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HomeMy WebLinkAbout1987-139RESOLUTION NO. 87- 139 A RESOLUTION PROVIDING FOR THE REFUNDING OF CERTAIN BONDS PREVIOUSLY ISSUED BY INDIAN RIVER COUNTY, FLORIDA FOR THE PURPOSE OF FINANCING THE ACQUISITION OF A SITE FOR, AND THE COST OF CONSTRUCTION AND EQUIPPING OF, A HEALTH CARE FACILITY BY FLORIDA CONVALESCENT CENTERS, INC., A FLORIDA CORPORATION, CON- SISTING OF AN APPROXIMATELY 91 -BED NURSING HOME, SUCH FACILITY LOCATED WITHIN INDIAN RIVER COUNTY, FLORIDA; PROVIDING FOR ISSU- ANCE BY INDIAN RIVER COUNTY, FLORIDA OF $4,800,000 .INDIAN RIVER COUNTY, FLORIDA VARIABLE RATE DEMAND/FIXED RATE INDUSTRIAL DEVELOPMENT 'REVENUE REFUNDING BONDS (FLORIDA CONVALESCENT CENTERS, INC. PROJECT), SERIES 1988, THE PROCEEDS OF WHICH WILL BE LOANED TO FLORIDA CONVALESCENT CENTERS, INC., A FLORIDA CORPORATION, AND APPLIED TO REFUND THE PREVIOUSLY ISSUED BONDS; PROVIDING FOR THE PAYMENT THEREOF; MAKING CERTAIN FINDINGS; AUTHORIZING THE REFUNDING; AUTHORIZING THE ISSUANCE OF THE BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF THE INDENTURE OF TRUST, THE LOAN AGREEMENT AND THE BOND PURCHASE AGREEMENT; AUTHORIZING A PRIVATE NEGOTIATED SALE OF THE BONDS; APPROVING AND AUTHORIZING THE DISTRIBUTION BY THE UNDERWRITER OF THE PRELIMINARY OFFI- CIAL STATEMENT AND APPROVING AND AUTHORIZING THE DISTRIBUTION OF THE OFFICIAL STATEMENT BY THE UNDERWRITER; DESIGNATING THE TRUSTEE AND THE REGISTRAR AND PAYING AGENT FOR THE BONDS; AND PROVIDING AN EFFECTIVE DATE. RECITALS The Florida Industrial Development Financing Act, being Part II of Chapter 159, Florida Statutes, as amended, authorizes local agencies to issue revenue refunding bonds for the purpose of refunding any bonds then outstanding which shall have been issued under the provisions of the Florida Industrial Development Financing Act. On August 12, 1986, Indian River County, Florida (the "Issuer") issued its $4,800,000 Industrial Development Revenue Bonds, Series 1986 (Florida Convalescent Centers, Inc. Project) (the "Prior Bonds") for the purpose of financing the acquisition of a site for, and the cost of construction and equipping of, a 91 -bed nursing home by Florida Convalescent Centers, Inc., a Florida corporation (the "Borrower"). • In order to take advantage of the lower rates of interest available through the use of variable rate demand instruments, the Borrower has requested the Issuer to issue its Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series 1988 (the "Bonds") for the purpose of refunding currently the Prior Bonds. Accordingly, the Issuer has duly adopted (i) Resolution No. 87-125 with respect to the Bonds, wherein the Bonds were referred to as "Industrial Development Revenue Refunding Bonds, Series 1987 (Florida Convalescent Centers, Inc. Project)", and (ii) Resolution No. 87-126 with respect to the Bonds, wherein the Bonds were referred to as "Revenue Refunding Bonds, Series 1987 (Florida Convalescent Centers, Inc. Project)." The Bonds will be issued under an Indenture of Trust (the "Indenture") between the Issuer and Third National Bank in Nashville (the "Trustee"). The Bonds will bear interest and will be subject to optional and mandatory tender and optional and mandatory redemption as specified in the Indenture and the Bonds. The proceeds of the Bonds will be loaned to the Borrower pursuant to a Loan Agreement (the "Loan Agreement") between the Issuer and the Borrower and will be applied to refund the Prior Bonds on the date of issuance of the Bonds or as soon thereafter as possible, in accordance with the terms of the Indenture. The Bonds will be secured by a direct -pay Letter of Credit (the "Letter of Credit") issued by The Toronto Dominion Bank, acting through its Chicago Branch (the "Bank"). The Borrower will be obligated to reimburse the Bank for amounts drawn under the Letter of Credit pursuant to a Reimbursement Agreement (the "Reimbursement Agreement"). The obligations of the Borrower under the Reimbursement Agreement will be secured by a mortgage (the "Mortgage") on certain real property located in Indian River County, Florida in favor of the Bank and will be guaranteed by National HealthCorp L.P., a Delaware limited partnership ("NHC") and James O. McCarver ("McCarver") pursuant to a Guaranty Agreement (the "Guaranty Agreement") among NHC, McCarver and the Bank. Bonds tendered by the holders thereof in accordance with the Bonds and the Indenture may be remarketed by Alex. Brown & Sons Incorporated, as remarketing agent (the "Remarketing Agent"), pursuant to a Remarketing Agreement (the "Remarketing Agreement") among the Remarketing Agent, the Borrower and NHC. BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF INDIAN RIVER COUNTY, FLORIDA AS FOLLOWS: Section 1. AUTHORITY FOR THIS RESOLUTION. This reso- lution is adopted pursuant to the provisions of Part II of Chapter 159, Florida Statutes, as amended, and other applicable provisions of law (the "Act"). Section 2. DEFINITIONS. Unless the context otherwise requires, the terms used in this resolution shall have the -2- • meanings specified in the Indenture and the Loan Agreement, which shall be in substantially the forms attached hereto as Exhibits "A" and "B", respectively, with such omissions, insertions and variations as may be necessary or desirable and are approved by the Chairman prior to the execution thereof, which necessity or desirability, and approval shall be presumed by such execution on behalf of the Issuer. The obligations of the Issuer authorized in this resolution are herein referred to as the "Bonds". The Issuer's Industrial Development Revenue Bonds (Florida Convalescent Centers, Inc. Project), Series 1986, which will be refunded with the proceeds of the Bonds are herein referred to as the "Prior Bonds." The "Project" shall mean the refinancing of the acquisition of a site for, and the cost of construction and equipping of a health care facility located in Indian River County, Florida consisting of an approximately 91 -bed nursing home. Section 3. FINDINGS. It is hereby ascertained, determined and declared as follows: A. The Issuer is a duly created and existing body corporate and politic and a political subdivision of the State of Florida, constitutes a "local agency" under the Act and is authorized by the Act to issue its revenue refunding bonds for the purpose of refunding any of its bonds outstanding under the Act, to sell such revenue refunding bonds at a negotiated sale and to apply the proceeds thereof to the purchase, redemption or payment of such outstanding bonds. B. The Issuer is authorized by the Act to make and execute financing agreements, contracts, deeds and other instruments necessary or convenient for the purpose of facilitating the refunding of any of its bonds previously issued for the purpose of financing the acquisition, construction and equipping of "projects", as defined in the Act, including machinery, equipment, land, rights in land and other appurtenances and facilities related thereto, to the end that the Issuer may be able to promote the economic growth of the State of Florida, increase opportunities for gainful employment and otherwise contribute to the welfare of the State of Florida and its inhabitants. C. The Project is a "project" within the meaning of the Act. The Project is appropriate to the needs and circumstances of the Issuer's community, and the location of the Project therein will make a significant contribution to the economic growth of the area of operation of the Issuer, shall increase opportunities for gainful employment, and shall serve a public purpose by advancing the general welfare of the State of. Florida and its people. D. Giving due regard to information available to the Issuer, including representations made by the Borrower and -3- 40 information provided by or on behalf of the Borrower, as to the financial condition of the Borrower, the nature of its business and the industry in which it is involved, its inherent stability, the security structure for the Bonds (including the Letter of Credit to be issued by the Bank and the guaranty by NHC and McCarver pursuant to the Guaranty Agreement of the Borrower's obligation to reimburse the Bank) and all other factors determinative of the Borrower's capabilities, financial and otherwise, of fulfilling its obligations consistently with the purposes of the Act, the Issuer believes the Borrower to be (i) financially responsible and fully capable and willing to fulfill its obligations under the Loan Agreement, including the obligation to make payments thereunder in the amounts and at the times required pursuant to the terms of the Loan Agreement and the obligation to repair and maintain the Project, and (ii) desirous of serving the purposes of the Act and willing and capable of fully performing all other obligations and responsibilities imposed upon the Borrower pursuant to the provisions of the Loan Agreement. E. The appropriate local agencies in Indian River County are able to cope satisfactorily with the impact of the Project, and all public facilities, utilities and services that will be necessary for the operation, repair and maintenance of the Project and on account of any increase in population or other circumstances resulting by reason of the location of the Project within the area of operation of the Issuer are available now or can be provided when needed. F. Adequate provision is made under the provisions of the Loan Agreement for the repair and maintenance of the Project at the expense of the Borrower, and for the payment of the principal of and premium, if any, and interest on the Bonds. G. The principal of and premium, if any, and interest on the Bonds and all payments required under the Loan Agreement and the Indenture shall be payable solely from the proceeds derived by or on behalf of the Issuer under the Loan Agreement or the Credit Facility. The Issuer shall never be required to (i) levy ad valorem taxes on any property within its territorial limits to pay the principal or purchase price of and premium, if any, and interest on the Bonds or to make any other payments provided for under the Loan Agreement and the Indenture, or (ii) pay the same from any funds of the Issuer other than those derived by or on behalf of the Issuer under the Loan Agreement or the Credit Facility; and such Bonds shall not constitute a lien upon any property owned by or situated within the territorial limits of the Issuer except the