforceable, then the Bond Interest Term Rate for such Bond Interest
• Term shall be the rate per annum equal to 110% of the BMA Index on the first day of
such Bond Interest Term.
(4) ARS Interest Rates. During each ARS Interest Rate Period, this
Bond shall bear interest at a rate determined by the periodic application of the Auction
Procedures, as provided in the Bond Indenture.
The Bond Trustee shall give notice by first class mail of an adjustment in
the Interest Rate Period not less than thirty (30) days. prior to the proposed effective date
of such Interest Rate Period. If notice of such adjustment has been mailed to the Holders
of the Series 2005C Bonds and Bond Counsel fails to deliver a Favorable Opinion of
Bond Counsel (as that term is defined in the Bond Indentur uIred pursuant to the
Bond Indenture, or if other conditions precedeaW have not been
satisfied, the Series 2005C Bonds 1 0 datory tender for
purchase (as described herein) on th been the effective date of such
adjustment unless the Bonds were p ly earing interest at an ARS Interest Rate. If
this Bond was previously bearing interest at an ARS Interest Rate, this Bond shall not be
subject to mandatory tender for purchase and shall bear interest as provided in the Bond
Indenture.
Optional Purchase of Bonds During Weekly-Interest Rate Period. During
any Weekly Interest Rate Period with respect to this Bond, this Bond shall be purchased
at the option of the Holder on any Business Day at a purchase price equal to the Purchase
• Price (as defined in the Bond Indenture), payable in immediately available funds, upon
DOCSSC1:358973.1 6
delivery to the Tender Agent at its Principal Office for delivery of notices and to the
• Remarketing Agent of an irrevocable written notice which states the name of this Bond,
the principal amount of this Bond and the date on which the same shall be purchased,
which date shall be a Business Day not prior to the seventh day next succeeding the date
of the delivery of such notice to the Tender Agent. Any notice delivered to the Tender
Agent after 4:00 p.m., New York City time, shall be deemed to have been received on the
next succeeding Business Day. For payment of such Purchase Price on the date specified
in such notice, this Bond must be delivered, at or prior to 10:00 a.m., New York•City
time, on the date specified in such notice, to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer hereof, ig form satisfactory to the Tender
Agent executed in blank by the Holder r older's duly authorized attorney, with such signature guarantee t company or member firm of
the New York Stock a ice by a Holder of this Bond that such
Holder elects to ha chased during a Weekly Interest Rate Period as
described above sha titute the irrevocable tender for purchase of this Bond with
respect to which such notice shall have been given irrespective of whether this Bond shall
be delivered to the Tender Agent for purchase.
Mandatory Tender for Purchase on Day Next Succeeding the Last Day of
Each Bond Interest Term. On the day next succeeding the last day of each Bond Interest
Term for this Bond while in a Short-Term Interest Rate Period, unless such day is the
first day of a new Interest Rate Period, this Bond shall be purchased from its Holder at a
purchase price equal to the principal amount hereof plus accrued interest to but not
• including the Purchase Date (as defined in the Bond Indenture), payable in immediately
available funds, if this Bond is delivered to the Tender Agent not later than 10:00 am.,
New York City time, on such day or, if delivered after 10:00 a.m., New York City time,
payable on the next succeeding Business Day; provided, however, that in any event this
Bond will not bear interest at the Bond Interest Term Rate after the last day of each Bond
Interest Term. The Purchase Price of any Bond so purchased shall be payable only upon
surrender of such Bond to the Tender Agent at its Principal Office, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank
by the Holder thereof or by the Holder's duly authorized attorney, with such signature
guaranteed by a commercial bank, bust company or member firm of the New York Stock
Exchange.
Mandatory Tender for Purchase on First DU of Each Interest Rate Period.
This Bond shall be subject to mandatory tender for purchase on ,he,,,first day of each
Interest Rate Period, or on the day, which would have firs; day of an Interest
Rate Period in the event that one of the c e stment to a new
Interest Rate Period shall not be denture (unless the
Bonds were previously bearing an In t te, in which case there is no
mandatory tender), at the Purchase e, payable in immediately available funds in
accordance with the Bond Indenture. The Purchase, Price of any Bond so purchased shall
be payable only upon surrender of such Bond to the Tender Agent at its Principal Office,
accompanied by an instrument of transfer thereof, in form satisfactory to. the Tender
Agent, executed in blank by the Holder thereof or by the Holder's duly authorized
•attorney, with such signature guaranteed by a commercial bank, trust company or
DOCSSC1:358973.1 7
member firm of the New York Stock Exchange, at or prior to 10:00 a.m., New York City
• time, on the date specified for such delivery in this paragraph or in the notice of
adjustment to a new Interest Rate Period provided to the Holders by the Bond Trustee.
or Delivery of an Alternate Li uidi ' i If Liquidity Facility Provided . If a
Liquidity Facility (as that to a Bond Indenture) securing the Series
2005C Bonds is deli v the sole discretion of the Corporation in
accordance e Loan Agreement, this Bond shall be subject to
mandatory t ase prior to the Noticed Termination Date (as that term is
defined in the denture) or the Expiration Date (as that term is defined in the Bond
Indenture) for the Liquidity Facility, and upon delivery of an Alternate Liquidity Facility
(as that term is defined in the Bond Indenture) at a Purchase Price, payable in
immediately available funds, equal to the principal amount plus accrued interest, if any.
The Purchase Price of any Bond so purchased shall be payable only upon surrender of
such Bond to the Tender Agent at its Principal Office; accompanied by an instrument of
transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the
Holder thereof or by the Holder's duly authorized attorney, with -such signature
guaranteed by a commercial bank, trust company or member firm of the New York Stock
Exchange, at or prior to 10:00 a.m., New York City time, on the date specified for such
delivery in a notice provided to the Holders by the Bond Trustee. The Liquidity Facility
is expected to provide that it may immediately terminate upon the occurrence of certain
events of default specified in the Liquidity Facility without notice or mandatory tender.
• The Tender Agent may refuse to accept delivery of any Bond for which a
proper instrument of transfer has not been provided; such refusal, however, shall not
affect the validity of the purchase of such Bond as herein described. In the event that any
Holder of a Bond who shall have given notice of such Holder's election to have this Bond
purchased during a Weekly Interest Rate Period hereof or any Holder of a Bond subject
to mandatory tender shall fail to deliver such Bond to the Tender Agent at the place and
on the applicable date and time specified, or shall fail to deliver such Bond properly
endorsed, such Bond shall constitute an "Undelivered Bond." If funds in the amount of
the Purchase Price of any Undelivered Bond are available for payment to the Holder
thereof on the date and at the time specified in accordance with enture, then
from and after the date and time of that required deli vexed Bond
shall be deemed to be purchased and shall no� ee standing under
the Bond Indenture; (ii) interest shall n c n; and (iii) funds in the
amount of the Purchase Price of such U re and shall be held by the Tender
Agent for the benefit of the Holder thereof, to be paid upon delivery (and proper
endorsement) of the Undelivered Bond to the Tender Agent at its Principal Office. Any
such funds held by the Tender Agent for the purchase of Undelivered Bonds shall be held
uninvested.
0
DOCSSC1:358973.1 8
BY ACCEPTANCE OF THIS BOND, EACH HOLDER -
• IRREVOCABLY AGREES THAT, IF THIS BOND (OR ANY PORTION HEREOF) IS
TO BE PURCHASED ON ANY DATE AND SUFFICIENT FUNDS ARE ON
DEPOSIT WITH THE BOND TRUSTEE FOR ALL PURCHASES TO BE MADE ON
SUCH DATE AS AFORESAID, THIS BOND (OR THE PORTION TO BE
PURCHASED) SHALL BE DEEMED TO HAVE BEEN PURCHASED FOR ALL
PURPOSES HEREUNDER AND .'TJHE BOND INDENTURE AND,
THEREAFTER, THE HO VE NO FURTHER RIGHTS
HEREUNDER 0?& WITH RESPECT TO THIS
BOND (OR SU TO RECEIVE -THE PURCHASE PRICE FOR
THIS BOND ( H RTION) FROM THE FUNDS SO DEPOSITED UPON
SURRENDER HEREOF AS AFORESAID.
The obligation to purchase Bonds upon optional or mandatory tender is
not initially supported by a Liquidity Facility or a covenant of the Corporation to
maintain levels of liquid assets, although the Bond Indenture provides that the
Corporation may deliver a Liquidity Facility to the Tender Agent at any time, in the sole
discretion of the Corporation, to provide a source of funds for the purchase of Bonds.
While any Weekly Interest Rate is in effect with respect to the Series
2005C Bonds, the Series 2005C Bonds are subject to redemption prior to their stated
maturity, at the option of the City (which option shall be exercised upon Request of the
Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least
twerity-five (25) days prior to the date fixed for redemption) in whole or in part on any
• date at a redemption price equal to the principal amount of such Bonds to be redeemed,
plus accrued interest thereon (if any) to the date fixed for redemption, without premium.
•
While any Serial Bond Interest Rate is in effect with respect to the Series
2005C Bonds, the Series 2005C Bonds are subject to redemption prior to their stated
maturity at the option of the City (which option shall be exercised upon Request of the
Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least forty-
five (45) days prior to the date fixed for redemption), in whole or in part, on the first day
following such Serial Bond Interest Rate Period at a redemption pn a equal to the
principal amount of such Bonds to be redeemed, plus accrued ' eon (if any) to
the date fixed for redemption, without premium the periods
specified below (or, if approved by nods and at the
redemption prices specified in a notice a Bond Trustee) in whole
or in part on any date, at the redempti ses expressed as a percentage of principal
amount) hereinafter indicated or specified in the notice of the Corporation to the Bond
Trustee, plus accrued interest thereon (if any) to the date fixed for redemption:
DOCSSC1:359973.1 9
Length of Serial Bond
• Interest Rate Period
(expressed in Years) Redemption Prices
greater than 20 after 10 years at 102% declining by I % every
year to 100%
less than or equal to 20 1020X declining by I % every
and greater th I` /o
less after 5 years at 102% declining by I % every
and a ?than 10 year to 100%
less than or equal to 10 not subject to optional redemption
The foregoing notwithstanding, if the Corporation delivers to the Bond
Trustee, the Remarketing Agent and the City prior to any Conversion Date to the Serial
Bond Interest Rate a notice containing an alternative redemption schedule setting forth
different dates on which, or different redemption prices at which, the Bonds may be
redeemed while the Serial Bond Interest Rate is in effect and a Favorable Opinion of
Bond Counsel, then during such Serial Bond Interest Rate Period such alternative
redemption schedule shall apply to the redemption of the Bonds.
• While any Bond Interest Term Rate is in effect, the Series 2005C Bonds
subject to such Bond Interest Term Rate are also subject to redemption prior to their
stated maturity, at the option of the City (which option shall be exercised upon Request of
the Corporation given to the Bond Trustee (unless waived by the Bond Trustee) at least
twenty-five (25) days prior to the date fixed for redemption) in whole or in part, on the
day succeeding the last day of such Bond Interest Term at a Redemption Price equal to
the principal amount of Series 2005C Bonds called for redemption, plus accrued interest
thereon (if any) to the date fixed for redemption, without premium.
While any ARS Interest Rate is in effect, the Series 2005C Bonds are also
subject to redemption prior to their stated maturity, at the option of the City (which
option shall be exercised upon Request of the Corporation given to the Bond Trustee
(unless waived by the Bond Trustee) at least forty (40) days prior to., date fixed for
redemption), in whole or in part, on any ARS Interest Paym Redemption
Price equal to the principal amount of Series 2005C M6ption, plus
accrued interest thereon (if any) to the date fixed mp out premium.
