BRANCH BANKING AND TRUST COMPANY
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NEW ISSUE/DTC BOOK-ENTRY ONLY RATINGS: Moody’s: Aa2/VMIG 1 (See “RATINGS”) In the opinion of Bond Counsel, under current law and subject to conditions described in the Section herein “TAX EXEMPTION,” interest on the Bonds (a) will not be included in gross income for Federal income tax purposes, (b) will not be an item of tax preference for purposes of the Federal alternative minimum income tax imposed on individuals and corporations, and (c) will be exempt from all taxes in the State of North Carolina. Such interest may be included in the calculation of a corporation’s alternative minimum income tax, and a holder may be subject to other Federal tax consequences as described in the Section herein “TAX EXEMPTION.” $5,000,000 NORTH CAROLINA MEDICAL CARE COMMISSION HEALTH CARE FACILITIES REVENUE BONDS (HOSPICE OF ALAMANCE-CASWELL PROJECT) SERIES 2008 Dated: Date of Delivery Price: 100% CUSIP: 65821D BE0 Due: December 1, 2033 The Bonds are being issued by the North Carolina Medical Care Commission (the “Commission”) pursuant to a Trust Agreement between the Commission and Branch Banking and Trust Company, as trustee (the “Trustee”), for the purpose of providing funds to Hospice of Alamance-Caswell Foundation, Inc. (the “Corporation”) and Hospice & Palliative Care Center of Alamance-Caswell, LLC (the “Company”) to be used, together with other available funds, to (1) pay a portion of the costs of the Project as more specifically referred to herein and (2) pay certain expenses incurred in connection with the issuance of the Bonds. The Bonds are limited obligations of the Commission, and the Commission will not be obligated to pay debt service on the Bonds except from the revenues and other funds pledged or assigned therefor under the Trust Agreement between the Commission and the Trustee. Neither the faith and credit nor the taxing power of the State of North Carolina or of any political subdivision thereof is pledged as security for the Bonds. The payment of the principal and purchase price of and interest on the Bonds will be secured by an irrevocable, direct-pay Letter of Credit (initially, the “Letter of Credit”) issued by BRANCH BANKING AND TRUST COMPANY (initially, the “Bank”) pursuant to which the Trustee will be permitted to draw up to (a) an amount equal to the aggregate principal amount of the Bonds outstanding for the payment of the principal of the Bonds or the principal component of the purchase price of the Bonds, plus (b) an amount equal to 35 days’ interest on the Bonds outstanding (computed at a rate of 12% per annum based on a 365-day year) for the payment of interest on the Bonds or the interest component of the purchase price of the Bonds, all as further described herein. The Letter of Credit will expire on December 23, 2011, unless extended or earlier terminated as described herein. See “THE LETTER OF CREDIT.” The Bonds are issuable as fully registered bonds without coupons in Authorized Denominations of $100,000 and integral multiples of $5,000 in excess thereof while bearing interest at the Weekly Rate. Purchases of the Bonds will be made in book-entry form only, and individual purchasers will not receive physical delivery of bond certificates. When issued, the Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). So long as Cede & Co. is the registered owner of the Bonds, principal and interest payments on the Bonds will be made to Cede & Co., which will in turn remit such payments to its Participants for subsequent disbursement to the beneficial owners of the Bonds, all as described herein. So long as Cede & Co. is the registered owner of the Bonds, references herein to the Holders or registered owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds. The Bonds will bear interest from their date of issuance through the last day of the first Weekly Rate Period at the rate determined by the Underwriter prior to such date of issuance. Thereafter, until the Bonds are converted to bear interest at a Long-Term Rate, if ever, the Bonds will bear interest at the Weekly Rate, reset weekly, determined by the Remarketing Agent on each Rate Computation Date for the next succeeding Weekly Rate Period, as described herein. While the Bonds bear interest at the Weekly Rate, interest is payable monthly in arrears, on the first Business Day of each month, commencing January 2, 2009, and on each Conversion Date (each, an “Interest Payment Date”). See “THE BONDS.” The Bonds are subject to optional, extraordinary optional and mandatory redemption prior to maturity and optional and mandatory tender as described herein. The Bonds are offered subject to prior sale, when, as and if issued by the Commission and accepted by the Underwriter, subject to the approval of Hunton & Williams LLP, Raleigh, North Carolina, Bond Counsel. Certain legal matters will be passed upon for the Corporation by Wishart, Norris, Henninger & Pittman, P.A., Burlington, North Carolina, for the Bank by Moore & Van Allen PLLC, Charlotte, North Carolina, and for the Underwriter by Parker Poe Adams & Bernstein LLP, Raleigh, North Carolina. It is expected that the Bonds will be available for delivery through the facilities of DTC in on or about December 23, 2008. BB&T CAPITAL MARKETS a division of Scott & Stringfellow, Inc. December 18, 2008
Transcript of BRANCH BANKING AND TRUST COMPANY
NEW ISSUE/DTC BOOK-ENTRY ONLY RATINGS: Moody’s: Aa2/VMIG 1 (See “RATINGS”)
In the opinion of Bond Counsel, under current law and subject to conditions described in the Section herein “TAX EXEMPTION,” interest on the Bonds (a) will not be included in gross income for Federal income tax purposes, (b) will not be an item of tax preference for purposes of the Federal alternative minimum income tax imposed on individuals and corporations, and (c) will be exempt from all taxes in the State of North Carolina. Such interest may be included in the calculation of a corporation’s alternative minimum income tax, and a holder may be subject to other Federal tax consequences as described in the Section herein “TAX EXEMPTION.”
$5,000,000 NORTH CAROLINA MEDICAL CARE COMMISSION
HEALTH CARE FACILITIES REVENUE BONDS (HOSPICE OF ALAMANCE-CASWELL PROJECT)
SERIES 2008 Dated: Date of Delivery Price: 100% CUSIP: 65821D BE0 Due: December 1, 2033
The Bonds are being issued by the North Carolina Medical Care Commission (the “Commission”) pursuant to a Trust Agreement between the Commission and Branch Banking and Trust Company, as trustee (the “Trustee”), for the purpose of providing funds to Hospice of Alamance-Caswell Foundation, Inc. (the “Corporation”) and Hospice & Palliative Care Center of Alamance-Caswell, LLC (the “Company”) to be used, together with other available funds, to (1) pay a portion of the costs of the Project as more specifically referred to herein and (2) pay certain expenses incurred in connection with the issuance of the Bonds.
The Bonds are limited obligations of the Commission, and the Commission will not be obligated to pay debt service on the Bonds except from the revenues and other funds pledged or assigned therefor under the Trust Agreement between the Commission and the Trustee. Neither the faith and credit nor the taxing power of the State of North Carolina or of any political subdivision thereof is pledged as security for the Bonds.
The payment of the principal and purchase price of and interest on the Bonds will be secured by an irrevocable, direct-pay Letter of Credit (initially, the “Letter of Credit”) issued by
BRANCH BANKING AND TRUST COMPANY (initially, the “Bank”) pursuant to which the Trustee will be permitted to draw up to (a) an amount equal to the aggregate principal amount of the Bonds outstanding for the payment of the principal of the Bonds or the principal component of the purchase price of the Bonds, plus (b) an amount equal to 35 days’ interest on the Bonds outstanding (computed at a rate of 12% per annum based on a 365-day year) for the payment of interest on the Bonds or the interest component of the purchase price of the Bonds, all as further described herein. The Letter of Credit will expire on December 23, 2011, unless extended or earlier terminated as described herein. See “THE LETTER OF CREDIT.”
The Bonds are issuable as fully registered bonds without coupons in Authorized Denominations of $100,000 and integral multiples of $5,000 in excess thereof while bearing interest at the Weekly Rate. Purchases of the Bonds will be made in book-entry form only, and individual purchasers will not receive physical delivery of bond certificates. When issued, the Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). So long as Cede & Co. is the registered owner of the Bonds, principal and interest payments on the Bonds will be made to Cede & Co., which will in turn remit such payments to its Participants for subsequent disbursement to the beneficial owners of the Bonds, all as described herein. So long as Cede & Co. is the registered owner of the Bonds, references herein to the Holders or registered owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds.
The Bonds will bear interest from their date of issuance through the last day of the first Weekly Rate Period at the rate determined by the Underwriter prior to such date of issuance. Thereafter, until the Bonds are converted to bear interest at a Long-Term Rate, if ever, the Bonds will bear interest at the Weekly Rate, reset weekly, determined by the Remarketing Agent on each Rate Computation Date for the next succeeding Weekly Rate Period, as described herein. While the Bonds bear interest at the Weekly Rate, interest is payable monthly in arrears, on the first Business Day of each month, commencing January 2, 2009, and on each Conversion Date (each, an “Interest Payment Date”). See “THE BONDS.”
The Bonds are subject to optional, extraordinary optional and mandatory redemption prior to maturity and optional and mandatory tender as described herein.
The Bonds are offered subject to prior sale, when, as and if issued by the Commission and accepted by the Underwriter, subject to the approval of Hunton & Williams LLP, Raleigh, North Carolina, Bond Counsel. Certain legal matters will be passed upon for the Corporation by Wishart, Norris, Henninger & Pittman, P.A., Burlington, North Carolina, for the Bank by Moore & Van Allen PLLC, Charlotte, North Carolina, and for the Underwriter by Parker Poe Adams & Bernstein LLP, Raleigh, North Carolina. It is expected that the Bonds will be available for delivery through the facilities of DTC in on or about December 23, 2008.
BB&T CAPITAL MARKETS a division of Scott & Stringfellow, Inc.
December 18, 2008
No dealer, broker, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Official Statement in connection with the offering described herein, and, if given or made, such other information or representation must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the Bonds offered hereby, nor shall there be any offer or solicitation of such offer or sale of the Bonds in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Neither the delivery of this Official Statement nor the sale of any of the Bonds implies that the information herein is correct as of any date subsequent to the date thereof. The information contained herein is subject to change after the date of this Official Statement, and this Official Statement speaks only as of its date.
The information contained herein has been obtained from the Commission, the Corporation, the Company and other sources believed to be reliable. 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.
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TABLE OF CONTENTS
Page INTRODUCTION ........................................................................................................................................ 1 THE COMMISSION .................................................................................................................................... 2
General .................................................................................................................................................. 2 Outstanding Debt .................................................................................................................................. 3 Membership .......................................................................................................................................... 4 Staff of the Commission........................................................................................................................ 4 Certain Administrative Officers ............................................................................................................ 4
THE BONDS ................................................................................................................................................ 5 General .................................................................................................................................................. 5 Interest Rates on the Bonds................................................................................................................... 6 Conversion of Interest Rate Determination Method ............................................................................. 7 Optional Tender of Bonds..................................................................................................................... 8 Mandatory Tender of Bonds ................................................................................................................. 9 Purchase of Bonds............................................................................................................................... 10 Delivery of Bonds ............................................................................................................................... 10 Delivery of Proceeds of Sale............................................................................................................... 10 No Remarketing Under Certain Conditions ........................................................................................ 11 Redemption of Bonds.......................................................................................................................... 11 Book-Entry-Only System.................................................................................................................... 14
SECURITY AND SOURCES OF PAYMENT FOR THE BONDS .......................................................... 17 THE LETTER OF CREDIT ....................................................................................................................... 17
General ................................................................................................................................................ 17 Drawings under the Letter of Credit ................................................................................................... 18 Reduction and Reinstatement of the Letter of Credit.......................................................................... 18 Substitute Letter of Credit ................................................................................................................... 18
SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT.................... 19 Tender Advances................................................................................................................................. 19 Events of Default under Reimbursement Agreement ......................................................................... 19
THE CORPORATION and the COMPANY.............................................................................................. 20 THE PROJECT........................................................................................................................................... 21 ESTIMATED SOURCES AND USES OF FUNDS .................................................................................. 22 ANNUAL DEBT SERVICE REQUIREMENTS....................................................................................... 23 UNDERWRITING AND REMARKETING.............................................................................................. 24 LITIGATION.............................................................................................................................................. 24 RATINGS ................................................................................................................................................... 24 LEGAL MATTERS.................................................................................................................................... 25 TAX EXEMPTION .................................................................................................................................... 25
Opinion of Bond Counsel.................................................................................................................... 25 Other Tax Matters ............................................................................................................................... 26
RELATIONSHIPS AMONG PARTIES .................................................................................................... 26 LEGALITY FOR INVESTMENT.............................................................................................................. 26 INVESTMENT COMPANY ACT NOTIFICATION................................................................................ 26 MISCELLANEOUS ................................................................................................................................... 27
Appendix A - Definitions of Certain Terms and Summary of Principal Legal Documents A-1Appendix B - Form of Letter of Credit B-1Appendix C - Certain Information Concerning Branch Banking and Trust Company C-1Appendix D - Proposed Form of Bond Counsel Opinion D-1
Department of Health and Human Services
The North Carolina Medical Care Commission Phone: (919) 733-2342 • Fax: (919) 733-2757
2701 Mail Service Center 27699-2701 • 701 Barbour Drive 27603 Raleigh, N.C.
Michael F. Easley, Governor Dempsey Benton, Secretary Department of Health and Human Services
$5,000,000 NORTH CAROLINA MEDICAL CARE COMMISSION
HEALTH CARE FACILITIES REVENUE BONDS (HOSPICE OF ALAMANCE-CASWELL PROJECT)
SERIES 2008
INTRODUCTION
This Official Statement, including the cover page and the appendices, is provided to furnish information regarding the offering by the North Carolina Medical Care Commission (the “Commission”) of its $5,000,000 Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project), Series 2008 (the “Bonds”). The Bonds are being issued pursuant to the Health Care Facilities Finance Act, Chapter 131A of the General Statutes of North Carolina, as amended (the “Act”), and a Trust Agreement, dated as of December 1, 2008 (the “Trust Agreement”), between the Commission and Branch Banking and Trust Company, as trustee (the “Trustee”).
Concurrently with the issuance of the Bonds, the Commission will enter into a Loan Agreement, dated as of December 1, 2008 (the “Loan Agreement”), with Hospice of Alamance-Caswell Foundation, Inc. (the “Corporation”) and Hospice & Palliative Care Center of Alamance-Caswell, LLC (the “Company”). Pursuant to the Loan Agreement, the Commission will lend the proceeds of the Bonds to the Corporation and the Company for the purpose of providing funds, together with other available funds, to (1) pay a portion of the costs of the Project as more specifically referred to herein and (2) pay certain expenses incurred in connection with the issuance of the Bonds. See “THE PROJECT” and “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein.
The Bonds are limited obligations of the Commission, payable solely from money to be received from the Corporation and the Company pursuant to the terms of the Loan Agreement and the promissory note issued pursuant thereto (the “Note”) and other amounts held in certain funds and accounts established under the Indenture and pledged therefor. See Appendix A hereto for summaries of certain provisions of the Indenture and the Loan Agreement.
The payment of the principal and purchase price of and interest on the Bonds will be secured by an irrevocable, direct-pay letter of credit (initially, the “Letter of Credit”) issued by Branch Banking and Trust Company (initially, the “Bank”), a North Carolina state banking corporation, pursuant to a Letter of Credit and Reimbursement Agreement dated as of December 1, 2008 among the Corporation, the Company and the Bank (the “Reimbursement Agreement”). The Letter of Credit will expire on December 23, 2011 unless extended or earlier terminated as described herein. Under the Letter of Credit,
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the Trustee will be permitted to draw up to (a) an amount equal to the aggregate principal amount of the Bonds outstanding for the payment of the principal of the Bonds or the principal component of the purchase price of the Bonds, plus (b) an amount equal to up to 35 days’ interest on the Bonds outstanding (computed at a rate of 12% per annum based on a 365-day year), but not exceeding the actual amount of interest accrued on the Bonds, for the payment of interest on the Bonds or the interest component of the purchase price of the Bonds, all as further described herein. See “THE LETTER OF CREDIT” and “SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT” and Appendices B and C.
The Commission will assign to the Trustee (a) all right, title and interest in and to the Notes and (b) substantially all right, title and interest in and to the Loan Agreement, to secure payment of the Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein.
No representation is made herein regarding the financial history or current financial condition of the Corporation and the Company or future revenues of the Corporation and the Company. There can be no assurance that moneys available to the Corporation and the Company will be sufficient to pay the debt service on the Bonds. Investors are advised to rely solely upon the Letter of Credit for payment of principal and purchase price of and interest on the Bonds.
This introduction is merely a summary and is qualified by reference to the entire Official Statement. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Loan Agreement and the Trust Agreement (see “DEFINITIONS OF CERTAIN TERMS” in Appendix A). Brief descriptions and summaries of the Loan Agreement, the Trust Agreement, the Letter of Credit and the Reimbursement Agreement are included in this Official Statement. Such descriptions and summaries do not purport to be comprehensive or definitive, and all references in this Official Statement to the Loan Agreement, the Trust Agreement, the Letter of Credit and the Reimbursement Agreement are qualified in their entirety by reference to such documents, and all references to the Bonds are qualified by reference to the definitive form of the Bonds contained in the Trust Agreement. Copies of such documents may be obtained from the Underwriter prior to the delivery of the Bonds at 200 West Second Street, Winston-Salem, North Carolina 27101, Attention: Gina Cocklereece, and thereafter will be on file with the Trustee, 223 West Nash Street, Wilson, North Carolina 27893, Attention: Corporate Trust Department.
THE COMMISSION
General
The Commission was created primarily as a result of the findings of the North Carolina Hospital and Medical Care Commission, a special commission appointed in 1944 to study the critical shortages in general hospital facilities and trained medical personnel in the State of North Carolina (the “State”) and to make recommendations for improvements in these areas. Among the recommendations made was that the legislature provide for a permanent State agency that would be responsible for the maintenance of high standards in the State’s hospitals and for the administration of a medical student loan fund and a statewide hospital and medical care program.
The Commission was established in 1945 and, pursuant to its enabling legislation, was given the power, among others, to make a survey of the hospital resources in the State and formulate a statewide program for construction and maintenance of local hospitals, health centers and related facilities and to receive and administer federal and State funds appropriated for such purposes.
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In 1946, Congress passed the Hospital Survey and Construction Act (Hill-Burton) to provide funds for the construction and renovation of health care facilities, and the Commission was designated as the agency empowered to administer the program within the State. Under this program, also known as the Hill-Burton program, health facility construction in North Carolina has totaled more than $500 million, of which 40% was provided by federal sources, 5% by the State and 55% by local sponsors. Of the more than 500 Hill-Burton projects approved by the Commission between 1946 and 1976, 241 were general hospital projects, including 80 completely new facilities.
Pursuant to the Executive Organization Act of 1973, the 17-member Commission was incorporated into the Department of Human Resources (now the Department of Health and Human Services). Three members of the Commission are nominated by the North Carolina Medical Society, one by the North Carolina Pharmaceutical Association, one by the North Carolina State Nurses’ Association, one by the North Carolina Hospital Association and one by The Duke Endowment. Each nomination is subject to the Governor’s approval. In addition, ten Commission members, one of whom must be a dentist, are appointed by the Governor.
Today the Commission has the duty and power to promulgate, adopt, amend and rescind rules in accordance with the laws of the State regarding the regulation and licensing or certification, as applicable, of hospitals, hospices, free standing outpatient surgical facilities, nursing homes, adult care homes, home care agencies, home health agencies, nursing pools, facilities providing mammography/pap smear services, free standing abortion clinics, ambulances and emergency medical services personnel.
In 1975, the North Carolina General Assembly enacted the Health Care Facilities Finance Act, which enables the Commission to issue tax-exempt revenue bonds to finance construction and equipment projects for nonprofit and public hospitals, nursing homes, continuing care facilities for the elderly and facilities related to the foregoing.
Outstanding Debt
As of September 30, 2008, the Commission had issued revenue bonds or notes for 341 projects. The total authorized principal amount of all such financings was $13,326,072,802 and the total outstanding principal amount of all such financings as of September 30, 2008, was $6,410,865,002 excluding financings that have been refunded. Each issue is payable solely from revenues derived from each corporate entity financed, is separately secured, and is separate and independent from all other series of bonds as to source of payment and security.
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Membership
As of June 30, 2008 the Commission consisted of the following 17 members:
Name Term Principal Occupation Residence
Lucy Hancock Bode, Chairperson 1993-2005* Housewife/Health Consultant Raleigh Joseph D. Crocker, Vice-Chairperson
1988-2012 Director of Operations Z. Smith Reynolds Foundation
Winston-Salem
Martha Barham, RN, MSN, CNAA 2005-2010 Registered Nurse High Point George A. Binder, MD 2004-2011 Physician Fayetteville George H. V. Cecil 1987-2007* Chairman, Biltmore Dairy Farms,
Inc. Asheville
Gerald P. Cox 2002-2010 Health Care Executive Rocky Mount John A. Fagg, MD 2004-2011 Physician Winston-Salem Charles Frock 2008-2012 Hospital Administrator Pinehurst Clifford B. Jones, Jr., DDS 1995-2011 Dentist Elizabeth City Elizabeth P. Kanof, MD 2008-2012 Physician Raleigh James H. Leonard 2008-2012 Financial Advisor Cary Albert F. Lockamy, RPh 1986-2010 Pharmacist Raleigh Mary L. Piepenbring 2005-2009 Director, Health Care Division
The Duke Endowment Charlotte
Carl K. Rust, II, MD 2002-2009 Physician Wilmington Robert E. Schaaf, MD 2005-2010 Physician Raleigh Henry A. Unger, MD 1998-2009 Physician Cary Margaret Weller-Stargell 2006-2009 President/CEO
Coastal Horizons Center Wilmington
* Members whose term expired on June 30 will continue to serve until re-appointed or a successor is appointed and qualified.
Staff of the Commission
The Division of Health Service Regulation of the Department of Health and Human Services employs a staff of approximately 450 persons (including registered architects, professional engineers and consultants in fields of emergency medicine, hospital administration, nursing service and administration, dietetics and nutrition, laboratory design and operation, and medical records), the services of whom are available to and used by the Commission. The Division of Health Service Regulation provides all necessary administrative and clerical assistance to the Commission.
Certain Administrative Officers
William J. Horton, Acting Secretary of the North Carolina Medical Care Commission and Acting Director of the Division of Health Service Regulation, North Carolina Department of Health and Human Services. Mr. Horton is responsible for the implementation of the Act. As Acting Director of the Division of Health Service Regulation, Mr. Horton has overall responsibility for all the division sections, which include Construction, Acute and Home Care Licensure and Certification, Nursing Home Licensure and Certification, Mental Health Licensure and Certification, Adult Care Licensure, Health Care Personnel Registry, Emergency Medical Services, Medical Facilities Planning and Certificate of Need. He has been with the Division of Health Service Regulation since 1993 and has worked with the Commission since 2004. Mr. Horton has a B.S. and M.S. from East Carolina University.
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William L. Warren, Chief, Construction Section, Division of Health Service Regulation, North Carolina Department of Health and Human Services. Mr. Warren is responsible for the review of plans and specifications for projects seeking assistance under the Act to insure that they meet the minimum standards of construction and design developed by the Construction Section for that purpose. Mr. Warren has been with the Construction Section of the Division of Health Service Regulation since 1984 and has served successively as Building Systems Engineer (1984-1988) and Assistant Chief (1988-1991). In December 1991, he assumed the position of Chief of the Construction Section. He has a B.S. degree in Engineering from North Carolina State University and is experienced in the areas of electrical, maintenance and mechanical engineering.
Christopher B. Taylor, CPA, Assistant Secretary, North Carolina Medical Care Commission, North Carolina Department of Health and Human Services. As Assistant Secretary, Mr. Taylor is responsible for the areas of (1) financial and operational auditing and compliance, (2) assistance and consultation to the Construction Section during project development and completion and (3) evaluation of and counseling of projects during the process of financing through the Commission. Mr. Taylor is a Certified Public Accountant and a magna cum laude graduate of North Carolina Wesleyan College. He served as a Senior Internal Auditor for the Department from 1979 until 1983. In 1983, Mr. Taylor was named Auditor for the Commission and served in that capacity until 1987, when he was appointed Financial Advisor for the Commission. In 2005, Mr. Taylor was appointed Assistant Secretary to the Commission. Mr. Taylor is a member of the American Institute of Certified Public Accountants, the North Carolina Association of Certified Public Accountants and the Healthcare Financial Management Association.
Kathy C. Larrison, Auditor, North Carolina Medical Care Commission, North Carolina Department of Health and Human Services. As Auditor for the Commission, Ms. Larrison is responsible for continuous review and audit of projects financed through the Commission to ensure financial, legal and operational compliance with the bond and note covenants. She has a B.B.A. in Accounting from Campbell University and is a member of the Healthcare Financial Management Association. She joined the staff in September 2004, after serving 17 years in an acute care hospital in the capacities of Staff Accountant, Controller and Chief Financial Officer.
THE BONDS
General
The Bonds will be issued only as fully registered bonds and will be initially registered in the name of Cede & Co., as nominee of DTC, as described below, in minimum denominations of $100,000 and integral multiples of $5,000 in excess thereof (while the Bonds bear interest at the Weekly Rate, “Authorized Denominations”). The Bonds will be dated their date of issuance and will mature, subject to prior redemption, on December 1, 2033. Interest on the Bonds will be computed on the basis of a 365-day year (366 days in a leap year) for the actual days elapsed while the Bonds bear interest at the Weekly Rate, and on the basis of a 360-day year of twelve 30-day months while the Bonds bear interest at a Long-Term Rate, if ever. While the Bonds bear interest at the Weekly Rate, interest on the Bonds will be paid monthly in arrears on the first Business Day of each month, commencing January 2, 2009.
This Official Statement is to be used for the offering of the Bonds when they bear interest at a Weekly Rate and are secured by a qualifying letter of credit and does not provide information about the Bonds when they bear interest at a Long-Term Rate or Rates.
Each Bond will bear interest from the date of delivery as hereinafter described. Each Bond will bear interest from the Interest Payment Date next preceding its date of authentication unless such
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authentication date (1) is prior to the first Interest Payment Date following the date of delivery in which event interest shall accrue from the date of delivery or (2) is an Interest Payment Date, in which event interest shall accrue from such authentication date; provided, that if interest on the Bonds is in default, Bonds will bear interest from the last date to which interest has been paid.
Both the principal of and the interest on the Bonds will be payable in any coin or currency of the United States of America that is legal tender for the payment of public and private debts on the respective dates of payment thereof. The principal of all Bonds will be payable at the Designated Office for Bond Deliveries upon the presentation and surrender of such Bonds as the same shall become due and payable.
Interest on any Bond that is payable, and is punctually paid or duly provided for, on any Interest Payment Date will be paid by check mailed by the Trustee to the person in whose name that Bond is registered at the close of business on the Regular Record Date.