Project in the manner provided in the Mortgage. The Issuer has no taxing authority. -4- s H. The payments to be made by the Borrower to the Trustee under the Loan Agreement, together with the payments to be derived by the Trustee from the Credit Facility, pursuant to the terms of the Indenture, will be sufficient to pay all principal and purchase price of and interest, and premium, if any, on Bonds, as the same shall become due, and to make all other payments required by the Loan Agreement and the Indenture. Section 4. REFUNDING AUTHORIZED. The refunding of the Prior Bonds with the proceeds of the Bonds in the manner provided in the Indenture and the Loan Agreement is hereby authorized. Section 5. AUTHORIZATION OF BONDS. obligations of the Issuer to be known as "Indian River County Florida Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series 1988" are hereby authorized to be issued in an aggregate principal amount of Four Million Eight Hundred Thousand Dollars ($4,800,000) in the form and manner described in the Indenture and the Bonds. The Bonds will be dated such date and mature in such years and amounts, will contain such redemption provisions, and will bear interest at such rates (not exceeding the maximum interest rate permitted by the Act or by other applicable provision of law), all as provided in the Indenture and the Bonds. Section 6. AUTHORIZATION OF EXECUTION AND DELIVERY OF INDENTURE OF TRUST. As security for the payment of the principal and purchase price of and premium, if any, and interest on the Bonds, pro rata and without preference of any one of the Bonds over any other thereof, the Indenture, in substantially the form attached hereto as Exhibit "A", with such changes, insertions, omissions, alterations and corrections as may be necessary or desirable and are approved by the Chairman of the Issuer, such necessity or desirability, and approval to be conclusively presumed by his execution thereof, is hereby approved by the Issuer, and the Issuer hereby authorizes and directs its Chairman to execute, and its Clerk to attest under the seal of the Issuer, the Indenture and to deliver to the Trustee and the Registrar and Paying Agent the Indenture, all of the provisions of which, when executed and delivered by the Issuer as authorized herein and by the Trustee and the Registrar and Paying Agent duly authorized, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein. The Issuer does hereby provide in the Indenture the terms, conditions, covenants, rights, obligations, duties and agreements to and for the benefit of the holders of the Bonds, the Issuer, the Trustee and the Registrar and Paying Agent. Section 7. AUTHORIZATION OF EXECUTION AND DELIVERY OF LOAN AGREEMENT. The Loan Agreement, in substantially the form -5- 40 attached hereto as Exhibit "B", with such changes, insertions, omissions, alterations and corrections as may be necessary or desirable and are approved by the Chairman of the Issuer, such necessity or desirability, and approval to be conclusively presumed by his execution thereof, is hereby approved by the Issuer, and the Issuer hereby authorizes and directs its Chairman to execute, and its Clerk to attest under the seal of the Issuer, the Loan Agreement and to deliver to the Borrower the Loan Agreement, all of the provisions of which, when executed and delivered by the Issuer as authorized herein and by the Borrower duly authorized, shall be deemed to be a part of this resolution as fully and to the same extent as if incorporated verbatim herein. Section 8. APPROVAL OF AND AUTHORIZATION TO DISTRIBUTE THE OFFICIAL STATEMENT. The Preliminary Official Statement, in substantially the form attached hereto as Exhibit "C", with such changes, insertions, omissions, alterations and corrections as may be required by applicable securities law or as may be necessary or desirable and are approved by the Chairman of the Issuer, is hereby approved by the Issuer. Alex. Brown & Sons Incorporated (the "Underwriter") is hereby authorized by the Issuer to make public and distribute the Preliminary Official Statement in connection with the sale and public re -offering of the Bonds. The Chairman of the Issuer is hereby authorized to complete the Preliminary official Statement by inserting the Initial Interest Rate and the Initial Interest Period which will be determined in accordance with the Indenture. The Preliminary Official Statement, as so completed, is referred to herein as the "Official Statement." The Official Statement, in substantially the form of the Preliminary Official Statement attached hereto as Exhibit "C", completed as described above, with such changes, insertions, omissions, alterations and corrections as may be required by applicable securities law or as may be necessary or desirable and are approved by the Chairman of the Issuer, such necessity or desirability and approval to be conclusively presumed by his execution thereof, is hereby approved by the Issuer and the Issuer hereby authorizes its Chairman to execute and deliver the Official Statement to the Underwriter. The Underwriter is hereby authorized by the Issuer to make Public and distribute the Official Statement in connection with the public re -offering of the Bonds. Section 9. NEGOTIATED SALE NECESSARY. It is hereby found, ascertained, determined and declared by the Issuer that a negotiated sale of the Bonds is in the best interest of the Issuer and the Borrower and is found to be necessary on the basis of the following reasons as to which specific findings are hereby made: (1) Industrial development revenue refunding bonds of a nature similar to the Bonds are traditionally sold on a -6- • negotiated basis and consequently a competitive sale of the Bonds would in all probability not produce better terms than a negotiated sale, particularly in view of the timing of such an offering and the current condition in the bond market. (2) The Bonds are payable solely from the proceeds of the Loan Agreement and the Credit Facility and therefore the Issuer does not have a direct interest in the terms of sale. The Borrower has expressed its unwillingness to undertake the risks and expenses attendant a public sale of the Bonds. (3) The complex nature of the security for payment of the Bonds requires a lengthy review of the credit of the Borrower and the Bank, which review would be financially impractical for bidders to undertake in a competitive sale context. Section 10. AUTHORIZATION OF PRIVATE NEGOTIATED SALE AND EXFCUTION AND DELIVERY OF BOND PURCHASE AGREEMENT. The Issuer hereby finds, determines and declares that the factors cited in Section 9 above require that the sale of the Bonds be negotiated at private sale rather than offered by competitive bid at public sale in order to assure the necessary flexibility to obtain the most favorable terms in the bond market. The negotiated sale of $4,800,000 principal amount of Bonds to Alex. Brown & Sons Incorporated (the "Underwriter"), is hereby authorized pursuant to Section 218.385, Florida Statutes, as amended, subject to final approval and execution by the Issuer, NHC, the Borrower and the Underwriter of the Bond Purchase Agreement, in substantially the form attached hereto as Exhibit "D". Such Bond Purchase Agreement is hereby approved by the Issuer and the Issuer hereby authorizes and directs its Chairman to execute, and its Clerk to attest under the seal of the Issuer, the Bond Purchase Agreement and deliver the Bond Purchase Agreement to the Borrower, NHC and the Underwriter. The Bonds shall be dated, mature, bear interest and be redeemable as stated in the final Bond Purchase Agreement referred to above. Section 11. NO PERSONAL LIABILITY. No covenant, stipulation, obligation or agreement herein contained or contained in the Loan Agreement, the Indenture, the Bonds or the Bond Purchase Agreement shall be deemed to be a covenant, stipulation, obligation or agreement of any member of the Issuer or its Board of Commissioners, or any officer, commissioner, agent or employee thereof in his or her indivi- dual capacity, and neither the members of the Issuer or its Board of Commissioners, nor any official executing the Bonds shall be liable personally thereon or be subject to any personal liability or accountability by reason of the issuance thereof. Section 12. NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly provided herein or in the Loan Agreement, -7- 40 in the Indenture or in the Bond Purchase Agreement, nothing in this resolution or in the Loan Agreement or in the Indenture, expressed or implied, is intended or shall be construed to confer upon any Person, firm or corporation other than the Issuer, the respective parties to such agreements, the Registrar and Paying Agent (with respect to the Indenture), and the holders of the Bonds, any right, remedy or claim, legal or equitable, under and by reason of this resolution or any provision thereof or of the Loan Agreement, the Bond Purchase Agreement or of the Indenture, this resolution, the Loan Agreement and the Indenture, intended to be and being for the sole and exclusive benefit of the respective aforesaid parties. Section 13. PREREQUISITES PERFORMED. All acts, conditions and things relating to the passage of this resolution, to the issuance of the Bonds, and to the execution and delivery of the Loan Agreement, the Bond Purchase Agreement, the Indenture and the Official Statement, required by the Constitution or laws of the State of Florida to happen, exist, and be performed precedent to and in the passage hereof, and precedent to the issuance of the Bonds, and precedent to the execution and delivery of the Loan Agreement, the Bond Purchase Agreement, the Indenture and the Official Statement, have happened, exist and have been performed as so required. Section 14. GENERAL AUTHORITY. The members, officers, attorneys, agents and employees of the Issuer are hereby authorized to do all acts and things required of them by this resolution, the Loan Agreement, the Bond Purchase Agreement or the Indenture, or desirable or consistent with the requirements hereof or such Loan Agreement, Bond Purchase Agreement or Indenture, for the full, punctual and complete performance of all the terms, covenants and agreements on the part of the Issuer contained in the Bonds, the Loan Agreement, Bond Purchase Agreement, the Indenture, and this resolution. Section 15. THIS RESOLUTION CONSTITUTES A CONTRACT. The Issuer covenants and agrees that this