The Bonds are subject to ifAifforNFor to their stated maturity, at the
option of the City (which option shall be Wcrsed upon Request of the Corporation in
accordance with the Bond Indenture) in whole or in part, on any date, from hazard
insurance or condemnation proceeds received with respect to the facilities of any of the
Members and deposited in the Special Redemption Account, at a redemption Price equal
to the principal amount thereof, plus accrued interest thereon (if any) to the date fixed for
• redemption, without premium
DOCSSC1:358M.1 10
In addition, the Bonds are also subject to redemption prior to maturity at
• the option of the City (which option shall be exercised upon Request of the Corporation
in accordance with the Bond Indenture) as a whole (but not in part) on any date at the
principal amount thereof and interest accrWedkthereon (if any) to the date fixed for
redemption, without premium, ' $ f "" changes in the Constitution of the
United States of Ame ' tat or administrative action or inaction by
the United States e, or any agency or political subdivision thereof
or by reason of ici ecisions and there is a good faith determination by any
Member that (a) the aster Indenture has become void or unenforceable or impossible to
perform or (b) unreasonable burdens or excessive liabilities have been imposed on such
Member, including without limitation, federal, state or other ad valorem property, income
or other taxes not being imposed on the Date of Issuance.
The Series 2005C Bonds are also subject to mandatory redemption prior to
the Maturity Date, in part, from Sinking Fund Installments payable on December 1
(subject to adjustment in accordance with the Bond Indenture) of each year set forth
below (provided, that if the Series 2005C Bonds are in a Weekly Interest Rate Period, a
Short-Term Interest Rate Period or a Serial Bond Interest Rate Period, and any such
December 1 is not a Business Day, the applicable Sinking Fund Installment shall be paid
on the next succeeding Business Day; and provided further, that if the Series 2005C
Bonds are in an ARS Interest Rate Period and any such December 1 is not an ARS
Interest Payment Date, the applicable Sinking Fund Installment shall be paid on the next
succeeding ARS Interest Payment Date), in the amount set forth below, at a redemption
• price equal to 100% of the principal, amount to be redeemed, plus accrued interest thereon
(if any) to the date fixed for redemption, without premium:
•
DOCSSC1:358973.1 I I
Sinking Fund
• Installment Date
(December It)
2016
2017
2018
2019
2020
2021
2022
2023
20
%Y27
•
•
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040*
Sinking Fund Installments
$1,975,000
2,025,000
2,100,000
2,150,000
2,200,000
2,250,000
2,325,000
2,425,000
t Subject to adjustment as provided in the Bond Indenture.
* Final maturity.
2,450,000
2,525,000
2,600,000
2,700,000
2,750,000
2,825,000
2,900,000
2,975,000
3,050,000
3,150,000
3,250,000
3,350,000
3,375,000
3,525,000
3,600,000
3,700,000
3,825,000
Any redemption of this Bond shall be made as provided in the Bond
Indenture upon not less than thirty (30) days' nor more than sixty (60) days' notice
(except in the case of redemption of Bonds that bear interest at a Weekly Interest Rate, or
at a Bond Interest Term Rate which shall be upon not less than _n days' notice and
except in the case of redemption of Bonds that bear ' Interest Rate
which shall be upon not less than twenty-five mg a copy of the
redemption notice postage prepai IgIMORdress shown on the bond
registration books of the Bond Tru , owever, that failure b the Bond
� Y
Trustee to mail any notice or any defe erein or in the mailing thereof, as it affects any
particular Bond, shall not affect the validity of the proceedings for redemption of any
other Bonds.
Any notice of redemption given in accordance with the provisions of the
Bond Indenture may be rescinded by written notice given to the Bond Trustee by the
Corporation no later than five Business Days prior to the date specified for redemption.
DOCSSC1:35M3.1
12
If this Bond is called for redemption and payment is duly provided therefor as specified
• in the Bond Indenture, interest shall cease to accrue hereon from and after the date fixed
for redemption.
If an Event of Default (as that term is defined in the Bond Indenture) shall
occur, the principal of all Bonds may be de 1 iiue and payable upon the conditions, in
the manner and with the effec "$o>ridenture. The Bond Indenture
provides that in certai%ft c s consequences may be rescinded.
Subject *JAke limitations and upon payment of the charges, if any,
provided in the Bond Indenture, Series 2005C Bonds may be exchanged, at the
designated corporate trust office of the Bond Trustee, for a like aggregate principal
amount of Series 2005C Bonds of other authorized denominations.
This Bond is transferable by the Holder hereof, in person or by such
Person's attorney duly authorized in writing, at the designated corporate trust office of
the Bond Trustee, but only in the manner, subject to the limitations and upon payment of
the charges, if any, provided in the Bond Indenture, and upon surrender and cancellation
of this Bond. Upon such transfer a Series 2005C Bond or Bonds, of authorized
denomination or denominations and for the same aggregate principal amount, will be
issued to the transferee in exchange herefor.
The City and the Bond Trustee shall treat the Holder hereof as the absolute
owner hereof for all purposes, and the City and the Bond Trustee shall not be affected by
• any notice to the contrary.
The Bond Indenture and the rights and obligations of the City and of the
Holders of the Bonds and of the Bond Trustee may be modified or amended from time to
time and at any time in the manner, to the extent, and upon the terms provided in the
Bond Indenture; provided that no such modification or amendment shall (i) extend the
stated maturity of this Bond, or reduce the amount of principal hereof, or extend the time
of payment, or change the method of computing the rate of interest hereon, or extend the
time of payment of interest hereon, or reduce any premium pay�3 1 on the redemption .
hereof or change the Purchase Price to be paiOupon out t he consent of
the Holder hereof, or (ii) reduce the percen of the Holders of
which is required to effect any such or permit the creation of
any lien on the Revenues and othe 1 r the Bond Indenture as security
for the Bonds prior to or on a p the lien created by the Bond Indenture, or
deprive the Holders of the Bonds of the lien created by the Bond Indenture on such
Revenues and other assets (except as expressly provided in the Bond Indenture), without
the consent of the Holders of all Bonds then outstanding, all as more fiilly set forth in the
Bond Indenture.
•
DOCSSCt:358973.1 13
It is hereby Obythe d all acts, conditions and things
• required to exist, to have &�eny
performed precedent to and in the
issuance of this Bon appened and have been performed in due time,
form and manner as r ovisions of the Law and by the Constitution and
laws of the State of C ornia, and that the amount of this Bond, together with all other
indebtedness of the City, does not exceed any limit prescribed by the Law or the
Constitution and laws of the State of California, and is not in excess of the amount of
Bonds permitted to be issued under the Bond Indenture.
•
•
This Bond shall not be entitled to any benefit under the Bond Indenture, or
become valid or obligatory for any purpose, until the certificate of authentication and
registration hereon endorsed shall have been signed by the Bond Trustee.
DOCSSC1:358973.1 14
IN WITNESS WHEREOF, CITY OF NEWPORT BEACH has caused
• this Bond to be executed in its name and on its behalf by the facsimile signature of its
Mayor and its seal to be reproduced hereon by facsimile and attested by the facsimile
signature of its City Clerk, all as of the date set. forth above.
DOCSSCI:358973.1 15
CITY OF
Lo
AA
• BOND TRUSTEE'S CERTIFICATE OF AUTHENTICATION
AND REGISTRATION
•
This- is one of the Bonds described in the within mentioned Bond
Indenture, which has been registered on the date set forth below.
Dated: August 24, 2005.
DOCSSC1:3589n.1 16
WELLS FARGO BANK,
NATIONAL ASSOCIATIO140 It
as Bond Trustee
By
Authorized Officer
!� J
unto
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer
the within mentioned Bond and hereby irrevocably
constitute(s) and appoint(s) attorney, to transfer the same on the
books of the within named Bond Trustee, with full power of substitution in the premises.
• Signature Guaranteed By:
•
NOTICE: Signature must be guaranteed by
an eligible guarantor institution.
DOCSSC1:358973.1
By:
No ' ssigmnent
mu p the name as it
app tthe face of the within Bond in
every particular, without alteration or
enlargement or any change whatsoever.
Social Security Number, Taxpayer
Identification Number or other Identifying
Number of Assignee:
17
STATEMENT OF INSURANCE
• Financial Guaranty Insurance Company, doing business in California as FGIC
Insurance Company ( "Financial Guaranty "), has issued a policy containing the following
provisions with respect to the Bonds, such policy being on file at the principal office of
Wells Fargo Bank, National Association, as paying agent (the "Paying Agent'):
Financial Guaranty hereb �nally and irrevocably agrees to pay for
disburseme4tothe Bo lon of the princ ipal or accreted value (if
applicable) o s which is then due for payment and which the
issuer of th shall have failed to provide. Due for payment means,
with respec p r accreted value (if applicable), the stated maturity date thereof
or the date the same shall have been duly called for mandatory sinking fund
redemption and does not refer to any earlier date on which the payment of principal or
accreted value (if applicable) of the Bonds is due by reason of call for redemption (other
than mandatory sinking fund redemption), acceleration or other advancement_ofmaturity,
and with respect to interest, the stated date for payment of such interest.
Upon receipt of telephonic or telegraphic notice, subsequently confirmed in
writing, or written notice-by registered or certified mail, from a Bondholder or the Paying
Agent to Financial Guaranty that the required payment of principal, accreted value or
interest (as applicable) has not been made by the Issuer to the Paying Agent, Financial
Guaranty on the due date of such payment or within one business day after receipt of
• notice of such nonpayment, whichever is later, will make a deposit of funds, in an
account with U.S. Bank Trust National Association, or, its su cessor as its agent
(the "Fiscal Agent "), sufficient to make the portio o t not paid by the
Issuer. Upon presentation to the Fis s tory to it of the
Bondholder's right to receive Ift— ppropriate instruments of
assignment required to vest all of M on er s right to such payment in Financial
Guaranty, the Fiscal Agent will disbIKe such amount to the Bondholder.
•
As used herein the term `Bondholder" means the person other than the Issuer or
the borrower(s) of bond proceeds who at the time of nonpayment of a Bond is entitled
under the terms of such Bond to payment thereof.
The policy is non - cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
DOCSSCI:358973.1 18
EXHIBIT NO. 37
Receipt for
Obligation No. 14
(executed by the Bond Trustee)
(BC)
0
•
RECEIPT FOR OBLIGATION NO. 14
The undersigned, Wells Fargo Bank, National Association, as bond trustee for the
City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian), Series
2005A, 2005B and 2005C, hereby acknowledges receipt from Wells Fargo Bank, National
Association, as master trustee under Supplemental Master Indenture for Obligation No. 14, dated as
of August 1, 2005, of Obligation No. 14, dated as of August 1, 2005, in the aggregate principal
amount of $200,000,000.
DOCSSC1:358317.3
Dated: August 24, 2005
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Bond Trustee
By: dak6y
Authorized Representative
EXHIBIT NO. 38
Opinion of Counsel to
the City
(City Attorney)
CITY OF NEWPORT BEACH
OFFICE OF THE CITY ATTORNEY
Fo R
August 24, 2005
City of Newport Beach, California
Newport Beach, California
Citigroup Global Markets Inc.
Los Angeles, California
Hoag Memorial Hospital Presbyterian
Newport Beach, California
$200,000,000
City of Newport Beach
Insured Revenue Bonds
• (Hoag Memorial Hospital Presbyterian)
Series 2005A, 2005B and 2005C
(the "Bonds ")
Ladies and Gentlemen:
This opinion is delivered to you pursuant to the Bond Purchase Contract dated August
22, 2005 (the "Purchase Contract'), between the City of Newport Beach, California (the
"City ") and Citigroup Global Markets Inc. (the "Purchaser"), which Hoag Memorial
Hospital Presbyterian (the "Borrower") has approved, in connection with the issuance by
the City of $200,000,000 aggregate principal amount of its Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian) Series 2005A, 2005B and 2005C (the "Bonds ")
pursuant to a Bond Indenture dated as of August 1, 2005 (the "Bond Indenture'),
between the City and Wells Fargo Bank, National Association, as bond trustee (the
"Bond Trustee "). The Bonds are being issued for the purpose of making a loan of the
proceeds thereof to the Borrower pursuant to a Loan Agreement dated as of August 1,
2005 (the "Loan Agreement) between the City and the Borrower.