Interest, premium, if any, and principal due to any person holding Bonds in an aggregate principal amount of $1,000,000 or more will be paid, upon the request of any such Holder, by wire transfer of immediately available funds to any account in the continental United States designated by such Holder.
Interest Rates on the Bonds
General. The Bonds initially will bear interest at the Weekly Rate. The interest rate on the Bonds may be converted from the Weekly Rate to a Long-Term Rate, from a Long-Term Rate to the Weekly Rate and from the interest rate applicable during a Long-Term Rate Period to the interest rate applicable during another Long-Term Rate Period as described below under “Conversion of Interest Rate Determination Method.”
Weekly Rate. For the period from and including the date of delivery to the first Thursday occurring thereafter, the Bonds shall bear interest at a rate determined by the Underwriter prior to the issuance of the Bonds. Thereafter and while the Bonds bear interest at the Weekly Rate, for each period from and including the first Thursday following a Rate Computation Date to and including the next succeeding Wednesday (each such period, including the period described in the immediately preceding sentence, being hereinafter called a “Weekly Rate Period”), the interest rate on the Bonds will be determined as follows:
(1) On each Rate Computation Date, the Remarketing Agent will determine that interest rate which if borne by the Bonds, would, in its judgment having due regard to prevailing financial market conditions and the yields at which comparable securities are then being sold, be the lowest interest rate necessary, but which would not exceed the interest rate necessary, to enable the Remarketing Agent to sell the Bonds at par plus accrued interest, and the interest rate so determined shall be the interest rate on the Bonds for the next succeeding Weekly Rate Period; provided, however, such Weekly Rate may be adjusted to a higher rate by the Remarketing Agent on any date during such Weekly Rate Period if such an adjustment is needed in order to enable the Remarketing Agent to remarket a Bond which has been tendered for purchase at the option of the holder thereof in accordance with the Trust Agreement. Such determination or adjustment is to be based on the knowledge of the Remarketing Agent of actual sales or pricing during the immediately preceding 105 days of securities which in the judgment of the Remarketing Agent are comparable to the Bonds and prevailing market conditions, or the marketing efforts with, or solicitation of proposals from, not less than three (3) institutional or money fund investors or other entities or individuals who customarily purchase tax-exempt variable rate demand bonds or other tax-exempt securities in denominations of $100,000 or more. Any such adjustment of the Weekly Rate occurring during a Weekly Rate Period will apply to all of the Bonds Outstanding at the time that such adjustment is made, and will be effective beginning on the date immediately following the date on which
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such rate is announced by the Remarketing Agent and thereafter to the beginning of the next Weekly Rate Period.
(2) If on or as of any Rate Computation Date, (a) no Person is serving as the Remarketing Agent, (b) the Remarketing Agent fails to establish the Weekly Rate in accordance with the procedure described in the preceding paragraph, or (c) the Weekly Rate established in accordance with the procedure described in the preceding paragraph is held to be invalid or unenforceable, then the Weekly Rate for the next succeeding Weekly Rate Period shall be the same as for the Weekly Rate Period ending on or immediately after such Rate Computation Date; provided, however, if the Weekly Rate has been determined pursuant to the provisions of the first part of this sentence for two consecutive Weekly Rate Periods or if such Rate Computation Date is the first Rate Computation Date that occurs with any conversion or deemed conversion from a Long-Term Rate to the Weekly Rate, then the Weekly Rate for the next succeeding Weekly Rate Period shall be the Alternate Weekly Rate.
(3) Notwithstanding the foregoing, the Weekly Rate will never exceed a rate which would cause the net effective interest rate for the Bonds as of any date, computed in accordance with applicable usury law, to exceed the Maximum Rate. All calculations of the Weekly Rate will be rounded to the nearest .01%.
(4) The determination of the Weekly Rate will be conclusive and binding upon the owners of the Bonds, the Commission, the Corporation, the Company, the Bank and the Trustee.
No information is being provided herein on the determination of rates during any Long-Term Period.
Conversion of Interest Rate Determination Method
Conversion Notice and Conversion Date. The Interest Rate Determination Method may be changed from the Weekly Rate to a Long-Term Rate, from a Long-Term Rate to the Weekly Rate or from a Long-Term Rate to a new Long-Term Rate on any Conversion Date by the Corporation and the Company giving written notice of such change (a “Conversion Notice”) to the Remarketing Agent and the Trustee with a copy to the Commission, the LGC, each Rating Agency, if any, and the Bank, if any. If the Interest Rate Determination Method in effect prior to the Conversion Date is the Weekly Rate, then the Conversion Date may be any Business Day and if such Interest Rate Determination Method is a Long-Term Rate, the Conversion Date must be the Business Day immediately succeeding the last day of the Long-Term Rate Period.
Opinions With Respect to Conversions. Each Conversion Notice given to the Remarketing Agent and the Trustee shall be accompanied by an opinion of Bond Counsel to the effect that the change in the Interest Rate Determination Method or the change from a Long-Term Rate to a new Long-Term Rate will not cause the interest on the Bonds to be included in the gross income of the Holders thereof for federal income tax purposes and that such change is permitted under the Trust Agreement.
The Corporation and the Company must deliver to the Remarketing Agent and the Trustee, by 10:00 a.m., Local Time, on the proposed Conversion Date a supplemental opinion of Bond Counsel to the effect that the change in the Interest Rate Determination Method or the change from a Long-Term Rate to a new Long-Term Rate is permitted under the Trust Agreement and, under the laws existing on such Conversion Date, the change will not cause the interest on the Bonds to be included in the gross income of the Holders thereof for federal income tax purposes.
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Notice of Conversion to Holders. The Trustee shall give written notice to the Holders of a Conversion Date by first-class mail, postage prepaid, at least 15 days prior to the proposed Conversion Date. Such notice shall state (1) that the Interest Rate Determination Method is being changed to another Interest Rate Determination Method or the interest rate applicable during a Long-Term Rate Period is being changed to a new interest rate during a new Long-Term Rate Period, (2) the proposed Conversion Date and (3) that the Bonds shall be purchased by the Trustee on the proposed Conversion Date in accordance with the Trust Agreement.
Failure or Revocation of Conversion. If (1) the Corporation and the Company fail to deliver to the Remarketing Agent and the Trustee by 10:00 a.m., Local Time, on the proposed Conversion Date any supplemental opinion of Bond Counsel required by the Trust Agreement or (2) an Event of Default shall have occurred and be continuing under the Trust Agreement, the Interest Rate Determination Method for the Bonds shall not be changed on the proposed Conversion Date.
Notwithstanding any other provision of the Trust Agreement to the contrary, no conversion of the Interest Rate Determination Method to a Long-Term Rate shall occur if the Corporation and the Company, not later than 10:00 a.m., Local Time, on the Business Day immediately preceding the applicable Rate Computation Date, direct the Trustee not to change the Interest Rate Determination Method to a Long-Term Rate by written notice, with a copy to the Remarketing Agent, the Commission, each Rating Agency, if any, and the Bank.
If a proposed conversion of the Interest Rate Determination Method is cancelled pursuant to the provisions of either of the two preceding paragraphs, all Bonds shall nevertheless be tendered for purchase on the proposed Conversion Date and shall be purchased on the proposed Conversion Date. The Bonds shall continue to bear interest in accordance with the Interest Rate Determination Method in effect prior to the proposed Conversion Date and, in the case of a proposed change from a Long-Term Rate, for a Long-Term Rate Period ending on the first day that is a day immediately preceding a Business Day and that occurs on or after the day that is the same number of days after the proposed Conversion Date as the number of days in the immediately preceding Long-Term Rate Period (but in no event later than the maturity of the Bonds); provided, however, that the rate of interest that the Bonds will bear shall be determined on the proposed Conversion Date.
Failure To Mail Certain Notices. Failure to mail the notice of a Conversion Date to Holders as described above, or any defect therein, shall not affect the validity of any interest rate or change in the Interest Rate Determination Method on any of the Bonds or the requirement that the Bonds shall be tendered pursuant to the Trust Agreement or extend the period for tendering any of the Bonds for purchase, and the Trustee shall not be liable to any Holder by reason of its failure to mail such notice or any defect therein.
Conversion to a Long-Term Rate. The Interest Rate Determination Method may not be converted to a Long-Term Rate unless the interest component of the Letter of Credit to be in effect immediately following such conversion, if any, provides for payment of at least 183 days of interest on the Bonds at such Long-Term Rate. If a rating for the Bonds is to be maintained after any such conversion, the Trustee and the Remarketing Agent must receive, prior to the effective date of such conversion, written confirmation from each Rating Agency, if any, of such rating.
Optional Tender of Bonds
While the Bonds bear interest at the Weekly Rate, any Bond (or portion thereof in an Authorized Denomination) shall be purchased, on the demand of the Holder thereof, in Authorized Denominations, on any Business Day at a purchase price equal to the principal amount thereof plus accrued interest, if
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any, to the Purchase Date (as defined below), upon: (1) delivery to the Remarketing Agent at its principal office by telephonic notice, followed by written notice within two Business Days (which may be delivered by telecopy, and which shall be satisfactory to the Remarketing Agent, and a copy of which shall be delivered by such Holder to the Trustee at the Designated Office for Notices), which (A) states the name of the registered owner and the principal amount of such Bond (and if only a portion thereof is to be purchased, the amount of such portion) and (B) states the date on which such Bond 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 Remarketing Agent (the “Purchase Date”); and (2) delivery of such Bond (with an appropriate transfer of registration form executed in blank acceptable to the Trustee) at the Designated Office for Bond Deliveries at or prior to 10:00 a.m., Local Time, on the Purchase Date; provided, however, that such Bond (or portion thereof) shall be so purchased only if the Bond so delivered to the Trustee shall conform in all respects to the description thereof in the aforesaid notice. Delivery of a notice to the Remarketing Agent to tender a Bond (or portion thereof) or Bonds for purchase and delivery of the Bond or Bonds described therein to the Trustee shall each constitute irrevocable acts on the part of the owner of such Bond or Bonds. If less than all of the principal amount of a Bond is purchased, the Holder must retain Bonds in Authorized Denominations and a replacement Bond in the remaining principal amount shall be issued to the registered owner tendering his Bond.
While the Bonds are held in a book-entry system, a purchase notice described above may be delivered by a Beneficial Owner, as set forth in the preceding paragraph, and must identify the Participant through which the Beneficial Owner maintains its interest. Upon delivery of such notice, the Beneficial Owner must make arrangements to have its beneficial ownership interest in the Bond being tendered (or portion thereof) transferred to the Trustee at or prior to 10:00 a.m., Local Time, on the Purchase Date, but need not otherwise comply with the requirement of delivery of the Bond (or portion thereof) being tendered to the Trustee described in the preceding paragraph.
When any Bonds shall have been delivered to the Trustee for purchase, the Remarketing Agent shall use its best efforts to remarket such Bonds at par plus accrued interest. In the event that sufficient funds are not available to the Trustee to purchase tendered Bonds, the Trustee is required to draw on the Letter of Credit in a sufficient amount to pay the purchase price for such tendered Bonds. Upon conversion to a Long-Term Rate, the Holders’ tender option will terminate.
Mandatory Tender of Bonds
The Bonds are subject to mandatory purchase at a purchase price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to but not including the date of purchase on the following dates (each of which is designated a “Mandatory Purchase Date”):
(1) each proposed Conversion Date;
(2) (a) each Substitution Date designated by the Corporation and the Company pursuant to the Trust Agreement, whether or not a Substitute Letter of Credit is delivered to the Trustee on such Substitution Date, or (b) the 15th day next preceding the stated expiration or termination date of the Letter of Credit unless by the 40th day prior thereto the Trustee has received evidence that the Letter of Credit has been extended or a Substitute Letter of Credit will be delivered in accordance with the Trust Agreement on or prior to the 15th day next preceding such stated expiration or termination date;
(3) while the Bonds bear interest at the Weekly Rate, on any Business Day designated by the Corporation and the Company, with the consent of the Bank and the Remarketing Agent; and
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(4) on the first Business Day that is at least 20 days after the Trustee receives written notice from the Bank that an “Event of Default” under and as defined in the Reimbursement Agreement has occurred and is continuing and directing a mandatory purchase of the Bonds.
Notice of a Mandatory Purchase Date shall be given in accordance with the Trust Agreement not less than 15 days prior to each Mandatory Purchase Date.
Purchase of Bonds
On any Purchase Date or Mandatory Purchase Date, the Trustee shall purchase, but only from the funds listed below, Bonds subject to purchase from the Holders thereof at a purchase price equal to the principal amount thereof plus accrued interest, if any, to the date of purchase. Funds for the payment of such purchase price shall be derived from the following sources in the order of priority indicated:
(i) proceeds of the remarketing of such Bonds on deposit in the Purchase Account;
(ii) moneys representing proceeds of a drawing under the Letter of Credit;
(iii) any other Available Moneys; and
(iv) any other revenues and moneys furnished by the Corporation and the Company pursuant to the Loan Agreement.
Delivery of Bonds
Bonds purchased by the Trustee shall be delivered by the Trustee as follows:
(1) Bonds sold by the Remarketing Agent shall be delivered to the purchasers thereof upon payment therefor;
(2) Bonds purchased with moneys drawn under the Letter of Credit shall be registered in the name of the Bank and held by the Bank or its designee (including the Trustee) as agent and bailee for the Bank pending remarketing and the Trustee shall note the same on its records; provided, however, that in the event such Bonds are remarketed, the Trustee shall not release such Bonds to the purchaser until it receives written evidence from the Bank of reinstatement of the Letter of Credit with respect to such Bonds;
(3) Bonds purchased with other moneys shall, at the direction of the Corporation and the Company, be (i) delivered to the Trustee at the Designated Office for Bond Deliveries for the account of the Corporation and the Company, (ii) canceled, or (iii) delivered to the Corporation and the Company; provided, however, that any Bonds so purchased after the selection thereof by the Trustee for redemption shall be canceled.
Delivery of Proceeds of Sale
The proceeds of the sale by the Remarketing Agent of any Bond shall be delivered to the Holder selling such Bond (or to the Corporation and the Company if the Bonds remarketed are held by or for the benefit of the Corporation and the Company, or to the Bank if the proceeds are from the sale of Pledged Bonds).
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No Remarketing Under Certain Conditions
Anything in the Trust Agreement to the contrary notwithstanding, the Remarketing Agent shall not remarket any Bond: (1) while the Bonds bear interest at the Weekly Rate, unless a Letter of Credit will be in effect following the remarketing of such Bond; (2) if there shall have occurred and be continuing one or more certain Events of Default or if any event shall have occurred and be continuing which with the lapse of time would constitute such an Event of Default; (3) if such Bond is to be purchased after notice of a redemption or mandatory purchase for such Bond is given but before such redemption or mandatory purchase occurs, unless the purchaser of such Bond (other than the Commission, the Corporation and the Company) is given a copy of such notice of redemption or mandatory purchase upon delivery of such Bond; (4) if the proposed purchaser of such Bond is the Commission, the Company or the Corporation, unless prior to such remarketing the Trustee and each Rating Agency shall have received an Opinion of Counsel experienced in bankruptcy law matters (which opinion shall be in form and substance acceptable to the Trustee and each Rating Agency) to the effect that use of the proceeds of such remarketing to pay the purchase price of such Bond will not constitute an avoidable preferential payment under Section 547 of the Bankruptcy Code recoverable from the Holders of such Bond pursuant to Section 550 of the Bankruptcy Code; and (5) if such Bond has been purchased in lieu of redemption pursuant to the Trust Agreement, unless the Remarketing Agent specifically agrees to undertake such remarketing.
Redemption of Bonds
Optional Redemption in Weekly Rate. While the Bonds bear interest at the Weekly Rate, the Bonds are subject to optional redemption prior to maturity at the option of the Commission, to be exercised as directed by the Corporation and the Company, with the prior written consent of the Bank, in whole on any Business Day or in part (in Authorized Denominations) on any Interest Payment Date at a Redemption Price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest to the redemption date.
No information is being provided regarding redemption provisions during any Long-Term Period.
Extraordinary Optional Redemption. (a) The Bonds are subject to optional redemption in whole or in part, on any Business Day, at a Redemption Price equal to 100% of the principal amount of the Bonds to be redeemed, plus interest accrued to the redemption date, in the event the Corporation and the Company elect to exercise their option to prepay the Loan from amounts received by the Corporation and the Company as insurance proceeds with respect to any casualty loss or failure of title or as condemnation awards, provided that such redemption shall not be less than $100,000, upon the occurrence of any of the following events: Damage or destruction of all or any part (if such damage or destruction causes the Project as a whole to be impracticable to operate, as evidenced by an Officer’s Certificate filed with the Commission and the Trustee) of the Project by fire or casualty, or loss of title to or use of all or any part (if such loss of title causes the Project as a whole to be impracticable to operate, as evidenced by an Officer’s Certificate filed with the Commission and the Trustee) of the Project as a result of the failure of title or as a result of Eminent Domain proceedings or proceedings in lieu thereof; provided, however, that in the event an amount greater than 10% of the aggregate principal amount of the Notes is prepaid, the Corporation and the Company shall file with the Commission, the Local Government Commission and the Trustee (1) an Officer’s Certificate to the effect that the forecasted Long-Term Debt Service Coverage Ratio for the Fiscal Year next succeeding the Fiscal Year in which such prepayment is made will be not less than 1.30 or (2) a report of a Management Consultant to the effect that the forecasted Long-Term Debt Service Coverage Ratio for the Fiscal Year next succeeding the Fiscal Year in which such prepayment is made will be not less than 1.10.
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(b) The Bonds are subject to optional redemption in whole but not in part, at Redemption Price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest to the redemption date, in the event the Corporation and the Company shall prepay the Loan, upon the occurrence of the following events: Changes in the Constitution of the United States of America or of the State or legislation or administrative action or failure of administrative action by the United States of America or the State or any agency or political subdivision of either, or any judicial decision, to the extent that, in the opinion of the Boards of Directors of the Corporation and the Company (expressed in a resolution) and in the opinion of a Management Consultant, both filed with the Commission and the Trustee, (1) the Loan Agreement is impossible to perform without unreasonable delay or (2) unreasonable burdens or excessive liabilities not being imposed on the date hereof are imposed on the Corporation and the Company.
Purchase in Lieu of Redemption. When Bonds are subject to extraordinary optional redemption as described above, Bonds paid by the Corporation and the Company or paid from a draw or claim under the Letter of Credit or otherwise paid by or on behalf of the Bank shall be purchased in lieu of redemption on the applicable redemption date at a purchase price equal to the principal amount thereof, plus accrued interest thereon to but not including the date of such purchase, if the Trustee has received a written request on or before such purchase date from the Corporation and the Company or the Bank, as the case may be, specifying that the moneys provided or to be provided by such party shall be used to purchase Bonds in lieu of redemption. No purchase of Bonds by the Corporation and the Company or the Bank under the Trust Agreement or advance or use of any moneys to effectuate any such purchase shall be deemed to be a payment or redemption of the Bonds or any portion thereof, and such purchase shall not operate to extinguish or discharge the indebtedness evidenced by such Bonds. No Bonds so purchased in lieu of redemption shall be required to be remarketed by the Remarketing Agent, unless the Remarketing Agent specifically agrees to undertake such remarketing. If a Letter of Credit is in effect on the date Bonds are to be purchased in lieu of redemption, the moneys used to purchase Bonds in lieu of redemption shall be Available Moneys.
Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory redemption in part by lot on December 1, 2010 and on each December 1 thereafter, to and including December 1, 2033, in the principal amounts set forth below at 100% of the principal amount of such Bonds being redeemed plus accrued interest to the date of redemption and the balance of the Bonds being payable at their maturity on December 1, 2033:
Year Amount Year Amount
2010 $100,000 2022 $200,000 2011 100,000 2023 200,000 2012 100,000 2024 200,000 2013 100,000 2025 200,000 2014 200,000 2026 200,000 2015 200,000 2027 200,000 2016 200,000 2028 300,000 2017 200,000 2029 300,000 2018 200,000 2030 300,000 2019 200,000 2031 300,000 2020 200,000 2032 300,000 2021 200,000 2033* 300,000
_________ * Maturity
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The aggregate amount of such Sinking Fund Requirements for the Bonds, together with the amount due upon the final maturity of such Bonds, shall be equal to the aggregate principal amount of the Bonds. The Sinking Fund Requirements for the Bonds shall begin in the Bond Year determined as provided above and shall end with the Bond Year immediately preceding the maturity of the Bonds (such final installment being payable at maturity and not redeemed). Any principal amount of Bonds retired by operation of the Sinking Fund Account by purchase in excess of the total amount of the Sinking Fund Requirement for such Bonds to and including such December 1, shall be credited against and reduce the future Sinking Fund Requirements for such Bonds in such manner as shall be specified by the Corporation Representative pursuant to the Trust Agreement.
On or before the 75th day next preceding any December 1 on which Bonds are to be retired pursuant to the Sinking Fund Requirement therefor, the Commission, the Corporation or the Company may deliver to the Trustee at the Designated Office for Bond Deliveries for cancellation Bonds required to be redeemed on such December 1 in any aggregate principal amount desired and receive a credit against amounts required to be transferred from the Sinking Fund Account on account of such Bonds in the amount of 100% of the principal amount of any such Bonds so purchased. Any principal amount of Bonds purchased by the Trustee and canceled in excess of the principal amount required to be redeemed on such December 1, shall be credited against and reduce the principal amount of future Sinking Fund Requirements for such Bonds in such manner as shall be specified in by the Corporation Representative pursuant to the Trust Agreement.
It shall be the duty of the Trustee, on or before the 15th day of December in each Bond Year, to recompute, if necessary, the Sinking Fund Requirement for such Bond Year and all subsequent Bond Years for the Bonds Outstanding. The Sinking Fund Requirement for such Bond Year as so recomputed shall continue to be applicable during the balance of such Bond Year and no adjustment shall be made therein by reason of Bonds purchased or redeemed or called for redemption during such Bond Year.
If any Bonds are paid or redeemed by operation of the Redemption Fund, the Trustee shall reduce future Sinking Fund Requirements therefor in such manner as shall be specified by the Corporation Representative pursuant to the Trust Agreement.
Selection for Redemption. The Bonds shall be redeemed only in Authorized Denominations. The Trustee shall select the Bonds to be redeemed in accordance with the terms and provisions of the Trust Agreement.
If less than all of the Bonds are to be called for redemption, the Trustee shall first select and call Pledged Bonds for redemption before any other Bonds are selected and called for redemption. If, following such selection, additional Bonds must be selected and called for redemption, the Trustee shall select, or arrange for the selection of, in such manner as it shall deem fair and equitable, the Bonds, in portions thereof equal to Authorized Denominations; provided that for so long as the only Holder is a Securities Depository Nominee, such selection shall be made by the Securities Depository. If there shall be called for redemption less than the principal amount of a Bond, the Commission shall execute and the Trustee shall authenticate and deliver, upon surrender of such Bond, without charge to the Holder thereof in exchange for the unredeemed principal amount of such Bond at the option of such Holder, Bonds in any Authorized Denomination or, if the Bonds are held in the Book Entry System, the Securities Depository shall, acting pursuant to its rules and procedures, reflect in the Book Entry System the partial redemption and the Trustee shall (i) either exchange the Bond or Bonds held by the Securities Depository for a new Bond or Bonds in the appropriate principal amount, if such Bond is presented to the Trustee by the Securities Depository, or (ii) obtain from the Securities Depository a written confirmation of the reduction in the principal amount of the Bonds held by such Securities Depository.
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Notice. Notice of the call for any redemption, identifying the Bonds or portions thereof being called and the date fixed for redemption, will be given by the Trustee by first-class mail (or by Electronic Means if required by a registered owner) to each registered owner of each such Bond addressed to such registered owner at his registered address and placed in the mails no less than 30 days or more than 60 days prior to the redemption date; provided, however, that failure to give such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred. Any notice mailed as provided in the Trust Agreement will be conclusively presumed to have been duly given, whether or not the registered owner receives the notice.
Conditional Redemption. In the case of an optional redemption or extraordinary optional redemption, the redemption notice may state that (a) it is conditioned upon the deposit of Available Moneys or Defeasance Obligations purchased with Available Moneys, or a combination of both, in an amount equal to the amount necessary to effect the redemption, with the Trustee no later than the scheduled redemption date or (b) the Corporation and the Company retain the right to rescind such notice on or prior to the scheduled redemption date (in either case, a “Conditional Redemption”), and such notice and optional redemption shall be of no effect if such moneys are not so deposited or if the notice is rescinded pursuant to the Trust Agreement as described below. In the case of a Conditional Redemption subject to the deposit of Available Moneys or Defeasance Obligations, the failure of the Corporation and the Company or any other Person to make such moneys or obligations available in part or in whole on or before the scheduled redemption date shall not constitute an Event of Default under the Trust Agreement and any Bonds subject to such Conditional Redemption shall remain Outstanding. Any Conditional Redemption subject to rescission may be rescinded in whole or in part at any time on or prior to the scheduled redemption date if a Corporation Representative instructs the Trustee in writing to rescind the redemption notice. Any Bonds subject to Conditional Redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an Event of Default under the Trust Agreement. If a Conditional Redemption for which notice has been sent to Holders will not occur, either because moneys or obligations are not available to effect such redemption on or before the scheduled redemption date or the Corporation and the Company have rescinded such notice, the Trustee shall immediately give Notice by Electronic Means to the Securities Depository if all of the Bonds are Book Entry Bonds or to the affected Holders of any Bonds that are not Book Entry Bonds that the redemption did not occur and that the Bonds called for redemption and not so paid remain Outstanding.
Book-Entry-Only System
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered Bonds registered in the name of Cede & Co., DTC’s partnership nominee. One fully-registered Bond certificate will be issued in the aggregate principal amount of the Bonds and will be deposited with DTC. So long as Cede & Co. is the registered owner of the Bonds, as DTC’s partnership nominee, reference herein to the Holders or registered owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and
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pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers; banks trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of 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 the Bonds (“Beneficial Owner”) is in turn 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 Participants through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee effect no 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 the Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners of the Bonds 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 security documents.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Commission as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the
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Commission or the Trustee on each payable date in accordance with their respective holdings shown on DTC’s records. Payments by Direct and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Direct and Indirect Participants and not of DTC, the Commission or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC, is the responsibility of the 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 the Direct Participants and the Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Remarketing Agent (with a copy to the Trustee), and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in such Bonds on DTC’s records to the Trustee. The requirement for physical delivery of the Bonds in connection with an optional tender or a mandatory purchase of the Bonds will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tender Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Commission and the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.