resolution shall constitute a contract between the Issuer and the holders from time to time of any of the Bonds then outstanding and that all covenants and agreements set forth herein and in the Loan Agreement and the Indenture to be performed by the Issuer shall be for the equal and ratable benefit and security of all holders of the Bonds without privilege, priority or distinction as to lien or otherwise of any of the Bonds over any other of the Bonds. Section 16. TRUSTEE AND REGISTRAR AND PAYING AGENT. Third National Bank in Nashville, a national banking association having trust powers, with its principal office and place of business in Nashville, Tennessee, is hereby designated Trustee for the Bonds under and pursuant to the Indenture. Chemical Bank, a banking corporation duly organized and -8- 40 existing under the laws of the State of New York, with its principal office and place of business in New York, New York having trust powers, is hereby designated Registrar and Paying Agent for the Bonds under and pursuant to the Indenture. Section 17. EXECUTION OF BONDS AND AUTHORIZATION OF ALL OTHER NECESSARY ACTION. The Chairman and the Clerk of the Issuer are hereby authorized and directed to execute and attest to, respectively, the Bonds when prepared and to deliver the Bonds to the Registrar and Paying Agent for authentication and delivery of the Bonds to the Underwriter upon payment of the purchase price pursuant to the conditions stated in the Indenture. Bonds shall be executed in the name of the Issuer by the Chairman of the Board attested by its Clerk and its corporate seal or a facsimile thereof shall be affixed thereto or reproduced thereon. The signatures of the Chairman and Clerk may be either manual or facsimile signatures. The certificate of authentication of the Registrar and Paying Agent shall appear on the Bonds, and no Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this resolution unless such certificate shall have been duly executed on such Bond. The authorized signature for the Registrar and Paying Agent shall be either manual or in facsimile; provided, however, that at least one of the signatures, including that of the authorized signatory for the Registrar and Paying Agent, appearing on the Bonds, shall at all times be a manual signature. In case any one or more of the officers of the Board who shall have signed or sealed any of the Bonds shall cease to be such officer or officers of the Board before the Bonds so signed and sealed shall have been actually sold and delivered, such Bonds may nevertheless be sold and delivered as if the persons who signed or sealed such Bonds had not ceased to hold such offices. Any Bonds may be signed and sealed on behalf of the Board by such person who at the actual time of the execution of such Bonds shall hold the proper office, although at the date of such Bonds such person may not have held such office or may not have been so authorized. The Chairman of the Issuer, the Clerk to the Issuer and Issuer's counsel are designated agents of the Issuer in connection with the issuance and delivery of the Bonds, and are authorized and empowered, collectively or individually, to take all action and steps to execute and deliver any and all instruments, documents or contracts on behalf of the Issuer which are necessary or desirable in connection with the execution and delivery of the Bonds and which are not inconsistent with the terms and provisions of this resolution and other actions relating to the Bonds heretofore taken by the Issuer.. Section 18. REPEALING CLAUSE. All resolutions or parts thereof of the Issuer in conflict with the provisions herein contained are, to the extent of such conflict, Hereby superseded and repealed. -9- 4b Section 19. SEVERABILITY OF INVALID PROVISIONS. The provisions of this resolution are severable, and if any provision, sentence, clause, section or part thereof shall be held to be illegal, invalid or unconstitutional or inapplicable to any person, entity or circumstances, such illegality, invalidity or unconstitutionality or inapplicability shall not affect or impair any of the remaining provisions, sentences, clauses, sections or parts of this resolution or their application to other persons, entities or circumstances. It is hereby declared to be the legislative intent that this resolution would have been adopted if such illegal, invalid or unconstitutional provision, sentence, clause, section or part had not been included herein and if the person, entity or circumstances to which this resolution or any part hereof is inapplicable had been specifically exempted herefrom; provided, however, that neither the principal and purchase price of nor the premium, if any, or interest on the Bonds shall ever constitute an indebtedness of the Issuer or a charge against the general credit of the Issuer within the meaning of any constitutional or statutory limitation or ever constitute or give rise to any pecuniary liability of the Issuer. Section 20. EFFECTIVE DATE. This resolution shall take effect immediately upon its adoption. The foregoing Resolution was offered by Commission- er Eggert who moved its adoption. The motion was seconded by Commissioner Bowman and, upon being put to a vote, the vote was as follows: Chairman Don C. Scurlock, Jr. Vice Chairperson Margaret C. Bowman Commissioner Richard N. Bird Commissioner Carolyn K. Eggert Commissioner Gary C. Wheeler -10- - Aye - Aye - - Aye - Aye - Aye The Chairman thereupon declared the Resolution duly passed and adopted this 24th day of November , 1987. ATTEST: BOARD OF COUNTY COMMISSIONERS OF INDIAN RIVER COUNTY, FLORIDA Freda Wrightz%— Ex -Officio Cle APPROVED AS TO FORM AND LEGAL SUFFICIENCY: eu.-. CiTSrlbs P. itunac County Attorney LN86/lm(6) By Don C. Scurlock, Jr. Chairman -11- 40 EXHIBITS TO RESOLUTION Item Exhibit 1. Indenture of Trust A 2. Loan Agreement B 3. Preliminary official Statement C 4. Bond Purchase Agreement D LN86/lm(6) 40 E X 16 i -r )q To ka.so���ol� NO. v7 - ZIF� DAZ/101287/101287 IRC/FL Conv. Cen. Refund CLM - 92158-3 INDENT.TRUST.D.1 Indian River County, Florida and Third National Bank in Nashville, as Trustee INDENTURE OF TRUST Dated as of , 1988 $4,800,000 Indian River County, Florida Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) Series 1988 -4 r TABLE OF CONTENTS Pace Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granting Clauses. . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE I Definitions and Rules of Conarruori�„ 1.01 Definitions. . . . . . . . . . . . . . . . . . . . 1.02 Rules of Construction . . . . . . . . . . . . . . . . . . ARTICLE II Authorization and Details of Bonds 2.01 Bonds Authorized . . . . . . . . . . . . . . . . . . . . 2.02 Details of Bonds . . . . . . . . . . . . . . . . . . 2.03 Interest . . . . . . . . . . . . . . . . . . . . . . . . 2.04 Sinking Fund Installments . . . . . . . . . . . . . . . 2.05 Conditions Precedent to Delivery of Bonds . 2.06 Execution and Authentication . . . . . . . . . . . . . . 2.07 Registration and Exchange of Bonds. . . . . . . . . . . 2.08 Bonds Mutilated, Destroyed, Lost or Stolen. . 2.09 Cancellation and Disposition of Bonds . , . . . . . . . ARTICLE III Redemption of Bonds: Optional and Mandatory Tender 3.01 Selection of Bonds to Be Redeemed . . . 3.02 Notice of Redemption. . . . . . . . . . 3.03 Redemption of Portion of Bond . . . . . 3.04 Optional and Mandatory Tender of Bonds. ARTICLE IV venues and Fund 4.01 Creation of Funds and Accounts. . . . . . 4.02 Application of Proceeds of Bonds. . . . . . . 4.03 Bonds Not to Be Arbitrage Bonds . . . . . 4.04 . Deposit of Revenues; Deposit of Certain Proceeds. . . . . . . . . 4.05 , Debt Service Fund: Application of Moneys . 4.06 Investment of Moneys. . . . . . . , . . . 4.07 Realization of Funds under Credit Facility. . • ARTICLE V Particular Covenants 5.01 Payment of Bonds . . . . . . . . . . . . . . . 5.02 Performance of Covenants, Undertakings and Agreements; Representations as to Authorization and Validity of Bonds . . . . . . . . . . . . 5.03 Liens, Encumbrances and Charges . . . . . . . . . . 5.04 Maintenance of Existence; Compliance with Law . . 5.05 Enforcement of Obligations of Borrower . . . . . 5.06 Financing Statements . . . . . . . . . . . . . . 5.07 Credit Facility; Substitute Credit Facilities . . . . 5.08 Bonds Not to be Purchased by Issuer on Tender Dates . ARTICLE VI Concerning the Trustee 6.01 Trustee Entitled to Indemnity . . . . 6.02 . . . . . . . Responsibilities of Trustee . . . . . . . . 6.03 . . . Evidence on which Trustee May Act . . . . . . . . . 6.04 Compensation . . . . . . . . . . . . . . . . 6.05 Permitted Acts. . . . . . . . . . . . 6.06 Resignation of Trustee . . . . . . . . . . . . . 6.07 . . Removal of Trustee. . . . . . . . . . 6.08 Successor Trustee . . . . . . . . 6.09 Transfer of Rights and Property to Successor Trustee. , 6.10 Merger, Conversion or Consolidation of Trustee. . . . . ARTICLE VII vents of Default and Remed 7.01 Events of Default . . . . . . . . 7.02 Acceleration of Maturity . . . . . . . . . . . . . . 7.03 Enforcement . . . . . . . . . . . . . 7.04 Priority of Payments following Default. . . . . . . 7.05 Effect of Discontinuance of Proceedings . . . . . . . 7.06 Majority of Bondholders May Control Proceedings . . . 7.07 Restrictions upon Action by Individual Bondholders. . 7.08 Actions by Trustee . . . . . . . . . . . . . . 7.09 . . . . . No Remedy Exclusive . . . . . . . . . . . . . . 7.10 . . . . No Delay or Omission Construed as a Waiver; Waiver of Default . . . . . . . . . . . . . . . . . . 7.11 . . . . . Notice of Default . . . . . . . . . . . . . . . . 7.12 . . . Special Acceleration of Bonds . . . . . . . . . . . . . 40 9.01 Defeasance . . . . . . . . . . . . . . . . . . . . . . . ARTICLE X Registrar and Paying Agent• the Remarketing Agent 10.01 The Registrar and Paying Agent. . . . . 10.02 The Remarketing Agent . . . . . . . . . . . . 10.03 Notice of Successors . . . . . . . . . . . . . . . . . . ARTICLE XI Miscellaneous 11.01 Further Assurances . . . . . 11.02 Evidence of Signatures of Bondholders and Ownership of Bonds. . . . . . . . . . . . 11.03 Preservation and Inspection of Documents . . 11.04 Moneys and Funds Held for Particular Bonds . 11.05 No Recourse on Bonds . . . . 11.06 Issuer Protected in Acting in Good Faith . 11.07 Severability of Invalid Provision. . . . . 11.08 Notices. . . . . . . . . . . . 11.09 Other Indentures . . . . . . 11.10 Business Days . . . . . . . . . . . . . . . . 