The opinions or conclusions expressed herein are based on an analysis of existing
laws, regulations, rulings ands court decisions and cover certain matters not directly
addressed by such authorities. Such opinions may be affected by actions taken or
omitted or events occurring after the date hereof. We have not undertaken to
. determine, or to inform any person, whether any such actions or events are taken or do
occur. We have assumed the genuineness of all documents and signatures presented
to us (whether as originals or as copies) and the due and legal execution and delivery
thereof by, and validity against, any parties other than the City. We have not
3300 Newport Boulevard • Post Office Box 1768 • Newport Beach, California 92658 -8915
Telephone: (949) 644 -3131 • Fax: (949) 644 -3139 • www.city.newport- beach.ca.us
• City of Newport Beach
Citigroup Global Markets Inc.
Hoag Memorial Hospital Presbyterian
Page 2
August 24, 2005
undertaken to verify independently, and have assumed, the accuracy of the factual
matters represented, warranted or certified in the documents, and of the legal
conclusions contained in the opinions, referred to in the second paragraph hereof. We
have further assumed compliance with all covenants and agreements contained in such
documents. In addition, we call attention to the fact that the rights and obligations under
the Bonds, the Bond Indenture, the Loan Agreement and the Purchase Contract may be
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other laws affecting creditors' rights, to the application of equitable principles and to
the exercise of judicial discretion in appropriate cases. We express no opinion with
respect to any indemnification, contribution, choice of law, choice of forum or waiver
provisions contained in the foregoing documents.
As counsel for the City in connection with the issuance of the Bonds, I have examined
certain documents, records and proceedings as I have deemed necessary and
appropriate for the purpose of this opinion and, on the basis of the foregoing and upon
• consideration of applicable law, I am of the opinion that:
1. The City is a municipal corporation and charter city duly organized and validly
existing under a freeholder's charter under the Constitution and laws of the State
of California and has corporate power and authority to consummate and carry out
all transactions contemplated by the Purchase Contract.
2. The Official Statement used in connection with the issuance and sale of the
Bonds (the "Official Statement ") has been duly authorized, executed and
delivered by the City.
3. Without assuming any responsibility for the accuracy, completeness or fairness
of the information or the statements contain in the Official Statement, to my
knowledge, the information relating to the City in its limited role as the conduit
issuer of the Bonds contained in the Official Statement under the headings "THE
CITY" and "LITIGATION — The City" does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. The Resolution of the City Council of the City approving and authorizing the
execution and delivery of the Bond Indenture, the Purchase Contract, the Bonds,
• the Loan Agreement and the Official Statement was duly adopted at a meeting of
the City Council which was called and held pursuant to law and all public notices
required by law and the procedural rules of the City Council and at which a
quorum was present and acting throughout.
• City of Newport Beach
Citigroup Global Markets Inc.
Hoag Memorial Hospital Presbyterian
Page 3
August 24, 2005
5. There is no action, suit, proceeding or investigation at law or in equity before or
by any court, public board or body known to be pending or threatened against or
affecting the City to restrain or enjoin the issuance of delivery of the Bonds or the
collection of revenues pledged under the Bond Indenture or the assignment of
the Loan Agreement under the Bond Indenture, in any way contesting or
affecting any authority for the issuance of the Bonds or the validity of the Bonds,
the Loan Agreement, the Bond Indenture or the Purchase Contract or in any way
contesting the existence or powers of the City with respect to the issuance of the
Bonds or the security therefore wherein an unfavorable decision, ruling or finding
would materially adversely affect the transactions contemplated by the Official
Statement, the Bond Indenture, the Loan Agreement or the Purchase Contract or
the validity of the Bonds.
6. The execution and delivery of the Bonds, the Bond Indenture, the Loan
Agreement and the Purchase Contract and compliance with the provisions
thereof under the circumstances contemplated thereby do not and will not conflict
with or constitute on the part of the City a breach or default under any agreement
or other instrument to which the City is a party or by which it is bound or any
existing law, regulation, court order or consent decree to which the City is
subject, the result of which breach or default would be to materially adversely
affect the City's ability to perform its obligations under the Loan Agreement, the
Bond Indenture, the Bonds or the Purchase Contract.
7. The Loan Agreement, the Bond Indenture, the Bonds and the Purchase Contract
have been duly executed and delivered by the City and, assuming due
authorization, execution and delivery by the other parties thereto, are valid and
binding obligations of the City enforceable in accordance with their terms subject
to laws relating to bankruptcy, insolvency, reorganization or creditors' rights
generally and to the application of equitable principles if equitable remedies are
sought.
8. All right and title to the payments due under the Loan Agreement have been duly
and legally assigned and pledged to the Bond Trustee for the payment of the
principal of, premium, if any, and interest on the Bonds.
Resp tfully Submitted,
Robin L. Clauson,
City Attorney
EXHIBIT NO. 39
Opinion of
Underwriter's Counsel
(Underwriter's Counsel)
®FOLEY
FOLEY d LARDNER LLP
ATTORNEYS AT LAW
321 NORTH CLARK STREET
SUITE 2800
• CHICAGO. IL 80810 -4784
312.832.4500 TEL
August 24, 2005 312.832.4700 FAX
Ll
www.foloy.com
CLIENTIMATTER NUMBER
058798 -0132
Citigroup Global Markets Inc.
Los Angeles, California
Re: $200,000,000 aggregate principal amount of the City of Newport
Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian) Series 2005A, 2005B and 2005C (the "Bonds ")
Ladies and Gentlemen:
We have acted as counsel to you as the Underwriter in connection with the
purchase by you of the $200,000,000 aggregate principal amount of the City of Newport Beach
Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian) Series 2005A, 2005B and
2005C (the "Bonds "), pursuant to a Bond Purchase Contract (the "Bond Purchase Contract "), by
and between the City of Newport Beach (the "City ") and you, as the Underwriter, which Hoag
Memorial Hospital Presbyterian (the "Borrower "), as Borrower, has approved. The Bonds are
being issued pursuant to a Bond Indenture dated as of August 1, 2005 (the "Bond Indenture ")
between the City and Wells Fargo Bank, National Association, as bond trustee (the "Trustee ")
for the purpose of making a loan to the Borrower pursuant to the Loan Agreement dated as of
August 1, 2005 (the "Loan Agreement') between the City and the Borrower.
In that connection, we have reviewed the Loan Agreement; the Bond Indenture;
the Master Indenture dated as of October 1, 1984, as supplemented by the Supplemental Master
Indenture for Obligation No. 14 (as so supplemented, the "Master Indenture "), between the
Borrower and Wells Fargo Bank, National Association, as successor Master Trustee (the "Master
Trustee "); Obligation No. 14; the Official Statement dated August 12, 2005 (the "Official
Statement') relating to the Bonds; the Continuing Disclosure Certificate dated the date of
issuance and delivery of the Bonds (the "Continuing Disclosure Certificate ") between the
Borrower and Wells Fargo Bank, National Association, as Dissemination Agent; the Letter of
Representation described in the Bond Purchase Contract; the Auction Agent Agreement dated as
of August 1, 2005 between the Trustee and Wells Fargo Bank, N.A., as Auction Agent; the
Broker - Dealer Agreement, dated as of August 1, 2005, among the Auction Agent, the Borrower
and you, as Broker - Dealer;, the financial guaranty insurance policy of FGIC Insurance Company
(the "Insurer ") insuring the Bonds; the opinion of Stradling Yocca Carlson & Rauth, a
Professional Corporation, counsel to the Borrower, dated the date hereof, certifications of the
City, the Borrower, the Master Trustee, the Trustee and others as to certain matters; such
opinions and such other records and documents; and we have made such investigations of law, as
we have deemed appropriate as a basis for the opinions and statements hereinafter expressed.
BOSTON JACKSONVILLE NEW YORK SAN DIEGO /DEL MAR TAMPA
BRUSSELS LOS ANGELES ORLANDO SAN FRANCISCO TOKYO 011.1287394.1
CHICAGO MADISON SACRAMENTO SILICON VALLEY WASHINGTON, D.C.
DETROIT MILWAUKEE SAN DIEGO TALLAHASSEE WEST PALM BEACH
FOLEY
Citigroup Global Markets Inc.
•August 24, 2005
Page 2
In rendering the opinions and making the statements hereinafter expressed, we are
not expressing any opinion or view of the validity, accuracy or sufficiency of the documents,
certificates or opinions referred to above or on the authorization, issuance, delivery or validity of
the Bonds and we have assumed, but not independently verified, that the signatures on all
documents, certificates and opinions that we have reviewed are genuine.
Based on and subject to the foregoing, and in reliance thereon, we are of the
opinion that:
1. The Bonds are not subject to the registration requirements of the Securities
Act of 1933, as amended; and the Bond Indenture and the Master Indenture are exempt from
qualification pursuant to the Trust Indenture Act of 1939, as amended.
2. Because the primary purpose of our professional engagement was not to
establish factual matters and because of the wholly or partially non -legal character of many
determinations involved in the preparation of the Official Statement, we are not passing upon
and do not assume any responsibility for the accuracy, completeness or fairness of any of the
statements contained in the Official Statement and make no representation that we have
independently certified the accuracy, completeness or fairness of any such statements. However,
• in our capacity as counsel for the Underwriter during the course of preparation of the Official
Statement, we met in conferences or had discussions with your representatives, representatives of
the Borrower and its counsel, bond counsel, and others, during which conferences the contents of
the Official Statement and related matters were discussed. Based on our participation in the
above mentioned conferences and in reliance thereon and on the certificates, opinions and other
documents herein mentioned, we advise you that no information came to our attention which
caused us to believe that the Official Statement as of its date and as of the date of this opinion
(except for any financial or statistical data or forecasts and the information relating to DTC and
the Insurer contained therein as to which we express no opinion or view) contained any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading.
3. The Continuing Disclosure Certificate satisfies the requirements of
Section (b)(5)(i) of Rule 15c2 -12 of the Securities and Exchange Commission (17 C.F.R., Part
240, §420.15c2- 12)(the "Rule "), which provide for an undertaking for the benefit of the holders,
including beneficial owners, of the Bonds to provide certain annual financial information and
event notices to various information repositories at the times and in the manner required by the
Rule.
4. With respect to the Bonds, other than the Borrower, there are no
"obligated persons" within the meaning of the Rule which would be required to provide certain
• annual financial information and event notices to various information repositories as required by
the Rule.
011.1287394.1
:FOLEY
Citigroup Global Markets Inc.
•August 24, 2005
Page 3
In rendering the foregoing opinions in paragraphs 3 and 4 hereof, we have
assumed the due authorization, execution and delivery of the Continuing Disclosure Certificate
by the Borrower, and that such Continuing Disclosure Certificate is a valid and binding
obligation of the Borrower enforceable in accordance with its terms.
The opinions expressed herein are based upon existing law as of the date hereof
and we express no opinion herein as of any subsequent date or with respect to any pending
legislation. We assume no obligation to supplement this opinion if any applicable laws change
after the date hereof or if we become aware of any facts that might change the opinions
expressed herein after the date hereof.
In rendering these opinions, we are expressing no opinion on the validity of the
Bonds or on the exclusion of interest evidenced by the Bonds from the gross income of the
holders thereof for federal income tax purposes or the exemption of interest on the Bonds from
State of California personal income taxes. We understand that you are relying on the opinion of
Bond Counsel in that regard.
The opinions herein are limited to the laws of the United States.