The Commission may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.
The Commission and the Trustee cannot and do not give any assurances that DTC, Direct Participants or Indirect Participants will distribute to the Beneficial Owners of the Bonds (a) payments of principal of, premium, if any, or interest on the Bonds, (b) confirmations of their ownership interests in the Bonds or (c) redemption or other notices sent to DTC or Cede & Co., its partnership nominee, as the registered owner of the Bonds, or that they will do so on a timely basis or that DTC, Direct Participants or Indirect Participants will serve and act in the manner described in this Official Statement. The information under this caption concerning DTC and DTC’s book-entry system has been obtained from sources that the Commission believes to be reliable, but the Commission takes no responsibility for the accuracy thereof.
Neither the Commission nor the Trustee will have any responsibility or obligations to the Direct Participants, Indirect Participants or the Beneficial Owners with respect to (1) the accuracy of any records maintained by DTC or any Direct Participant or Indirect Participant; (2) the payment by DTC or any Direct Participant or Indirect Participant of any amount due to any Beneficial Owner in respect of the principal amount of or redemption price or interest on the Bonds; (3) the delivery by DTC or any Direct Participant or Indirect Participant of any notice to any Beneficial Owner that is required or permitted to be given to Holders under the terms of the Trust Agreement; (4) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Bonds; or (5) any consent given or other action taken by DTC as Holder.
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SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
The principal of, premium, if any, and interest on the Bonds will be payable from (i) moneys paid by the Corporation and the Company pursuant to the Loan Agreement and the Notes and (ii) certain funds and accounts created under the Indenture. The Commission will assign to the Trustee (a) its right, title and interest in and to the Notes, and (b) its right, title and interest in and to the Loan Agreement, including the right to receive loan payments thereunder (except for certain reserved rights, including its rights to indemnification and the payment of certain expenses, its rights to give certain approvals and consents and its rights to receive certain documents, information and notices), as security for the payment of the principal of, redemption premium, if any, and interest on the Bonds. The Bonds will be secured by the moneys and securities held by the Trustee in certain funds and accounts created under the Trust Agreement, as described below.
Pursuant to the Loan Agreement and the Note, the Corporation and the Company agree to make payments to the Trustee in such amounts and at such times as will be sufficient to pay, when due, the principal of, redemption premium, if any, and interest on the Bonds; and pursuant to the Loan Agreement, the Corporation and the Company agree to provide for payment sufficient to pay the purchase price of Bonds tendered or deemed tendered for purchase to the extent that other moneys are not available therefor. See Appendix A hereto for a summary of certain provisions of the Loan Agreement.
The Bonds are limited obligations of the Commission, and the Commission will not be obligated to pay debt service on the Bonds except from the revenues and other funds pledged or assigned therefor under the Trust Agreement, including moneys paid by the Corporation and the Company under the Note. Neither the faith and credit nor the taxing power of the State of North Carolina or of any other political subdivision thereof is pledged as security for the Bonds.
The payment of the principal and purchase price of and interest on the Bonds will be secured by the Letter of Credit. See “THE LETTER OF CREDIT” herein at Appendix B hereto. No representation is made concerning the financial status or prospects of the Corporation or the Company or the value or financial viability of the Project. PROSPECTIVE PURCHASERS OF THE BONDS ARE ADVISED TO RELY SOLELY UPON THE LETTER OF CREDIT FOR PAYMENT OF PRINCIPAL AND PURCHASE PRICE OF AND INTEREST ON THE BONDS.
THE LETTER OF CREDIT
General
Payment of the principal of and interest on the Bonds will also be secured by an irrevocable, direct-pay Letter of Credit (initially, the “Letter of Credit”) to be issued by Branch Banking and Trust Company (initially, the “Bank”) on the date of issuance of the Bonds pursuant to the terms of the Reimbursement Agreement. The Letter of Credit when issued will be in the stated amount of $5,057,535 (the “Stated Amount”) of which an aggregate amount not exceeding $5,000,000 (the “Principal Component”) may be drawn upon with respect to the payment of principal of the Bonds or the principal component of the purchase price of the Bonds and an aggregate amount not exceeding $57,535 (the “Interest Component”) may be drawn upon with respect to the payment of up to 35 days’ interest on the Bonds or the interest component of the purchase price of the Bonds (computed at a rate of 12% per annum based on a 365-day year); provided, however, that the amount available to be drawn under the Letter of Credit with respect to interest on the Bonds or the interest component of the purchase price of the Bonds will in no event exceed the actual amount of interest accrued on the Bonds.
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The Letter of Credit will terminate on the earliest to occur of any of the following: (1) 3:00 p.m. (prevailing Eastern Time) on December 23, 2011 (the “Expiration Date”), (2) the close of business on the second Business Day following a conversion of the interest rate on the Bonds to a Long-Term Rate, (3) the date the Bank honors a draft following receipt from the Trustee of a certificate stating that an Event of Default has occurred under the Trust Agreement and the Bonds have been accelerated, (4) the date the Letter of Credit is surrendered to the Bank for cancellation following the Trustee’s acceptance of a Substitute Letter of Credit, (5) the date on which the Bank honors a draft drawn under the Letter of Credit to purchase the Bonds following the Trustee’s receipt of written notice from the Bank that an Event of Default under and as defined in the Reimbursement Agreement has occurred and is continuing and a written notice from the Bank directing a mandatory purchase of the Bonds pursuant to the Trust Agreement and (6) the date the Bank receives notice from the Trustee that the principal amount of and interest on the Bonds shall have been paid, redeemed or defeased in full, pursuant to the Trust Agreement. The Bank may extend the Expiration Date from time to time at the request of the Corporation or the Company by delivering to the Trustee a notice of extension of the Letter of Credit specifying a new Expiration Date.
Drawings under the Letter of Credit
The Trustee is authorized and directed to draw moneys under the Letter of Credit to the extent available in accordance with the terms thereof to make timely payments of principal of and interest on the Bonds. The Trustee is authorized and directed to draw in accordance with the provisions of the Trust Agreement moneys under the Letter of Credit to the extent available in accordance with the terms of the Letter of Credit in order to effect the purchase of Bonds (or portions thereof in Authorized Denominations) on a Mandatory Purchase Date or Purchase Date. Upon declaration of acceleration of the Bonds following an Event of Default under the Trust Agreement, the Trustee is authorized and directed to draw on the Letter of Credit to the extent available in an amount equal to the full unpaid principal of and accrued interest on the Bonds.
Reduction and Reinstatement of the Letter of Credit
The Bank’s obligation under the Letter of Credit will be reduced immediately following the Bank’s honoring any draft drawn under the Letter of Credit by an amount equal to the amount of such draft. In connection with a drawing to pay the principal of the Bonds upon the acceleration, redemption or stated maturity thereof, the Interest Component of the Stated Amount will be automatically and permanently reduced by the amount of interest that would accrue on the amount of such drawing (computed at a rate of 12% per annum based on a 365-day year) for a period of 35 days. Amounts drawn under the Letter of Credit to pay interest on the Bonds will be reinstated immediately following such drawing except for any portion of such drawing honored with respect to interest accrued on the Bonds upon the acceleration, redemption or stated maturity thereof. At such time as the Trustee receives written notice from the Bank that the Bank has been reimbursed for a drawing under the Letter of Credit to pay the purchase price of the Bonds, the amount so drawn will be reinstated. Drawings made under the Letter of Credit to pay the principal of Bonds in connection with a redemption will not be reinstated.
Substitute Letter of Credit
The Corporation and the Company may elect to provide a Substitute Letter of Credit by giving written notice to the Trustee, the Remarketing Agent, the Commission, the LGC and the Bank not less than 25 days prior to the Substitution Date specified in such notice, stating: (1) its election to provide a Substitute Letter of Credit and specifying the Substitution Date, (2) the name and a brief description of the bank that will issue the Substitute Letter of Credit, (3) the expiration date of the Substitute Letter of Credit, (4) whether the Bonds will be rated by a Rating Agency upon delivery of the Substitute Letter of
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Credit, (5) if the Bonds will be rated by a Rating Agency upon delivery of the Substitute Letter of Credit, the expected ratings, and (6) if the Bonds will not be rated upon delivery of the Substitute Letter of Credit, the long-term and short-term senior debt or bank deposit ratings of the bank which will issue the Substitute Letter of Credit by an entity which could be a Rating Agency, along with the documents required by the Trust Agreement. The Trustee shall give notice to the Holders at least 15 days prior to the proposed Substitution Date.
Certain limited information regarding the Bank is set forth in Appendix C. Such information has been provided by the Bank. There may have been material changes in the financial condition of the Bank since the date of the information presented or referenced in Appendix C. None of the Commission, the Corporation and the Company or the Underwriter makes any representation as to the accuracy or completeness of such information.
SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT
Tender Advances
Unless an event of default has occurred and is continuing under the Reimbursement Agreement or unless the representations and warranties contained in the Reimbursement Agreement, the Loan Agreement and the Related Documents (as defined in the Reimbursement Agreement) are incorrect, the proceeds of the amount of each drawing under the Letter of Credit to pay the portion of the purchase price of Bonds allocable to principal and interest (a “Tender Drawing”) will constitute an advance made by the Bank to the Corporation and the Company on the date and in the amount of such Tender Drawing (each such loan being herein referred to as a “Tender Advance”) repayable as provided in the Reimbursement Agreement.
In addition to the other amounts payable by the Corporation and the Company under the Reimbursement Agreement, the Corporation and the Company are also required thereunder to pay interest on each Tender Advance to the Bank as provided in the Reimbursement Agreement at a fluctuating rate of interest. Any Tender Advances, and interest thereon, not paid when due as provided in the Reimbursement Agreement shall thereafter bear interest at the Base Rate (as defined in the Reimbursement Agreement) plus two percent per annum.
The Reimbursement Agreement provides that all Bonds (or portions thereof) the purchase price of which was provided pursuant to a draw on the Letter of Credit will be pledged to the Bank, pursuant to the Reimbursement Agreement, to secure the Corporation’s and the Company’s obligations under the Reimbursement Agreement. The Trust Agreement provides that all Bonds (or portions thereof) the purchase price of which was provided pursuant to a draw on the Letter of Credit, shall be registered in the name of the Bank and held by the Bank, or its designee (including the Trustee) as agent and bailee of the Bank, pending remarketing, and no such Bond will be released from the pledge thereof until the Bank has been reimbursed for the amounts due pursuant to the Reimbursement Agreement and reinstates the Letter of Credit in the amount of any drawing thereunder relating to such Bond.
Events of Default under Reimbursement Agreement
The Reimbursement Agreement sets forth a number of events of default, including, but not limited to, the failure of the Corporation and the Company to reimburse the Bank for any drawing under the Letter of Credit when due. The Bank may waive any event of default under the Reimbursement Agreement.
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If an event of default under the Reimbursement Agreement occurs and is continuing, the Bank may, in its sole discretion, (1) declare all unreimbursed drawings in respect of the Letter of Credit to be immediately due and payable, and upon such declaration the same will become and be immediately due and payable, without presentment, protest, demand or other notice of any kind, all of which have been waived by the Corporation and the Company in the Reimbursement Agreement, (2) notify the Trustee that an event of default under the Reimbursement Agreement has occurred and is continuing and request that (a) the Bonds be accelerated pursuant to the Trust Agreement, or (b) the Trustee cause a mandatory purchase of the Bonds pursuant to the Trust Agreement and (3) pursue all remedies available to it at law, by contract, at equity or otherwise and all rights of set off.
THE CORPORATION AND THE COMPANY
The Corporation was formed in 1980 as a nonprofit corporation under North Carolina law. The Company was formed in 2005 as a limited liability company under North Carolina law. The Corporation is the sole member of the Company. The Corporation’s primary focus is to raise funds for the operations of the programs offered by the Company and the Company’s primary focus to operate such programs. The Corporation owns the facilities and leases the same to the Company.
The Corporation and the Company together comprise a community-based agency that provides comprehensive, compassionate care to persons who have a limited life expectancy measured in months rather than years. The Corporation and the Company also provide home health care services and counseling for children and adults. The primary service area is Alamance, Caswell, eastern Guilford and western Orange counties in North Carolina.
The Corporation, the Company and their programs are licensed by the State of North Carolina for both hospice and home health care, certified by the federal Medicare program, and have received national accreditation from the Accreditation Commission for Health Care, demonstrating a commitment to meeting and exceeding the highest national standards for quality.
The Corporation’s Hospice Home (the “Hospice Home”) is a 12-bed hospice inpatient facility located in Burlington, North Carolina. The Hospice Home provides around-the-clock nursing, nurse assistant and personal care services. In addition, an on-site social worker and chaplain are available to provide counseling, emotional and spiritual comfort, and other services for patients and their families. The Hospice Home also offers specially-trained volunteers for friendly visits and support. When medically appropriate, physical therapy is available, and integrative therapies such as Healing Touch, pet therapy, music therapy and aromatherapy are offered.
No representation is made herein regarding the financial history or current financial condition of the Corporation and the Company or future revenues of the Corporation and the Company. There can be no assurance that moneys available to the Corporation or the Company will be sufficient to pay the debt service on the Bonds. Investors should not rely upon information provided herein regarding the business of the Corporation, the Company, the Project, the estimated uses of funds for the Project, or any evidence regarding the financial history, current financial condition or future revenues of the Corporation or the Company in making investment decisions concerning the Bonds. Investors are advised to rely solely upon the Letter of Credit for payment of principal and purchase price of and interest on the Bonds.
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THE PROJECT
The proceeds of the Bonds, together with other available funds, will be used to (1) pay a portion of the costs of the Project (the “Project”) described below, and (2) pay certain expenses incurred in connection with the issuance of the Bonds.
The Project consists of acquiring, constructing, and equipping of (a) an approximately 6,000 square feet expansion and renovations of existing space of the Hospice Home, to include 4 new patient rooms, family living space, kitchen, laundry, storage and other ancillary space and (b) an approximately 23,150 square foot new office and grief counseling building connected by walkway to the existing facility.
Construction of the Project began in August 2008 and is anticipated to be completed in October 2009.
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ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds in connection with the plan of finance are as follows:
Sources
Par Amount of the Bonds $5,000,000
Equity Contribution 38,250
Total $5,038,250
Uses
Project Costs $4,918,250
Costs of Issuance1 120,000
Total $5,038,250
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1 Includes underwriter’s discount, initial remarketing fees, legal fees, accounting fees, printing costs, fees and expenses of the Trustee and other miscellaneous fees and expenses. Also includes Credit Issuer related fees not subject to the 2% cap on costs of issuance under the Code.
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ANNUAL DEBT SERVICE REQUIREMENTS
The following table sets forth, for each bond year beginning December 1, the amounts required to be paid by the Corporation or the Company in such bond year for the payment of principal of (whether at maturity or pursuant to mandatory redemption) and interest on the Bonds. In some cases, totals in the following table may not foot due to rounding.
Bond Year (Beginning
December 1) Principal
Amortization Interest(1) Total
Principal and Interest 2009 $171,869 $171,869 2010 $100,000 174,319 274,319 2011 100,000 167,496 267,496 2012 100,000 160,855 260,855 2013 100,000 153,598 253,598 2014 200,000 146,672 346,672 2015 200,000 139,814 339,814 2016 200,000 133,107 333,107 2017 200,000 125,891 325,891 2018 200,000 118,964 318,964 2019 200,000 112,092 312,092 2020 200,000 105,338 305,338 2021 200,000 98,183 298,183 2022 200,000 91,256 291,256 2023 200,000 84,370 284,370 2024 200,000 77,774 277,774 2025 200,000 70,941 270,941 2026 200,000 64,267 264,267 2027 200,000 57,620 257,620 2028 300,000 51,002 351,002 2029 300,000 44,207 344,207 2030 300,000 37,514 337,514 2031 300,000 30,831 330,831 2032 300,000 23,504 323,504 2033 300,000 10,950 310,950
$5,000,000 $2,452,435 $7,452,435 _______________
(1)Based on an assumed interest rate of 3.445% (which includes letter of credit, remarketing and issuer fees) plus the Trustee’s annual fees.
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UNDERWRITING AND REMARKETING
Scott & Stringfellow, Inc., t/a BB&T Capital Markets (the “Underwriter”), has entered into a Contract of Purchase to purchase all of the Bonds, if any of the Bonds are to be purchased, at a price equal to the aggregate principal amount of the Bonds, less underwriter’s discount of $45,000. The obligation of the Underwriter to pay for the Bonds is subject to certain terms and conditions set forth in the Contract of Purchase. The Corporation and the Company have agreed to indemnify the Underwriter, the Commission and the Local Government Commission as to certain matters in connection with the Bonds.
Scott & Stringfellow, Inc., t/a BB&T Capital Markets, will also serve as the Remarketing Agent with respect to the Bonds pursuant to a Remarketing Agreement dated as of December 1, 2008 among the Commission, the Corporation, the Company and the Remarketing Agent. The Remarketing Agent has agreed to use its best efforts to remarket the Bonds that are tendered for purchase from time to time. A successor Remarketing Agent may be appointed according to the terms of the Remarketing Agreement and the Trust Agreement.
LITIGATION
There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Commission, threatened against or affecting the Commission wherein an unfavorable decision, ruling or finding would adversely affect (i) the transactions contemplated by, or the validity or enforceability of, the Bonds, the Trust Agreement, the Loan Agreement or the Notes or described in the Official Statement, or (ii) the tax-exempt status of interest on the Bonds.
There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Corporation and the Company, threatened against or affecting the Corporation and the Company wherein an unfavorable decision, ruling or finding would have a material adverse effect on the financial condition of the Corporation and the Company or would adversely affect (i) the transactions contemplated by, or the validity or enforceability of, the Bonds, the Trust Agreement, the Loan Agreement, the Notes, the Contract of Purchase or described in the Official Statement, or (ii) the tax-exempt status of interest on the Bonds.
RATINGS
It is anticipated that Moody’s Investors Service, Inc. (“Moody’s”) will assign its municipal bond ratings of “Aa2/VMIG1” to the Bonds, contingent upon the issuance of the Letter of Credit. Any explanation of the significance of such ratings may only be obtained from Moody’s. Certain information and materials not included in this Official Statement were furnished to Moody’s concerning the Bonds. Generally, rating agencies base their ratings on such information and materials and on investigations, studies and assumptions by the rating agencies. There is no assurance that the ratings mentioned above will remain for any given period of time or that such ratings might not be lowered or withdrawn entirely by Moody’s, if in its judgment circumstances so warrant. The Underwriter has no responsibility to bring to the attention of the holders of the Bonds any proposed revision or withdrawal of the ratings on the Bonds. Any such downward change in or withdrawal of any such rating might have an adverse effect on the market price of the Bonds.
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LEGAL MATTERS
Legal matters incident to the authorization and validity of the Bonds are subject to the approving opinion of Hunton & Williams LLP, North Carolina, Bond Counsel. The proposed form of such opinion is contained in Appendix D.
Certain legal matters will be passed on for the Corporation and the Company by Wishart, Norris, Henninger & Pittman, P.A., Burlington, North Carolina, for the Bank by Moore & Van Allen PLLC, Charlotte, North Carolina, and for the Underwriter by Parker Poe Adams & Bernstein LLP, Raleigh, North Carolina.
TAX EXEMPTION
Opinion of Bond Counsel
In the opinion of Bond Counsel, Hunton & Williams LLP, under current law, interest on the Bonds (a) will not be included in gross income for Federal income tax purposes and (b) will not be an item of tax preference for purposes of the Federal alternative minimum income tax imposed on individuals and corporations; however, with respect to corporations (as defined for Federal income tax purposes) subject to the alternative minimum income tax, such interest is taken into account in determining adjusted current earnings for purposes of computing such tax. No other opinion is expressed by Bond Counsel regarding the Federal tax consequences of the ownership of or the receipt or accrual of interest on the Bonds.
The opinion of Bond Counsel is given in reliance upon certifications by representatives of the Corporation, the Company and the Commission as to certain facts relevant to both the opinion and requirements of the Code. The Commission, the Company and the Corporation have covenanted to comply with provisions of the Code regarding, among other things, the use, expenditure and investment of proceeds of the Bonds and the timely payment to the United States of any arbitrage rebate amounts with respect to the Bonds. Failure by the Commission, the Corporation or the Company to comply with such covenants could cause interest on the Bonds to be included in gross income for Federal income tax purposes retroactively to their date of issue.
Under the Bonds and related documents, the taking of certain actions or the occurrence of certain events necessitates the obtaining of an opinion of bond counsel with respect to the effect of such action or events on the exclusion of interest on the Bonds from gross income of the holders thereof. The opinion of Bond Counsel delivered upon issuance of the Bonds does not express or imply any opinion concerning the effect of such future actions or events.
In the opinion of Bond Counsel, under current law, interest on the Bonds will not be subject to taxation as income by the State of North Carolina.
The Internal Revenue Service (the “Service”) has a program to audit state and local government obligations to determine whether the interest thereon is includible in gross income for Federal income tax purposes. If the Service does audit the Bonds, under current Service procedures, the Service will treat the Commission as the taxpayer and the owners of the Bonds will have only limited rights, if any, to participate.
Bond Counsel’s opinion represents its legal judgment based in part upon the representations and covenants referenced therein and its review of existing law, but is not a guarantee of result or binding on the Service or the courts. Bond Counsel assumes no duty to update or supplement its opinion to reflect
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any facts or circumstances that may thereafter come to Bond Counsel’s attention or to reflect any changes in law or the interpretation thereof that may thereafter occur or become effective.
Other Tax Matters
In addition to the matters addressed above, prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to certain taxpayers, including without limitation, financial institutions, property and casualty insurance companies, S corporations, foreign corporations subject to the branch profits tax, recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers of the Bonds should consult their tax advisors as to the applicability and impact of such consequences. From time to time, proposed legislation is considered by the United States Congress that, if enacted, would affect the tax consequences of owning tax-exempt obligations such as the Bonds. Consequently, prospective purchasers should be aware that future legislation may have an adverse effect on the tax consequences of owning the Bonds.
There are many events which could affect the value and liquidity or marketability of the Bonds after their issuance, including but not limited to public knowledge of an audit of the Bonds by the Service, a general change in interest rates for comparable securities, a change in Federal or state income tax rates, legislative or regulatory proposals affecting state and local government securities and changes in judicial interpretation of existing law. In addition, certain tax considerations relevant to owners of Bonds who purchase Bonds after their issuance may be different from those relevant to purchasers upon issuance. Neither the opinion of Bond Counsel nor this Official Statement purport to address the likelihood or effect of any such potential events or such other tax considerations and purchasers of the Bonds should seek advice concerning such matters as they deem prudent in connection with their purchase of Bonds.
Prospective purchasers of the Bonds should consult their own tax advisors as to the status of interest on the Bonds under the tax laws of any state other than North Carolina.
RELATIONSHIPS AMONG PARTIES
A member of the firm Wishart, Norris, Henninger & Pittman, P.A., counsel to the Corporation and the Company, is on the board of the Corporation.
LEGALITY FOR INVESTMENT
The Bonds are legal investments for all public officers and bodies of the State of North Carolina and its political subdivisions and all insurance companies, trust companies, banking associations, investment companies, executors, administrators, trustees and other fiduciaries in the State of North Carolina.
INVESTMENT COMPANY ACT NOTIFICATION
The Bank, the Corporation and the Company have covenanted (in the Reimbursement Agreement and the Loan Agreement) to provide written notice to the Trustee and the Remarketing Agent of any transaction that would result in the Corporation and the Company controlling or being controlled by the Bank within the meaning of Section 2(a)(9) of the Investment Company Act of 1940. Such notice shall be given, where reasonable, 30 days prior to the consummation of the transaction resulting in such control and in no event later than 30 days subsequent to such transaction. Under the Trust Agreement, the
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Trustee has agreed to notify holders of the Bonds of any such notice within five Business Days of the Trustee’s receipt thereof.
MISCELLANEOUS
The Corporation and the Company have furnished all information herein relating to the Corporation and the Company. Any statements involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. The Commission and its staff assume no responsibility for the accuracy or completeness of any representation or statement in this Official Statement except for material with respect to them included under the sections entitled “THE COMMISSION” and “LITIGATION.” Neither this Official Statement nor any statement that may have been made orally or in writing is to be construed as a contract with the owner of any of the Bonds.
The Commission has duly authorized the execution and delivery of, and the Corporation and the Company have approved, this Official Statement.
NORTH CAROLINA MEDICAL CARE COMMISSION
By: /s/ Lucy Hancock Bode Chairman
Approved:
HOSPICE OF ALAMANCE-CASWELL FOUNDATION, INC. By: /s/ Peter Barcus Peter Barcus Chief Executive Officer HOSPICE & PALLIATIVE CARE CENTER OF ALAMANCE-CASWELL, LLC By: /s/ Peter Barcus Peter Barcus Chief Executive Officer
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APPENDIX A
DEFINITION OF CERTAIN TERMS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
Brief descriptions of the Loan Agreement and the Trust Agreement are included in this Appendix A. Such descriptions do not purport to be comprehensive or definitive; all references herein to the Loan Agreement and the Trust Agreement are qualified in their entirety by reference to each such document.
DEFINITIONS OF CERTAIN TERMS
The following is a summary of the definitions of certain terms contained in the Loan Agreement, and the Trust Agreement and used in this Official Statement. Terms which are used herein and not otherwise defined herein have the definitions specified in the Loan Agreement or the Trust Agreement.
“Accountant” means a firm of independent certified public accountants satisfactory to the Commission and the Trustee.
“Accounts” means any right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of, (ii) for services rendered or to be rendered, or (iii) for a secondary obligation incurred or to be incurred. The term “Accounts” includes healthcare insurance receivables. The term “Accounts” does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or sold. Any terms used in this definition (other than the term “Accounts”) have the meanings given such terms, if any, in the UCC.
“Account Lien Amount” means the product of (x) the Coverage Factor multiplied by (y) an amount equal to the Corporation’s net patient accounts (as shown in its Financial Statements for the most recent Fiscal Year for which Financial Statements are available).
“Act” means the Health Care Facilities Finance Act, Chapter 131A of the General Statutes of North Carolina, as amended, or any successor statute.
“Affiliate” means a corporation, partnership, joint venture, association, business trust or similar entity organized under the laws of the United States of America or any state thereof which is directly or indirectly controlled by the Corporation, by any other Affiliate or by any Person which controls the Corporation, or which controls any other Affiliate. For purposes of this definition, control means the power to direct the management and policies of a Person through the ownership of not less than a majority of its voting securities, the right to designate or elect not less than a majority of the members of its board of directors or other governing body or by contract or otherwise.