11.11 Execution in Several Counterparts. . . . . . 11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . Acceptance of Duties by Registrar and Paying Agent. . . . . . . . , , Exhibit A - Form of Bond . . . . . . . . . . . . . . . . . . . . . . . ARTICLE VIII Modification or Amendment of Indenture and Loan Agreement 8.01 Supplemental Indentures without Consent . 8.02 Supplemental Indentures Requiring Consent of Bondholders. . . . . 8.03 Notation on Bonds . . 8.04 Amendment of Loan Agreement or Mortgage . 8.05 Consent of Credit'Facility Provider . 8.06 Advice to Rating Agencies of Supplemental Indentures. . 8.07 Consent of Borrower, NHC, Registrar and Paying Agent and Remarketing Agent . . . . . . . . . . . . . . . . ARTICLE IX Defeasance 9.01 Defeasance . . . . . . . . . . . . . . . . . . . . . . . ARTICLE X Registrar and Paying Agent• the Remarketing Agent 10.01 The Registrar and Paying Agent. . . . . 10.02 The Remarketing Agent . . . . . . . . . . . . 10.03 Notice of Successors . . . . . . . . . . . . . . . . . . ARTICLE XI Miscellaneous 11.01 Further Assurances . . . . . 11.02 Evidence of Signatures of Bondholders and Ownership of Bonds. . . . . . . . . . . . 11.03 Preservation and Inspection of Documents . . 11.04 Moneys and Funds Held for Particular Bonds . 11.05 No Recourse on Bonds . . . . 11.06 Issuer Protected in Acting in Good Faith . 11.07 Severability of Invalid Provision. . . . . 11.08 Notices. . . . . . . . . . . . 11.09 Other Indentures . . . . . . 11.10 Business Days . . . . . . . . . . . . . . . . 11.11 Execution in Several Counterparts. . . . . . 11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . Acceptance of Duties by Registrar and Paying Agent. . . . . . . . , , Exhibit A - Form of Bond . . . . . . . . . . . . . . . . . . . . . . . 40 Indenture a valid assignment and pledge of the Revenues, have been done and performed, and the creation, execution and delivery of this Indenture, and the creation, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized. GRANTING CLAUSES The Issuer, in consideration of the premises, of the acceptance by the Trustee of the trusts hereby created, of the purchase and acceptance of the Bonds by the owners thereof and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, in order to secure the payment of the principal or Redemption Price of and interest on, and the purchase price of, the Bonds according to their tenor and effect and, to the extent provided herein, the payment of amounts due under the Credit Facility Agreement in accordance with the terms thereof, and to secure the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell, convey, assign and pledge, and grant a security interest in, the following to the Trustee and its successors in trust and assigns forever, subject only to the provisions of this Indenture permitting the application thereof on the terms and conditions set forth in this Indenture: GRANTING CLAUSE FIRST All of the right, title and interest of the Issuer in and to the Loan Agreement, excepting only the Issuer's rights to receive payment of the Administrative Expenditure (defined herein), to indemnification and, prior to the occurrence of an Event of Default (defined herein), to receive notices and give certain approvals as provided in the Loan Agreement, and all remedies in connection therewith; and GRANTING CLAUSE SECOND All right, title and interest of the Issuer in and to the Revenues and any and all other real or personal property of every name and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred, as and for additional security hereunder by the Issuer or by anyone on its behalf, or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; TO HAVE. AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its successors in trust and assigns forever upon the terms and trusts herein set forth for the equal and ratable benefit, security and protection of all present and future owners of the Bonds from time to time issued under and secured by this Indenture, without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any other Bonds, except as otherwise expressly provided herein, and, to the extent provided herein, for the benefit of the Credit Facility Provider to secure payment of amounts due to the Credit Facility Provider under the Credit Facility Agreement in accordance with the terms thereof; `M • PROVIDED, HOWEVER, that if the Issuer shall pay, or cause to be paid, the principal or Redemption Price of and interest on, and the purchase price of, the Bonds, according to the true intent and meaning thereof, or shall provide for the payment thereof as permitted by Article IX hereof, and shall perform and observe all the covenants and conditions of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon compliance with Article IX hereof the lien of this Indenture shall be discharged and satisfied; otherwise this Indenture to be and remain in full force and effect. All Bonds issued and secured hereunder are to be issued, authenticated and delivered and all such property, rights and interest, including (without limitation) the amounts hereby assigned and pledged, are to be dealt with and disposed of under, upon and subject to the terms and conditions hereinafter expressed, and the Issuer does hereby agree and covenant with the Trustee and with the respective owners of the Bonds as follows (subject, however, to the provisions of Section 5.01 hereof): - 3 - • ARTICLE I Definitions and Rules of Construction Section 1.01. Definitions. As used in this Indenture, the following terms shall have the following meanings, unless a different meaning clearly appears from the context: "Act„ means the Florida Industrial Development Financing Act, consisting of Part II of Chapter 159, Florida Statutes, as amended, and all future acts supplemental. thereto or amendatory thereof. "Adjustment Date" means the day after the last day of the Initial Interest Period, the first Business Day of each month thereafter during which the Bonds will bear interest at the Variable Rate, and each Mandatory Tender Date after which the Bonds will bear interest at the Variable Rate. "Administrative Exoenditure" means any expenditures of the Issuer, the Trustee and the Registrar and Paying Agent under this Indenture, the Loan Agreement or the Mortgage not otherwise paid or provided for by the Borrower, and all other expenditures reasonably and necessarily incurred by the Issuer or the Trustee by reason of the financing and refinancing of the Project, including (without limitation) legal, financing and administrative expenses and expenses incurred to compel full and punctual performance of the Loan Agreement or the Mortgage in accordance with the terms thereof. "Agency Obligations" means direct obligation (including bonds, notes or participation certificates) of, or obligations the timely payment of the principal of and the interest on which are unconditionally guaranteed by, any agency or instrumentality of the United States of America. "_'Alternate Credit Facility" means any letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility meeting the requirements of and delivered to the Trustee in accordance with Section 3.03(b) of the Loan Agreement, as amended, modified or supplemented from time to time. "Authorized Officer" means (i) in the case of the Issuer, the Chairman, or the Vice Chairman of the Board of County Commissioners of the Issuer and any other person set forth in a certificate executed by the Chairman or the Vice Chairman of the Board of County Commissioners of the Issuer and delivered to the Trustee; (ii) in the case of the Borrower, the President, the Vice President or the Secretary of the Borrower and any other person set forth in a certificate executed by the President or the Vice President of the Borrower and delivered to the Trustee; (iii) in the case of NHC, the Senior Vice President of NHC and any other person set forth in a certificate executed by the Senior Vice President of NHC and delivered to the Trustee; and (iv) in the case of the Trustee, the President, any Vice -President, any Assistant Vice - President, any Corporate Trust Officer or any Assistant Corporate Trust Officer of the Trustee, and any other person authorized pursuant to a resolution of the Board of Directors of the Trustee. - 4 - "_Available Moneys" means moneys held by or on behalf of the Trustee or the Registrar and Paying Agent (i) that constitute proceeds of Bonds; (ii) that were received by the Trustee or the Registrar and Paying Agent from the remarketing of the Bonds by the Remarketing Agent; (iii) that were realized by the Trustee or the Registrar and Paying Agent under the Credit Facility; (iv) that were received by the Trustee from or on behalf of the Issuer or the Borrower and that have been on deposit with the Trustee for at least 124 days during which no proceeding by or against the Issuer or the Borrower (as the case may be) under any federal or state bankruptcy or insolvency law or any similar law in effect on the date of this Indenture or thereafter enacted shall have been commenced or be pending, unless such proceeding shall have been dismissed and such dismissal shall be final and not subject to appeal.; (v) that constitute proceeds (including, without limitation, investment earnings) of any of the foregoing; and (vi) with respect to which there shall have been delivered to the Trustee an opinion of nationally -recognized counsel experienced in bankruptcy matters to the effect that the payment of such moneys to the holder of any Bond will not be avoidable under the preference avoidance powers of a trustee in bankruptcy of the Issuer or the Borrower under Section 547 of the United States Bankruptcy Code (or any section amendatory of, supplemental to or replacing such Section) in the event that the Issuer or the Borrower becomes the subject of a case thereunder. For the purposes of clause (iv) of this definition, moneys shall be deemed to have been received by or deposited with the Trustee only when cash or its equivalent is so received or deposited (as the case may be) or, in the case of checks or drafts, when final payment thereof has been made to the Trustee by the payor bank. "Bond" or "Bonds" means the Indian River County, Florida Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series 198 , authorized by Section 2.01 of this Indenture, ")fond Counsel" means a law firm having a national reputation in the field of municipal law whose legal