• We are furnishing this letter to you pursuant to the Bond Purchase Contract solely
for your benefit as Underwriter. This letter is not to be used, circulated, quoted or otherwise
referred to for any other purpose except that reference to our opinion in the first numbered
paragraph of this letter may be made in the Official Statement or other documents and except
that reference may be made to this letter in any list of closing documents pertaining to the sale of
the Bonds.
Respectfully,
Foley & Lardner LLP
4JL'1'f (-Lp
•
011.1287394.1
EXHIBIT NO. 40
Opinion of Counsel to
the Corporation
(CC)
STRADLING YOCCA CARLSON & RAUTH
•
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
660 NEWPORT CENTER DRIVE, SUITE 1600
NEWPORT BEACH, CA 92660 -6422
TELEPHONE (949) 725 -4000
FACSIMILE (949) 725 -4100
August 24, 2005
City of Newport Beach
Newport Beach, California
Citigroup Global Markets, Inc.
Los Angeles, California
Financial Guaranty Insurance Company
New York, New York
Wells Fargo Bank, National Association
• as bond trustee and as master trustee
Los Angeles, California
SAN FRANCISCO OFFICE
44 MONTGOMERY STREET. SUITE 4200
SAN FRANCISCO, CALIFORNIA 94104
TELEPHONE (415) 293 -2240
FACSIMILE (415) 293 -2255
SANTA BARBARA OFFICE
3D2 OLIVE STREET
SANTA BARBARA, CALIFORNIA 93101
TELEPHONE (9D5) 564 -0065
FACSIMILE (BD5) 564 -1044
Re: $200,000,000 Citv of Newport Beach Insured Revenue Bonds (Hoag Memorial
Hospital Presbyterian) Series 2005A. Series 2005B and Series 2005C
Ladies and Gentlemen:
We have acted as special counsel to Hoag Memorial Hospital Presbyterian, a California
nonprofit public benefit corporation (the "Corporation "), in connection with the sale and delivery of
$200,000,000 City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital
Presbyterian) Series 2005A, Series 2005B and Series 2005C (collectively, the "Bonds "); however,
we are not general counsel to the Corporation.
Our opinion is based on the following general transaction structure:
The Bonds are being executed and delivered pursuant to an indenture dated as of August 1,
2005 (the "Indenture ") between the City of Newport Beach (the "City ") and Wells Fargo Bank,
National Association, as trustee (the "Bond Trustee'). The proceeds of the Bonds are being loaned
to the Corporation under the terms of a loan agreement dated as of August 1, 2005 (the "Loan
Agreement') between the City and the Corporation.
The Corporation is issuing its obligation number fourteen ( "Obligation No. 14 ") to evidence
its obligation to make payments sufficient to pay the principal of, premium, if any, interest on and
. purchase price of the Bonds pursuant to a master trust indenture dated as of October 1, 1984, as
DOCSOC/ 1 119552v6/22936 -0004
City of Newport Beach
Citigroup Global Markets, Inc.
is
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Two
previously amended and supplemented by supplemental master indentures and agreements (as so
amended and as amended by Supplemental Master Indenture No. 14 (as hereinafter defined), the
"Master Indenture "), by and between the Corporation and Wells Fargo Bank, National Association,
as successor master trustee (the "Master Trustee ").
The Bonds are being sold pursuant to a bond purchase contract dated August 22, 2005
between the Corporation, the City and Citigroup Global Markets, Inc. (the "Purchase Contract "). An
official statement dated August 12, 2005 (the "Official Statement ") has been prepared to furnish
information with respect to the sale and delivery of the Bonds.
Following their issuance the Bonds will bear interest at the Auction Rate, as defined in the
Indenture, determined by Wells Fargo Bank, National Association, as the Auction Agent, pursuant to
certain Auction Procedures, as defined in the Indenture. The Auction Procedures require the
participation of one or more broker - dealers.
Pursuant to a broker- dealer agreement dated as of August 1, 2005 (the "Broker- Dealer
Agreement ") by and among Wells Fargo Bank, National Association, as Auction Agent, Citigroup
Global Markets Inc. and the Corporation, Citigroup Global Markets Inc. agrees to act as Broker -
Dealer with respect to the Auction Procedures.
This Opinion is provided pursuant to paragraph 3(e)(4) of the Purchase Contract.
We have made such investigations of facts and law, examined such documents, obtained such
certificates from public officials and officers of the Corporation, and done such other things as we
have determined to be necessary or appropriate to render this opinion. As to questions of fact
relevant to this opinion, we have been furnished with and relied solely upon certificates of public
officials, closing certificates of and questionnaires completed by certain officers of the Corporation,
and documents submitted to us in response to our information request to the Corporation dated on or
about June 3, 2005 and follow -up with officers of the Corporation where indicated based on the
information received from such sources. We have assumed and have not verified the accuracy of the
facts stated in any certificate, questionnaire or the documents provided to us in response to our
requests as described above. Whenever a statement herein is qualified by "known to us," "to our
current actual knowledge," or similar phrase, it is intended to indicate that, during the course of our
representation of the Corporation, no information that would give us current actual knowledge of the
inaccuracy of such statement has come to the attention of those attorneys in this firm who have
rendered legal services in connection with the transaction described in the introductory paragraph
hereof. However, except as otherwise expressly indicated, we have not undertaken any independent
investigation to determine the accuracy of such statement, and any limited inquiry undertaken by us
• during the preparation of this opinion letter should not be regarded as such an investigation; no
DOCS OC/ 1119552v6r22936 -0004
City of Newport Beach
. Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Three
inference as to our knowledge of any matters bearing on the accuracy of any such statement should
be drawn from the fact of our representation of the Corporation.
We have assumed the legal capacity of all natural persons and that, with respect to all parties
to agreements or instruments relevant hereto (other than the Corporation), such parties had the
requisite power and authority to execute, deliver and perform such agreement or instruments, that
such agreements or instruments have been duly authorized by all requisite action, executed and
delivered by such parties, and that such agreement or instruments are the valid binding and
enforceable obligations of such parties. We have further assumed the authenticity of all items
submitted to us as originals, the conformity to originals of all items submitted to us as certified or
photostatic copies, and except for signatures on behalf of the Corporation, the genuineness of such
signatures. We have further assumed that the City is a duly organized and validly existing local
government entity and that the Bonds have been duly issued by the City.
Our opinions expressed herein are subject to and limited by the effect of Trident Center v.
• Connecticut General Life Insurance Co., 847 F.2d 564 (9"' Cit. 1988), in which the Ninth Circuit
Court of Appeals, applying what it said was California law, held that parole evidence was admissible
to vary the provisions of an unambiguous agreement. To the extent Trident accurately expresses
California law on the subject, our opinion assumes that no party to any agreement or instrument
referenced herein in any action seeking to enforce it offers any parole evidence that would expand,
modify or otherwise affect the express terms of said agreement or document or the respective rights
or obligations of the parties thereunder.
•
Based on the foregoing, and subject to the additional assumptions, exceptions, the
qualifications and limitations set forth below, as of the date of this letter, it is our opinion that:
1. The Corporation is a nonprofit public benefit corporation duly organized and in good
standing under the laws of the State of California.
2. The Corporation has the corporate power and authority to enter into the Loan
Agreement, the Tax Certificate and Agreement (as defined in the Indenture), the Purchase Contract
(including the Letter of Representation appended thereto), the Broker - Dealer Agreement,
Supplemental Master Indenture No. 14, Obligation No. 14 and the Continuing Disclosure Certificate
(collectively, the `Borrower Documents "), to perform all of its duties contained therein and in the
Master Indenture, and to approve the Official Statement.
3. The execution of Supplemental Master Indenture No. 14 is authorized or permitted by
the Master Indenture.
DOCSOC/ 1 1 19552v6/22936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Four
4. All conditions precedent to the execution of Supplemental Master Indenture No. 14
have been complied with. The Borrower Documents and the Master Indenture have been duly
authorized by all necessary corporate action on the part of the Corporation and have been duly
executed and delivered by the Corporation.
5. The obligations under the Loan Agreement and Obligation No. 14 which have been
assigned to the Bond Trustee constitute the legal, valid and binding agreements of the Corporation
with the Bond Trustee enforceable against the Corporation in accordance with their terms.
6. The Borrower Documents and the Master Indenture and any obligations of the
Corporation under the Loan Agreement and Obligation No. 14 not so assigned to the Bond Trustee
constitute the legal, valid and binding obligations of the Corporation, enforceable against the
Corporation in accordance with their terms.
• 7. The Corporation has the corporate power to approve and has duly approved the
Indenture and the Official Statement and duly authorized the distribution of the Official Statement.
8. The distribution of the Official Statement and the approval thereof by the
Corporation, the approval by the Corporation of the Indenture and the execution and delivery by the
Corporation of the Master Indenture and the Borrower Documents, the performance by the
Corporation of the duties and covenants of the Corporation contained therein and the fulfillment of or
compliance by the Corporation with the terms and conditions thereof (a) do not and will not
constitute on the part of the Corporation a breach of or default (with due notice or the passage of time
or both), and do not result in the creation or imposition of any prohibited lien, charge or encumbrance
upon the property or assets of the Corporation, under the articles of incorporation or bylaws of the
Corporation, or the resolution of the Board of Directors of the Corporation duly adopted on July 12,
2005 authorizing the transactions contemplated by the documents referred to in this paragraph, (b) do
not and will not, to our knowledge, constitute a material breach of the terms, conditions or provisions
of, or constitute a default under, any material contract, undertaking, indenture or other agreement or
instrument; and (c) neither is prohibited by, nor subjects the Corporation to, a fine, penalty, or other
similar sanction under, any statute or regulation of the State of California, or any federal statute or
regulation, of a type which are typically applicable to transactions similar to those transactions
contemplated by the documents referred to in this paragraph, and which breach, default, lien, charge
or encumbrance would materially and adversely affect the consummation of the transactions
contemplated by the documents referred to in this paragraph, or the financial condition or operations
of the Corporation.
9. With respect to requirements imposed on the Corporation, no consent, approval,
. authorization of or designation, declaration, or filing with any California or United States federal
DOCSOG 1119552v6(22936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Five
•
authority (except as may be required under any state or federal blue sky or securities laws) is required
in connection with the execution and delivery by the Corporation of the Master Indenture and the
Borrower Documents or the approval by the Corporation of the Indenture and the Official Statement
or the distribution of the Official Statement, or, in the case of the Master Indenture and the Borrower
Documents, is required in connection with the performance of the obligations and duties of the
Corporation contained therein, except as has been obtained or made on or before the date hereof and
as is in full force and effect or which are not required to be made or obtained until after the date
hereof. All requirements and conditions to be fulfilled by the Corporation prior to the issuance of
Obligation No. 14 set forth in the Master Indenture and the Supplemental Master Indenture have
been complied with and satisfied.
10. (a) To our current actual knowledge, there is no action, suit, or pending against
the Corporation or its properties in any court or before any governmental authority or agency, or
arbitration board or tribunal, which challenges the consummation of the financing transactions
contemplated by or the validity of the Bonds, the Master Indenture or the Borrower Documents,
which, if determined adversely to the Corporation, would have a material and adverse effect on such
consummation or validity.
(b) To our current actual knowledge, there is no action, suit or proceeding,
pending against the Corporation or the assets, properties or operations of the Corporation which, if
determined adversely to the Corporation, would have a material and adverse effect on the
Corporation or its financial condition, assets or operations (taken as a whole).
(c) To our current actual knowledge, the Corporation is not in violation or breach
with respect to any specific judicial or administrative adjudicative order or decree directed to or
affecting the Corporation by any federal, state, or municipal court or other governmental authority
which violation or breach might have consequences that would materially and adversely affect the
consummation of the transactions contemplated by the documents referred to in this paragraph 10 or
the financial condition or operations of the Corporation (taken as a whole).
11. The Corporation is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code "), and is exempt from federal income taxation under
Section 501(a) of the Code except for unrelated business income subject to taxation under
Section 511 of the Code.