“Alternate Weekly Rate” means, as of any Rate Computation Date, the greater of: (i) the SIFMA Municipal Swap Index plus 0.30%, or (ii) 75% of LIBOR.
“Available Moneys” means, if a Letter of Credit is in effect, (i) proceeds from the original issuance and sale of the Bonds and investment earnings thereon which were at all times since their receipt by the Trustee held in a separate and segregated account in which only such proceeds and investment earnings thereon are held; (ii) moneys on deposit with the Trustee in trust for the benefit of the Holders for at least 367 days during which no Event of Bankruptcy with respect to the Corporation or the
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Company (or any other Person obligated, as guarantor or otherwise, to make payments on the Bonds or under the Loan Agreement or the Reimbursement Agreement, or an “affiliate” of the Corporation or the Company as defined in Bankruptcy Code § 101(2)) or the Commission has occurred and investment earnings thereon which were at all times since their receipt by the Trustee held in a separate and segregated account in which only such moneys and investment earnings thereon are held; (iii) proceeds on deposit with the Trustee from the remarketing by the Remarketing Agent of the Bonds pursuant to the Trust Agreement which were at all times since their receipt by the Trustee held in a separate and segregated account in which only such proceeds are held; (iv) moneys drawn under the Letter of Credit which were at all times since their receipt by the Trustee held in a separate and segregated account in which only such moneys are held; and (v) moneys which, in an Opinion of Counsel experienced in bankruptcy law matters (which opinion will be delivered to the Trustee and each Rating Agency at or prior to the time of deposit of such moneys with the Trustee and must be in form and substance acceptable to the Trustee and each Rating Agency), if used to pay principal, purchase price, redemption premium, if any, or interest on the Bonds, will not constitute an avoidable preferential payment under Section 547 of the Bankruptcy Code recoverable from Holders of the Bonds pursuant to Section 550 of the Bankruptcy Code; otherwise, “Available Moneys” means any moneys on deposit with the Trustee.
“Balloon Long-Term Indebtedness” means Long-Term Indebtedness 25% or more of the principal payments of which are due in a single year, which portion of the principal is not required by the documents pursuant to which such Indebtedness is incurred to be amortized by payment or redemption prior to such year.
“Bank” means Branch Banking and Trust Company, in its capacity as issuer of the Letter of Credit, its successors in such capacity and their assigns, and upon the delivery and acceptance of a Substitute Letter of Credit, the bank issuing such Substitute Letter of Credit.
“Bankruptcy Code” means Title 11 of the United States Code, as amended, and any successor statute or statutes having substantially the same function.
“Beneficial Owner” means the Person in whose name a Bond is recorded as beneficial owner of such Bond by the Securities Depository or a Participant or an Indirect Participant on the records of such Securities Depository, Participant or Indirect Participant, as the case may be, or such Person’s subrogee.
“Bond Counsel” means a firm of attorneys knowledgeable and experienced in the law relating to municipal securities and the law relating to federal and State taxation of interest thereon and approved by the Commission.
“Bond Fund” means the North Carolina Medical Care Commission Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project), Series 2008 Bond Fund created and so designated by the Trust Agreement and consisting of the Interest Account, the Sinking Fund Account, the Letter of Credit Account and the Purchase Account.
“Bond Year” means the period commencing on December 1 of any year and ending on the last day of November of the following year.
“Bonds” means the North Carolina Medical Care Commission Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project), Series 2008, authorized and issued by the Trust Agreement.
“Book Entry Bonds” means the Bonds for which a Securities Depository or its nominee is the Holder.
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“Book Entry System” means a book entry system established and operated for the recordation of Beneficial Owners of the Bonds pursuant to the Trust Agreement.
“Book Value” when used in connection with Property, Plant and Equipment or other Property of the Corporation, means the value of such property, net of accumulated depreciation, as it is carried on the books of the Corporation in conformity with GAAP.
“Business Day” means any day of the year, other than a Saturday or a Sunday, on which banks located in the cities in which the Designated Office for Bond Deliveries, the Designated Office for Notices, the office of the Bank at which drawings on the Letter of Credit are to be made and the principal office of the Remarketing Agent are located are not required or authorized to remain closed and on which the New York Stock Exchange is not closed.
“Capitalization” means the sum of the aggregate principal amount of Outstanding Long-Term Indebtedness of the Corporation, plus aggregate unrestricted fund balance or unrestricted net assets of the Corporation, all as calculated in accordance with GAAP.
“Closing” means the date on which the Loan Agreement becomes legally effective, the same being the date on which the Bonds are delivered against payment therefor.
“Code” means the Internal Revenue Code of 1986, as amended, and all regulations promulgated thereunder.
“Commission” means the North Carolina Medical Care Commission of the Department of Health and Human Services of the State of North Carolina, and any successor thereto.
“Commission Representative” means each of the persons at the time designated to act on behalf of the Commission in a written certificate furnished to the Corporation and the Trustee, which certificate must contain the specimen signature(s) of such person(s) and be signed on behalf of the Commission by its Chairman or Vice Chairman.
“Company” means Hospice & Palliative Care Center of Alamance-Caswell, LLC, a North Carolina limited liability company whose sole member is the Corporation.
“Completion Date” means the date of completion of the Project, as such date is certified pursuant to the Loan Agreement.
“Completion Indebtedness” means any Long-Term Indebtedness incurred by the Corporation for the purpose of financing the completion of facilities for the acquisition, construction or equipping of which Long-Term 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 that such Long-Term Indebtedness theretofore incurred was originally incurred, and, to the extent the same shall be applicable, in accordance with the general plans and specifications for such facility as originally prepared with only such changes as have been made in conformance with the documents pursuant to which such Long-Term Indebtedness theretofore incurred was originally incurred.
“Construction Account” means the account in the Construction Fund created and so designated by the Trust Agreement.
“Construction Fund” means the North Carolina Medical Care Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project), Series 2008 Construction Fund created and so designated
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by the Trust Agreement and consisting of the Construction Account, the Issuance Account and the Revolving Fund Account.
“Consultant” means a firm or firms which is not, and no member, stockholder, director, officer, trustee or employee of which is, an officer, director, trustee or employee of the Corporation or any Affiliate, and which is a professional management consultant of national repute for having the skill and experience necessary to render the particular report required by the provision hereof in which such requirement appears and which is acceptable to the Commission.
“Conversion Date” means the date specified by the Corporation and the Company pursuant to the Trust Agreement on which the rate of interest payable on the Bonds is to be converted from (i) the Weekly Rate to a Long-Term Rate, (ii) a Long-Term Rate to the Weekly Rate or (iii) the interest rate applicable during a Long-Term Rate Period to the interest rate applicable during another Long-Term Rate Period; provided, however, that Conversion Date does not include a deemed conversion under the Trust Agreement.
“Corporation” means Hospice of Alamance-Caswell Foundation, Inc., a nonprofit corporation duly incorporated and validly existing under and by virtue of the laws of the State of North Carolina, and any successor or successors thereof.
“Corporation Representative” means each of the persons at the time designated to act on behalf of the Corporation in a written certificate furnished to the Commission and the Trustee, which certificate must contain the specimen signature(s) of such person(s) and be signed on behalf of the Corporation by its President, Executive Director or Chief Financial Officer.
“Cost” means, as applied to the Project, without intending thereby to limit or restrict any proper definition of such word under the Act, all items of cost set forth in the Trust Agreement.
“Coverage Factor” means an amount determined in accordance with the following schedule:
Long-Term Debt Service Coverage Ratio for Preceding Fiscal Year Coverage Factor
greater than or equal to 4.0 100%
less than 4.0 but greater than or equal to 3.0 75%
less than 3.0 but greater than or equal to 2.0 50%
less than 2.0 but greater than or equal to 1.5 25%
less than 1.5 0%
“Cross-over Date” means, with respect to Cross-over Refunding Indebtedness, the date on which the principal portion of the related Cross-over Refunded Indebtedness is to be paid or redeemed from the proceeds of such Cross-over Refunding Indebtedness.
“Cross-over Refunding Indebtedness” means Indebtedness issued for the purpose of refunding other Indebtedness if the proceeds of such refunding Indebtedness are irrevocably deposited in escrow to secure the payment on the applicable redemption date or maturity date of the refunded Indebtedness, and
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the earnings on such escrow deposit (i) are required to be applied to pay interest on such refunding Indebtedness until the Cross-over Date and (ii) are not to be used directly or indirectly to pay interest on the Cross-over Refunded Indebtedness.
“Defaulted Interest” means any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date.
“Defeasance Obligations” means (i) noncallable Government Obligations, (ii) evidences of ownership of a proportionate interest in specified noncallable Government Obligations, which Government Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian, (iii) Defeased Municipal Obligations and (iv) evidences of ownership of a proportionate interest in specified Defeased Municipal Obligations, which Defeased Municipal Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian.
“Defeased Municipal Obligations” means obligations of state or local government municipal bond issuers which are rated in the highest rating category by S&P and Moody’s, respectively, provision for the payment of the principal of and interest on which shall have been made by deposit with a trustee or escrow agent of (i) noncallable Government Obligations, (ii) evidences of ownership of a proportionate interest in specified noncallable Government Obligations, (iii) cash or (iv) any combination of such noncallable Government Obligations, evidences of ownership and cash, which Government Obligations or evidences of ownership, together with any cash, are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian, the maturing principal of and interest on such Government Obligations or evidences of ownership, when due and payable, being sufficient, together with any cash, to provide money to pay the principal of, premium, if any, and interest on such obligations of such state or local government municipal bond issuers.
“Derivative Agreement” means, without limitation, (i) any contract known as or referred to or which performs the function of an interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract; (ii) any contract providing for payments based on levels of, or changes or differences in, interest rates, currency exchange rates, or stock or other indices; (iii) any contract to exchange cash flows or payments or series of payments; (iv) any type of contract called, or designed to perform the function of, interest rate floors or caps, options, puts or calls, to hedge or minimize any type of financial risk, including, without limitation, payment, currency, rate or other financial risk; and (v) any other type of contract or arrangement that the Corporation determines is to be used, or is intended to be used, to manage or reduce the cost of Indebtedness, to convert any element of Indebtedness from one form to another, to maximize or increase investment return, to minimize investment return risk or to protect against any type of financial risk or uncertainty.
“Derivative Indebtedness” means Indebtedness (or that portion of Indebtedness) for which the Corporation has entered into a Derivative Agreement.
“Derivative Period” means the period during which a Derivative Agreement is in effect.
“Designated Office for Bond Deliveries” means, with respect to the Trustee, the address for such party set forth in the Trust Agreement, as it may be changed from time to time pursuant to the provisions of the Trust Agreement.
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“Designated Office for Notices” means, with respect to the Trustee, the address for such party set forth in the Trust Agreement, as it may be changed from time to time pursuant to the provisions of the Trust Agreement.
“Electronic Means” means telephone, telecopy, telegraph, telex, internet, facsimile transmission or any other similar means of electronic communication. Any communication by telephone as an Electronic Means must be promptly confirmed in writing or by one of the other means of electronic communication authorized in the Trust Agreement.
“Eminent Domain” means the eminent domain or condemnation power by which all or any part of the Project may be taken for public use or any agreement that is reached in lieu of proceedings to exercise such power.
“Equipment” means those items constituting equipment as that term is defined in the North Carolina Uniform Commercial Code, whether such equipment is now owned or hereafter acquired by the Corporation for use in the operation and maintenance of the Operating Assets.
“Event of Bankruptcy” means (i) with respect to the Corporation or the Company (or any other Person obligated, as guarantor or otherwise, to make payments on the Bonds or under the Loan Agreement or the Reimbursement Agreement, or an “affiliate” of the Corporation or the Company as defined in Bankruptcy Code § 101(2)) and the Commission, the filing of a petition in bankruptcy by or against the Corporation or the Company (or such other Person) or the Commission under the Bankruptcy Code or the commencement of a proceeding by or against the Corporation or the Company (or such other Person) or the Commission under any other law concerning insolvency, reorganization or bankruptcy; and (ii) with respect to the Bank, the Bank becomes insolvent or bankrupt or fail to pay its debts generally as such debts become due or admits in writing its inability to pay any of its indebtedness or consents to or petition for or apply to any authority for the appointment of a receiver, liquidator or trustee or similar official for itself or for all or any substantial part of its properties or assets or any such trustee, receiver, liquidator or similar official is otherwise appointed or bankruptcy, insolvency, reorganization, arrangement or liquidation proceedings or similar proceedings are instituted by or against the Bank or entry of an order of relief by or against the Bank.
“Event of Default” means, with respect to the Loan Agreement, each of those events set forth under the caption “SUMMARY OF THE LOAN AGREEMENT—Defaults and Remedies” herein, and with respect to the Trust Agreement, each of those events set forth under the caption “SUMMARY OF THE TRUST AGREEMENT—Events of Default” herein.
“Financial Statements” means consolidated or combined financial statements of the Corporation and its Affiliates, if any, for a Fiscal Year, or for such other period for which an audit has been performed, prepared in accordance with generally accepted accounting principles consistently applied and including such statements as are necessary for a fair presentation of financial position, results of operations and changes in unrestricted net assets and cash flows as of the end of such period, which have been audited and reported upon by an Accountant. “Financial Statements” include, in an additional information section, unaudited consolidating or combining financial statements for the same Fiscal Year which set forth the results for the Corporation separately from the results of the Corporation and its Affiliates.
“Fiscal Year” means the fiscal year of the Corporation, which is the period commencing on the first day of October of each calendar year and ending on the last day of September of the following calendar year unless the Commission and the Trustee are notified in writing by the Corporation of a change in such period, in which case the Fiscal Year will be the period set forth in such notice.
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“Fitch” means Fitch Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation is dissolved or liquidated or no longer performs the functions of a securities rating agency, “Fitch” will be deemed to refer to any other nationally recognized securities rating agency designated by the Commission with the approval of the Corporation, the Company and the Remarketing Agent by notice to the Trustee and the Master Trustee.
“GAAP” means generally accepted accounting principles consistently applied.
“Governing Body” means, when used with respect to the Corporation, its board of directors, in which the powers of the Corporation are vested.
“Government Obligations” means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America.
“Governmental Restrictions” means federal, state or other applicable governmental laws or regulations affecting the Corporation and its health care facilities placing restrictions and limitations on the (i) fees and charges to be fixed, charged and collected by the Corporation or (ii) the amount or timing of the receipt of such revenues.
“Gross Receipts” means all revenues, income, receipts and money (other than proceeds of borrowing) received in any period by or on behalf of the Corporation including, but without limiting the generality of the foregoing, (a) revenues derived from the Corporation’s operations, (b) gifts, grants, bequests, donations and contributions and the income therefrom, exclusive of any 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 indebtedness, (c) proceeds derived from (i) insurance, (ii) accounts, (iii) securities and other investments, (iv) inventory and other tangible and intangible Property, (v) medical or hospital insurance, indemnity or reimbursement programs or agreements and (vi) contract rights and other rights and assets now or hereafter owned, held or possessed by the Corporation, and (d) rentals received from the leasing of real or tangible personal property.
“Guaranty” means any obligation of the Corporation or the Company guaranteeing in any manner, directly or indirectly, any obligation of any other Person which obligation of such other Person would, if such obligation were the obligation of the Corporation or the Company, constitute Indebtedness under the Loan Agreement. For the purposes of the Loan Agreement, a Guaranty will be valued at twenty-five percent (25%) of the Indebtedness guaranteed at an interest rate borne by such Indebtedness on the date calculated, unless such Guaranty has been drawn upon, in which case such Guaranty will be valued at one hundred percent (100%) of the principal amount of the Indebtedness guaranteed at an interest rate borne by such Indebtedness on the date calculated for a period ending two years after the date that such Guaranty was drawn upon.
“Holder” means the Person in whose name a Bond is registered in the registration books maintained by the Trustee.
“Income Available for Debt Service” means, with respect to the Corporation, as to any Fiscal Year, its excess of revenues over expenses before depreciation, amortization and interest expense on Long-Term Indebtedness, as determined in accordance with GAAP; provided, however, that (1) no determination thereof will take into account any unrealized gain or loss, including any unrealized gain or loss on investments or unrealized change in the value of any Derivative Agreement or any payments made by the counterparty to the Derivative Agreement in accordance with the terms thereof, or any gain or loss resulting from either the extinguishment of Indebtedness or the sale, exchange or other disposition of capital assets not made in the ordinary course of business, or any impairment losses (provided, however,
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that realized gains and losses on assets that suffer an impairment loss will be determined using the basis for such asset without giving effect to any reduction(s) in basis resulting from such impairment loss) and (2) revenues will not include income from the investment of Qualified Escrow Funds to the extent that such income is applied to the payment of principal or interest on Long-Term Indebtedness which is excluded from the determination of Long-Term Debt Service Requirement or Related Bonds secured by such Long-Term Indebtedness.
“Indebtedness” means (i) all indebtedness of the Corporation or the Company for borrowed money, (ii) all installment sales, conditional sales and capital lease obligations, incurred or assumed by the Corporation or the Company, and (iii) all Guaranties, whether constituting Long-Term Indebtedness or Short-Term Indebtedness.
“Indirect Participant” means a broker-dealer, bank or other financial institution for which the Securities Depository holds Bonds as a securities depository through a Participant.
“Insurance Consultant” means a Person which is not, and no member, stockholder, director, officer or employee of which is, a director, officer or employee of the Corporation or an Affiliate, which is qualified to survey risks and to recommend insurance coverage for continuing care facilities and services and organizations engaged in such operations.
“Interest Account” means the account in the Bond Fund created and so designated by the Trust Agreement.
“Interest Payment Date” means (i) while the Bonds bear interest at the Weekly Rate, the first Business Day of each month, commencing January 2, 2009, (ii) while the Bonds bear interest at a Long-Term Rate, each June 1 and December 1, and (iii) each Conversion Date.
“Interest Rate Determination Method” means either of the methods of determining the interest rate on the Bonds described in the Trust Agreement.
“Investment Grade Rating” means a long-term debt rating of “Baa3” or higher by Moody’s or “BBB-” or higher by S&P or “BBB-” or higher by Fitch, or any other rating approved by the Commission and the LGC.
“Investment Obligations” means any investment to the extent from time to time permitted by applicable law, including but not limited to Sections 131A-14 and 159-30 of the General Statutes of North Carolina, as amended, or any successor statutes.
“Issuance Account” means the account in the Construction Fund created and so designated by the Trust Agreement.
“Issuance Costs” means all issuance costs, within the meaning of Section 147(g) of the Code, incurred in connection with the Bonds.
“Letter of Credit” means the irrevocable, direct-pay letter of credit issued by the Bank in favor of the Trustee for the benefit of the Holders of the Bonds on the date of Closing, and any amendments or supplements thereto or extensions thereof, in an amount sufficient to pay the principal of the Outstanding Bonds, plus (i) if such letter of credit is to be in effect while the Bonds bear interest at the Weekly Rate, interest for a period of not less than thirty-five (35) days at the Maximum Rate, (ii) if such letter of credit is to be in effect while the Bonds bear interest at a Long-Term Rate, interest at such Long-Term Rate for a period of at least one hundred eighty-three (183) days, or (iii) such greater number of days at the
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Maximum Rate as may be required by any Rating Agency, and, upon the delivery and acceptance of a Substitute Letter of Credit, such Substitute Letter of Credit.
“Letter of Credit Account” means the account in the Bond Fund created and so designated by the Trust Agreement.
“Letter of Representations” means, when all the Bonds are Book Entry Bonds, the Blanket Letter of Representations dated October 31, 1995, executed by the Commission and delivered to DTC and any amendments thereto or successor blanket agreements between the Commission and any successor Securities Depository, relating to a system of Book Entry Bonds to be maintained by such Securities Depository with respect to any bonds, notes or other obligations issued by the Commission.
“LIBOR” means, for any Rate Computation Date, the rate per annum determined on the basis of the rate for deposits in United States dollars of amounts equal to or comparable to the principal amount of the Bonds to which the Alternate Weekly Rate will apply, offered for a term of one month, which rate appears on the display designated as Page 3750 of the Telerate Service (or such other page as may replace page 3750 of that service or such other service or services as may be nominated by the British Bankers’ Association for the purpose of displaying London interbank offered rates for United States dollar deposits), determined as of approximately 11:00 a.m., London time, two (2) London business days prior to such Rate Computation Date, or if such rate is not available, another rate determined to be comparable by the Remarketing Agent or, if the Remarketing Agent fails to do so, the Trustee (who may rely upon an opinion of a commercial or investment banking firm knowledgeable in municipal finance).
“Lien” means any mortgage, deed of trust or pledge of, security interest in or encumbrance on any Property which secures any Indebtedness or any other obligation of the Corporation or which secures any obligation of any Person.
“Loan” means the loan of the proceeds of the Bonds made by the Commission to the Corporation and the Company pursuant to the Loan Agreement.
“Loan Agreement” or “Agreement” means the Loan Agreement, dated as of December 1, 2008, between the Commission and the Corporation, including any amendments or supplements thereto as therein permitted.
“Loan Repayments” means those payments so designated by and set forth in the Loan Agreement.
“Local Government Commission” or “LGC” means the Local Government Commission of North Carolina, a division of the Department of the State Treasurer, and any successor or successors thereto.
“Local Time” means Eastern Daylight Time or Eastern Standard Time, as applicable.
“Long-Term Debt Service Coverage Ratio” means, for each Fiscal Year, the ratio determined by dividing Income Available for Debt Service for such Fiscal Year by Maximum Annual Debt Service. If any Fiscal Year consists of less than twelve (12) months as a result of a change in Fiscal Year or a merger or consolidation permitted under the Loan Agreement, Income Available for Debt Service for such Fiscal Year is the lesser of (A) actual Income Available for Debt Service for such Fiscal Year converted to a 12-month figure by multiplying the dollar amount by the ratio of twelve (12) to the actual number of months in the Fiscal Year and (B) Income Available for Debt Service for the twelve (12) months ending at the end of such Fiscal Year, calculated on the basis of unaudited financial statements if audited financial statements are not available.
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“Long-Term Debt Service Requirement” means, for any period of 12 consecutive calendar months for which such determination is made, the aggregate of the payments to be made in respect of principal and interest on Outstanding Long-Term Indebtedness of the Corporation during such period, also taking into account:
(i) with respect to Balloon Long-Term Indebtedness, the amount of principal which would be payable in such period if such principal were amortized from the date of incurrence thereof over a period of twenty (20) years (or, if the term thereof exceeds 20 years, over a period equal to such term) on a level debt service basis at an interest rate equal to the rate borne by such Indebtedness on the date calculated, except that if the date of calculation is within twelve (12) months of the actual maturity of such Indebtedness, the full amount of Outstanding principal payable at maturity will be included in such calculation unless the Corporation has received a binding commitment from a bank, insurance company or other financial institution that provides for the payment of such principal at or prior to maturity;
(ii) with respect to Long-Term Indebtedness which is Variable Rate Indebtedness, the interest on such Variable Rate Indebtedness will be equal to the actual interest rates which were in effect (taking into account the periods during which each such interest rate was in effect) during the period of calculation or, in the case of a forecast of the Long-Term Debt Service Requirement, the forecasted interest on such Variable Rate Indebtedness will be equal to the 52-week running average of The Bond Market Association TM Municipal Swap Index as disseminated by Municipal Market Data, a Thomson Financial Services Company, for the most recent date available (or, if such index is no longer available, another index certified to be comparable by a commercial bank or investment banking firm experienced in municipal finance);
(iii) with respect to any Credit Facility, (1) to the extent that such Credit Facility has not been used or drawn upon, the amounts which may become due and payable on account of use of or drawing upon such Credit Facility will not be included in the Long-Term Debt Service Requirement, and (2) to the extent that such Credit Facility is used or drawn upon to pay principal or interest on the Bonds, repayment of the amount so used or drawn will not be included in the Long-Term Debt Service Requirement; and
(iv) with respect to Derivative Indebtedness, for so long as the provider of the Derivative Agreement has a long-term credit rating of at least “A” (without regard to any rating refinement or gradation by numerical modifier or otherwise) assigned to it by Moody’s and S&P and has not defaulted on its payment obligations thereunder, the interest on such Indebtedness during any Derivative Period will be calculated by adding (x) the amount of interest payable by the Corporation on such Derivative Indebtedness pursuant to its terms and (y) the amount of interest payable by the Corporation under the Derivative Agreement and subtracting (z) the amount of interest payable by the provider of the Derivative Agreement at the rate specified in the Derivative Agreement; provided, however, that to the extent that the provider of any Derivative Agreement does not have a long-term rating of at least “A” (without regard to any rating refinement or gradation by numerical modifier or otherwise) assigned to it by Moody’s and S&P or is in default thereunder, the amount of interest payable by the Corporation will be the interest calculated as if such Derivative Agreement had not been executed;
provided, however, that interest will be excluded from the determination of Long-Term Debt Service Requirement to the extent the same is provided from the proceeds of the Long-Term Indebtedness or from the proceeds of Related Bonds secured by such Long-Term Indebtedness, and principal and interest on Long-Term Indebtedness will be excluded from the determination of Long-Term Debt Service Requirement to the extent that such principal or interest is payable from available Qualified Escrow
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Funds (other than principal or interest so payable solely by reason of the Corporation’s failure to make payments from other sources).
“Long-Term Indebtedness” means all Indebtedness having a maturity of a term longer than one year incurred or assumed by the Corporation, including Guaranties, Short-Term Indebtedness if a commitment by an institutional lender exists to provide financing to retire such Short-Term Indebtedness and such commitment provides for the repayment of principal on terms which would, if such commitment were implemented, constitute Long-Term Indebtedness, and the current portion of Long-Term Indebtedness, for any of the following:
(i) money borrowed for an original term, or renewable at the option of the Corporation for a period from the date originally incurred, longer than one year;
(ii) leases which are required to be capitalized in accordance with GAAP having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one year; and
(iii) installment sale or conditional sale contracts having an original term in excess of one year;
provided, however, that any Guaranty by the Corporation of any obligation of any Person, which obligation would, if it were a direct obligation of the Corporation, constitute Short-Term Indebtedness, will be excluded.
“Long-Term Rate” means the interest rate on the Bonds established from time to time pursuant to the Trust Agreement.
“Long-Term Rate Period” means any period of not less than one year during which the Bonds bear interest at a Long-Term Rate.
“Management Consultant” means an independent management consulting firm of favorable repute for skill and experience in performing the duties imposed upon it by the Loan Agreement, selected by the Corporation and, after notice of such selection to the Commission and the Trustee, approved by the Commission.