opinions are generally accepted by purchasers of municipal Bonds. "Bondholder". "Holder" or "Owner" or any similar term, when used with reference to a Bond, means the registered owner of such Bond. "Borrower" means Florida Convalescent Centers, Inc., a corporation duly organized and existing under the laws of the State of Florida, and its successors and assigns. "_Business Day" means a day other than (i) a Saturday, Sunday or other day on which banking institutions in the State or the city in which the Principal Office of the Trustee, the Registrar and Paying Agent, the Remarketing Agent or the Credit Facility Provider is located are authorized or required to close and (ii) a day on which the New York Stock Exchange is closed. "Code" means the Internal Revenue Code of 1986, as amended, or any applicable predecessor statutory provisions, and the applicable regulations thereunder. - 5 - 77 "Computation Date" means the date selected by the Remarketing Agent on which a Fixed Rate for the Bonds is determined by the Remarketing Agent in accordance with Section 2.03 hereof, which shall be a date that is at least seven but not more than 15 Business Days before the first day of the Fixed Rate Period for which such Fixed Rate is determined. "Conversion Date" means each Fixed Rate Date and each date after the Initial Adjustment Date, on which the interest rate on the Bonds converts from a Fixed Rate to a Variable Rate. Credit Facility" means the letter of credit issued by The Toronto - Dominion Bank, acting through its Chicago Branch, on the date of the initial authentication and delivery of the Bonds, as amended, modified or supplemented from time to time, and any Qualified Credit Facility or Alternate Credit Facility. "Credit Facility Agreement" means the Reimbursement Agreement dated as of , 1987, between the Borrower and The Toronto -Dominion Bank, acting through its Chicago Branch, and any other agreement between the Borrower and a Credit Facility Provider pursuant to which a Credit Facility is issued, as such agreements may be amended, modified or supplemented from time to time. "Credit Facility Bond" means any Bond during the period from and including the day on which it is purchased with amounts realized under the Credit Facility to but excluding the day on which it is purchased by any person other than the Credit Facility Provider and transferred to such person under the conditions set forth in Section 3.04 hereof pertaining to the remarketing of Credit Facility Bonds. "Credit Facility Provider" means the issuer of the Credit Facility then in effect, if any. "Event of Default" means any Event of Default specified in Section 7.01 hereof. "Fixed Rate" means the fixed rate or rates of interest borne by the Bonds during each Fixed Rate Period, determined in accordance with Section 2.03 hereof and Section 4(b) of the Bonds. "Fixed Rate Date" means the first day of each Fixed Rate Period. "Fixed Rate Period" means a period commencing after the Initial Interest Period, and established in accordance with Section 2.03 hereof during which the rate of interest borne by the Bonds (other than Credit Facility Bonds) is not subject to change. "Government Obligations" means direct obligation of, or obligations the timely payment of the principal of and the interest on which are unconditionally guaranteed by, the United States of America, including (without limitation) any certificate evidencing an interest in any such obligation. - 6 - 40 "Indenture" means this Indenture of Trust, as amended, modified or supplemented from time to time by Supplemental Indenture. "_Independent Counsel" means any attorney or attorneys duly admitted to practice law before the highest court of any state who have regularly engaged in the practice of law as their primary occupation for at least five years and who are not officers or full-time employees of the Issuer or the Borrower. Bond Counsel may be deemed Independent Counsel. "Initial Adjustment Date" means the day following the last day of the Initial Interest Period. Initial Interest Period means the period determined by the Remarketing Agent as set forth in Section 2.03(a) hereof during which the Bonds bear interest at the rate determined by the Remarketing Agent in accordance with such Section 2.03(a). "Interest Payment Date" means the first Business Day of each month through and including the day following the last day of the Initial Interest Period, and thereafter, (i) for any period during which the Bonds bear interest at the Variable Rate, the first Business Day of each month, each Mandatory Tender Date and the maturity date of the Bonds, (ii) for any Short Fixed Rate Period, the day following the last day of such Fixed Rate Period, (iii) for any long Fixed Rate Period (other than any such Fixed Rate Period that is described in item (iv) of this paragraph), the first day of the calendar month beginning each six calendar month period after the commencement of such Fixed Rate Period that occurs during such Fixed Rate Period and the day following the last day of such Fixed Rate Period, and (iv) for any Long Fixed Rate Period extending to the maturity date of the Bonds, each January 1 and July 1. "Investment Obligations" means: (a) Government Obligations; (b) Agency Obligations; (c) negotiable certificates of deposit issued by banks, trust companies or savings and loan associations having a capital and surplus aggregating at least $25,000,000 and continuously secured (to the extent not fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation) for the benefit of the Trustee and the holders of Bonds Outstanding either (i) by lodging with a bank or trust company, as collateral security, Government Obligations or Agency Obligations having a market value (exclusive of accrued interest) not less than the amount of such deposit, or (ii) if the furnishing of security as provided in clause (i) of this paragraph is not permitted by applicable law, in such other manner as may then be required or permitted by applicable state or federal laws and regulations regarding the security for, or granting a preference in the case of, the deposit of trust funds; (d) repurchase agreements for Government Obligations and Agency Obligations with any bank, trust company or dealer in government Bonds reporting to, trading with and recognized as a primary dealer by a Federal Reserve Bank, acting as principal or agent, if such Government Obligations and Agency Obligations are delivered to, or registered in the name of, the Trustee or the Registrar and Paying Agent or are supported by a safekeeping receipt issued by a depository satisfactory to the Trustee, provided that such repurchase agreements must provide that the value of the underlying Government Obligations and Agency Obligations shall be continuously maintained at a current market value �Z not 7 less than the repurchase price; (e) obligations of any state of the United States or any political subdivision thereof rated in one of the two highest rating categories by a Rating Agency; (f) obligations of any state of the United States or any political subdivision thereof for the payment of the principal or redemption price of and interest on which there shall have been irrevocably deposited Government Obligations maturing as to principal and interest at times and in amounts sufficient to provide such payment; (g) commercial paper or finance company paper rated in the highest category by a Rating Agency; and (h) so long as any Credit Facility shall be in effect, such other investments as shall be approved in writing by the Credit Facility Provider. "Issuer" means Indian River County, Florida, and its successors and assigns. an Agreement" means the Loan Agreement dated as of the date hereof between the Borrower and the Issuer, as amended, modified or supplemented from time to time. longer. "Long Fixed Rate Period" means a Fixed Rate Period of six months or Date. "Mandatory Tender Dare" means each Conversion Date and any Termination '_'_Mandatory Tender Notice" means a notice of a Mandatory Tender Date given by the Registrar and Paying Agent in accordance with Section 3.04(b) hereof. "Maximum Rate" means fifteen percent (158) per annum, or such higher rate as shall be established for the Bonds by resolution of the Issuer in accordance with Section 2.03 hereof. "Mortgage" means the mortgage instrument dated as of 198 , pertaining to the Project executed and delivered by the Borrower to the Trustee and the initial Credit Facility Provider, as amended, modified or supplemented from time to time. "NHC" means National HealthCorp P.L., a Delaware limited partnership, and its successors and assigns. "Non -Tender Notice" means a notice given to the Registrar and Paying Agent by the holder of any Bond in accordance with Section 7(c) of the Bonds of such holder's election not to tender such Bond for purchase on any Mandatory Tender Date. "Optional Tender Date" means, with respect to any Bond, a date on which such Bond is required to be purchased upon the demand of the holder thereof in accordance with Section 7(a) of such Bond. M:W s "Optional Tender Notice" means a notice given to the Registrar and Paying Agent by the holder of any Bond in accordance with Section 7(a) of the Bonds of such holder's election to tender such Bond for purchase. __Outstanding" or "outstanding" means, when used with reference to Bonds, as of any particular date, all Bonds authenticated and delivered under this Indenture except: (i) any Bond cancelled by the Registrar and Paying Agent (or delivered to the Registrar and Paying Agent for cancellation) at or before such date; (ii) any Bond for the payment of the principal or Redemption price of and interest on which provision shall have been made as provided in Section 9.01 of this Indenture; and (iii) any Bond in lieu of or in substitution for which a new Bond shall have been authenticated and delivered pursuant to Article II, Section 3.04 or Section 8.03 of this Indenture. "Principal Office" means (i) when used with reference to the Issuer, the principal office of the Issuer, (ii) when used with reference to the Trustee or the Registrar and Paying Agent, the corporate trust office of the Trustee or the Registrar and Paying Agent, respectively, designated as such by written notice to the Issuer, the Borrower, NHC, the Trustee, the Registrar and Paying Agent, the Remarketing Agent and the Credit Facility Provider, which offices, during such time as a Credit