12. The Corporation is an organization described in Section 3(a)(4) of the Securities Act
of 1933, as amended, and Section 12(g)(2)(D) of the Securities Act of 1934, as amended.
DOCSOC/ 1119552v6/22936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Six
13. The Corporation has the corporate power and authority to own its properties and
assets and to carry on its business as now being conducted by it. The Corporation is duly licensed by
the State of California Department of Health Services as a general acute care hospital and is qualified
to participate in the federal Medicare and state Medi -Cal programs.
14. The Master Indenture is exempt from qualification under the Trust Indenture Act of
1939, as amended, and Obligation No. 14 is exempt from registration under the Securities Act of
1933, as amended.
In connection with our participation in the preparation of the Official Statement, we have not
independently verified the accuracy, completeness or fairness of the statements contained therein,
and the limitations inherent in the examination made by us and the knowledge available to us are
such that we are unable to assume, and we do not assume, any responsibility for the accuracy,
completeness or fairness of the statements contained in the Official Statement. However, on the
• basis of our examination and our participation in conferences with certain officers of the Corporation,
its independent auditors and representatives of the Underwriter, its counsel and Bond Counsel in
connection with the preparation of the Official Statement, we can advise you supplementally as a
matter of fact that we have no current actual knowledge that the Official Statement as of its date or
the date hereof contained or contains any untrue statement of a material fact or omitted or omits to
state any material fact required to be stated therein or necessary in order to make the statements
therein not misleading. However, we are not expressing any belief as to the financial statements and
the notes thereto or any financial statistical or economic data or forecast, or the demographic and
statistical data, or any information regarding the City, the Book -Entry Only System and The
Depository Trust Company, all as contained in the Official Statement.
•
On the basis of our examination (including a computerized Lexis on -line search of UCC
filings with the California Secretary of State dated August 22, 2005), and our participation in
conferences with certain officers of the Corporation, we can advise you supplementally as a matter of
fact that to our current actual knowledge the Corporation has not created or suffered to be created or
exist any Liens, other than Permitted Liens, as such terms are defined in the Master Indenture. We
advise you we have not reviewed a current preliminary or other title report with respect to the real
estate assets of the Corporation.
Our opinion is subject to the following qualifications:
(a) We have not examined the question of what law would govern the
interpretation or enforcement of the Master Indenture, the Indenture, Obligation No. 14, the
Loan Agreement, the Purchase Contract or the Broker - Dealer Agreement and, except as set
DOCSOC/ 1119552v6/22936 -0004
City of Newport Beach
Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Seven
forth in b, c and d below, we express no opinion with respect to the laws of any state or
jurisdiction other than California.
(b) We express our opinion with respect to federal law only as set out in
paragraphs 8, 9, 10, 11, 12, 13 and 14 hereof and as it may apply to exception paragraphs c,
d, a and g. In addition, the supplemental advisory statements set forth in the paragraph
immediately following paragraph 14 are made with respect to federal law to the extent it may
apply.
(c) Except as specifically provided in paragraphs 12 and 14 and in exception
paragraph d, we express no opinion with respect to the registration or qualification provisions
of federal or state securities laws or their application to any of the documents referred to
herein or any transaction contemplated thereunder.
• (d) The enforceability of the documents listed in paragraphs 5 and 6 may be
limited:
(i) by bankruptcy, insolvency, fraudulent conveyance, or other similar
laws or proceedings affecting the enforcement of creditors' rights generally as such
proceedings or laws affect the Corporation, including, without limitation, self -help
remedies, applicable foreclosure procedures and by application of equitable principles
regardless of whether such enforceability is considered in a proceeding in equity or at
law,
(ii) to the extent that enforcement may be held to be against public policy,
(iii) to the extent that the indemnification provisions in such documents
may be limited by applicable securities law or public policy,
(iv) by the implied covenant of good faith and fair dealing, and
(v) to the extent that enforcement may be limited by donor restrictions on
certain funds.
(e) Our opinion as expressed in paragraphs 8 (as to decrees and orders) and 10 is
based solely upon a status review of the litigation identified by the Corporation, an interview
with the President and the Chief Financial Officer of the Corporation, a review of the minutes
of the Board of Directors of the Corporation, and a review of responses to inquiries by us of
• litigation counsel identified by the Corporation regarding litigation matters pertaining to the
Corporation.
DOCSOC/ 1 119552v6f22936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Eight
(f) We express no opinion as to
0) The enforceability of provisions in any of the documents mentioned
herein with respect to the payment of attorneys' fees.
(ii) The enforceability under certain circumstances of provisions waiving
stated rights or unknown future rights, or providing that rights or remedies are not
exclusive, but every right or remedy is cumulative and may be exercised in addition
or with any other right or remedy or that the election of some particular remedy or
remedies does not preclude or waive recourse to one or more others.
(iii) The enforceability under certain circumstances of provisions which
waive statutory rights to receive notice or to be allowed to cure, or which waive
statutes of limitations.
• (iv) The enforceability under certain circumstances of provisions to the
effect that failure to exercise or delay in exercising rights or remedies will not operate
as a waiver of that right or remedy or that waivers must be in writing in order to be
effective.
(v) The enforceability under certain circumstances of provisions to the
effect that the invalidity or unenforceability of certain provisions shall not impair the
validity or enforceability of remaining provisions.
(vi) The enforceability of provisions in any of the documents relating to
the disposition of insurance proceeds or condemnation proceeds.
(vii) The enforceability of provisions in any of the documents relating to
the execution of claims by third parties to such documents.
(viii) The enforceability of provisions increasing the interest rate payable
after a default or imposing a prepayment premium (except upon voluntary
prepayment) or late charges.
(ix) The enforceability of provisions which waive rights of set -off.
(x) The enforceability of provisions that time is of the essence.
• (xi) The enforceability of any provisions that indemnify any party against
its own negligence or wilful misconduct.
DOCSOC/ 1119552 v6 /22936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Nine
(xii) The effect of California Civil Code Section 1670.5 which provides
that a court may refuse to enforce, or may limit the application of, a contract or any
clause thereof which the court finds as a matter of law to have been unconscionable at
the time it was made.
(xiii) The effect of Section 1698 of the California Civil Code which
provides in part that provisions of any instrument or agreement may only be waived
in writing will not be enforced to the extent that an oral agreement has been executed
modifying provisions of such instrument or agreement.
(xiv) The enforceability of provisions governing choice of law, waiving the
right to trial by jury, consenting to jurisdiction or venue, altering the statutory method
of service of process, or appointing any party as the attorney -in -fact for the other
Pty.
• (g) Certain provisions of the Borrower Documents and the Master Indenture may
be unenforceable under applicable California laws governing such provisions, but neither
such laws nor the possible unenforceability of the provisions referred to in section (f) above,
subject to the other exceptions, qualifications and limitations in this Opinion, render the
Borrower Documents and the Master Indenture invalid as a whole or substantially interfere
with realization of the principal benefits provided by the Borrower Documents and the
Master Indenture. In addition, we advise you that California court decisions invoking
statutes or principles of equity have held that certain covenants and provisions of agreements
are unenforceable where (i) the breach of such covenants or provisions imposes restrictions
or burdens upon the debtor, including the acceleration of indebtedness due under debt
instruments, and it cannot be demonstrated that the enforcement of such restrictions or
burdens is reasonably necessary for the protection of the creditor, or (ii) the creditor's
enforcement of such covenants or provisions under the circumstances would be unreasonable,
violate the creditor's implied covenant of good faith and fair dealing or would be
commercially unreasonable.
(h) Our opinions as expressed in paragraphs 1 1 and 12 are based solely upon:
(i) The current articles of incorporation as certified by the Secretary of
State of the State of California and bylaws of the Corporation as provided to us by the
Corporation;
(ii) A copy of a letter dated March 10, 1954 by the Internal Revenue
• Service addressed to the Corporation confirming that the Corporation is exempt from
DOCS00 1119552v6122936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Ten
federal income taxes under Section 501(a) of the Code as an organization described
in Section 501(c)(3) and that the Corporation is not a "private foundation" within the
meaning of Section 509(a) of the Code;
(iii) A certificate from the Executive Vice President of the Corporation
stating that the Corporation has not been notified by the Internal Revenue Service of
any investigation of, or proposed or actual revocation of its status as an organization
described in section 501(c)(3) of the Code which is not a private foundation; and
(iv) Factual information set forth in certificates from officers of the
Corporation, the Corporation's responses to our questionnaire delivered to us on
June 30, 2005 and the documents and other information submitted to us (including at
least three years of minutes of the Board of Directors of the Corporation and its last
three Form 990 filings with the Internal Revenue Service) in response to our
• information request to the Corporation dated on or about June 3, 2005, and follow -up
with officers of the Corporation where indicated based on the information received
from such sources.
(i) We understand that you will rely upon the opinion of Bond Counsel as to
matters concerning the effect of the execution and delivery of the Indenture on the validity
and tax- exempt status of the Bonds, and we express no opinion herein on such matters.
Q) The opinions expressed herein are based on facts, laws, regulations and case
law in effect as of the date hereof, and we assume no obligation to revise or supplement this
letter should such facts, laws, regulations and case law be changed in any respect, including
any changes in organization or affairs of the Corporation.
(k) We have not rendered insurance advice to the Corporation as to any types or
classifications of coverage, including general and medical malpractice liability coverage, and
we do not represent by this opinion or otherwise that we have reviewed or made any
assessment about, nor do we express any opinion about the types or amounts of coverage, of
the ability of any insurer or any self insurance program or organization to meet its obligations
pursuant to any policy or agreement with the Corporation, or of the adequacy of the funding
or reserves thereof.
(1) As special counsel to the Corporation in this matter, we have not rendered
financial advice to the Corporation and do not represent by this opinion, or otherwise, that we
have reviewed or made any assessment about, nor do we offer any opinion about, the
• financial condition of the Corporation, past, present or future (except only as financial
DOCSOC71119552v6122936 -0004
City of Newport Beach
• Citigroup Global Markets, Inc.
Financial Guaranty Insurance Company
Wells Fargo Bank, National Association
August 24, 2005
Page Eleven
condition is related to a standard of materiality as used in paragraphs 8, 10(b) and 10(c)
hereof), and with respect to the latter we have relied entirely on the assessment of materiality
made by the Executive Vice - President of the Corporation.
(m) We express no opinion with respect to any numerical or mathematical
calculation or computation regarding the Bonds, any of the documents referred to herein or
any certificate given or issued with respect to the matters referred to herein. Without limiting
the generality of the above, we specifically express no opinion with respect to any such
calculation or computation contained in or related to the subject matter of the "Tax
Certificate and Agreement" or Internal Revenue Service Form 8038.
(n) We express no opinion as to the ownership or the condition of title of any real
or personal property of the Corporation.
• (o) Our opinion is limited to the matters expressly set forth herein, and no
opinion or other statement may be inferred or implied beyond the matters expressly stated.
We are members of the Bar of the State of California and, accordingly, do not purport to be
experts on or to be qualified to express any opinion herein concerning, nor do we express any
opinion herein concerning, any laws other than the laws of the State of California and federal law.
C�
This opinion is furnished by us as special counsel to the Corporation and it may be relied
upon only by the addressees, their counsel and Orrick, Herrington & Sutcliffe, LLP, as Bond
Counsel. This letter shall not be used, quoted, disseminated, circulated or relied upon by any other
person or entity, for any purpose, without our prior written consent, except as copies may be included
in transcripts of the proceedings relating to the issuance of the Bonds.