“Master Indenture” means a master trust indenture between the Corporation and a corporate trustee executed and delivered after the date of the Loan Agreement, the terms of which are acceptable to the Commission and the Local Government Commission, pursuant to which an Obligation is issued in substitution for the Note. The term “Master Indenture” includes any amendments or supplements thereto permitted thereunder.
“Master Trustee” means the trustee serving as such under the Master Indenture, and any successors or assigns thereof.
“Maximum Annual Debt Service” means the highest Long-Term Debt Service Requirement for any succeeding fiscal year.
“Maximum Rate” means, while the Bonds bear interest at the Weekly Rate, 12% per annum, or such greater rate as is fixed, at one time or from time to time, in a certificate filed by the Commission (at the direction of the Corporation and the Company), provided that in order to increase the Maximum Rate to any rate greater than 12%, the Corporation and the Company has (a) obtained written consent of the
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Commission and the Local Government Commission to such higher Maximum Rate and (b) caused to be delivered to the Trustee, and the Trustee has accepted, an amendment to the Letter of Credit or a Substitute Letter of Credit in an amount sufficient to pay the principal of the Outstanding Bonds, plus interest at such new rate established in such certificate for a period of not less than 35 days (or such greater number of days as may be required by any Rating Agency).
“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation is dissolved or liquidated or no longer performs the functions of a securities rating agency, “Moody’s” will be deemed to refer to any other nationally recognized securities rating agency designated by the Commission with the approval of the Corporation, the Company and the Remarketing Agent by notice to the Trustee and the Master Trustee.
“Net Book Value” when used in connection with Property, Plant and Equipment or other Property of any Person, means the value of such Property, net of accumulated depreciation, as it is carried on the books of such Person in conformity with generally accepted accounting principles, and when used in connection with Property, Plant and Equipment or other Property of the Corporation, means the aggregate of the values so determined with respect to such Property, Plant and Equipment or other Property of the Corporation determined in such a manner that no portion of such value of Property, Plant and Equipment or other Property is included more than once.
“Non-Recourse Indebtedness” means any Indebtedness secured by a Lien, the liability for which is effectively limited to the Property, the purchase or acquisition or, in the case of land only, the improvement of which was financed with the proceeds of such Non-Recourse Indebtedness and which is subject to such Lien with no recourse, directly or indirectly, to any other Property of the Corporation.
“Note” means the Corporation’s and the Company’s promissory note in the principal amount of $5,000,000, dated the date of Closing, issued to the Commission to evidence the Loan, substantially in the form of Exhibit B to the Loan Agreement and, upon delivery of an Obligation to the Commission in substitution therefor, such Obligation.
“Obligation” means an obligation issued under the Master Indenture and the Supplement and delivered to the Commission pursuant to the Loan Agreement in substitution for the Note.
“Officer’s Certificate” means a certificate signed by a Commission Representative or a Corporation Representative, as the case may be.
“Operating Assets” means any or all land, leasehold interests, buildings, machinery, equipment, hardware, and inventory owned or operated by the Corporation and used in its trade or business, whether separately or together with other such assets, but not including cash, investment securities and other Property held for investment purposes.
“Opinion of Counsel” means an opinion in writing signed by an attorney or firm of attorneys acceptable to the Trustee and the Commission who may be counsel for the Commission or the Corporation and the Corporation or other counsel.
“Outstanding” means, when used with reference to the Bonds, as of a particular date, all Bonds theretofore issued under the Trust Agreement, except (i) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation, (ii) Bonds for the payment of which Available Moneys, Defeasance Obligations or a combination of both, sufficient to pay, on the date when such Bonds are to be paid or redeemed, the principal amount of or the Redemption Price of, and the interest accruing to such date on, the Bonds to be paid or redeemed, has been deposited with the Trustee in trust for the Holders of
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such Bonds; Defeasance Obligations will be deemed to be sufficient to pay or redeem Bonds on a specified date if the principal of and the interest on such Defeasance Obligations, when due, will be sufficient to pay on such date the Redemption Price of, and the interest accruing on, such Bonds to such date, (iii) Bonds in exchange for or in lieu of which other Bonds have been issued, (iv) Bonds not deemed outstanding under the Trust Agreement, and (v) Bonds deemed to have been paid in accordance with the Trust Agreement, except as provided in the Trust Agreement or the Loan Agreement; and, when used with reference to Indebtedness, as of any date of determination, all Indebtedness theretofore issued or incurred and not paid and discharged, or deemed paid or discharged pursuant to the terms thereof.
“Outstanding” means, when used with reference to Indebtedness, as of any date of determination, all Indebtedness theretofore issued or incurred and not paid and discharged, or deemed paid and discharged, pursuant to the terms thereof.
“Participant” means a broker-dealer, bank or other financial institution for which the Securities Depository holds Bonds as a securities depository.
“Permitted Liens” has the meaning given under the caption “SUMMARY OF THE LOAN AGREEMENT—Limitation on Creation of Liens”.
“Person” includes an individual, association, unincorporated organization, corporation, limited liability company, partnership, joint venture, business trust or a government or an agency or a political subdivision thereof, or any other entity.
“Pledged Bonds” means any Bonds purchased with proceeds from a draw under the Letter of Credit and pledged to the Bank under the Reimbursement Agreement.
“Project” means the Project as defined in the Loan Agreement, including any modifications thereof, substitutions therefor or additions thereto and excluding deletions therefrom.
“Property” means all property of the Corporation and the Company, whether real or personal, tangible or intangible and wherever situated.
“Property, Plant and Equipment” means all Property of the Corporation and the Company which is property, plant and equipment under GAAP.
“Purchase Account” means the account in the Bond Fund created and so designated by the Trust Agreement.
“Put Indebtedness” means Long-Term Indebtedness twenty-five percent (25%) or more of the principal of which is required, at the option of the owner thereof, to be purchased or redeemed at one time.
“Qualified Escrow Funds” means amounts deposited in a segregated escrow fund or other similar fund or account which fund or account is required by the documents establishing such fund or account to be applied toward the Corporation’s and the Company’s payment obligations with respect to principal or interest on (a) the Long-Term Indebtedness or Related Bonds secured thereby which are issued under the documents establishing such fund or account or (b) Long-Term Indebtedness or Related Bonds secured thereby which are issued prior to the establishment of such fund or account.
“Rate Computation Date” means (i) while the Bonds bear interest at the Weekly Rate, the Wednesday of each calendar week, provided that if any Wednesday is not a Business Day, then the Rate
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Computation Date will be the first Business Day preceding such Wednesday, (ii) in connection with a conversion or deemed conversion of the Interest Rate Determination Method from a Long-Term Rate to the Weekly Rate, such Conversion Date, and (iii) a date that is not more than twenty (20) nor less than two (2) days prior to any Conversion Date relating to a conversion to a Long-Term Rate.
“Rating Agency” means each of Fitch when the Bonds are rated by Fitch, Moody’s when the Bonds are rated by Moody’s, and S&P when the Bonds are rated by S&P.
“Rebate Requirement” means Rebate Requirement as defined in the Tax Certificate.
“Redemption Fund” means the North Carolina Medical Care Commission Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project), Series 2008 Redemption Fund created and so designated by the Trust Agreement.
“Redemption Price” means, with respect to Bonds or a portion thereof, the principal amount of such Bonds or portion thereof plus the applicable premium, if any, payable upon redemption thereof in the manner contemplated in accordance with its terms and the terms of the Trust Agreement.
“Reimbursement Agreement” means the Letter of Credit and Reimbursement Agreement dated as of December 1, 2008, between the Corporation, the Company and the Bank, and any amendments and supplements thereto, and any similar agreement between the Corporation, the Company and the issuer of a Substitute Letter of Credit.
“Related Bond Indenture” means any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued.
“Related Bonds” means revenue bonds or 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, pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to the Corporation in consideration of the execution, authentication and delivery of any evidence of indebtedness or obligation to or for the order of the governmental issuer.
“Related Documents” means Related Documents as defined in the Reimbursement Agreement.
“Remarketing Agent” means the Remarketing Agent appointed pursuant to the Trust Agreement, which initially will be BB&T Capital Markets, a division of Scott & Stringfellow, Inc.
“Remarketing Agreement” means the Remarketing Agreement, dated as of December 1, 2008, among the Corporation, the Company, the Commission and the Remarketing Agent, as the same may be amended or supplemented from time to time, or any remarketing agreement entered into with a successor Remarketing Agent.
“Required Payments under the Agreement” means the payments so designated by and set forth in the Loan Agreement.
“Revolving Fund Account” means the account in the Construction Fund created and so designated by the Trust Agreement.
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“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, and if S&P is dissolved or liquidated or no longer performs the functions of a securities rating agency, “S&P” will be deemed to refer to any other nationally recognized securities rating agency designated by the Commission with the approval of the Corporation, the Company and the Remarketing Agent by notice to the Trustee and the Master Trustee.
“Securities Depository” means The Depository Trust Company, New York, New York or other recognized securities depository selected by the Commission, which maintains a Book Entry System in respect of the Bonds, and will include any substitute for or successor to the securities depository initially acting as Securities Depository.
“Securities Depository Nominee” means, as to any Securities Depository, such Securities Depository or the nominee of such Securities Depository in whose name is registered on the registration books maintained by the Trustee the Bond certificates to be delivered to and immobilized at such Securities Depository during the continuation with such Securities Depository of participation in its Book Entry System.
“Short-Term Indebtedness” means all obligations, other than the current portion of Long-Term Indebtedness, incurred or assumed by the Corporation and the Company, for any of the following: (i) money borrowed for an original term, or renewable at the option of the Corporation for a period from the date originally incurred, of one (1) year or less; (ii) leases which are required to be capitalized in accordance with GAAP having an original term, or renewable at the option of the lessee for a period from the date originally incurred, of one (1) year or less; and (iii) installment sale or conditional sale contracts having an original term of one (1) year or less.
“SIFMA Municipal Swap Index” means, for any Rate Computation Date, the Securities Industry and Financial Markets Association Municipal Swap Index as disseminated by Municipal Market Data, a Thomson Financial Services Company, or its successor, as of such Rate Computation Date or, if such index is not determined as of such Rate Computation Date, as of the first date immediately prior to such Rate Computation Date that such index has been determined, or if such index is not available, another index determined to be comparable by the Remarketing Agent or, if the Remarketing Agent fails to do so, the Trustee (who may rely upon an opinion of a commercial or investment banking firm knowledgeable in municipal finance).
“Sinking Fund Account” means the account in the Bond Fund created and so designated by the Trust Agreement.
“Sinking Fund Requirement” means, with respect to the Bonds for any Bond Year, the principal amount fixed or computed as provided in the Trust Agreement for the retirement of such Bonds by purchase or redemption on December 1 of the Bond Year set forth in the Trust Agreement.
The aggregate amount of such Sinking Fund Requirements for the Bonds together with the amount due upon the final maturity of such Bonds will be equal to the aggregate principal amount of the Bonds. The Sinking Fund Requirements for the Bonds will begin in the Bond Year set forth in the Trust Agreement and will end with the Bond Year immediately preceding the maturity of such Bonds (such final installment being payable at maturity and not redeemed). Any principal amount of the Bonds retired by operation of the Sinking Fund Account by purchase in excess of the total amount of the Sinking Fund Requirement for such Bonds to and including such December 1, will be credited against and reduce the future Sinking Fund Requirements for such Bonds in such manner as will be specified in an Officer’s Certificate of the Corporation filed with the Trustee pursuant to the Trust Agreement.
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“State” means the State of North Carolina.
“Substitute Letter of Credit” means an irrevocable, direct-pay letter of credit other than the Letter of Credit issued by the Bank and delivered to the Trustee on the date of Closing (as such letter of credit may be amended, supplemented or extended from time to time), issued by a commercial bank organized or licensed under the laws of the United States or any state of the United States or a branch or agency of a foreign commercial bank located in the United States and subject to regulation by state or federal banking regulatory authorities, in favor of the Trustee for the benefit of the Holders of the Bonds, the terms of which are in all material respects the same as the Letter of Credit (except for any appropriate revisions in the forms of certificates attached thereto), with a term of at least one year following the effective date thereof (or, if sooner, a term of at least fifteen (15) days following maturity of the Bonds), which will be delivered in accordance with the terms of the Trust Agreement; provided, however, that if such Substitute Letter of Credit is provided in connection with a conversion of the Interest Rate Determination Method to a Long-Term Rate, the term of such Letter of Credit will be at least equal to the length of the Long-Term Rate Period. An amendment to any Letter of Credit for the sole purpose of extending the term thereof or increasing the interest component thereof in connection with an increase in the Maximum Rate will not be deemed to be a Substitute Letter of Credit.
“Substitution Date” means a Business Day not less than fifteen (15) days prior to the expiration or termination date of the Letter of Credit then in effect which the Corporation and the Company notify the Trustee pursuant to the Trust Agreement will be the effective date of a Substitute Letter of Credit.
“Supplement” means the supplement to the Master Indenture between the Corporation and the Master Trustee pursuant to which the Obligation is issued.
“Tax Certificate” means the Non-Arbitrage Agreement and Certificate of the Corporation and the Company executed by the Commission, the Corporation and the Company, respectively, in connection with the issuance of the Bonds.
“Total Operating Revenues” means, with respect to the Corporation and the Company, as to any period of time, total operating revenues as determined in accordance with generally accepted accounting principles consistently applied.
“Total Required Payments” means the sum of Loan Repayments and Required Payments under the Loan Agreement.
“Transfer” means any act or occurrence the result of which is to dispossess any Person of any asset or interest therein, including specifically, but without limitation, the forgiveness of any debt or the lease of any such asset.
“Trust Agreement” means the Trust Agreement securing the Bonds, dated as of December 1, 2008, between the Commission and the Trustee, including all amendments or supplements thereto.
“Trustee” means the bank or trust company at the time serving as Trustee under the Trust Agreement, whether the original or successor Trustee.
“UCC” means the North Carolina version of the Uniform Commercial Code, Chapter 25 of the General Statutes of North Carolina, as amended, or any successor statute.
“Variable Rate Indebtedness” means any portion of Indebtedness the interest rate on which is not established at the time of incurrence at a fixed or constant rate.
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“Weekly Rate” means the Weekly Rate of interest on the Bonds determined pursuant to the Trust Agreement.
SUMMARY OF THE LOAN AGREEMENT
The following is a summary of certain provisions of the Loan Agreement to which reference is made for a full and complete statement of its provisions.
Total Required Payments
The obligation of the Corporation and the Company to make the Loan Repayments, to make all other Required Payments under the Loan Agreement and the Note and to perform and observe the other agreements contained in the Loan Agreement is absolute and unconditional and will not be abated, diminished or deducted, regardless of any cause or circumstances whatsoever including any defense, set-off, recoupment or counterclaim that the Corporation and the Company may have or assert against the Commission or the Trustee or any other Person.
Loan Repayments; Required Payments Under the Loan Agreement
The Corporation and Company are required to make the Total Required Payments under the Loan Agreement when due. Loan Repayments and certain Required Payments under the Loan Agreement are required to be paid, when due and payable, directly to (i) the Trustee for deposit in the Bond Fund or the Redemption Fund and (ii) any Person entitled to such payments.
Loan Repayments are required to be sufficient in the aggregate to repay the Loan and interest thereon and to pay in full all Bonds issued under the Trust Agreement, together with the total interest and redemption premium, if any, thereon. The Corporation and the Company are required to repay the Loan in installments as provided in the Loan Agreement, each installment being deemed a Loan Repayment.
The Loan Repayments are due and payable as follows:
(i) to the credit of the Interest Account, (A) while the Bonds bear interest at the Weekly Rate, on the Business Day next preceding each Interest Payment Date, an amount equal to the interest payable on the Bonds on such Interest Payment Date, and (B) while the Bonds bear interest at a Long-Term Rate, on the 25th day of each month, an amount equal to one sixth (1/6) of the interest payable on the Bonds on the next ensuing Interest Payment Date, in each case less any applicable credit under the Trust Agreement; provided, however, that if a Letter of Credit is in effect, no deposit will be required to be made until such Interest Payment Date;
(ii) to the credit of the Sinking Fund Account, beginning on December 25, 2009, and continuing on the 25th day of each month thereafter, an amount equal to one twelfth (1/12) of the amount required to retire the Bonds to be called pursuant to mandatory sinking fund redemption or to be paid at maturity on the next ensuing December 1 in accordance with the Sinking Fund Requirement therefor; provided, however, that if a Letter of Credit is in effect, no deposit will be required to be made until such December 1; and
(iii) to the credit of the Redemption Fund, any amounts that may from time to time be required to enable the Trustee to pay redemption premiums as and when Bonds are called for redemption.
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The Corporation and the Company will pay, when due and payable, as Required Payments under the Loan Agreement, certain fees and costs, exclusive of fees and costs payable from the proceeds of the Bonds, as provided in the Loan Agreement.
The Corporation and the Company will also pay to the Trustee for deposit into the Purchase Account the purchase price of Bonds tendered or deemed tendered pursuant to the Trust Agreement.
Other Covenants of the Corporation and the Company
The Loan Agreement provides that the Corporation and the Company will comply with each covenant, condition and agreement set forth in the Loan Agreement. The Loan Agreement also sets forth certain other covenants of the Corporation and the Company with respect to: the role of the Commission; examination of books and records of the Corporation and the Company; the execution, acknowledgment and delivery of supplements, amendments and other corrective instruments as may reasonably be required with respect to the performance of the Loan Agreement; inspection of any Property, Plant and Equipment by the Commission, the Trustee and the Bank; the investment of funds and environmental matters.
Completion of Payment of the Cost of the Project
If, after exhaustion of the money in the Construction Fund, the Corporation and the Company should pay any portion of the Cost of the Project, the Corporation and the Company will not be entitled to any reimbursement therefor from the Commission or from the Trustee, and will not be entitled to any abatement, diminution or postponement of Total Required Payments
Compliance with Law
So long as the Loan is outstanding, the Corporation and the Company, at their sole cost and expense, will comply or cause there to be compliance with all laws, orders, rules, regulations and requirements relating to the acquisition, construction, use or occupancy of the Project and will observe and comply with the requirements of all policies of insurance at any time in force with respect to any of the buildings, improvements, machinery or equipment constituting a part of the Project. Nothing contained in this provision will prevent the Corporation or the Company from contesting in good faith the applicability or validity of any law, ordinance, order, rule, regulation or requirement, so long as the Corporation and the Company has delivered to the Trustee and the Commission an opinion of Counsel acceptable to the Trustee and the Commission to the effect that such failure to comply during the period of such contest will not materially impair the use of the Project or the interests of the Corporation and the Company in the Project.
Income Tax Status
The Corporation and the Company will take all appropriate measures to maintain their status as an organization described in Section 501(c)(3) of the Code and the regulations thereunder and its exemption from federal income tax under Section 501(a) of the Code. The Corporation and the Company will not perform any acts or enter into any agreements that have the effect of prejudicing the Corporation’s or the Company’s tax-exempt status or the exclusion from gross income of the interest on any Bonds for purposes of federal income taxation or fail to perform any act or fulfill any obligation required to maintain such status or exemption. The Corporation and the Company will take all appropriate measures to maintain their tax-exempt status under State income tax laws and the regulations thereunder.
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Financial Statements and Other Information
The Corporation and the Company agrees to furnish to the Commission, the Local Government Commission, the Trustee and any requesting Holder certain financial information, including quarterly unaudited financial statements, an annual audit report for each Fiscal Year and certain Officer’s Certificates relating to its compliance with the Long-Term Debt Service Coverage Ratio and other covenants contained in the Loan Agreement.
Limitations on Creation of Liens
The Corporation and the Company agree that they will not create or suffer to be created or permit the existence of any Lien upon Property now owned or hereafter acquired by it other than Permitted Liens.
Permitted Liens consist of the following:
(i) Any Lien securing Indebtedness incurred pursuant to the Loan Agreement;
(ii) Liens arising by reason of good faith deposits with the Corporation or the Company in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by the Corporation or the Company 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;
(iii) 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 or the Company to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pension or profit sharing plans or other social security, or to share in the privileges or benefits required for companies participating in such arrangements;
(iv) Any judgment lien against the Corporation or the Company so long as such judgment is being contested in good faith and execution thereon is stayed;
(v) (A) Rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law, affecting any Property; (B) any liens on any Property for taxes, assessments, levies, fees, water and sewer charges, and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent, or the amount or validity of which, are being contested in good faith and execution thereon is stayed or, with respect to liens of mechanics, materialmen, laborers, suppliers or vendors, have been due for less than 90 days; (C) easements, rights-of-way, servitudes, restrictions, oil, gas or other mineral reservations and other minor defects, encumbrances, and irregularities in the title to any Property which, in an Opinion of Counsel, do not materially impair the use of such Property for its intended purposes or materially and adversely affect the value thereof; (D) to the extent that it affects title to any Property, the Trust Agreement; and (E) landlord’s liens;
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(vi) Any Lien which is existing on the date of authentication and delivery of the Loan Agreement, provided that no such Lien may be increased, extended, renewed or modified to apply to any Property of the Corporation and the Company not subject to such Lien on such date or to secure Indebtedness not Outstanding as of the date hereof, unless such Lien as so extended, renewed or modified otherwise qualifies as a Permitted Lien under the Loan Agreement;
(vii) Any Lien securing Indebtedness incurred for the purpose of financing Equipment in an amount not exceeding the greater of (1) 15% of Total Operating Revenues or (2) $1,000,000 (provided that such Lien attaches only to the Equipment with respect to which such Indebtedness was incurred) or any security interest in Gross Receipts securing Short-Term Indebtedness for working capital permitted under the Loan Agreement, provided that no Event of Default exists under the Loan Agreement as of the date that any such Indebtedness is to be incurred;
(viii) Any Lien securing Non-Recourse Indebtedness permitted by the Loan Agreement;
(ix) Any Lien on pledges, gifts or grants to be received in the future including any income derived from the investment thereof;
(x) Any Lien on inventory which does not exceed 25% of the Book Value thereof;
(xi) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of such proceeds;
(xii) Any Lien securing all Long-Term Indebtedness of the Corporation and the Company on a parity basis;
(xiii) Any Liens subordinate to the Lien described in clause (xi) of this paragraph required by a statute under which a Related Bond is issued;
(xiv) Liens on moneys deposited by residents, patients or others with the Corporation or the Company as security for or as prepayment for the cost of care;
(xv) Liens on Property received by the Corporation or the Company through gifts, grants or bequests, such Liens being due to restrictions on such gifts, grants or bequests of Property or the income thereon;
(xvi) Liens on Property due to rights of third party payors for recoupment of amounts paid to the Corporation or the Company;
(xvii) Any Lien securing the obligations of the Corporation or the Company under a Derivative Agreement, so long as the notional amount of all Derivative Agreements secured by such Liens does not exceed the greater of (1) the original principal amount of the Bonds, or (2) the aggregate amount of obligations then outstanding under a Master Indenture;
(xviii) Liens in favor of the Bank or permitted under the Reimbursement Agreement; and
(xix) Any lien on Accounts that are sold pursuant to the Loan Agreement or that are pledged to secure Indebtedness permitted by the Loan Agreement.
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Limitations on Indebtedness
The Corporation and the Company each covenant and agree that they will not incur any Additional Indebtedness if, after giving effect to all other Indebtedness incurred by the Corporation and the Company, such Indebtedness could not be incurred pursuant to subparagraphs (a) to (i), inclusive, under this caption. Any Indebtedness may be incurred only in the manner and pursuant to the terms set forth in such subparagraphs.
(a) Long-Term Indebtedness may be incurred if prior to incurrence of the Long-Term Indebtedness there is delivered to the Trustee:
(i) an Officer’s Certificate of a Corporation Representative certifying that (A) immediately after the incurrence of the proposed Long-Term Indebtedness the aggregate principal amount of all Long-Term Indebtedness will not exceed sixty-five percent (65%) of Capitalization; and (B) the forecasted Long-Term Debt Service Coverage Ratio, taking the proposed Long-Term Indebtedness into account, for (1) in the case of Long-Term Indebtedness (other than a Guaranty) to finance capital improvements, the first complete Fiscal Year next succeeding the date on which such capital improvements are expected to be placed in operation or (2) in the case of Long-Term Indebtedness not financing capital improvements or in the case of a Guaranty, the first complete Fiscal Year next succeeding the date on which the Indebtedness is incurred, is not less than 1.20; or
(ii) an Officer’s Certificate of a Corporation Representative certifying that the Long-Term Debt Service Coverage Ratio for the most recent Fiscal Year preceding the date of delivery of the Officer’s Certificate of the Corporation Representative for which there are Financial Statements available taking all Long-Term Indebtedness incurred after such period and the proposed Long-Term Indebtedness into account as if such Long-Term Indebtedness had been incurred at the beginning of such period, is not less than 1.35; or
(iii) (A) an Officer’s Certificate of a Corporation Representative demonstrating that the Long-Term Debt Service Coverage Ratio for the most recent Fiscal Year preceding the date of delivery of the Officer’s Certificate of the Corporation Representative for which there are Financial Statements available, excluding the proposed Long-Term Indebtedness, was at least 1.20 and (B) a written report of a Consultant demonstrating that the forecasted Long-Term Debt Service Coverage Ratio is not less than 1.35 for (x) in the case of Long-Term Indebtedness (other than a Guaranty) to finance capital improvements, each of the two full Fiscal Years succeeding the date on which such capital improvements are expected to be in operation or (y) in the case of Long-Term Indebtedness not financing capital improvements or in the case of a Guaranty, each of the two full Fiscal Years succeeding the date on which the Indebtedness is incurred, as shown by pro forma financial statements for the Corporation for each such period, accompanied by a statement of the relevant assumptions upon which such pro forma financial statements for the Corporation are based; provided, however, that if the Long-Term Debt Service Coverage Ratio calculated pursuant to this clause (a)(iii)(B) is greater than 1.50, an Officer’s Certificate may be substituted for the required Consultant’s report.
Notwithstanding any of the Long-Term Debt Service Coverage Ratios specified in subparagraph (a)(ii) and (a)(iii) above, if the report of a Consultant states that Governmental Restrictions have been imposed which make it impossible for the coverage requirements of this subparagraph to be met, then such coverage requirements will be reduced to the maximum coverage permitted by such Governmental Restrictions but in no event less than 1.00.
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(b) In addition to Long-Term Indebtedness permitted to be incurred under subparagraph (a) above, Long-Term Indebtedness may be incurred provided that there has been delivered to the Trustee an Officer’s Certificate of a Corporation Representative certifying that immediately after giving effect to any Long-Term Indebtedness incurred pursuant to this subparagraph the aggregate of Long-Term Indebtedness incurred under this subparagraph does not exceed twenty-five percent (25%) of Total Operating Revenues as reflected in the Financial Statements for the most recent Fiscal Year for which Financial Statements are available; provided, further, that the aggregate of the principal amount of Indebtedness Outstanding under this subparagraph (b) and subparagraphs (d) and (g) below does not at any time exceed twenty-five percent (25%) of Total Operating Revenues as reflected in such Financial Statements.