Facility is in effect, shall be the office of the Trustee to which the Credit Facility is addressed and the office of Registrar and Paying Agent designated in the document appointing the Registrar and Paying Agent as agent of the Trustee for purposes of realizing funds under the Credit Facility, (iii) when used with respect to the Remarketing Agent, the office of the Remarketing Agent, dec:ignated as such by written notice to the Issuer, the Borrower, NRC, the Trustee, the Registrar and Paying Agent and the Credit Facility Provider, and (iv) when used with reference to the Credit Facility Provider, the office of the Credit Facility Provider at which demands for payment under the Credit Facility must be presented. "Project" means the construction and acquisition of the facilities more particularly described in Exhibit A to the Loan Agreement, or such facilities, as the context requires. "Purchase Price" or "purchase price", when used with respect to Bonds or portions thereof required to be purchased on any Tender Date in accordance with Section 7(a) or 7(b) of the Bonds, shall mean the price at which such Bonds or portions thereof are required to be purchased, as set forth in such Section 7(a) or 7(b) (as the case may be). "Qualified Credit Facility" means any letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar 9 40 credit or liquidity facility meeting the requirements of and delivered to the Trustee in accordance with Section 3.03(a) of the Loan Agreement, as amended, modified or supplemented from time to time. "Rating Agency" means Moody's Investors Service or any other securities rating agency that shall have assigned a rating that is then in effect with respect to the Bonds, and their successors and assigns, and "Rating Agencies" means each such Rating Agency. "Redemption Price" means, when used with respect to a Bond or any portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof in accordance with such Bond. "Registrar andPaying Agent" means Chemical Bank, a banking corporation organized and existing under the laws of the State of New York, and its successors and any other corporation that may at any time be substituted in its place in accordance with this Indenture. "Remarketing Agent" means Alex. Brown 6 Sons Incorporated and any other Remarketing Agent appointed pursuant to Section 10.02 hereof, and their successors. "Revenues" means (i) all payments to the Issuer or the Trustee pursuant to the Loan Agreement, (ii) proceeds of the Bonds and all moneys and securities on deposit in the funds and accounts created by this Indenture and (iii) all other receipts of the Issuer attributable to the refinancing of the Project by the issuance of the Bonds. months. "Short Fixed Rate Period" means a Fixed Rate Period of fewer than six "_Sinking Fund Installment" means the amounts provided in Section 2.04 of this Indenture to redeem or pay at maturity Bonds at the times provided therein, as such amounts may be changed in accordance with such Section 2.04. "State" means the State of Florida. "Supplemental Indenture" means any indenture entered into by the Issuer and the Trustee amending, modifying or supplementing this Indenture, any Supplemental Indenture or any Bond in accordance with the terms of this Indenture. ender Datg" means an Optional Tender Date or a Mandatory Tender Date. "Termination Date" means (i) the first Business Day of the calendar month in which the stated expiration date of the Credit- Facility then in effect occurs, provided that, if there shall be delivered to the Trustee a Qualified Credit Facility prior to the day that is five days before the date upon which the Registrar and Paying Agent is required to give a Mandatory Tender Notice with respect to such Termination Date in accordance with Section 3.04 hereof, the Termination Date shall be determined with reference to the stated expirati,n date - 10 - 40 of such Qualified Credit Facility and (ii) the effective date of each Alternate Credit Facility that replaces any Credit Facility. ;1stee„ means Third National Bank in Nashville, a national banking association, organized and existing under the laws of the United States of America, and its successors, and any other corporation that may at any time be substituted in its place in accordance with this Indenture. "Trusty Estate" means all property, rights and other assets that from time to time may be pledged and assigned to the Trustee under the Granting Clauses of this Indenture. "Variable Rate" means the rate of interest borne by the Bonds during any period commencing after the Initial Interest Period other than a Fixed Rate period, determined from time to time in accordance with Section 2.03 hereof and the Bonds. Section 1.02. Rules of Construction. Unless the context clearly indicates to the contrary, the following rules shall apply to the construction of this Indenture: (a) Words importing the singular number include the plural number and words importing the plural number include the singular number. (b) Words of the masculine gender include correlative words of the feminine and neuter genders. (c) The headings and the table of contents set forth in this Indenture are solely for convenience of reference and shall not constitute a part of this Indenture nor shall they affect its meaning, construction or effect. (d) Words importing persons include any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or agency or political subdivision thereof. (e) Any reference to a particular percentage or proportion of the holders of Bonds shall mean the holders at the particular time of the specified percentage or proportion in aggregate principal amount of all Bonds then Outstanding under this Indenture, except Bonds held by or for the account of the Issuer or the Borrower (whether or not theretofore issued and whether or not held in the treasury of the Issuer or the Borrower or pledged to or by the Issuer or the Borrower to secure any indebtedness); provided, however, that Bonds so pledged may be regarded as Outstanding for the purposes of this paragraph if the pledgee shall establish to • the satisfaction of the Trustee the pledgee's right to vote such Bonds. For the purposes of this paragraph, Credit Facility Bonds shall not be deemed to be held by or for the account of the Borrower or the Issuer. (f) Any reference to the Revenue Fund, the Debt Service Fund, the Interest Account, the Principal Account, the Purchase Account, or the Rebate Fund shall be to the fund or account so designated that is created under Section 4.01 of this Indenture. (g) During any period in which no Credit Facility shall be in effect, the provisions of this Indenture and the Loan Agreement that related to the Credit Facility, the Credit Facility Provider and the Credit Facility Agreement shall be of no force and effect. (h) If a Fixed Rate Period is established that extends to the maturity date of the Bonds, commencing on the earliest day on which no Credit Facility Bonds remain outstanding, the provisions of this Indenture that relate to the Remarketing Agent shall be of no force and effect. (i) Any reference contained in this Indenture to the principal amount of any Bond or of any portion of any Bond shall be deemed a reference to 1008 of the principal amount of such Bond or such portion of such Bond (as the case may be). 12 ARTICLE II Authorization and Details of Bonds Section 2.01. Bonds Authorized. There is hereby authorized the issuance under this Indenture of a series of Bonds in the aggregate principal amount of Four Million Eight Hundred Thousand Dollars ($4,800,000), which shall be designated "Indian River County, Florida Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Projedt), Series 198 ", for the purpose of refunding the $4,800,000 outstanding amount of the Issuer's Industrial Development Revenue Bond (Florida Convalescent Centers, Inc. Project), Series 1986. No Bonds may be issued under this Indenture except. the Bonds described in this Section. Section 2.02. Details of Bonds. The Bonds shall be issued as fully registered Bonds without coupons. The Bonds shall bear interest, be subject to mandatory and optional redemption and tender prior to maturity and mature, and shall otherwise have the terms, tenor, denominations, details and specifications, set forth in the form of Bond attached hereto as Exhibit A. The Bonds shall be substantially in the form set forth in Exhibit A attached hereto and made a part hereof with such insertions, omissions or variations as may be deemed necessary or appropriate by the officers of the issuer executing the same and as shall be permitted by the Act. The Issuer hereby adopted the form of Bond set forth in Exhibit A hereto, and all of the covenants and conditions set forth therein, as and for the form of obligation to be incurred by the Issuer. The covenants and conditions set forth in the form of Bond are incorporated in this Indenture by reference and shall be binding upon the Issuer as though set forth in full herein. The Bonds may contain, or have endorsed thereon, any notations, legends or endorsements not inconsistent with the provisions of this Indenture that are necessary or desirable to meet any law, stock exchange rule or usage if approved by an Authorized Officer of the Issuer prior to the authentication and delivery thereof. The execution and delivery of the Bonds by the Issuer in accordance with this Indenture shall be conclusive evidence of the approval of the form of the Bonds by the Issuer, including any insertions, omissions, variations, notations, legends or endorsements authorized by this Indenture. The Bonds shall be numbered in the manner determined by the Registrar and Paying Agent. Before authenticating and delivering any Bond, the Registrar and Paying Agent shall complete the form of such Bond to show the registered owner, principal amount, number and authentication date thereof. Section 2.03 Interest. (a) Initial Interest Rate and Initial Interest Period. On or prior to the date of initial delivery of the Bonds, the Remarketing Agent, in consultation with the Borrower and NHC, shall determine the Initial Interest Period for the Bonds which shall be a period of not more than 180 days extending from and including the date of initial delivery of the Bonds through and including the day preceding the first Business Day of a month. The Initial Interest Period shall - 13 - El contain the number of days that in the judgment of the Remarketing Agent, as of the