DOCSOG l 119552v6/22936 -0004
Respectfully submitted, ' r vf-"
EXHIBIT NO. 41
Opinion of Counsel to
the Bond Insurer
(Bond Insurer)
FDIC
• Financial Guaranty Insurance Company
125 Park Avenue
New York, NY 10017
7 212.312.3000
F 212.312.3093
August 24, 2005
City of Newport Beach
Hoag Memorial Hospital Presbyterian
Citigroup Global Markets Inc.,
as Underwriter or as Representative of the Underwriters
Re: $200,000,000.00 in aggregate principal amount of City of Newport Beach,
California Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B, and Series 2005C
Ladies and Gentleman:
• I am Counsel of Financial Guaranty Insurance Company, doing business in California as
FGIC Insurance Company ("Financial Guaranty"), and have been requested to render an
opinion concerning the issuance by Financial Guaranty of its Municipal Bond New Issue .
Insurance Policy (the "Policy") in connection with the issuance of the captioned
obligations (the `Bonds'D. I have examined such documents and records as I have
deemed relevant for purposes of this opinion, including (a) the Certificate of
Incorporation of Financial Guaranty, including all amendments thereto, (b) the amended
By -laws of Financial Guaranty as in effect on the date hereof, (c) the certificate of
authority issued to Financial Guaranty by the Superintendent of Insurance of the State of
New York, (d) the certificate of authority issued to Financial Guaranty by the Insurance
Commissioner of the State of California, (e) the executed Policy and (f) the statements in
the Official Statement dated August 12, 2005, relating to the Bonds (the "Official
Statement ") under the caption "BOND INSURANCE ".
On the basis of the foregoing, it is my opinion that:
(1) Financial Guaranty is a stock insurance corporation validly existing and in good
standing under the laws of the State of New York and qualified to do business
therein and is licensed and authorized to issue its financial guaranty insurance
policies under the laws of the State of California.
(2) The Policy is valid and binding upon Financial Guaranty and enforceable in
• accordance with its terms, subject to applicable laws affecting creditors' rights
generally.
FDIC
• August 24, 2005
(3) Financial Guaranty, as an insurance company, is not eligible for relief under the
Federal Bankruptcy Laws. Any proceedings for the liquidation, conservation or
rehabilitation of Financial Guaranty would be governed by the provisions of the
Insurance Law of the State of New York.
(4) The statements described above in the Official Statement relating to Financial
Guaranty and the Policy accurately and fairly present the summary information
set forth therein and do not omit any material fact with respect to the description
of Financial Guaranty relative to the material terms of the Policy or the ability of
Financial Guaranty to meet its obligations under the Policy.
Very truly yours,
Carmen Tigreros
Counsel
•
05010567
•
EXHIBIT NO. 42
Final Opinion of
Bond Counsel
Mal
O
O R R I C K
August 24, 2005
ORRICK, HERRINGTON N SUTCLIFFE LLP
4100 CAPITOL MALL
;mTE 3000
,ACRAMENTO, cA 95814 449.7
fei qjp. "e: UU
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by the City of
Newport Beach (the "City ") of $200,000,000 principal amount of its Insured Revenue Bonds
• (Hoag Memorial Hospital Presbyterian), Series 2005A, Series 2005B and Series 2005C
(collectively, the "Bonds "), issued pursuant to the provisions of Ordinance No. 85 -23 and 84 -4
adopted by the City Council of the City on February 13, 1984, under Sections 3, 5 and 7 of
Article XI of the Constitution of the State of California and Section 200 of Article II of the
Charter of the City, a resolution adopted by the City Council on July 26, 2005 and a Bond
Indenture dated as of August 1, 2005 (the "Bond Indenture "), between the City and Wells Fargo
Bank, National Association, as bond trustee (the "Bond Trustee "). The Bond Indenture provides
that the Bonds are issued for the purpose of making a loan of the proceeds thereof to Hoag
Memorial Hospital Presbyterian (the "Corporation ") pursuant to a Loan Agreement dated as of
August 1, 2005 (the "Loan Agreement'), between the City and the Corporation. Capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in the Bond
Indenture.
In such connection, we have reviewed the Bond Indenture; the Loan Agreement;
the Tax Certificate and Agreement; opinions of counsel to the City and the Corporation;
certificates of the City, the Bond Trustee, the Corporation, and others; and such other documents,
opinions and matters to the extent we deemed necessary to render the opinions set forth herein.
We have relied on the opinion of Stradling Yocca Carlson & Rauth, a Professonal
Corporation, counsel to the Corporation, regarding, among other matters, the current qualification
of the Corporation as an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986 (the "Code "). We note that the opinion is subject to a number of qualifications and
limitations. We have also relied upon representations of the Corporation regarding the use of the
facilities financed with the proceeds of Bonds in activities that are not considered unrelated trade
DOCSSC1:357M.4
. O R R I C K
City of Newport Beach
August 24, 2005
Page 2
or business activities of the Corporation within the meaning of Section 513 of the Code. We
note that the opinion of counsel to the Corporation does not address Section 513 of the Code.
Failure of the Corporation to be organized and operated in accordance with the Internal Revenue
Service's requirements for the maintenance of its status as an organization described in Section
501(c)(3) of the Code, or use of the bond - financed facilities in activities that are considered
unrelated trade or business activities of the Corporation within the meaning of Section 513 of the
Code, may result in interest on the Bonds being included in gross income for federal income tax
purposes, possibly from the date of issuance of the Bonds.
The interest rate mode and certain agreements, requirements and procedures
contained or referred to in the Bond Indenture, the Loan Agreement, the Tax Certificate and
Agreement and other relevant documents may be changed and certain actions (including, without
limitation, defeasance of Bonds) may be taken or omitted under the circumstances and subject to
the terms and conditions set forth in such documents. No opinion is expressed herein as to any
Bond or the interest thereon if any such change occurs or action is taken or omitted upon the
advice or approval of counsel other than ourselves.
The opinions expressed herein are based on an analysis of existing laws,
regulations, rulings and court decisions and cover certain matters not directly addressed by such
authorities. Such opinions may be affected by actions taken or omitted or events occurring after
the date hereof. We have not undertaken to determine, or to inform any person, whether any
such actions are taken or omitted or events do occur or any other matters come to our attention
after the date hereof. We disclaim any obligation to update this letter. We have assumed the
genuineness of all documents and signatures presented to us (whether as originals or as copies)
and the due and legal execution and delivery thereof by, and validity against, any parties other
than the City. We have assumed, without undertaking to verify, the accuracy of the factual
matters represented, warranted or certified in the documents, and of the legal conclusions
contained in the opinions, referred to in the second and third paragraphs hereof. Furthermore, we
have assumed compliance with all covenants and agreements contained in the Bond Indenture,
the Loan Agreement and the Tax Certificate and Agreement, including (without limitation)
covenants and agreements compliance with which is necessary to assure that future actions,
omissions or events will not cause interest on the Bonds to be included in gross income for
federal income tax purposes. We call attention to the fact that the rights and obligations under
the Bonds, the Bond Indenture, the Loan Agreement and the Tax Certificate and Agreement and
their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the
application of equitable principles and to the exercise of judicial discretion in appropriate cases.
We express no opinion with respect to any indemnification, contribution, penalty, choice of law,
• choice of forum, waiver or severability provisions contained in the foregoing documents, nor do
we express any opinion with respect to the state or quality of title to or interest in any of the real
DOCSSC1:357860.4
. O R R I C K
City of Newport Beach
August 24, 2005
Page 3
or personal property described in or as subject to the lien of the Bond Indenture or the accuracy
or sufficiency of the description contained therein of, or the remedies available to enforce liens
on, any such property. Finally, we undertake no responsibility for the accuracy, completeness or
fairness of the Official Statement or other offering material relating to the Bonds and express no
opinion with respect thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date
hereof, we are of the following opinions:
1. The Bonds constitute the valid and binding limited obligations of the City.
2. The Bond Indenture has been duly executed and delivered by, and
constitutes the valid and binding obligation of, the City. The Bond Indenture creates a valid
pledge, to secure the payment of the principal of and interest on the Bonds, of the Revenues and
any other amounts (including proceeds of the sale of the Bonds) held by the Bond Trustee in any
fund or account established pursuant to the Bond Indenture, except the Rebate Fund and the
• Bond Purchase Fund, subject to the provisions of the Bond Indenture permitting the application
thereof for the purposes and on the terms and conditions set forth in the Bond Indenture. The
Bond Indenture also creates a valid assignment to the Bond Trustee, for the benefit of the
Holders from time to time of the Bonds, of the right, title and interest of the City in the Loan
Agreement (to the extent more particularly described in the Bond Indenture).
3. The Loan Agreement has been duly executed and delivered by, and
constitutes the valid and binding agreement of, the City.
4. The Bonds are not a lien or charge upon the funds or property of the City
except to the extent of the aforementioned pledge and assignment. Neither the faith and credit
nor the taxing power of the City, the State of California or of any political subdivision thereof is
pledged to the payment of the principal of or interest on the Bonds. The Bonds are not a debt of
the State of California, and said State is not liable for the payment thereof.
DOCSSCI 357960,4
0 O R R I C K
r�
U
0
City of Newport Beach
August 24, 2005
Page 4
5. Interest on the Bonds is excluded from gross income for federal income
tax purposes under Section 103 of the Code and is exempt from State of California personal
income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal
individual or corporate alternative minimum taxes, although we observe that it is included in
adjusted current earnings when calculating corporate alternative minimum taxable income. We
express no opinion regarding other tax consequences related to the ownership or disposition of,
or the accrual or receipt of interest on, the Bonds.
DOCSSC 1 357860.4
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
per � k, )--T
EXHIBIT NO, 43
Supplemental Opinion of
Bond Counsel
(BQ
11 11
u
X
O R R I C K
August 24, 2005
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92658
Citigroup Global Markets Inc., as Underwriter
444 South Flower Street, 27`h Floor
Los Angeles, California 90071
ORRICK, HERRINGTON n SUTCLIFFE Lw
410 CAWOL MALL
SUITE 3000
SACRAMENTO. iA 95814 4499
c! Sic -9200
jaaX J_ o'."29 400
`A. Y: N:. J R A Ii K. C OM
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B and Series 20050
(Supplemental Opinion)
• Ladies and Gentlemen:
This letter is addressed to you pursuant to Section 3(e)(2) of the Bond Purchase Contract,
dated August 22, 2005 (the "Purchase Contract'), between Citigroup Global Markets Inc., as
underwriter (the "Underwriter "), and the City of Newport Beach (the "City "), with the approval
of Hoag Memorial Hospital Presbyterian (the "Corporation "), providing for the purchase of
$200,000,000 principal amount of City of Newport Beach Insured Revenue Bonds (Hoag-
Memorial Hospital Presbyterian) Series 2005A, 2005B and 20050 (collectively, the "Bonds ").
The Bonds are being issued pursuant to a Bond Indenture, dated as of August 1, 2005 (the "Bond
Indenture "), between the City and Wells Fargo Bank, National Association, as bond trustee
(the "Bond Trustee "), for the stated purpose of making a loan of the proceeds thereof to the
Corporation pursuant to a Loan Agreement, dated as of August 1, 2005 (the `Loan Agreement')
between the City and the Corporation. Capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Bond Indenture or, if not defined in the Bond Indenture, in
the Purchase Contract.
In connection with our role as bond counsel, we have reviewed the Purchase Contract;
the Bond Indenture; the Loan Agreement; the Master Indenture; Supplement No. 14; Obligation
No. 14; the Auction Agent Agreement, the Broker - Dealer Agreement, the Tax Certificate and
Agreement; the Continuing Disclosure Certificate; opinions of counsel to the City, the Bond
Trustee and the Corporation; certificates of the City, the Bond Trustee, the Corporation and
others; and such other documents, opinions and matters to the extent we deemed necessary to
provide the opinions or conclusions set forth herein.
oocssC s59otes
• ORRICK
City of Newport Beach
Citigroup Global Markets Inc.