(c) Long-Term Indebtedness may be incurred for the purpose of refunding any Outstanding Long-Term Indebtedness without limitation if, prior to the incurrence of such Long-Term Indebtedness, there is delivered to the Trustee (i) either (A) an Officer’s Certificate of a Corporation Representative stating that, taking into account the Long-Term Indebtedness proposed to be incurred, the existing Long-Term Indebtedness to remain Outstanding after the refunding and the refunding of the existing Long-Term Indebtedness to be refunded, Maximum Annual Debt Service will not increase by more than 15%, or (B) the conditions described in subparagraph (a)(ii) or (a)(iii) above are met with respect to such proposed Long-Term Indebtedness, taking into account the existing Long-Term Indebtedness to remain Outstanding after the refunding and the refunding of the existing Long-Term Indebtedness to be refunded and (ii) an Opinion of Counsel stating that upon the incurrence of such proposed Long-Term Indebtedness, and application of the proceeds thereof (on the Cross-over Date, in the case of Cross-over Refunding Indebtedness), the Outstanding Long-Term Indebtedness to be refunded thereby will no longer be Outstanding.
(d) Short-Term Indebtedness may be incurred subject to the limitation that the aggregate principal amount of all Short-Term Indebtedness does not at any time exceed twenty-five percent (25%) of Total Operating Revenues as reflected in the Financial Statements for the most recent Fiscal Year for which Financial Statements are available; provided, however, that there is a period of at least twenty (20) consecutive calendar days during each such Fiscal Year for which Financial Statements are available during which Short-Term Indebtedness (excluding Short-Term Indebtedness incurred pursuant to subparagraph (g) below) does not exceed three percent (3%) of Total Operating Revenues; provided, further, that the aggregate of the principal amount of Indebtedness Outstanding under this subparagraph (d), subparagraph (b) above and subparagraph (g) below does not at any time exceed twenty-five percent (25%) of Total Operating Revenues as reflected in the Financial Statements for the most recent Fiscal Year for which Financial Statements are available.
(e) Non-Recourse Indebtedness may be incurred without limit.
(f) Completion Indebtedness may be incurred without limit; provided, however, that prior to the incurrence of Completion Indebtedness, the Corporation Representative will furnish to the Trustee the following: a certificate of an architect estimating the costs of completing the facilities for which Completion Indebtedness is to be incurred; an Officer’s Certificate of the chief financial officer of the Corporation certifying that the amount of Completion Indebtedness to be incurred will be sufficient, together with other funds, if applicable, to complete construction of the facilities in respect of which Completion Indebtedness is to be incurred; and a certificate from a Consultant to the effect that the Long-Term Indebtedness originally incurred to finance the costs of the construction of the facilities in respect of which Completion Indebtedness is to be incurred was estimated prior to the date of incurrence of the original Long-Term Indebtedness to be sufficient, together with other funds, if applicable, to complete the construction of such facilities, but due to certain factors enumerated in the certificate the
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costs of constructing such facilities exceeded the amount of the original Indebtedness plus other funds, if applicable.
(g) Indebtedness secured by Accounts may be incurred if prior to the incurrence of such Indebtedness there is delivered to the Trustee an Officer’s Certificate of a Corporation Representative certifying that immediately after the incurrence of such Indebtedness, the amount of Accounts that have been pledged to secure Indebtedness that has been issued pursuant to this subparagraph (g) and is then Outstanding will not exceed the difference between (i) the Account Lien Amount and (ii) an amount equal to the Net Book Value of any patient Accounts that have been sold as permitted by the Loan Agreement in the then current 12-month period; provided, however, that (A) the determination of whether a disposition of Accounts is a sale or loan will be made in accordance with generally accepted accounting principles and (B) any Indebtedness issued pursuant to this provision will be considered to be Short-Term Indebtedness subject to the incurrence test set forth in subparagraph (d) above.
(h) Put Indebtedness may be incurred, if prior to the incurrence of such Put Indebtedness (i) the conditions described in subparagraphs (a)(i), (a)(ii) or (a)(iii) above are met and (ii) a binding commitment from a bank or other financial institution exists to provide financing sufficient to pay the purchase price of such Put Indebtedness on any date on which the owner of such Put Indebtedness may demand payment thereof pursuant to the terms of such Put Indebtedness.
(i) Notwithstanding the foregoing provisions of the Loan Agreement described under this caption, nothing contained in the Loan Agreement will preclude the Corporation and the Company from incurring any obligation under a Letter of Credit or the Reimbursement Agreement.
Long-Term Debt Service Coverage Ratio
The Corporation and the Company covenant to set rates and charges for their facilities, services and products such that the Long-Term Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.20.
(a) If at any time the Long-Term Debt Service Coverage Ratio of 1.20, as derived from the Financial Statements for the most recent Fiscal Year, is not met, the Corporation and the Company covenant to retain a Consultant within thirty (30) days after its receipt of Financial Statements to make recommendations to increase such Long-Term Debt Service Coverage Ratio in the following Fiscal Year to the level required or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest level attainable. Any Consultant so retained will be required to submit such recommendations within forty-five (45) days after being so retained. The Corporation and the Company agree that they will, to the extent permitted by law, follow the recommendations of the Consultant. So long as a Consultant is retained and the Corporation and the Company follow such Consultant’s recommendations to the extent permitted by law, the provisions of the Loan Agreement described under this caption will be deemed to have been complied with even if the Long-Term Debt Service Coverage Ratio for the following Fiscal Year is below the required level; provided, however, that the revenues of the Corporation will not be less than the amount required to pay when due the total operating expenses of the Corporation and to pay when due the debt service on all Indebtedness of the Corporation for such Fiscal Year; provided further, however, that the Corporation and the Company will not be required to retain a Consultant to make recommendations pursuant to this provision more frequently than biennially.
(b) If a report of a Consultant is delivered to the Trustee, which report states that Governmental Restrictions have been imposed which make it impossible for the coverage requirement in clause (a) above to be met, then such coverage requirement will be reduced to the maximum coverage permitted by such Governmental Restrictions but in no event less than 1.00 and thereafter, for so long as
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such Governmental Restrictions are in effect, a report of a Consultant stating that Governmental Restrictions which make it impossible for the coverage requirement in clause (a) above to be met are still in effect will be delivered to the Trustee biennially.
Sale, Lease or Other Disposition of Operating Assets; Disposition of Cash and Investments; Sale of Accounts
(a) The Corporation and the Company agree that they will not Transfer in any Fiscal Year Operating Assets except for Transfers:
(i) To any Person of Operating Assets the Net Book Value of which does not exceed the greater of two percent (2%) of Property, Plant and Equipment net of depreciation and five percent (5%) of the unrestricted fund balance or unrestricted net assets of the Corporation, as shown on the Financial Statements for the most recent Fiscal Year for which such Financial Statements are available;
(ii) To any Person if prior to the sale, lease or other disposition there is delivered to the Trustee an Officer’s Certificate of a Corporation Representative stating that such Operating Assets have become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other disposition thereof will not (A) impair the structural soundness, efficiency or economic value of the remaining Operating Assets, or (B) adversely affect the amount of Total Operating Revenues of the Corporation; provided, however, that an Officer’s Certificate of a Corporation Representative will not be required to be delivered to the Trustee with respect to the Transfer of any such Operating Assets having an aggregate Net Book Value of less than the greater of (A) $1,000,000 per year or (B) 2.5% of all Property of the Corporation;
(iii) To any Affiliate whose financial statements are consolidated with the financial statements of the Corporation without limit;
(iv) To any Person provided there is delivered to the Trustee prior to such Transfer either:
(A) an Officer’s Certificate certifying the Long-Term Debt Service Coverage Ratio, adjusted to exclude the revenues and expenses derived from the Operating Assets proposed to be disposed of, for the most recent Fiscal Year preceding the date of delivery of the Officer’s Certificate for which Financial Statements are available and such Long-Term Debt Service Coverage Ratio is not less than 1.30 and not less than sixty-five percent (65%) of what it would have been were such Transfer not to take place; or
(B) the report of a Consultant to the effect that the forecasted Long-Term Debt Service Coverage Ratio, taking such Transfer into account, for each of the two Fiscal Years succeeding the date on which such Transfer is expected to occur, and the Long-Term Debt Service Coverage Ratio for each such period is not less than 1.30 and not less than sixty-five percent (65%) of what it would have been were such Transfer not to take place, accompanied by a statement of the relevant assumptions upon which such forecasts are based; or
(v) To any Person provided that (A) the Corporation or the Company receive, as consideration for such Transfer, cash, services or Property equal to the fair market value of the asset so transferred (fair market value of real property is evidenced by a written report of an
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independent appraiser who is a Member of the Appraisal Institute (MAI) which report states the fair market value of a date not more than one (1) year prior to the date as of which such fair market value is being determined), and (B) if the fair market value of the asset to be transferred exceeds five percent (5%) of the unrestricted fund balance or unrestricted net assets as shown on the Financial Statements for the most recent Fiscal Year for which such Financial Statements are available, then the Corporation must deliver to the Trustee prior to such Transfer either:
(A) an Officer’s Certificate certifying the Long-Term Debt Service Coverage Ratio, adjusted to exclude the revenues and expenses derived from the Operating Assets proposed to be disposed of, for the most recent Fiscal Year preceding the date of delivery of the Officer’s Certificate for which Financial Statements are available and such Long-Term Debt Service Coverage Ratio is not less than 1.30 and not less than sixty-five percent (65%) of what it would have been were such Transfer not to take place; or
(B) the report of a Consultant to the effect that the forecasted Long-Term Debt Service Coverage Ratio, taking such Transfer into account, for each of the two Fiscal Years succeeding the date on which such Transfer is expected to occur, is not less than 1.30 and not less than sixty-five percent (65%) of what it would have been were such Transfer not to take place, accompanied by a statement of the relevant assumptions upon which such forecasts are based.
The Corporation and the Company covenant to maintain records adequate to enable the Trustee to ascertain that the provisions of paragraph (v) above have been complied with and to make such records available to the Trustee upon written request.
(b) The Corporation and the Company agree that they will not Transfer cash or securities except for Transfers:
(i) To any Affiliate whose financial statements are consolidated with the financial statements of the Corporation without limit.
(ii) To any Person if the Long-Term Debt Service Coverage Ratio for the most recent Fiscal Year for which Financial Statements are available would not be reduced below 1.75 if the fair market value of the cash or securities that are the subject of the proposed Transfer was deducted from Income Available for Debt Service for such period; provided however, that there is filed with the Trustee an Officer’s Certificate of a Corporation Representative, accompanied by and based upon such Financial Statements, demonstrating compliance with the foregoing limitation prior to making any Transfer otherwise permitted by this paragraph (ii) in any given Fiscal Year which would, in the aggregate, exceed 0.5% of Total Operating Revenues as shown on such Financial Statements.
(iii) To any Person provided that the Corporation or the Company receive as consideration for such Transfer Property, cash, securities or services the fair market value of which is at least equal to the amount of the cash or securities so transferred and further provided that, if the Trustee so requests, the Corporation and the Company can demonstrate the foregoing in an Officer’s Certificate filed with the Trustee.
(c) The Corporation and the Company agree that they will not Transfer Accounts; provided, however, that the Corporation and the Company will have the right to sell, in any 12-month period beginning on the latest date the Financial Statements for the preceding Fiscal Year may be delivered pursuant to the Loan Agreement, its Accounts in an amount not to exceed the difference between (i) the
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Account Lien Amount and (ii) the amount of Accounts that have been pledged to secure Outstanding Indebtedness incurred by the Corporation and the Company pursuant to subparagraph (g) under the caption above entitled “Limitation on Indebtedness” during such 12-month period, if the Corporation and the Company (i) receive as consideration for such sale cash, services or Property equal to the fair market value of the accounts receivable so sold, with the fair market value thereof to be determined in the following manner: (1) as certified to the Trustee in an Officer’s Certificate of the Corporation that the cash, services or Property received in exchange for the accounts receivable had a value at least equal to 80% of the net book value of such accounts receivable as reflected on the balance sheet of the Corporation or (2) if the value of the cash, services or Property to be received in exchange for the accounts receivable has a value less than 80% of the net book value of such accounts receivable, then as certified in a report by a Consultant chosen by the Corporation that the value of the cash, services or Property to be received in exchange for the accounts receivable is the reasonable fair market value of such accounts receivable based on standards applicable to the health care industry and (ii) deliver to the Trustee an Officer’s Certificate that such sale of accounts receivable constitutes a “sale” under GAAP.
(d) Nothing in the Loan Agreement will be construed as limiting the ability of the Corporation and the Company to purchase or sell Property (other than Operating Assets) in the ordinary course of business or to transfer cash, securities and other investment properties in connection with ordinary investment transactions where such purchases, sales and transfers are for substantially equivalent value. Furthermore, nothing in the Loan Agreement will be construed as limiting the ability of the Corporation to expend funds in the ordinary course of business for operations, maintenance or management fees.
Insurance
The Corporation and the Company each agree that it will maintain, or cause to be maintained, the following types of insurance (including one or more self-insurance programs considered to be adequate) in such amounts as, in its judgment, are adequate to protect it and its Property and operations and which types and amounts of insurance are of the character usually maintained by Persons operating properties and engaged in operations similar to those of the Corporation and the Company: (i) comprehensive general public liability insurance, including blanket contractual liability and automobile insurance including owned or hired automobiles (excluding collision and comprehensive coverage thereon), (ii) fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke and uniform standard coverage and vandalism and malicious mischief endorsements and business interruption insurance, (iii) professional liability or medical malpractice insurance, (iv) workers’ compensation insurance, and (v) boiler insurance. The Corporation and the Company may not self-insure for items covered under clauses (ii) and (v) of the preceding sentence.
The Corporation and the Company must employ an Insurance Consultant to review its insurance requirements from time to time (but not less frequently than biennially with respect to risks covered by insurance companies and not less frequently than annually with respect to risks for which the Corporation and the Company are self-insured). If the Insurance Consultant makes recommendations for the increase of any coverage, the Corporation and the Company increase or cause to be increased such coverage in accordance with such recommendations, subject to a good faith determination of the Governing Bodies of the Corporation and the Company that such recommendations, in whole or in part, are in the best interests of the Corporation and the Company. Notwithstanding the above provisions, the Corporation and the Company have the right, without giving rise to an Event of Default solely on such account, (i) to maintain insurance coverage below that most recently recommended by the Insurance Consultant, if the Corporation and the Company furnish to the Commission, the Bank and the Trustee a report of the Insurance Consultant to the effect that the insurance so provided affords either the greatest amount of coverage available for the risk being insured against at rates which in the judgment of the Insurance
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Consultant are reasonable in connection with reasonable and appropriate risk management, or the greatest amount of coverage necessary by reason of state or federal laws now or hereafter in existence limiting medical and malpractice liability, or (ii) to adopt alternative risk management programs which the Insurance Consultant determines to be reasonable, including, without limitation, to self-insure in whole or in part individually or in connection with other institutions, to participate in programs of captive insurance companies, to participate with other health-care institutions in mutual or other cooperative insurance or other risk management programs, to participate in state or federal insurance programs, to take advantage of state or federal laws now or hereafter in existence limiting medical and malpractice liability, or to establish or participate in other alternative risk management programs; all as may be approved by the Insurance Consultant as reasonable and appropriate risk management by the Corporation and the Company. If the Corporation and the Company are self-insured for any coverage, the report of the Insurance Consultant mentioned above states whether the anticipated funding of any self-insurance fund is actuarially sound, and, if not, the required funding to produce such result.
Maintenance of Corporate Existence; Permitted Mergers and Consolidations
The Corporation and Company each must maintain its corporate existence and not dissolve or otherwise sell or dispose of all or substantially all of its assets or consolidate with or merge into another Person or permit one or more Persons to consolidate with or merge into it unless, among other things, the following conditions are satisfied:
(a) the Commission and the Bank have consented in writing to such dissolution, disposition of assets, consolidation or merger and the Trustee has received notice thereof;
(b) the surviving entity (the “Successor Entity”) is either an organization described in Section 501(c)(3) of the Code or a governmental unit described in Section 150(a)(2) of the Code;
(c) the Successor Entity (if other than the Corporation or the Company) has the power to assume and does assume in writing all of the obligations of the Corporation and the Company under the Loan Agreement;
(d) the Commission has received a written opinion of Bond Counsel to the Commission to the effect that such merger, consolidation or transfer of assets will not adversely affect the exclusion from gross income of the interest on the Bonds for purposes of federal income taxation; and
(e) the Successor Entity has met all facility licensing requirements to which the Corporation and the Company is each subject.
Upon compliance with the foregoing conditions, the Commission must deliver to the Corporation and the Company an instrument releasing the Corporation the Company from their obligations under the Loan Agreement unless the parties agree otherwise.
Use and Operation of Project
The Corporation and the Company will operate the Project exclusively as a nonprofit hospice care facility rendering health care services to the general public without discrimination as to race, creed, color, sex or national origin for the public purpose of better providing for the present and prospective health, safety and general welfare of the people of the State. The Corporation and the Company will not use any part of the Project financed with the proceeds of the Bonds primarily as a place of worship; provided, however, to the extent permitted by law, that the foregoing will not be deemed to prohibit use of a portion of the Project as a chapel, meditation room or for a pastoral care program reasonably available to persons
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of different creeds and reasonably related to the providing of continuing care or other health care services. The Corporation and the Company will maintain and operate the Project in a manner consistent with the Corporation’s and the Company’s obligations imposed under the Loan Agreement and their status as an organization described in Section 501(c)(3) of the Code, as determined by the Internal Revenue Service of the United States.
Defaults and Remedies
Events of Default are defined in the Loan Agreement to include: (a) failure of the Corporation or the Company to make any payment required under the Loan Agreement or the Note when due, whether at maturity, redemption, acceleration or otherwise, (b) failure of the Corporation and the Company to perform, observe or comply with any covenant, condition or agreement on its part under the Loan Agreement (other than a failure to make any payments under clause (a) of this paragraph) and such failure continues for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, has been given to the Corporation or the Company by the Trustee or to the Corporation or the Company and the Trustee by the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding; provided, however, that if such performance, observation or compliance requires work to be done, action to be taken or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such 30-day period, no Event of Default will be deemed to have occurred or to exist if, and so long as, the Corporation and the Company will commence such performance, observation or compliance within such period and will diligently and continuously prosecute the same to completion, (c) the occurrence of an Event of Default under the Trust Agreement, (d) the Master Trustee has declared the aggregate principal amount of the Obligation and all interest due thereon immediately due and payable in accordance with the Master Indenture, (e) the Corporation and the Company fail to make any required payment with respect to any Indebtedness in an aggregate outstanding principal amount equal to or greater than one-half of one percent (0.5%) of Income Available for Debt Service for the most recent Fiscal Year for which Financial Statements are available, except Non-Recourse Indebtedness and the Bonds, whether such Indebtedness now exists or is hereafter created, when and as the same becomes due and payable and any period of grace with respect thereto has expired, or another event of default as defined in any instrument, indenture or mortgage evidencing or securing such Indebtedness has occurred and be continuing, and as a result of such failure to pay or other event of default such Indebtedness has been accelerated; provided, however, that acceleration of such Indebtedness will not constitute an Event of Default if the Corporation and the Company in good faith is contesting the validity, amount or collectability of such Indebtedness and maintains reserves satisfactory to the Trustee for the payment of such Indebtedness pending the resolution of such contest, (f) the entry of a decree or order by a court having jurisdiction in the premises for an order for relief against the Corporation or the Company, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Corporation or the Company under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, custodian, assignee, or sequestrator (or other similar official) of the Corporation or Company or of any substantial part of their Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of ninety (90) consecutive days; or (g) the institution by the Corporation or the Company of proceedings for an order for relief, or the consent by it to an order for relief against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement, adjustment, composition or relief under the United States Bankruptcy Code or any other similar applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, custodian, assignee, trustee or sequestrator (or other similar official) of the Corporation or the Company or of any substantial part of their Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Corporation or the Company in furtherance of any such action.
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Upon the happening and continuance of an Event of Default under the Loan Agreement, the Commission may take the following remedial steps: (i) in the case of an Event of Default described in clause (a) of the preceding paragraph, take whatever action at law or in equity is necessary or desirable to collect the payments then due; (ii) in the case of an Event of Default described in clause (b) of the preceding paragraph, take whatever action at law or in equity is necessary or desirable to enforce the performance, observance or compliance by the Corporation and the Company with any covenant, condition or agreement by the Corporation and the Company under the Loan Agreement; (iii) in the case of an Event of Default described in clause (c) of the preceding paragraph, take such action or cease such action as the Trustee directs, but only to the extent that such directions are consistent with the provisions of the Trust Agreement; (iv) in the case of an Event of Default described in clause (d) of the preceding paragraph, the Commission takes such action, or ceases such action, as the Master Trustee directs, but only to the extent that such directions are consistent with the provisions of the Master Indenture; and (v) in the case of an Event of Default described in clauses (d), (e) or (f) of the preceding paragraph, the Commission takes such action, or ceases such action, as the Trustee directs, but only to the extent that such directions are consistent with the provisions of the Trust Agreement; provided, however, if an Obligation has been issued, the Commission takes such action, or ceases such action, as the Master Trustee directs, but only to the extent that such directions are consistent with the provisions of the Master Indenture.
Prepayment of the Loan
The Corporation and the Company have the option to prepay, together with accrued interest, all or any portion of the unpaid aggregate amount of the Loan in accordance with the Trust Agreement. Such prepayment will be made by the Corporation and the Company taking, or causing the Commission to take, the actions required (i) for payment of the Bonds, whether by redemption or purchase prior to maturity or by payment at maturity, or (ii) to effect the purchase, redemption or payment at maturity of less than all of the Outstanding Bonds according to their terms.
The Corporation and the Company have the option to prepay all or a portion of the unpaid aggregate amount of the Loan, together with accrued interest to the date of prepayment, from amounts received by the Corporation or the Company as insurance proceeds with respect to any casualty loss or failure of title or as condemnation awards pursuant to the Loan Agreement, provided that such prepayment will not be less than $100,000, and upon the occurrence of the following events: damage or destruction of all or any part (if such damage or destruction causes the Project as a whole to be impracticable to operate, as evidenced by an Officer’s Certificate filed with the Commission and the Trustee) of the Project by fire or casualty, or loss of title to or use of all or any part (if such loss of title causes the Facilities as a whole to be impracticable to operate, as evidenced by an Officer’s Certificate filed with the Commission and the Trustee) of the Project as a result of the failure of title or as a result of Eminent Domain proceedings or proceedings in lieu thereof, provided, however, that in the event an amount greater than ten percent (10%) of the aggregate principal amount of the Note is prepaid, the Corporation and the Company will file with the Commission, the Local Government Commission and the Trustee (i) an Officer’s Certificate to the effect that the forecasted Long-Term Debt Service Coverage Ratio for the Fiscal Year next succeeding the Fiscal Year in which such prepayment is made will be not less than 1.30 or (ii) a report of a Management Consultant to the effect that the forecasted Long-Term Debt Service Coverage Ratio for the Fiscal Year next succeeding the Fiscal Year in which such prepayment is made will be not less than 1.10.
The Corporation and the Company has the option to prepay all of the unpaid aggregate amount of the Loan, together with accrued interest to the date of prepayment, upon the occurrence of the following events: changes in the Constitution of the United States of America or of the State or legislation or administrative action or failure of administrative action by the United States of America or the State or
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any agency or political subdivision of either, or any judicial decision, to the extent that, in the opinion of the Boards of Directors of the Corporation and the Company (expressed in a resolution) and in the opinion of a Management Consultant, both filed with the Commission and the Trustee, (i) the Loan Agreement is impossible to perform without unreasonable delay or (ii) unreasonable burdens or excessive liabilities not being imposed on the date of the Loan Agreement are imposed on the Corporation or the Company.
Amendments to Loan Agreement
The Loan Agreement may be amended, without the consent of or notice to any of the Holders, as will be consistent with the terms of the Trust Agreement and the Loan Agreement and, in the opinion of the Trustee, who may rely upon a written Opinion of Counsel, will not materially and adversely affect the Holders, to cure any ambiguity or formal defect or omission therein or in any supplement thereto, to correct or supplement any provisions therein which may be inconsistent with any other provisions therein or make any other amendments with respect to matters or questions arising thereunder, to grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers, authority or security that may lawfully be granted or conferred upon the Holders or the Trustee, to add conditions, limitations and restrictions on the Corporation and the Company to be observed thereafter, and to make any change to the administrative provisions of the Loan Agreement to accommodate the provisions of a Substitute Letter of Credit. Any other amendments to the Loan Agreement require approval of the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding, except for certain amendments which would require consent of the Holders of all Bonds then Outstanding.
Members, Officers and Employees of the Commission, the Corporation, the Company and the Local Government Commission Not Liable
Neither the members, officers and employees of the Commission or the Local Government Commission nor the members of the Boards of Directors or the officers and employees of the Corporation and the Company will be personally liable for any costs, losses, damages, or liabilities caused or subsequently incurred by the Corporation and the Company or any officer, director or agent thereof in connection with or as a result of the Loan Agreement.
Exclusion from Gross Income Covenant
The Corporation and the Company covenant that they will not take any action which will, or fail to take any action which failure will, cause interest on the Bonds to become includable in the gross income of the Holders for federal income tax purposes pursuant to the provisions of the Code; provided, however, that the Commission will have no obligation to pay any amounts necessary to comply with this covenant other than from money received by the Commission from the Corporation and the Company for such purposes.
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SUMMARY OF THE TRUST AGREEMENT
The following is a summary of certain provisions of the Trust Agreement to which reference is made for a full and complete statement of its provisions.
Various Funds and Accounts Created by the Trust Agreement
The Trust Agreement creates the following funds and accounts: the Bond Fund (and four separate accounts therein designated as the Interest Account, the Sinking Fund Account, the Letter of Credit Account and the Purchase Account) and the Redemption Fund. The Trust Agreement also creates the Construction Fund and three separate accounts therein designated as the Construction Account, the Issuance Account and the Revolving Fund Account.
The money and securities in each of the aforementioned funds and accounts, other than the Revolving Fund Account, will be held in trust by the Trustee and will be subject to a lien and charge in favor of the Holders of the Bonds until paid out or transferred as provided in the Trust Agreement.