date of determination, produces the greatest likelihood of the lowest net interest cost to the Issuer and the Borrower during the first 180 days after the initial delivery of the Bonds. It is recognized that, in order to increase the likelihood of achieving the lowest overall debt service cost to the Issuer and the Borrower, the Remarketing Agent may, in the exercise of its judgment, determine an Initial Interest Period that would result in a higher initial interest rate than would have been determined if a different initial interest period were established. The determination of the Initial Interest Period that would result in a higher initial interest rate than would have been determined if a different initial interest period were established. The determination of the Initial Interest Period by the Remarketing Agent as herein provided shall be based upon the market for and the relative yields of the Bonds and other securities that, in the judgment of the Remarketing Agent, are comparable to the Bonds, or any fact or circumstance relating to the Bonds or affecting the market for the Bonds or affecting such comparable securities in a manner that, in the judgment of the Remarketing Agent, will affect the market for the Bonds. The Remarketing Agent, in the exercise of its judgment, may consider such information and resources as it deems appropriate in making the determination required by this paragraph, but the Remarketing Agent's determination of the Initial Interest Period shall be based solely upon the Remarketing Agent's judgment. The Initial Interest Period determined as provided in this paragraph shall be conclusive and binding on the holders of the Bonds. On the date of determination of the Initial Interest Period, the Remarketing Agent shall determine the interest rate on the Bonds to be effective during the Initial Interest Period, which rate shall be equal to the lower of the Maximum Rate and the minimum rate that, in the judgment of the Remarketing Agent, taking into account prevailing market conditions, would enable the Remarketing Agent to sell all of the Bonds on the date of initial delivery thereof, at a price equal to the principal amount thereof. The Remarketing Agent shall, upon the determination of the Initial Interest Period and initial interest rate, give notice to the Trustee, the Registrar and Paying Agent, the Credit Facility Provider, the Borrower and NHC of the Initial Interest Period and initial interest rate by telephone, telex or other electronic transmission (confirmed in writing in the case of any oral notice). (b) Variable Rate. Commencing on the Initial Adjustment Date, the Bonds shall bear interest at the Variable Rate. The Variable Rate shall be determined in accordance with Section 4(a) of the Bonds on the Initial Adjustment Date, and on each Adjustment Date thereafter so long as the Bonds bear interest at the Variable Rate. (c) Conversion of Interest Rate and Establishment of Fixed Rate Periods. The Borrower, and N11C, may from time to time (i) establish one or more consecutive Fixed Rate Periods or (ii) at the expiration of any Fixed Rate Period (A) change the interest rate on the Bonds from the Fixed Rate to the Variable Rate of (B) establish one or more additional consecutive Fixed Rate Periods, in each case by delivering to the Trustee, at least 40 but not more than 90 days before the proposed Conversion Date (1) a written notice signed by an Authorized Officer of the borrower and an Authorized Officer of N11C, that specifies the proposed change, the Conversion Date and, if one or more Fixed Rate Periods will be established, the last day of each such Fixed Rate Period, (2) an opinion of 14 40 Bond Counsel to the effect that the establishment of such Fixed Rate Periods or such change (as the case may be) is permitted by this Indenture and will not adversely affect the excludability from gross income, for federal income tax purposes, of interest paid on the Bonds, and (3) if a Credit Facility is in effect and the proposed Conversion Date is not also a Termination Date, written evidence from each of the Rating Agencies that such conversion or establishment of such Fixed Rate Period will not result in a reduction or withdrawal of its ratings on the Bonds. The Trustee shall deliver copies of the items required by this paragraph upon receipt to the Registrar and Paying Agent, the Remarketing Agent, the Credit Facility Provider and each of the Rating Agencies. Each Fixed Rate Period established when the Bonds bear interest at the Variable Rate shall commence on the first Business Day of a month and otherwise shall commence on the date following the last day of a Fixed Rate Period. Each Long Fixed Rate Period shall end on the last calendar day of a month, unless the Bonds will bear interest at a Variable Rate after such Long Fixed Rate Period or such Long Fixed Rate Period will be followed by a Short Fixed Rate Period in which event such Long Fixed Rate Period shall end on the day immediately preceding the first Business Day of a month. All Short Fixed Rate Periods shall end on the day immediately preceding the first Business Day of a month. Fixed Rate Periods established by the Borrower in accordance with this paragraph may be of the same or different lengths. In connection with the establishment of one or more Fixed Rate Periods, at the written request of the Borrower and NHC, the Registrar and Paying Agent shall select particular Bonds to be redeemed from Sinking Fund Installments becoming due during any of such Fixed Rate Periods, which selection shall be made at least 35 days before the Fixed Rate Date on which the first such Fixed Rate Period begins. At least 35 days before each Conversion Date, the Registrar and Paying Agent shall mail a Mandatory Tender Notice to each holder of Bonds in accordance with Section 3.04 hereof. Notwithstanding anything to the contrary contained in this Indenture, in the event that not later than 5:00 p.m., New York City time, on any proposed Conversion Date the Remarketing Agent delivers to the Trustee a certificate to the effect that all of the Bonds have not been successfully remarketed on such Conversion Date, the conversion of the interest rate borne by the Bonds shall automatically be rescinded and the Bonds will bear interest from and after such date at the Variable Rate until converted to a Fixed Rate as provided in this paragraph; provided, however, that if the Bonds bore interest at a Fixed Rate prior to such proposed Conveision Date, a new Fixed Rate Period shall be established for the Bonds in accordance with paragraph (e) of this Section as if the borrower had not elected to change the interest rate on the Bonds or to establish a new Fixed Rate Period, and the Computation Date for such Fixed Rate Period shall be the first day of such Fixed Race Period (or, if not a Business Day, the immediately preceding Business Day) unless there shall be delivered to the Trustee an opinion of Bond Counsel to the effect that the automatic conversion of the interest rate borne by the Bonds to the Variable Rate in accordance with this paragraph will not adversely affect the excludability from gross income, for federal incomes -tax purposes, on interest paid on the Bonds; and provided further that such proposed Conversion Date shall be a Mandatory Tender Date notwithstanding such automatic rescission. The Trustee shall immediately give notice of any such rescission to the Borrower, NHC, the Registrar and Paying Agent, the Credit Facility Provider and each of the Rating Agencies. Upon receipt of such notice, the Registrar and Paying Agent shall immediately give 15 40 notice of such rescission to the holders of the Bonds in accordance with the terms of the Bonds. (d) Rescission of Fixed Rate Periods at Election of Borrower. At any time prior to the Computation Date for any Fixed Rate Period established by the Borrower, in accordance with paragraph (c) above, the Borrower may rescind its election to establish such Fixed Rate Period by written notice to the Trustee signed by Authorized Officers of the Borrower and an Authorized Officer of NtiC; provided, however, that if such Fixed Rate Period shall be the second or any subsequent Fixed Rate Period in a succession of Fixed Rate Periods established by the Borrower in accordance with paragraph (c) of this Section, there shall first be delivered to the Trustee an opinion of Bond Counsel to the effect that such rescission will not adversely affect the excludability from gross income, for federal income tax purposes, of interest paid on the Bonds. If the borrower rescinds its election to establish a Fixed Rate Period as provided in this paragraph, the Bonds will continue to near interest at the Variable Rate then in effect, as if such notice had not been given or, if a Fixed Rate Period is then in effect, a new Fixed Rate Period shall be established as provided in paragraph (e) of this Section as if the Borrower had not elected to establish a new Fixed Rate Period for the Bonds. Upon receipt of the items required by this paragraph, the Trustee shall immediately give notice of such rescission to the Remarketing Agent, the Credit Facility Provider, the Rating Agencies and the Registrar and Paying Agent and shall deliver copies of the opinion of Bond Counsel, if any, to the Remarketing Agent, the Credit Facility Provider and the Registrar and Paying Agent. Upon receipt of such notice of rescission from the Trustee, the Registrar and Paying Agent shall immediately give notice of such rescission to the holders of the Bonds in accordance with the terms of the Bonds. (e) Aromatic Establishment of Fixed Rate Periods. If, 40 days before the last day of any Fixed Rate Period for which a successor Fixed Rate Period has not been established in accordance with paragraph (c) of this Section, the Borrower shall not have elected to change the interest rate on the Bonds to the Variable Rate or to establish a new Fixed Rare Period by delivery of the notice and opinion required by paragraph (c) of this Section, a new Fixed Rate Period shall automatically be established for the Bonds having the same number of months as the Fixed Rate Period then ending, if such Fixed Rate Period was shorter than 12 months, and otherwise having 12 months (or such fewer number of months as shall remain until the maturity date of the Bonds) , and a new Fixed Rate shall be determined as provided in the Bonds and in paragraph (f) of this Section as if the