August 24, 2005
Page 2
We have relied on the opinion of Stradling Yocca Carlson & Rauth, a
Professional Corporation, counsel to the Corporation regarding, among other matters, the current
qualification of the Corporation as an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986 (the "Code "). We note that such opinion is subject to a number of
qualifications and limitations. We have also relied upon representations of the Corporation
regarding the use of the facilities financed with the proceeds of the Bonds in activities that are
not considered unrelated trade or business activities of the Corporation within the meaning of
Section 513 of the Code. We note that the opinion of counsel to the Corporation does not
address Section 513 of the Code. Failure of the Corporation to be organized and operated in
accordance with the Internal Revenue Service's requirements for the maintenance of its status as
an organization described in Section 501(c)(3) of the Code, or use of the bond - financed facilities
in activities that are considered unrelated trade or business activities of the Corporation within
the meaning of Section 513 of the Code, could negatively affect several of the opinions and
conclusions set forth below.
• The opinions or conclusions expressed herein are based on an analysis of existing
laws, regulations, rulings and court decisions and cover certain matters not directly addressed by
such authorities. Such opinions or conclusions may be affected by actions taken or omitted or
events occurring after the date hereof. We have not undertaken to determine or to inform any
person whether any such actions are taken or omitted or events do occur or any other matters
conic to our attention after the date hereof. We have assumed the genuineness of all documents
and signatures presented to us (whether as originals or as copies) and the due and legal execution
and delivery thereof by, and validity against, any parties other than the City. We have assumed,
without undertaking to verify, the accuracy of the factual matters represented, warranted or
certified in the documents and of the legal conclusions contained in the opinions referred to in
the second and third paragraphs hereof. We have further assumed compliance with all covenants
and agreements contained in such documents. In addition, we call attention to the fact that the
rights and obligations under the Bonds, the Bond Indenture, the Loan Agreement, the Master
Indenture; Supplement No. 14; Obligation No. 14; the Auction Agent Agreement, the Broker -
Dealer Agreement, the Tax Certificate and Agreement and the Purchase Contract and their
enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance, moratorium and other laws relating to or affecting creditors' rights, to the
application of equitable principles, and to the exercise of judicial discretion in appropriate cases
and to the limitations on legal remedies against public instrumentalities of the State of California.
We express no opinion with respect to any indemnification, contribution, penalty, choice of law,
choice of forum, severability or waiver provisions contained therein. Finally, we undertake no
responsibility for the accuracy, completeness or fairness of the Official Statement, dated
. August 12, 2005 (the "Official Statement "), or other offering materials relating to the Bonds and
express no opinion relating thereto, except as expressly set forth in numbered paragraphs 3 and 4
DOCSSC 1:359016.2
• 0 R R I C K
City of Newport Beach
Citigroup Global Markets Inc.
August 24, 2005
Page 3
below.
Based on and subject to the foregoing and in reliance thereon, as of the date
hereof, we are of the following opinions or conclusions:
1. The Bonds are not subject to the registration requirements of the Securities
Act of 1933, as amended, and the Bond Indenture is exempt from qualification pursuant
to the Trust Indenture Act of 1939, as amended. No opinion is expressed with respect to
the Policy.
2. The Purchase Contract has been duly executed and delivered by the City
and is a valid and binding agreement of the City.
3. The statements contained in the Official Statement under the captions
"THE AUCTION RATE SECURITIES," "SECURITY FOR THE BONDS," "TAX
MATTERS," APPENDIX C — "Auction Procedures," APPENDIX D — "Summary of
. Principal Documents," and APPENDIX E— "Form of Opinion of Bond Counsel,"
excluding any material that may be treated as included under such captions by cross -
reference, insofar as such statements purport to summarize certain provisions of the
Bonds, the Bond Indenture, the Loan Agreement, the Master Indenture;
Supplement No. 14; Obligation No. 14; the Auction Agent Agreement, the Broker - Dealer
Agreement, and the form and content of our final legal opinion, dated the date hereof,
concerning certain federal tax matters relating to the Bonds, are accurate in all material
respects.
4. We are not passing upon and do not assume any responsibility for the
accuracy (except as explicitly stated in paragraph numbered 3 above), completeness or
fairness of any of the statements contained in the Official Statement and make no
representation that we have independently verified the accuracy, completeness or fairness
of any such statements. We have not reviewed any electronic version of the Official
Statement and assume that any such version is identical in all respects to the printed
version. In our capacity as bond counsel in connection with issuance of the Bonds, we
participated in conferences with your representatives, your counsel, representatives of the
Corporation, the Bond Trustee, their respective counsel and others, during which
conferences the contents of the Official Statement and related matters were discussed.
Based on our participation in the above- referenced conferences (which did not extend
beyond the date of the Official Statement), and in reliance thereon and on the records,
documents, certificates, opinions and matters herein mentioned (as set forth above),
• subject to the limitations on our role as bond counsel, we advise you as a matter of fact
and not opinion that no facts came to the attention of the attorneys in our firm rendering
DOCSSCl:359016.2
0
O R R I C K
City of Newport Beach
Citigroup Global Markets Inc.
August 24, 2005
Page 4
ORRICK, HERRING TON 9 SUTCLIEEE u>
400 CAPITOL MALL
>UI*E 300(1
SACRAMEN'l1, (A )814-4L417
WWW ORRICK.i DAI
subject to the limitations on our role as bond counsel, we advise you as a matter of fact
and not opinion that no facts came to the attention of the attorneys in our firm rendering
legal services in connection with such issuance which caused us to believe that the
Official Statement, as of its date and as of the date hereof (except for CUSIP numbers,
any financial, statistical, economic, engineering or demographic data or forecasts,
numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of
opinion, or any information about book - entry, The Depository Trust Company, the
Insurer, the Policy, and the information contained in Appendices B, F and G, included or
referred to therein, as to which we expressly exclude from the scope of this paragraph and
as to which we express no opinion or view) contained or contains any untrue statement of
a material fact or omitted or omits to state any material fact required to be stated therein
or necessary to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.
• This letter is furnished by us as bond counsel. No attomey - client relationship has
existed or exists between our firm and the Underwriter in connection with the Bonds or by virtue
of this letter. Our engagement with respect to the Bonds has concluded with their issuance. We
disclaim any obligation to update this letter. This letter is delivered to the City as issuer and to
the Underwriter as the underwriter of the Bonds, is solely for your benefit as such issuer and
underwriter and is not to be used, circulated, quoted or otherwise referred to or relied upon for
any other purpose or by any person other than the City and the Underwriter. This letter is not
intended to, and may not, be relied upon by owners of the Bonds or by any other party to whom
it is not specifically addressed.
f`J
DOCSSC I :35901 G.2
Very truly yours,
ORRICK. HERRiN ON & SUTCLIFFE LLN
EXHIBIT NO, 44
Reliance Letters
(BC)
O
ORRICK
August 24, 2005
Citigroup Global Markets, Inc., as underwriter
444 South Flower Street, 27th Floor
Los Angeles, California 90071
ORRICK, NERRINGFON & SUiCLIFFE UP
400 CAPITOL MAIL
SUITE 3000
SACRAMENTO, CA 95814 -A&91-
916 47 9?00
•. 9iE- i_9 -49jC
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A. Series 2005B and Series 2005C
Ladies and Gentlemen:
In connection with the delivery of the above - referenced bonds (the 'Bonds ") we have
delivered our final legal opinion concerning the validity of the Bonds and certain other matters,
• dated the date hereof and addressed to the issuer of the Bonds.
You may rely on said opinion as though the same were addressed to you. No attorney -
client relationship has existed or exists between the addressee of this letter and our firm in
connection with the Bonds or by virtue of this letter.
•
DOCSSCI:358986.1
Very truly yours,
Cam. Zf�"v
ORRICK, HOER V4GTON & SUTCLIFFE LLP
O
O R R I C K
August 24, 2005
Wells Fargo Bank, National Association,
as bond trustee
707 Wilshire Boulevard, 17th Floor
Los Angeles, California 90017
ORRICK, HERRINGTON R SUTCLIFFE V.P
400 CAPITOL MALL
SUITE 3000
SACRAMENTO, CA 958114 -4497
9) O76'44 7 -9'00
lax ojl�.
'dJ4VJJ.IR =i LF_CviS
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A Series 2005B and Series 2005C
Ladies and Gentlemen:
In connection with the delivery of the above - referenced bonds (the "Bonds ") we have
is delivered our final opinion concerning the validity of the Bonds and certain other matters, dated
the date hereof and addressed to the issuer of the Bonds.
•
You may rely on said opinion as though the same were addressed to you, as trustee, but
solely for the benefit of, and as if you were one of, the holders of the Bonds. No attorney- client
relationship has existed or exists between the addressee of this letter and our firm in connection
with the Bonds or by virtue of this letter.
DOCSSCL:358986.1
Very truly yours,
ORRICK, HERRaGTON & SUTCLIFFE LLP
X
O R R I C K
August 24, 2005
Financial Guaranty Insurance Corporation
125 Park Avenue
New York, New York 10017
ORRICK. HERRINGTON S SUTCLIFFE LLv
4QQ CAPITOL MAIL
suITE 3000
SACRAMENTO, CA 95814 -4A97
tel 916- 447 -9200
,t:Ix 916 -329 -4900
WWW.ORRICK.COM
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B and Series 2005C
Ladies and Gentlemen:
In connection with the delivery of the above - referenced bonds (the 'Bonds ") we have
delivered our final legal opinion concerning the validity of the Bonds and certain other matters,
• dated the date hereof and addressed to the issuer of the Bonds.
You may rely on said opinion as though the same were addressed to you; provided,
however, that we give no opinion with respect to the tax status of amounts, if any, that may be
paid to you (by subrogation or otherwise) with respect to interest paid by you to the bondholders.
No attomey- client relationship has existed or exists between the addressee of this letter and our
firm in connection with the Bonds or by virtue of this letter.
0
DOCSSC1:358986.1
Very truly yours,
C�,.,�A NFL ; .�•��. �w
ORRICK, HERRWGTON & SUTCLIFFE LLP
n
U
O
O R R I C K
August 24, 2005
ORRICK, HERRINGTON & SUTCLIFFE Lv
400 CAPITOL MALL
SUITE 3000
ALRAMENFJ, CA YiS14 -444
.;Q00
W Nv:, 0 R'.Lb h.CnV
Hoag Memorial Hospital Presbyterian,
One Hoag Drive
Newport Beach, CA 92658
Re: City of Newport Beach Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian)
Ladies and Gentlemen:
In connection with the delivery of the above - referenced bonds (the 'Bonds ") we have
delivered our final legal opinion concerning the validity of the Bonds and certain other matters,
dated the date hereof and addressed to the issuer of the Bonds.
You may rely on said opinion as though the same were addressed to you, subject to your
acknowledgement that the opinion is based in part on information provided and certifications
made by you. No attorney- client relationship has existed or exists between the addressee of this
letter and our firm in connection with the Bonds or by virtue of this letter.