Construction Fund
The Trustee will make the deposits to the Construction Account and the Issuance Account required by the provisions of the Trust Agreement. All money received by the Commission from any source, including the Corporation or the Company, for the Project will be deposited immediately upon its receipt to the credit of the Construction Account.
Payments from the Construction Fund are to be made to pay the Cost of the Project in accordance with the provisions of the Trust Agreement. All Issuance Costs incurred in connection with the Bonds and to be financed from the proceeds of the sale of the Bonds will be paid only from the Issuance Account. Upon receipt of a requisition of the Corporation and the Company signed by the Corporation Representative and approved by the Bank, the Trustee will transfer from the Construction Account to the Revolving Fund Account at one time or from time to time, a sum or sums aggregating not more than Five Hundred Thousand Dollars ($500,000) to be used by the Corporation and the Company as a revolving fund for the payment of items of Cost, other than Issuance Costs, that cannot conveniently be paid as otherwise provided in the Trust Agreement. After the Project has been completed, any balance remaining in the Construction Fund will be applied by the Trustee, subject to certain limitations, for any purpose permitted by the Act which, in the opinion of Bond Counsel, will not cause interest on the Bonds to become includable in the gross income of the Holders thereof for federal income tax purposes.
Funds Received
The Trustee will deposit all amounts received as Loan Repayments in the following order, subject to the credits as provided in the Trust Agreement:
(a) to the credit of the Interest Account, (A) while the Bonds bear interest at the Weekly Rate, on the Business Day next preceding each Interest Payment Date, an amount equal to the interest payable on the Bonds on such Interest Payment Date, and (B) while the Bonds bear interest at a Long-Term Rate, on the 25th day of each month, an amount equal to one sixth (1/6) of the interest payable on the Bonds on the next ensuing Interest Payment Date, in each case less any applicable credit under the Trust Agreement; provided, however, that if a Letter of Credit is in effect, no deposit will be required to be made until such Interest Payment Date;
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(b) to the credit of the Sinking Fund Account, beginning on December 25, 2009, and continuing on the 25th day of each month thereafter, an amount equal to one twelfth (1/12) of the amount required to retire the Bonds to be called pursuant to mandatory sinking fund redemption or to be paid at maturity on the next ensuing December 1 in accordance with the Sinking Fund Requirement therefor; provided, however, that if a Letter of Credit is in effect, no deposit will be required to be made until such December 1; and
(c) to the credit of the Redemption Fund, any amounts that may from time to time be required to enable the Trustee to pay redemption premiums as and when the Bonds are called for redemption.
The Trustee will deposit all moneys drawn under the Letter of Credit to pay interest, principal, purchase price or redemption premium, if applicable, into the Letter of Credit Account and then transfer such moneys to the Interest Account, the Sinking Fund Account, the Purchase Account or the Redemption Fund, as appropriate. The Trustee will deposit all remarketing proceeds received from the Remarketing Agent pursuant to the Trust Agreement and any other moneys received by the Trustee for the purchase of tendered bonds into the Purchase Account. While a Letter of Credit is in effect, each deposit into the Bond Fund or the Redemption Fund not constituting Available Moneys will be placed in a separate subaccount within the Interest Account, the Sinking Fund Account, the Purchase Account or the Redemption Fund, as appropriate, and may not be commingled with other money in any such subaccount until such money becomes Available Moneys.
If, after giving effect to the credits specified below, any installment of Total Required Payments should be insufficient to enable the Trustee to make the deposits required above, the Trustee will give the Corporation or the Company telephonic notice thereof, promptly confirmed in writing, and request that each future installment of the Total Required Payments be increased as may be necessary to make up any previous deficiency in any of the required payments and to make up any deficiency or loss in any of the above-mentioned accounts and funds.
To the extent that principal of, redemption premium, if any, or interest on the Bonds is to be paid from amounts drawn under the Letter of Credit and deposited in the Letter of Credit Account and then transferred to the Interest Account, the Sinking Fund Account, the Purchase Account or the Redemption Fund, as appropriate, deposits then due to be made into such funds and accounts and future deposits to such funds and accounts will be reduced by the amount so deposited, and the Loan Repayments due on or following the date such amounts are deposited will be reduced by the amounts so deposited.
To the extent that investment earnings are credited to the Interest Account or the Sinking Fund Account in accordance with the Trust Agreement or amounts are credited thereto as a result of the application of the proceeds of the Bonds or a transfer of investment earnings on any other fund or account held by the Trustee, or otherwise, future deposits to such accounts will be reduced by the amount so credited, and the Loan Repayments due from the Corporation and the Company in the months following the date upon which such amounts are credited will be reduced by the amounts so credited.
All amounts received by the Trustee as principal of or interest accruing on the Bonds to be redeemed as a result of a prepayment of the Note will be deposited in the Redemption Fund and the Interest Account, respectively, when received. All amounts received by the Trustee as redemption premiums will be deposited in the Redemption Fund when received.
Under the Trust Agreement, the Trustee is directed to withdraw from the Interest Account, the Sinking Fund Account or the Redemption Fund, as applicable, and make available at the Designated Office for Bond Deliveries sufficient funds (to the extent available) to pay the principal of, redemption
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premium, if any, and interest on the Bonds as the same become due and payable, whether due by maturity, acceleration, redemption or otherwise, only in the following order of priority:
FIRST: Amounts drawn by the Trustee under a Letter of Credit.
SECOND: Available Moneys on deposit in such funds or accounts, other than amounts received by the Trustee in respect of drawings under a Letter of Credit.
THIRD: Any other amounts in such funds or accounts, including but not limited to moneys obtained from the Corporation and the Company.
Bond Fund Accounts
If the Bonds are not in a Book Entry System, not later than 1:00 p.m., Local Time, on each Interest Payment Date, or date for the payment of Defaulted Interest, or date upon which Bonds are to be redeemed, the Trustee will withdraw from the Interest Account and remit by mail, or as permitted under the Trust Agreement, by wire transfer, to each Holder which is not a Securities Depository Nominee the amount required for paying interest on such Bonds when due and payable.
If the Bonds are in a Book Entry System, at such time as to enable the Trustee to make payments of interest on the Bonds in accordance with any existing agreement between the Trustee and any Securities Depository, the Trustee will withdraw from the Interest Account and remit by wire transfer, in Federal Reserve or other immediately available funds, the amounts required to pay to any Holder which is a Securities Depository Nominee interest on the Bonds on the next succeeding Interest Payment Date; provided, however, that in no event will the Trustee be required to make such wire transfer prior to the Business Day next preceding each Interest Payment Date, and provided further that such wire transfer will be made not later than 1:00 p.m., Local Time, on each Interest Payment Date.
If a Letter of Credit is in effect and the Bank fails to pay a conforming draw in immediately available funds by 1:00 p.m., Local Time, on an Interest Payment Date, the Trustee will immediately notify the Corporation and the Company of the amount of the deficiency. Upon notification, the Corporation and the Company will immediately deliver to the Trustee an amount sufficient to cure the same.
If no Letter of Credit is in effect, then in the event the balance in the Interest Account on (i) the Business Day next preceding an Interest Payment Date, or date on which Bonds are to be redeemed, while the Bonds bear interest at the Weekly Rate, or (ii) on the 26th day of the month next preceding an Interest Payment Date or date upon which Bonds are to be redeemed, while the Bonds bear interest at a Long-Term Rate, is insufficient for the payment of interest becoming due on the Bonds on such Interest Payment Date or date upon which Bonds are to be redeemed, the Trustee will notify the Corporation and the Company of the amount of the deficiency. Upon notification, the Corporation and the Company will immediately deliver to the Trustee an amount sufficient to cure the same.
The Trustee will withdraw from the Purchase Account and remit by wire transfer, in Federal Reserve or other immediately available funds, the purchase price of any Bond tendered or deemed tendered pursuant to the Trust Agreement to the Holder of such Bond.
Money held for the credit of the Sinking Fund Account will be applied during each Bond Year to the retirement of Bonds then Outstanding as provided in the Trust Agreement.
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If a Letter of Credit is in effect and the Bank fails to pay a conforming draw in immediately available funds by 1:00 p.m., Local Time, on December 1 of any Bond Year in which Bonds are called for redemption to fulfill the Sinking Fund Requirement for such Bond Year, the Trustee will immediately notify the Corporation and the Company of the amount of the deficiency. Upon notification, the Corporation and the Company will immediately deliver to the Trustee an amount sufficient to cure the same.
If no Letter of Credit is in effect, then in the event the balance in the Sinking Fund Account on any November 25th is insufficient for the payment of the Sinking Fund Requirement on the Bonds on the next ensuing December 1, the Trustee will notify the Corporation and the Company of the amount of such deficiency. Upon notification, the Corporation will, not later than the Business Day prior to such December 1, deliver to the Trustee an amount sufficient to cure the same.
Redemption Fund
Money held for the credit of the Redemption Fund will be applied to the purchase or redemption of Bonds as provided in the Trust Agreement.
Letter of Credit
Except with respect to any Bonds held by the Commission, the Corporation, the Company or the Bank, the Trustee will draw moneys under the Letter of Credit in accordance with the terms thereof to the extent necessary (i) to make timely payments of principal of, redemption premium, if any (if the Letter of Credit provides for payment of such redemption premium) and interest on the Bonds; (ii) to pay the purchase price for any Bonds tendered whenever and to the extent moneys are not available therefor from remarketing proceeds; and (iii) to pay all unpaid principal of and accrued interest on the Bonds upon declaration of acceleration pursuant to the Trust Agreement.
The Corporation and the Company may elect to provide a Substitute Letter of Credit by giving written notice to the Trustee at the Designated Office for Notices, the Remarketing Agent, the Commission, the LGC and the Bank not less than twenty-five (25) days prior to the Substitution Date specified in such notice, stating: (i) its election to provide a Substitute Letter of Credit and specifying the Substitution Date, (ii) the name and a brief description of the bank that will issue the Substitute Letter of Credit, (iii) the expiration date of the Substitute Letter of Credit, (iv) whether the Bonds will be rated by a Rating Agency upon delivery of the Substitute Letter of Credit, (v) if the Bonds will be rated by a Rating Agency upon delivery of the Substitute Letter of Credit, the expected ratings, and (vi) if the Bonds will not be rated upon delivery of the Substitute Letter of Credit, the long-term and short-term senior debt or bank deposit ratings of the bank which will issue the Substitute Letter of Credit by an entity which could be a Rating Agency.
The Substitute Letter of Credit must be delivered to the Trustee not later than 10:00 a.m. on the Substitution Date, together with an Opinion of Counsel and an opinion of Bond Counsel, each opining as to certain matters set forth in the Trust Agreement, and the written consent of the Remarketing Agent. In the event the Substitute Letter of Credit and the items specified in the preceding sentence are not delivered to the Trustee by 10:00 a.m., Local Time, on the Substitution Date, the Trustee will not accept delivery of the Substitute Letter of Credit and no substitution will be deemed to have occurred. During any Long-Term Rate Period, the Trustee will not accept any Substitute Letter of Credit. The Trustee may accept a Substitute Letter of Credit on the first day of any Long-Term Rate Period.
Upon receipt of the notice from the Corporation and the Company described in the preceding paragraph, the Trustee will give written notice of the Substitution Date by first-class mail, postage
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prepaid, to all Holders of the Bonds addressed to each such Holder at its registered address and placed in the mails not less than fifteen days prior to such Substitution Date. Such notice will state: (i) the Substitution Date, (ii) the expiration date of the Letter of Credit for which the Substitute Letter of Credit is to be substituted, (iii) the expiration date of the Substitute Letter of Credit, (iv) the name of the bank that is issuing the Substitute Letter of Credit and include a brief description of such bank, including the long-term and short-term senior debt or bank deposit ratings of such bank, and (v) that the Bonds are subject to mandatory tender for purchase on the Substitution Date in accordance with the Trust Agreement.
Investment of Money
Money held for the credit of all funds and accounts created under the Trust Agreement and held by the Trustee (other than the Letter of Credit Account and Purchase Account, which will not be invested) will be continuously invested and reinvested by the Trustee in Investment Obligations to the extent practicable in accordance with the instructions of the Corporation and the Company. Any such Investment Obligations will mature not later than the respective dates when the money held for the credit of such funds or accounts will be required for the purposes intended.
No Investment Obligations in any fund or account may mature beyond the latest maturity date of any Bonds Outstanding at the time such Investment Obligations are deposited unless irrevocable instructions have been given to redeem such Investment Obligations on a date or dates not later than the latest maturity date of any Bonds Outstanding.
Investment Obligations credited to any fund or account established under the Trust Agreement (other than the Revolving Fund Account) will be held by or under the control of the Trustee and will be deemed at all times to be part of such fund or account in which such money was originally held, and the interest accruing thereon and any profit or loss realized upon the disposition or maturity of such investment will be credited to or charged against such fund or account. The Trustee will sell at the market price available or reduce to cash a sufficient amount of such Investment Obligations whenever it is necessary to provide money to make any payment or transfer of money from any such fund or account. The Trustee will not be liable or responsible for any loss resulting from any investment of funds made by it in accordance with the Trust Agreement.
Valuation
For the purpose of determining the amount on deposit in any fund or account, Investment Obligations in which money in such fund or account is invested will be valued (a) at face value if such Investment Obligations mature within six months from the date of valuation, and (b) if such Investment Obligations mature more than six months after the date of valuation, at the price at which such Investment Obligations are redeemable by the holder at such holder’s option if so redeemable or, if not so redeemable, at the lesser of (i) the cost of such Investment Obligations minus the amortization of any premium or plus the amortization of any discount thereon and (ii) the market value of such Investment Obligations.
The Trustee will value the Investment Obligations in the funds and accounts established under the Trust Agreement and held by the Trustee three Business Days prior to each June 1 and December 1 and at such times as is required in order for the Corporation and the Company to comply with the Tax Certificate. In addition, the Investment Obligations will be valued by the Trustee at any time requested by the Commission Representative, the Corporation Representative or the Company Representative on reasonable notice to the Trustee at the Designated Office for Notices (which period of notice may be
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waived or reduced by the Trustee), except that the Trustee will not be required to value the Investment Obligations more than once in any calendar month other than as provided in the Trust Agreement.
Events of Default
Each of the following events is an Event of Default under the Trust Agreement:
(a) payment of any installment of interest on any Bond is not made by the Commission when due and payable;
(b) payment of the principal or the redemption premium, if any, of any Bond is not made by the Commission when due and payable, whether at maturity or by proceedings for redemption or pursuant to a Sinking Fund Requirement or otherwise;
(c) payment of the purchase price of any Bond tendered or deemed tendered pursuant to the Trust Agreement is not made when due and payable;
(d) default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Trust Agreement or any agreement supplemental thereto and such default continues for thirty (30) days or such further time as may be granted in writing by the Trustee after receipt by the Commission, of a written notice from the Trustee specifying such default and requiring the same to be remedied; provided, however, if prior to the expiration of such 30-day period the Commission institutes action reasonably designed to cure such default, no Event of Default will be deemed to have occurred upon the expiration of such 30-day period for so long as the Commission pursues such curative action with reasonable diligence and provided that such curative action can be completed within a reasonable time;
(e) an “Event of Default” has occurred under the Loan Agreement or the Master Indenture, if applicable, and such “Event of Default” has not been remedied or waived; or
(f) the Trustee has received written notice from the Bank that an “Event of Default” has occurred and is continuing under the Reimbursement Agreement and directing an acceleration of the Bonds.
Remedies on Default
Upon the happening and continuance of any Event of Default under the Trust Agreement, the Trustee may, and (i) 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 (ii) in the case of any Event of Default described in clause (a), (b), (c), or (f) under the immediately preceding caption, must, by notice in writing to the Commission, the Corporation, the Company and the Bank, declare the principal of all Bonds then Outstanding to be due and payable. Notwithstanding the foregoing, the prior written consent of the Bank to any declaration of acceleration must be obtained in the case of any Event of Default described in clause (d) or (e) under the immediately preceding caption. Such declaration may be rescinded under the circumstances specified in the Trust Agreement.
Upon the happening and continuance of any Event of Default under the Trust Agreement as described above, then and in every such case the Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding shall, proceed, subject to the indemnification provisions of the Trust Agreement, to protect and enforce its rights and the rights of the Holders under the laws of the State or under the Trust Agreement by such
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suits, actions or special proceedings in equity or at law, or by proceedings in the office of any board or officer having jurisdiction, either for the specific performance of any covenant or agreement contained in the Trust Agreement or in aid or execution of any power granted in the Trust Agreement or for the enforcement of any proper legal or equitable remedy, as the Trustee, being advised by counsel chosen by the Trustee, deems most effectual to protect and enforce such rights.
Notwithstanding the immediately preceding paragraph, the prior written consent of the Bank to any enforcement of remedies must be obtained by the Trustee in the case of any Event of Default described in clause (d) or (e) under the immediately preceding caption.
Right of Holders and Bank to Direct Proceedings
The Holders of a majority in aggregate principal amount of Bonds then Outstanding will have the right, subject, in certain circumstances, to the right of the Trustee to be indemnified to its satisfaction as provided in the Trust Agreement, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee under the Trust Agreement, provided that such direction will be in accordance with law and the provisions of the Trust Agreement. Notwithstanding the foregoing sentence, if a Letter of Credit is in effect, the Bank, not the Holders, will have the right, subject, in certain circumstances, to the right of the Trustee to be indemnified to its satisfaction as provided in the Trust Agreement, by an instrument in writing executed and delivered to the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by the Trustee under the Trust Agreement, provided that such direction will be in accordance with law and the provisions of the Trust Agreement.
Except as provided in the Trust Agreement, no Holder may institute any suit, action or proceeding on any Bond or for any remedy under the Trust Agreement unless such Holder previously has given to the Trustee written notice of the Event of Default on account of which suit, action or proceeding is to be instituted, and unless the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding have made a written request of the Trustee to act and have furnished indemnity to the Trustee, as required in the Trust Agreement, and the Trustee has refused or neglected to comply with such request within a reasonable time. Notwithstanding the foregoing, the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds Outstanding may institute any such suit, action or proceeding in their own names for the benefit of all Holders. Except as provided in the Trust Agreement, no Holder will have any right in any manner whatsoever to enforce any right thereunder, and any individual rights given to such Holders by law are restricted by the Trust Agreement to the rights and remedies therein provided.
Notwithstanding the immediately preceding paragraph, nothing in the Trust Agreement will affect or impair the right of any Holder to enforce the payment of the principal of and interest on his Bond or the obligation of the Commission to pay the principal of and interest on each Bond to the Holder thereof at the time and place in said Bond expressed.
Waiver
The Trustee may, and upon written request of the Holders of not less than a majority in principal amount of the Bonds then Outstanding shall, waive any Event of Default which in its opinion has been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of the Trust Agreement or before the completion of the enforcement of any rights of the Trustee thereunder, but such waiver will not waive any subsequent Event of Default or impair any rights or remedies consequent thereon.
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Notwithstanding the immediately preceding paragraph, if a Letter of Credit is in effect, the Trustee will, upon the written request of the Bank, waive any Event of Default under the Trust Agreement; provided, however, the Trustee will not waive any Event of Default unless all principal and purchase price of, redemption premium, and interest on the Bonds then in arrears and all fees and expenses of the Trustee then due are paid in full or provided for and the Trustee has received notice in writing from the Bank that the amount available to be drawn under the Letter of Credit in respect of the principal and purchase price of, redemption premium, if applicable, and interest on the Bonds has been reinstated in full.
Notice of Default
The Trustee will mail, first class, postage prepaid, to the Commission, the Local Government Commission, the Corporation, the Company, the Remarketing Agent and all Holders at their addresses as they appear on the registration books written notice of the occurrence of any Event of Default set forth in the Trust Agreement within thirty (30) days after the Trustee gives notice of the same, pursuant to the provisions of the Trust Agreement that any such Event of Default has occurred; provided that, except upon the happening of certain Event of Default specified in the Trust Agreement, the Trustee may withhold such notice to the Holders if in its opinion such withholding is in the interest of the Holders; and provided further that the Trustee is not subject to any liability to any Holder by reason of its failure to mail any such notice.
Rights of Bank
All rights of the Bank under the Trust Agreement to consent to declarations of acceleration, to consent to enforcement of remedies, to direct proceedings, to compel waivers, to consent to amendments and to give any other consents or to vote under the Trust Agreement will be suspended (i) for so long as the Bank wrongfully dishonors any draft (or other appropriate form of demand) presented in strict conformity with the requirements of the Letter of Credit and has not honored a subsequent draft (or other appropriate form of demand), if any, thereunder or (ii) if no Letter of Credit is in effect or any Letter of Credit terminates in accordance with its terms and all amounts due under the Reimbursement Agreement have been paid in full.
Removal and Resignation of Trustee
The Trustee may be removed (i) at any time by an instrument or concurrent instruments in writing, executed by the Holders of not less than a majority in aggregate principal amount of Bonds then Outstanding and filed with the Commission or (ii) so long as no Event of Default has occurred and is continuing, by a written instrument executed by the Corporation and the Company, subject to the prior written consent of the Commission, and filed with the Commission not less than sixty (60) days before such removal is to take effect as stated in such instrument or instruments.
The Trustee may also be removed at any time for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provisions of the Trust Agreement with respect to the duties and obligations of the Trustee by any court of competent jurisdiction upon the application of the Commission or the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding.
Subject to the acceptance of appointment by a successor Trustee, the Trustee may resign by giving written notice to the Commission, the Master Trustee, the Corporation and the Company, and mailing such notice, postage prepaid, at the Trustee’s expense, to each Holder, not less than sixty (60) days before such resignation is to take effect, but such resignation will take effect immediately upon the
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appointment of a new Trustee if such new Trustee is appointed before the time limited by such notice and then accepts the trusts of the Trust Agreement.
Appointment of Successor Trustee
If at any time the Trustee resigns, is removed, dissolved or otherwise becomes incapable of acting, or the bank or trust company acting as Trustee is taken over by any governmental official, agency, department or board, the position of Trustee will thereupon become vacant. If the position of Trustee becomes vacant for any reason, the Corporation and the Company will recommend and the Commission will appoint a Trustee to fill such vacancy. A successor Trustee will not be required if the Trustee sells or assigns substantially all of its trust business and the vendee or assignee continues in the trust business, or if a transfer of the trust department of the Trustee is required by operation of law, provided that such vendee, assignee or transferee (i) is a bank or trust company 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, (ii) is of good standing, (iii) has a combined capital and surplus aggregating not less than One Hundred Million Dollars ($100,000,000) and (iv) has been approved by the Commission, the Company and the Corporation.
At any time within one year after any such vacancy has occurred, the Holders of not less than twenty five percent (25%) in principal amount of Bonds then Outstanding, by an instrument or concurrent instruments in writing, executed by such Holders and filed with the Commission, may nominate a successor Trustee, which the Commission will appoint and which will supersede any Trustee theretofore appointed by the Commission.
If no appointment of a successor Trustee is made pursuant to the provisions described above, any Holder or any retiring Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee.
Any successor Trustee appointed will (i) be a bank or trust company 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, (ii) be of good standing, (iii) have a combined capital and surplus aggregating not less than One Hundred Million Dollars ($100,000,000) and (iv) be approved by the Commission, the Company and the Corporation.
Owners of Bonds Deemed Holders of Obligation; Bank Deemed Holder of Bonds
In the event that any request, notice, direction or consent is required or permitted by the Master Indenture of the registered owners of obligations issued thereunder, including the Obligation, the Holders of Bonds then Outstanding will be deemed to be registered owners of the Obligation for the purpose of any such request, notice, direction or consent in the proportion that the aggregate principal amount of Bonds then Outstanding held by each such Holder of Bonds bears to the aggregate principal amount of all Bonds then Outstanding.
For purposes of giving any consents or directions contemplated under the Trust Agreement, or exercising any voting rights given to the Holders under the Trust Agreement, for so long as a Letter of Credit is in effect and subject to the provisions of the Trust Agreement described under the caption “Rights of Bank” above, the Bank will be deemed to be the Holder of the Bonds.
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Modification of the Trust Agreement
The Commission and the Trustee may, from time to time and at any time, enter into agreements supplemental to the Trust Agreement, without the consent of or notice to any Holder, to effect any one or more of the following: (a) cure any ambiguity or defect or omission or correct or supplement any provision in the Trust Agreement or any supplemental trust agreement to the Trust Agreement, (b) grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Holders or the Trustee which are not contrary to or inconsistent with the Trust Agreement as then in effect or to subject to the pledge and lien of the Trust Agreement additional revenues, properties or collateral, including Defeasance Obligations, (c) add other conditions, limitations and restrictions to the Trust Agreement, which are not contrary to or inconsistent with the Trust Agreement as then in effect, (d) add other covenants and agreements to be observed by the Commission to the Trust Agreement or surrender any right or power reserved to or conferred upon the Commission under the Trust Agreement, which are not contrary to or inconsistent with the Trust Agreement as then in effect, (e) comply with any federal or state securities law, (f) make any other change that is determined by the Trustee, who may rely upon an Opinion of Counsel, to be not materially adverse to the interests of the Holders, (g) if all of the Bonds are Book Entry Bonds, amend, modify, alter or replace the Letter of Representations as provided in the Trust Agreement or other provisions relating to Book Entry Bonds, (h) facilitate the issuance and delivery of certificated Bonds to Beneficial Owners if the Book Entry System for the Bonds is discontinued, or (i) make any change to the administrative provisions of the Trust Agreement to accommodate the provisions of a Substitute Letter of Credit.
The Holders of not less than a majority in aggregate principal amount of the Bonds Outstanding have the right to consent to and approve the execution by the Commission and the Trustee of supplemental trust agreements as deemed necessary or desirable by the Commission for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Trust Agreement, provided that nothing contained in the Trust Agreement will permit or be construed as permitting (a) an extension of the maturity of principal of or interest on any Bonds issued under the Trust Agreement without the consent of the Holders of such Bonds, (b) a reduction in the principal amount of or the redemption premium or the rate of interest on any Bonds without the consent of the Holders of such Bonds, (c) the creation of a pledge of receipts and revenues to be received by the Commission under the Loan Agreement superior to the pledge created under the Trust Agreement without the consent of the Holders of all Bonds Outstanding, (d) a preference or priority of any Bond over any other Bond without the consent of the Holders of all Bonds Outstanding, or (e) a reduction in the aggregate principal amount of Bonds required for consent to such supplemental trust agreement without the consent of the Holders of all Bonds Outstanding.
Any provision of the Trust Agreement to the contrary notwithstanding, any supplemental trust agreement or amendment to the Trust Agreement is subject to the prior written consent of the Bank so long as the Bank is not then in default with respect to its obligations under the Letter of Credit.