DOCSSC 1:358986.1
Very truly yours,
ti - .-�+�� L� r
O,x„a Ham• ,
ORRICK, HERRllVGTON & SUTCLIFFE LLP
EXHIBIT NO. 45
Opinion of Counsel to
the Bond Trustee
(Bond Trustee Counsel)
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Law Department
Wells Fargo & Company
MAC N9305 -172
Sixth and Marquette
Minneapolis, MN 55479
August 24, 2005
To the Parties Listed on Attached Schedule A
$200,000,000
City of Newport Beach
Insured Revenue Bonds
(Hoag Memorial Hospital Presbyterian)
Series 2005A, Series 2005B and Series 2005C
. Ladies and Gentlemen:
I am Senior Counsel for Wells Fargo & Company, the parent corporation of Wells Fargo Bank,
National Association, a national banking association. As such, I have reviewed the provisions of
(i) the Bond Indenture dated as of August 1, 2005 (the "Indenture ") between the City of Newport
Beach, as issuer (the "City ") and Wells Fargo Bank, National Association, as trustee (the
"Trustee "), (ii) the Supplemental Master Indenture dated as of August 1, 2005 (the
"Supplemental Master Indenture ") between the Hoag Memorial Hospital Presbyterian (the
"Corporation ") and the Trustee, which supplements and amends the Master Indenture dated as of
October 1, 1984, as previously amended and supplemented (together with the Supplemental
Master Indenture, the "Master Indenture ", and together with the Bond Indenture and the Master
Indenture, the "Indenture ") between the Corporation and the Trustee, as successor trustee
thereunder, and (iii) the Auction Agent Agreement dated as of August 1, 2005 (the "Auction
Agent Agreement') between Wells Fargo Bank, National Association, as Auction Agent, and the
Trustee. In addition, I am generally familiar with the Articles of Association and the Bylaws of
the Trustee and am also familiar with the corporate proceedings of the Trustee with regard to its
authorization, execution and delivery of the Indenture and the Auction Agent Agreement, which
documents shall be collectively referred to hereinafter as the "Agreements ". Capitalized terms
used herein shall have the respective meanings ascribed to them in the Indenture, except as
otherwise defined herein.
• For purposes of this opinion, I have assumed the genuineness of all signatures, the authenticity of
all documents submitted to me as originals, and the conformity with originals of all documents
August 24, 2005
Page 2
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submitted to me as copies. In making my examination of documents executed by entities other
than the Trustee, I have assumed that each such other entity had the power to enter into and
perform all its obligations thereunder, and also have assumed the due authorization of all
requisite action and due execution of such documents by each such entity. Where questions of
fact material to my opinions expressed below were not established independently, I have relied
upon statements of officers of the Trustee as contained in their certificates.
Based upon the foregoing, I am of the opinion that:
I. The Trustee is a national banking association duly organized, validly existing and
in good standing under the laws of the United States of America.
2. The Trustee is duly eligible and qualified to act as Trustee under the Indenture
and as Auction Agent under the Auction Agent Agreement.
3. The Trustee has all requisite power, authority and legal right to execute and
deliver the Agreements and to perform its obligations under the Agreements, and has taken all
necessary corporate action to authorize the execution and delivery of and the performance of its
obligations under the Agreements.
• 4. The Trustee has duly executed and delivered the Agreements. Assuming the due
authorization, execution and delivery thereof by the other parties thereto, the Agreements are the
legal, valid and binding agreements of the Trustee enforceable in accordance with their terms,
except to the extent enforceability thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors'
rights and remedies heretofore or hereafter enacted, and (ii) the application of equitable
principles and the exercise of judicial discretion in appropriate cases.
5. The City's Insured Revenue Bonds (Hoag Memorial Hospital Presbyterian),
Series 2005A, Series 2005B and Series 2005C, have been duly authenticated by the Trustee.
6. The execution, delivery and performance of the Agreements do not now, and will
not upon consummation of the transactions contemplated thereby in accordance with the existing
terms thereof conflict with, result in a breach of or constitute a default under, any term or
provision of the Articles of Association or Bylaws of the Trustee, any existing term or provision
of any agreement, contract, instrument or indenture of any nature whatsoever, known to me, to
which the Trustee is a party or by which it is bound; or, to the best of my knowledge after due
inquiry, any existing order, judgment, writ, injunction or decree of any court or governmental
authority having jurisdiction over the Trustee, nor will it conflict with or constitute a breach of or
default under any law or administrative regulation to which the Trustee is subject (except that no
• representation, warranty or agreement is made herein with respect to any federal or state
securities or Blue Sky laws or regulations) or result in the creation or imposition of any lien,
August 24, 2005
Page 3
charge or other security interest or encumbrance of any nature whatsoever upon any of the
property or assets of the Trustee.
7. To the best of my knowledge after due inquiry, there are no actions, proceedings
or investigations pending or threatened against the Trustee before any court, administrative
agency or tribunal (i) asserting the invalidity of the Agreements (ii) seeking to prevent the
consummation of any of the transactions contemplated thereby or (iii) that might materially and
adversely affect the performance by the Trustee of its obligations under, or the validity or
enforceability of the Agreements. For purposes of the foregoing, I have not regarded any actions,
proceedings or investigations "threatened" unless the potential litigants or governmental
authority has manifested to a member of the Wells Fargo & Company Law Department having
responsibility for litigation matters involving the corporate trust activities of the Trustee present
intention to initiate such proceedings.
I advise you that I am admitted to practice in the State of California (the "State ") and do not
purport to be an expert in or generally familiar with or qualified to express legal opinions based
on the laws of any jurisdiction other than the federal laws of the United States ( "Federal') and
the State. These opinions are further limited to such State and Federal laws in effect as of the
date hereof.
• The foregoing opinions are being famished to you solely for your benefit and that of your
counsel and may not be relied upon by, nor may copies be delivered to, any other person without
my prior written consent.
Very truly yours,
James G. Ray
Senior Counsel
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City of Newport Beach
Newport Beach, California
Hoag Memorial Hospital Presbyterian
Newport Beach, California
Citigroup Global Markets, Inc.
Los Angeles, California
Financial Guaranty Insurance Company
Los Angeles, California
Wells Fargo Bank, National Association
Los Angeles, California
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Schedule A
EXHIBIT NO, 46
Distribution List
(BC)
Institution &
Key Contacts
HOAG MEMORIAL HOSPTI'AL PRESBYTERIAN
SERIES 20055 FINANCING
Distribution List
HOAG MEMORIAL HOSPITAL PRESBYTERIAN
One Hoag Drive
P.O. Box 6100
Newport Beach, California 92658 -6100
Peter M. Foulke
Executive Vice President
pfoulke(a)hoaghospital. org
Jennifer Mitzner
Vice President Finance and CFO
imitmea,hoaehosuital. or¢
Boriana Farias
Treasury Manager
Bfari?sl AoaQhosPital.orQ
CITY OF NEWPORT BEACH
3300 Newport Blvd.
P.O. 1768
Newport Beach, CA 92658 -8915
Dennis Danner
Treasurer
ddanner(a)city.newport- beach. ca.us
Dick Kurth
dkurth(�city. newport- beach, ca. us
STRADLINO YOCCA CARLSON & RAUTH
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660
Kurt Yeager
Partner
kyeager@sycr.com
Carol Lew
clewCasYcr.com
Bradley R. Neal
• Associate
bneal()a sycr.com
Steven R. Pacelli
WacelliLaD..sycr.corn
August 19, 2005
Telephone Number
(949) 764 -8250
(949) 7644411
(949) 764-4437
(949) 644 -3123
(949) 725-4169
(949) 725-4237
(949) 725-4164
(949) 725 -4143
Fax Number
(949) 764 -5746
(949) 764 -4416
(949) 764-4416
(949) 644 -3339
(949) 725 -4100
(949) 823 -5164
(949)82; -5143
Hoag Memorial Hospital Presbyterian
Distribution List (811912005)
Page 2
institution &
Key Contacts Telephone Number
ORRICK, HERRINGTON & SUTCLIFFE LLP
400 Capitol Mall
Suite 3000
Sacramento, CA 95814
John Myers (916) 329 -7903
Attorney at Law
Jmyetsa,orrick com
Diane S. Potter (916) 329 -7985
Attorney at Law
Dsnotter(a)orric k. com
Bryan D. Victor, Esq. (916) 329 -7979
Attorney at Law
bvictor a,omck.com
Melissa Warr (916) 329 -7963
Project Manager
mwarr .orrick.com
FOLEY & LARDER LLP
321 North Clark Street
Chicago, IL 60610 -4764
Robert Zimmerman (312) 832 -4521
Attorney at Law Cell: (312) 925 -0402
rzimmerma nQfoley. com
Karl W. Von Drathen (312) 832 -5112
Attorney at Law
kvondrathen(a)fole y. com
CITIGROUP
444 South Flower Street
27" Floor
Los Angeles, CA 90071
Charles G. Plimpton (213) 486 -8856
Director Cell: (714) 264 -5377
charles.g ulimutonPcitigroup.com
Chad J. Kenan (213) 486 -8841
Assistant Vice President Cell: (310) 502 -1133
chad.kena n(a)citi group. com
Rose Diaz -Betts (213) 486-8911
Assistant
rosalia.d.diazbetts(@,cifigrogp.com
Fax Number
(916) 3294900
(916) 3294900
(916) 3294900
(916) 3294900
(312) 832 -4700
(312) 832 -4700
(213) 486 -8918
(213) 486 -8918
(213) 486 -8918
Hoag Memorial Hospital Presbyterian
Distribution List (811912005)
Page 3
Onstitution &
Key Contacts Telephone Number
390 Greenwich Street
2nd Floor
New York, New York 10013
Adam Rudner (212) 723 -5688
Vice President
adam.mdner(a)citi gmun. com
One Sansome Street
28th Floor
San Francisco, CA 94104
Renee Ng (415) 951 -1621
Analyst Cell: (415) 420 -9380
renee.riR(@,citiRroui).com
ERNST & YOUNG LLP
Suite 1000
18111 Von Karman Avenue
Irvine, CA 92612 -1007
Cheryl S. Moreno (949) 437 -0382
• AABS Senior Manager
chervl.moreno .ev.com
David Copley (949) 437 -0250
Audit Partner
david.coL)Iey(@,ey.co m
Kit Y. Lim (949) 437 -0320
Kit LimCr�ey com
WELLS FARCO BANK
MAC E2818 -176
707 Wilshire Blvd., 17th Floor
Los Angeles, CA 90017
Kathryn Valdivia (213) 614 -3350
Vice President
Kathryn.m.valdivia(c)wellsfar o. com
Ametta Lee (213) 614 -3319
Assistant Vice President
Ametta.leeO.wellsfarao. com
LJ
Fax Number
(212) 723 -8939
(415) 951 -1747
(949) 437 -0590
(866) 535 -1398
(213) 614 -3355
(213) 614 -3355
Hoag Memorial Hospital Presbyterian
Distribution List (811911005)
.Institution &
Key Contacts Telephone Number
WELLS FARCO & COMPANY
MAC U1228 -104
299 South Main Street, 10th Floor
Salt Lake City, Utah 84111
David L. Blackner (801) 246 -5859
Senior Counsel, Law Department
david.b lackner(a),wellsfar2o. com
WELLS FARCO BANK, N.A.
45 Broadway, 12'h Floor
New York, NY 10006
Lisa D'Angelo (212) 515 -5261
Vice President
Lisa. da nKelo(a,wellsfaneo. com
Joseph Panepinto (212) 515 -5276
Vice President
ioseph.panet)intona wellsfargo.com
At t-rinN AGE. \'I' Col'IsEL
Name Phone
MOODY'S INVESTOR SERVICE
11815 River Rim Road
San Diego, CA 92126
Mimi Park (858) 577 -0622 or
Vice President/Senior Analyst (212) 553 -1348
mimi Uark(amoodvs.com
STANDARD & POOR'S
One Market
Steuart Tower
15i° Floor
San Francisco, CA 94105 -1000
Lisa Zuckerman (415) 371 -5036
lisa c zuckermanaa standardandpoors.com
Jamie Cortez (415) 371 -5014
lames cortez(astandardandpoors.com
Is
Fax Number
(801) 246 -5230
(212) 509 -1716
(212) 509 -1716
Fax
(212) 298 -7125
(415) 371 -5090
(415) 371 -5090
Hoag Memorial Hospital Presbyterian
Distribution List (811911005)
Page 5
.Institution &
Key Contacts Telephone Number Fax Number
FGIC
125 Park Avenue
New York, NY 10017
John Chyriwski (415) 371 -5036 (212) 312 -2787
John. Chyriwski(&faic. com
Jill Greiss (415) 371 -5036 (212) 312 -2787
Attorney at Law
j ill. ereis s (a4 fzic. c o m
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