Defeasance
When, among other things, the principal, premium, if any, and interest due on all of the Bonds is paid and, with respect to Bonds not yet due and payable, sufficient money or Defeasance Obligations or a combination thereof are held by the Trustee for such payment, then the right, title and interest of the Trustee in the funds and accounts created in the Trust Agreement will cease and the Trustee will release the Trust Agreement.
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No Recourse Against Members, Officers or Employees of Commission and Local Government Commission
The members, officers and employees of the Commission and the Local Government Commission are not personally liable for any costs, losses, damages or liabilities caused or incurred by the Commission or the Local Government Commission in connection with the Trust Agreement, or for the payment of any sum or for the performance of any obligation under the Trust Agreement.
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APPENDIX B
FORM OF LETTER OF CREDIT
IRREVOCABLE LETTER OF CREDIT LETTER OF CREDIT NO. ________________
December 23, 2011 Branch Banking and Trust Company Corporate Trust Services 223 West Nash Street Wilson, North Carolina 27894
Ladies and Gentlemen:
At the request of Hospice of Alamance-Caswell Foundation, Inc. and Hospice & Palliative Care Center of Alamance Caswell, LLC (together, the “Company”), we hereby establish this Irrevocable Letter of Credit in your favor as Trustee under a Trust Agreement dated as of December 1, 2008, between the North Carolina Medical Care Commission (the “Issuer”) and Branch Banking and Trust Company, as trustee (the “Trust Agreement”) pursuant to which $5,000,000 principal amount of the Issuer’s Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project) Series 2008 (the “Bonds”) have been issued. We hereby authorize you to draw on us an amount not exceeding $5,057,535 (the “Initial Stated Amount” and, as the same may from time to time be reduced and thereafter reinstated as hereinafter provided, the “Stated Amount”) of which (i) subject to the provisions below reducing amounts available hereunder, an aggregate amount not exceeding $5,000,000 may be drawn on in respect of principal or the portion of the purchase price corresponding to principal of the Bonds (the “Principal Component”); and (ii) subject to the provisions below reducing amounts available hereunder, an aggregate amount not exceeding $57,535 may be drawn on in respect of the payment of up to thirty-five (35) days’ interest or the portion of the purchase price corresponding to interest on the Bonds at an assumed per annum interest rate of 12% based on a 365-day year (the “Interest Component”) effective immediately and expiring at 3:00 P.M. (prevailing Eastern Time) at our Presentation Office (as hereinafter defined) on December 23, 2011 (the “Expiration Date”) or as hereinafter provided.
Multiple and partial drawings may be made under this Letter of Credit, but no single drawing under this Letter of Credit shall be honored in an amount exceeding the Stated Amount. Any and all payments made under this Letter of Credit will be made with our own funds.
Funds under this Letter of Credit are available to you against a sight draft drawn on us, stating on its face “Drawn under Branch Banking and Trust Company Irrevocable Letter of Credit No. ________________”, presented for payment on a Business Day (as defined in the Trust Agreement), and accompanied by a written certificate:
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(a) in the form of Annex A attached hereto (an “A Drawing”) if the drawing is made with respect to payment of principal of the Bonds upon the acceleration, redemption or stated maturity thereof;
(b) in the form of Annex B attached hereto (a “B Drawing”) if the drawing is made with respect to payment of interest on the Bonds on or prior to their stated maturity date or upon the acceleration or redemption thereof; and
(c) in the form of Annex C attached hereto (a “C Drawing”) if the drawing is made with respect to payment of the purchase price of Bonds tendered, or deemed tendered, for purchase pursuant to Section 2.09 of the Trust Agreement.
The demand for payment hereunder shall not exceed the Stated Amount. The Stated Amount shall be reduced by delivery to us of your certificate in the form of Annex D in the amount specified in such certificate.
The Principal Component of the Stated Amount shall be further automatically and permanently reduced by the amount of each A Drawing. The Stated Amount shall also be reduced by the amount of any drawing hereunder, except that (i) the amount of each B Drawing honored in respect of interest shall immediately and automatically be reinstated following the honoring of such drawing (except as provided in the next following sentence); and (ii) the amount of each C Drawing shall be restored upon receipt by you of notice from us confirming that the Company has reimbursed us for such drawing. In the case of a B Drawing delivered in connection with a redemption, acceleration or stated maturity (but not purchase) of Bonds as indicated on Annex B, there shall be a pro rata permanent reduction of the Interest Component as provided in such Annex B.
The Letter of Credit shall terminate, effective immediately, on the earliest to occur of any of the following: (i) 3:00 p.m. (prevailing Eastern Time) on the Expiration Date, (ii) the close of business on the second Business Day following a conversion of the interest rate on the Bonds to a Long-Term Rate (as defined in the Trust Agreement), (iii) the date on which we honor a draft drawn hereunder pursuant to Section 8.02 of the Trust Agreement following the occurrence of an Event of Default thereunder and an acceleration, (iv) the date this Letter of Credit is surrendered to us by you for cancellation following acceptance by you of a Substitute Letter of Credit (as defined in the Trust Agreement), (v) the date on which we honor a draft drawn hereunder to purchase the Bonds following your receipt of written notice from us that an Event of Default under the Letter of Credit and Reimbursement Agreement dated as of December 1, 2008 (the “Reimbursement Agreement”) between the Company and us has occurred and is continuing and a written notice from us directing a mandatory purchase of the Bonds pursuant to Section 2.09(b) of the Trust Agreement, and (vi) the date on which we receive from you a certificate in the form of Annex E hereto. This Letter of Credit shall be promptly surrendered to us by you upon such termination. The Expiration Date may be extended by us at our discretion at any time or from time to time, by our giving written notice of such extension to you specifying a new Expiration Date.
The aforesaid certificates, which form an integral part of this Letter of Credit, shall have all blanks appropriately filled in and shall be signed by your authorized officer, and any sight
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draft and the aforesaid certificates shall be in the form of a letter on your letterhead either delivered to us at our office located at 115 North Third Street, Wilmington, North Carolina 28401, Attention: Corporate Banker (the “Presentation Office”) on a Business Day or delivered to us by facsimile (at telecopier number (910) 815-2858) on a Business Day (or at such other address or telecopier number as we may designate in a written notice delivered to you). The originals of all documents telecopied to us pursuant to which a drawing is made hereunder shall be delivered to us immediately following such facsimile. If demand for payment is made hereunder not later than 11:00 A.M. (prevailing Eastern Time) on any Business Day, and provided that such demand for payment and the documents presented in connection therewith conform to the terms and conditions hereof, payment of the amount demanded shall be made in immediately available funds not later than 1:00 P.M. (prevailing Eastern Time) on the same Business Day. If demand for payment is made hereunder after 11:00 A.M. (prevailing Eastern Time) on any Business Day, and provided that such demand for payment and the documents presented in connection therewith conform to the terms and conditions hereof, payment of the amount demanded shall be made in immediately available funds, not later than 10:00 A.M. (prevailing Eastern Time) on the next succeeding Business Day.
This Letter of Credit is transferable in its entirety (but not in part) to any transferee whom you certify to us has succeeded you as Trustee under the Trust Agreement. Transfer of the available balance of this Letter of Credit to a successor transferee shall be effected by the presentation to us of this Letter of Credit accompanied by a written certificate in the form of Annex F attached hereto.
Only you (or a transferee as permitted by the terms of this Letter of Credit) may make a drawing under this Letter of Credit. Upon payment to you or your account of the amount demanded hereunder, we shall be fully discharged of our obligation under this Letter of Credit with respect to the respective demand for payment and we shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such demand for payment. By paying to you an amount demanded in accordance herewith we make no representation as to the correctness of the amount demanded. Bonds that are registered in the name of, or held by or for the account of the Company, the Issuer or are held or required to be held for our benefit pursuant to the Trust Agreement (“Pledged Bonds”) shall not be entitled to any benefit of this Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and shall not in any way be amended, amplified or limited by reference to any document, instrument or agreement referred to herein or in which this Letter of Credit is referred to or to which this Letter of Credit is related, except for the certificates referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such certificates.
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This Letter of Credit, except as otherwise expressly stated herein, is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Publication No. 500, and to the extent not inconsistent therewith, the laws of the State of North Carolina.
BRANCH BANKING AND TRUST COMPANY
By: Title: ____________________________________
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Annex A
DRAWING CERTIFICATE (Principal)
[Date] Branch Banking and Trust Company 115 North Third Street Wilmington North Carolina 28401 Attention: Corporate Banker
Re: Drawing Certificate
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the “Trustee”), hereby certifies to Branch Banking and Trust Company, in its capacity as issuer of the Letter of Credit (the “Bank”), with reference to Irrevocable Letter of Credit No. ________________ (the “Letter of Credit”; the terms “Bonds”, “Stated Amount”, “Principal Component” and “Trust Agreement” as used herein having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Trust Agreement.
2. The Trustee is making a demand for payment under the Letter of Credit with respect to $________ to be used for the payment of principal of the Bonds.
3. The amount of principal of the Bonds which is due and payable is $________ and is the amount of the sight draft accompanying this Certificate.
4. The amount of this demand for payment and the sight draft accompanying this Certificate was computed in compliance with the terms and conditions of the Bonds and the Trust Agreement, is made in accordance with the Trust Agreement and does not exceed the Principal Component of the Stated Amount of the Letter of Credit.
5. Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will apply the same directly to the payment when due of the principal of the Bonds pursuant to the Trust Agreement, (b) no portion of said amount shall be applied by the undersigned for any other purpose, and (c) no portion of said amount shall be commingled with any other funds held by the Trustee.
[6.] [Only if applicable] [This drawing is being made on account of an Event of Default under the Trust Agreement and an acceleration of the Bonds in accordance with Section 8.02 thereof.]
The undersigned acknowledges that upon the Bank’s honoring the sight draft accompanying this Certificate, the Principal Component of the Stated Amount of the Letter of Credit shall be permanently reduced by the aggregate amount of such sight draft.
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IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY, as Trustee
By:
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Annex B
DRAWING CERTIFICATE (Interest)
[Date]
Branch Banking and Trust Company 115 North Third Street Wilmington North Carolina 28401 Attention: Corporate Banker
Re: Drawing Certificate
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the “Trustee”) hereby certifies to Branch Banking and Trust Company, in its capacity as issuer of the Letter of Credit (the “Bank”), with reference to Irrevocable Letter of Credit No. ________________ (the “Letter of Credit”; the terms “Bonds”, “Stated Amount”, “Interest Component” and “Trust Agreement” as used herein having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Trust Agreement.
2. The Trustee is making a demand for payment under the Letter of Credit with respect to $________ to be used for the payment of interest on the Bonds on or prior to their stated maturity date.
3. The amount of interest on the Bonds which is due and payable is $________ and is the amount of the sight draft accompanying this Certificate.
4. The amount of this demand for payment and the sight draft accompanying this Certificate was computed in compliance with the terms and conditions of the Bonds and the Trust Agreement, is made in accordance with the Trust Agreement, and does not exceed the Interest Component of the Stated Amount of the Letter of Credit.
5. Upon receipt by the undersigned of the amount demanded hereby (a) the undersigned will apply the same directly to the payment when due of the interest on the Bonds pursuant to the Trust Agreement, (b) no portion of said amount shall be applied by the undersigned for any other purpose, and (c) no portion of said amount shall be commingled with any other funds held by the Trustee.
[6.] [Only if applicable] [The amount drawn hereby is to be used to pay interest on Bonds redeemed and not purchased. The undersigned acknowledges that upon the Bank’s honoring the sight draft accompanying this Certificate, the Interest Component of the Stated Amount of the Letter of Credit shall be permanently reduced by an amount equal to thirty-five (35) days interest on the principal amount of the Bonds being redeemed computed at the rate of 12% per annum.]
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[7.] [Only if applicable] [This drawing is being made on account of an Event of Default under the Trust Agreement and an acceleration of the Bonds in accordance with Section 8.02 thereof.]
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY, as Trustee
By:
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Annex C
DRAWING CERTIFICATE (Purchase Price)
[Date]
Branch Banking and Trust Company 115 North Third Street Wilmington North Carolina 28401 Attention: Corporate Banker
Re: Drawing Certificate
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the “Trustee”) hereby certifies to Branch Banking and Trust Company, in its capacity as issuer of the Letter of Credit (the “Bank”), with reference to Irrevocable Letter of Credit No. ________________ (the “Letter of Credit”; the terms “Bonds”, “Trust Agreement”, “Stated Amount” and “Pledged Bonds” as used herein having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Trust Agreement.
2. The Trustee is making a demand for payment under the Letter of Credit to be applied to the payment of the portion of the purchase price of Bonds tendered, or deemed tendered, for purchase pursuant to Section 2.09 of the Trust Agreement, equal to the principal amount thereof. The amount of such portion of the purchase price equal to the principal amount of such Bonds is $__________.
3. The Trustee is making a demand for payment under the Letter of Credit to be applied to the payment of the portion of the purchase price of Bonds tendered, or deemed tendered, for purchase pursuant to Section 2.09 of the Trust Agreement, equal to the amount of accrued and unpaid interest on such Bonds to the date of purchase thereof. The amount of such portion of the purchase price equal to accrued and unpaid interest on such Bonds to the date of purchase thereof is $____________.
4. The amount of this demand for payment is $__________ (the sum of the amounts in Paragraphs 2 and 3 above) and the sight draft accompanying this Certificate was computed in compliance with the terms and conditions of the Bonds and the Trust Agreement, is made in accordance with the Trust Agreement, and does not exceed the Stated Amount of the Letter of Credit.
5. Upon receipt of the undersigned of the amount demanded hereby, (a) the undersigned will apply the same directly to the payment when due of the appropriate amount owing on account of the purchase price of Bonds tendered, or deemed tendered, pursuant to the Trust Agreement, (b) no portion of said amount shall be applied for any other purpose and (c) no portion of said amount shall be commingled with any other funds held by the Trustee.
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6. The Trustee agrees to hold, as the designee and agent for the Bank, the Bonds tendered for purchase and, upon request, will deliver the Bonds with respect to which this drawing relates and the purchase price of which demand is made hereunder to the Bank as Pledged Bonds entitled to a security interest in favor of the Bank.
[7.] [Only if applicable] [This drawing is being made on account of an Event of Default under the Reimbursement Agreement and a written notice from us directing a mandatory purchase of the Bonds in accordance with Section 2.09(b) thereof.]
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY, as Trustee
By:
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Annex D
[Date] Branch Banking and Trust Company 115 North Third Street Wilmington North Carolina 28401 Attention: Corporate Banker
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the “Trustee”) hereby certifies to Branch Banking and Trust Company, in its capacity as issuer of the Letter of Credit (the “Bank”), with reference to Irrevocable Letter of Credit No. ________________ (the “Letter of Credit”; the terms “Bonds”, the “Trust Agreement” and “Stated Amount” as used herein having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Trust Agreement.
2. The Trustee hereby notifies you that on or prior to the date hereof $_________ amount of the Bonds have been paid or defeased pursuant to the Trust Agreement other than with funds drawn under the Letter of Credit.
3. Following the payment or the defeasance referred to in paragraph (2) above, the aggregate principal amount of all the Bonds outstanding is $___________.
4. The amount of interest (computed at a rate of twelve percent (12%) per annum based on a 365-day year), accruing on the Bonds referred to in paragraph 3 above for a period of thirty-five (35) days is $_____.
5. Upon receipt by the Bank of this Certificate, the Stated Amount of the Letter of Credit is reduced to $_____ (such amount being equal to the amounts specified in paragraphs 3 and 4 above).
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate this _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY, as Trustee
By:
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Annex E
[Date] Branch Banking and Trust Company 115 North Third Street Wilmington North Carolina 28401 Attention: Corporate Banker
Attention: Corporate Banker
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the “Trustee”) hereby certifies to Branch Banking and Trust Company, in its capacity as issuer of the Letter of Credit (the “Bank”), with reference to Irrevocable Letter of Credit No. ________________ (the “Letter of Credit”; the terms “Bonds” and “Trust Agreement” as used herein having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Trust Agreement.
2. The Trustee hereby notifies you that all the Bonds have been paid, redeemed or defeased pursuant to the Trust Agreement.
3. The Letter of Credit is attached hereto and is being surrendered to you herewith.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate this ___ day of _____, 20__.
BRANCH BANKING AND TRUST COMPANY, as Trustee
By:
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Annex F
[Date] Branch Banking and Trust Company 115 North Third Street Wilmington North Carolina 28401 Attention: Corporate Banker
Ladies and Gentlemen:
We refer to Irrevocable Letter of Credit No. ________________ (the “Letter of Credit”), issued in favor of Branch Banking and Trust Company, in its capacity as Trustee under the Trust Agreement (as defined in the Letter of Credit).
For value received we hereby irrevocably transfer to ____________________, hereinafter referred to as the transferee, all rights of the undersigned to draw under the above Letter of Credit in its entirety.
By this transfer, all rights of the undersigned in such Letter of Credit are transferred to the transferee and the transferee shall have the sole rights relating to any amendments, whether increases or extensions or other amendments and whether now existing or hereafter made. All amendments are to be advised direct to the transferee without necessity of any consent of or notice to the undersigned.
The Letter of Credit is returned herewith for the purpose of effecting such transfer.
Please notify the transferee of this transfer and the conditions of the Letter of Credit.
Very truly yours,
(Signature of Transferor)
Signature Authenticated
(Bank)
(Authorized Signature)
C-1{ PAG PPAB 1488270v9E |Error! Bookmark not defined.}
APPENDIX C
CERTAIN INFORMATION CONCERNING BRANCH BANKING AND TRUST COMPANY
The information contained in this Appendix has been obtained from Branch Banking and Trust Company (the “Bank”) and is not to be construed as a representation by the Commission, the Corporation, the Company or the Underwriter.
The Bank is a wholly-owned subsidiary of BB&T Corporation (“BB&T Corporation”), a North Carolina financial holding company. The Bank is chartered under the laws of the State of North Carolina to engage in a general banking business.
The Bank provides a full range of commercial banking, consumer banking and trust and investment services primarily through its branch network located in North Carolina, South Carolina, Virginia, West Virginia, Kentucky, Georgia, Florida, Alabama, Maryland, Tennessee, Indiana and Washington, D.C. As of September 30, 2008, the Bank had total assets of approximately $133.166 billion, and total deposits of approximately $88.353 billion.
The Bank submits quarterly to the Federal Deposit Insurance Corporation, its primary federal regulator, certain information regarding its financial condition entitled “Consolidated Reports of Conditions and Income for a Bank with Domestic and Foreign Offices” (“Call Reports”). All Call Reports may be obtained by calling the FDIC at (800) 688-3342 or (877) 275-3342.
Additionally, BB&T Corporation is subject to the informational requirements of the Securities and Exchange Act of 1934, as amended, and in accordance therewith files reports and other information with the Securities and Exchange Commission (the “SEC”). The Bank will provide copies of BB&T Corporation’s most recent Form 10-K and any reports on Form 10-Q or Form 8-K filed since the date of such Form 10-K, in each case as filed with the SEC, free of charge to any recipient of this document, upon written request of such person delivered in writing to: BB&T Corporation, 200 West Second Street, Winston-Salem, North Carolina 27101, Attention: External Reporting.
The information concerning BB&T Corporation and the Bank contained herein is furnished solely to provide limited introductory information, is not intended to be comprehensive and is qualified in its entirety by the detailed information appearing in the documents and filings (including all financial statements) referenced above.
THE LETTER OF CREDIT IS AN OBLIGATION OF THE BANK AND NOT AN OBLIGATION OF BB&T CORPORATION.
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APPENDIX D
PROPOSED FORM OF BOND COUNSEL OPINION
December ___, 2008 North Carolina Medical Care Commission Raleigh, North Carolina 27603
$5,000,000 North Carolina Medical Care Commission
Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project), Series 2008
Ladies and Gentlemen:
We have examined the applicable law, including Chapter 131A of the General Statutes of North Carolina, as amended, and certified copies of proceedings and documents relating to the issuance and sale by the North Carolina Medical Care Commission (the “Commission”) of its $5,000,000 Health Care Facilities Revenue Bonds (Hospice of Alamance-Caswell Project) Series 2008 (the “Bonds”). Reference is made to the form of the Bonds for information concerning their details, payment and redemption provisions, their purpose and the proceedings pursuant to which they are issued. Terms used but not defined herein have the same meaning as defined in the form of the Bonds.
The Bonds are issued under and are equally and ratably secured by a Trust Agreement dated as of December 1, 2008 (the “Trust Agreement”), between the Commission and Branch Banking and Trust Company, as Trustee (the “Trustee”), which assigns to the Trustee, as security for the Bonds, the Commission’s rights (except for the rights of the Commission to indemnification, the payment of fees and expenses, giving of certain consents and receipt of notices), under a Loan Agreement dated as of December 1, 2008 (the “Loan Agreement”), between the Commission and Hospice of Alamance-Caswell Foundation, Inc. (the “Corporation”) and Hospice & Palliative Care Center of Alamance-Caswell, LLC (the “Company”), including a promissory note (the “Note”) of the Corporation and the Company. The proceeds of the Bonds will be used to (i) finance the acquisition, construction, furnishing and equipping of certain facilities relating to the Company’s and the Corporation’s primary activities as a provider of inpatient hospice care, grief counseling, hospice homecare and home health services, including but not limited to (a) approximately 6,000 square foot expansion and renovation of existing space, to include 4 new patient rooms, family living space, kitchen laundry, storage and other ancillary space and (b) an approximately 23,150 square foot new office and grief counseling building connected to an existing building all to be located in Burlington, North Carolina (collectively, the “Project”), and (ii) pay certain expenses incurred in connection with the issuance of the Bonds by the Commission. The Bonds were sold pursuant to a Contract of Purchase dated December 22, 2008, between Scott & Stringfellow, Inc., trading as BB&T Capital Markets, as underwriter (the “Underwriter”), and the North Carolina Local Government Commission and approved by the Commission, the Corporation and the Company.
As further security for the Bonds, Branch Banking and Trust Company, as letter of credit bank (the “Bank”), has issued its irrevocable letter of credit (the “Letter of Credit”) in an initial stated amount not to exceed $5,057,535, authorizing the Trustee to draw on the Bank, in accordance with the terms and
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conditions set forth in the Letter of Credit, for payment of principal, premium and up to 35 days’ interest on the Bonds. Reference is made to the opinion of Moore & Van Allen PLLC, counsel to the Bank, dated today, as to, among other things, the validity and enforceability of the Letter of Credit, upon which you are relying as to matters therein. No opinion as to such matters is expressed herein.
Reference is made to the opinion of Wishart, Norris, Henninger & Pittman, P.A., counsel to the Corporation and Company, dated today, as to, among other things, the due authorization, execution and delivery of the Loan Agreement and related documents by the Corporation and Company and the enforceability of such documents against the Corporation and the Company, upon which you are relying as to matters therein. No opinion as to such matters is expressed herein.
Without undertaking to verify the same by independent investigation, we have relied on certificates and representations made by the Corporation, the Company, the Governor of the State of North Carolina and the Commission with respect to certain facts relevant to both our opinion and requirements of the Code. The Corporation, the Company and the Commission have covenanted to comply with current provisions of the Code regarding, among other matters, the use, expenditure and investment of the proceeds of the Bonds, certain tax-exempt obligations and the timely payment to the United States of any arbitrage rebate amounts with respect to the Bonds, all as set forth in the documents and proceedings providing for the issuance of and security for the Bonds (the “Covenants”).
Based on the foregoing and assuming due authorization, execution and delivery of all documents by parties other than the Commission, we are of the opinion that:
1. The Bonds have been duly authorized, executed and issued in accordance with the Constitution and the statutes of the State of North Carolina and constitute valid and binding limited obligations of the Commission, payable as to both principal and interest in accordance with their terms solely from the revenues and receipts derived from the Loan Agreement and the Letter of Credit. Neither the faith and credit nor the taxing power of the State of North Carolina or of any political subdivision thereof, including the Commission, is pledged as security for the payment of the principal of or the interest on the Bonds.
2. The Loan Agreement has been duly authorized, executed and delivered by the Commission and constitutes a valid and binding obligation of the Commission enforceable against the Commission in accordance with its terms.
3. The Trust Agreement has been duly authorized, executed and delivered by the Commission, constitutes a valid and binding obligation of the Commission, assigns and pledges to the Trustee the Note and certain of the rights of the Commission under the Loan Agreement, and is enforceable against the Commission in accordance with its terms.
4. The rights of the holders of the Bonds and the enforceability of such rights as well as the enforceability of the obligations of the Commission under the Trust Agreement and the Loan Agreement may be limited or otherwise affected by (a) bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and (b) principles of equity, whether considered at law or in equity.
5. Under current law, interest on the Bonds (a) is not included in gross income for Federal income tax purposes and (b) is not an item of tax preference for purposes of the Federal alternative minimum income tax imposed on individuals and corporations; however, with respect to corporations (as defined for Federal income tax purposes) subject to the alternative minimum income tax, such interest is
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taken into account in determining adjusted current earnings for purposes of computing such tax. The opinion set forth in the preceding sentence is subject to the condition that all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest on the Bonds be, or continue to be, not included in gross income for Federal income tax purposes are so satisfied and therefore failure by the Borrower or the Commission to comply with the Covenants, among other things, could cause interest on the Bonds to be included in gross income for Federal income tax purposes retroactively to their date of issue. We express no opinion regarding other Federal tax consequences of the ownership of or receipt or accrual of interest on the Bonds.
6. Under current law, interest on the Bonds is exempt from all taxes within the State of North Carolina.
We advise you that under the Trust Agreement the taking of certain actions or the occurrence of certain events require delivery to the Trustee of an opinion of Bond Counsel (which may or may not be this firm) substantially to the effect that such actions or events will not cause the interest on the Bonds to be included in the gross income of the Holders thereof for federal income tax purposes. The opinions expressed in this letter speak only as of its date, and nothing should be interpreted or construed to express or imply any opinion concerning the effect of any future events or actions on the exclusion of interest on the Bonds from gross income for purposes of federal income taxation. The availability of such an opinion will depend upon the facts and law existing at the time the opinion is sought.
Our services as bond counsel to the Commission have been limited to delivering the foregoing opinion based on our review of such legal proceedings and documents as we deem necessary to approve the validity of the Bonds and the tax-exempt status of the interest thereon. We express no opinion herein as to the financial resources of the Corporation, the Company or the Bank, their ability to provide for payment of the Bonds or the accuracy or completeness of any information, including the Official Statement dated December 18, 2008, with respect to the Bonds, that may have been relied upon by anyone in making the decision to purchase Bonds.
Very truly yours,