Borrower had elected to establish a new Fixed Rate Period. If such Fixed Rate Period (other than any such Fixed Rate Period established upon any rescission by the Borrower of its election to establish a Fixed Rate Period of a different length) ends after the due date for the payment of any Sinking Fund Installment, at least 35 days before the Fixed Rate Date on which such Fixed Rate Period begins, the Registrar and Paying Agent shall select Bonds in an aggregate principal amount equal to the amount of such Sinking Fund Installment to be redeemed from such Sinking Fund Installment. (f) Fixed Rate. At least 35 days before each Fixed Rate Date, the Remarketing Agent shall preliminarily determine (i) if a Long Fixed Rate Period will commence on such date, the lowest interest rate that, in its judgment, will be the Fixed Rate determined on the Computation Date for such Fixed Rate Period - 16 - 4D and (ii) if a Long Fixed Rate Period is then in effect, the lowest interest rate that, in its judgment, would be the Fixed Rate if the Borrower rescinded its election to establish the succeeding Fixed Rate Period. Such determinations shall be based upon historical trends and projections of the interest rates on the Bonds and comparable securities or any other information deemed appropriate by the Remarketing Agent. If particular Bonds shall have been selected to be redeemed from particular Sinking Fund Installments in accordance with this Section, the Remarketing Agent may determine a different preliminary Fixed Rate for the Bonds that are to be redeemed from each Sinking Fund Installment. The Remarketing Agent shall give notice of such preliminary interest rates to the Trustee, the Registrar and Paying Agent, the Borrower and NHC on the date of determination thereof by telephone, telex or other electronic transmission (promptly confirmed in writing in the case of any oral notice). On each Computation Date, the Remarketing Agent shall determine the Fixed Rate as provided in Section 4(b) of the Bonds. (g) Notice of Interest Rates. On each Adjustment Date and Computation Date, the Remarketing Agent shall give notice to the Trustee, the Registrar and Paying Agent, the Credit Facility Provider, the Borrower and NHC of the interest rate or rates determined for the Bonds on such date by telephone, telex or other electronic transmission (promptly confirmed in writing in the case of any oral notice). (h) Maximum Rate. The Issuer may from time to time, upon the written request of Authorized Officers of the Borrower and NHC, increase the Maximum Rate by delivering to the Trustee (i) a copy of the resolution or other enabling action of the Issuer authorizing such increase in the Maximum Rate, certified by an Authorized Officer of the Issuer, (ii) an opinion of Bond Counsel to the effect that such resolution has been duly adopted by the Issuer and is valid and binding and that such increase in the Maximum Rate will not adversely affect the excludability from gross income, for federal income tax purposes, of interest paid on the Bonds and (iii) an amendment of the Credit Facility or other evidence satisfactory to the Trustee that the amount that can be realized under the Credit Facility for the payment of interest on the Bonds will be sufficient, after adding all amounts, if any, that will be available for the payment of interest on any Credit Facility Bonds when such Bonds cease to be Credit Facility Bonds, to pay up to the same number of days interest on Bonds that are not Credit Facility Bonds (calculated at the increased Maximum Rate) as could have been paid prior to such increase (calculated at the prior Maximum Rate). The Trustee shall give written notice to the Registrar and Paying Agent, the Remarketing Agent and each of the Rating Agencies of any increase in the Maximum Rate promptly upon its receipt of the items referred to in this paragraph. Section 2.04. Sinking Fund Installments. The Sinking Fund Installments for the Bonds shall be due on January 1 of the following years in the following amounts: Sinking Fund Sinking Fund Year Installment Year Installment - 17 - 40 At the election of the Borrower, the Sinking Fund Installment due on any date shall be reduced by an amount equal to the aggregate principal amount of Bonds surrendered uncancelled by the Borrower to the Registrar and Paying Agent, purchased with amounts on deposit in the Principal Account or redeemed pursuant to Section 6(a), 6(b) or 6(e) of the Bonds prior to such date and not theretofore credited against a Sinking Fund Installment. In addition, at the written request of the Borrower and NkiC (i) so long as the Credit Facility is in effect (with the written consent of the Credit Facility Provided), or (ii) on any Fixed Rate Date on which a Fixed Rate Period extending to the maturity date of the Bonds begins, the Issuer may elect to increase or decrease the Sinking Fund Installment due on any date if there shall first be delivered to the Trustee (with a copy to the Registrar and Paying Agent), an opinion of Bond Counsel to the effect that such increase or decrease will not adversely affect the tax-exempt status, for federal income tax purposes, of interest paid on the Bonds. No such change in the Sinking Fund Installments shall be made if the effect of such change is to increase the average weighted maturity of the Bonds. Each such election shall be made by written notice signed by an Authorized Officer of the Issuer or Authorized Officers of the Borrower and NNC (as the case may be) and delivered to the Trustee and the Registrar and Paying Ao t nt aleast 45 days before the due date for payment of such Sinking Fund Installment, or such fewer number of days as shall be acceptable to the Registrar and Paying Agent. The Trustee shall deliver copies of the notices and opinion required by this paragraph to the Remarketing Agent, the Credit Facility Provider and each of the Rating Agencies. Notwithstanding the foregoing provisions of this Section, the amount of any Sinking Fund Installment due on any date may not be reduced to an amount less than the outstanding amount of Bonds that have been previously selected for redemption on such date pursuant to Section 2.03 hereof in connection with the establishment of a Fixed Rate Period for the Bonds. Section 2.05. Conditions Precedent to Delivery of Bonds. The Bonds shall be executed by the Issuer and delivered to the Registrar and Paying Agent, whereupon the Registrar and Paying Agent shall authenticate and deliver the Bonds upon the order of the Issuer, but only upon delivery to the Registrar and Paying Agent of an instrument executed by an Authorized Officer of the Trustee appointing the Registrar and Paying Agent as the agent of the Trustee for the purpose of realizing funds under the Credit Facility and a certificate of such Authorized Officer to the effect that, on or prior to such date, the Trustee has received the purchase price of the Bonds and each of: the following: (a) a written order, signed by an Authorized Officer of the Issuer, directing the authentication and delivery of the Bonds, describing the Bonds to be authenticated and delivered, designating the purchasers to whom the Bonds are to be delivered, stating the purchase price of the Bonds and stating that all items required by this Section are therewith delivered to the Trustee; (b) an opinion of Bond Counsel to the effect that (i) this Indenture creates the valid pledge of and the valid lien upon the Trust Estate that it purports to create, subject - 18 - • only to the provisions of this Indenture permitting the application thereof for or to the purposes and on the terms and conditions set forth in this Indenture, and (ii) the Issuer is duly authorized and empowered to issue the Bonds and, upon the execution, authentication and delivery thereof, the Bonds will be duly and validly issued and will constitute valid and binding limited obligations of the Issuer; (c) a counterpart of this Indenture executed by the parties hereto; (d) a counterpart of the Loan Agreement executed by the parties thereto; (e) a counterpart of the Mortgage executed by the parties thereto; (f) the initial Credit Facility, substantially in the form set forth as F.xhihit A to the initial Cr—iit Facility Agreement; (g) a counterpart of the initial Credit Facility Agreement executed by the parties thereto; (h) an opinion of Bond Counsel (who may rely upon the opinion of other Independent Counsel, who may be counsel to the Borrower or the Trustee) to the effect that this Indenture, the Loan Agreement and the Mortgage have been duly authorized, executed and delivered between the parties thereto and constitute valid and binding obligations of such parties; (i) an opinion of Independent Counsel to the effect that the initial Credit Facility has been duly authorized, executed and delivered by the Credit Facility Provider and constitutes the valid and binding obligation of the Credit Facility Provider; and (j) the certificate required to be delivered to the Trustee as a condition precedent: to the disbursement of moneys constituting proceeds from the sale of the Bonds as set forth in Section 4.02 hereof. Section 2.06. Execution and Authentication. The Bonds shall be executed in the name and on behalf of the Issuer by the manual or facsimile signature of the Chairman or Vice Chairman of the Board of County Commissioners of the Issuer and sealed with its corporate seal (or a facsimile thereof), attested by the manual or facsimile signature of the Clerk to the Board of County Commissioners of the Issuer. - 19 - do In case any officer whose manual or facsimile signature appears on any Bond shall cease to be such officer before delivery of such Bond, such signature shall, nevertheless, be valid and sufficient for all purposes as if he had remained in office until such delivery, and the Issuer may, by resolution, adopt and use for the execution of any Bond the manual or the facsimile signature of any person who shall have been at the time the proper officer to sign such Bond, notwithstanding the fact that such person may not have been such officer on the date of such Bond or that such person may have ceased to be such officer at the time when such Bond is actually authenticated and delivered. Bonds so executed shall be delivered to the Registrar and Paying Agent for authentication by it, and the Registrar and Paying Agent shall authenticate and deliver such Bonds as herein provided and not otherwise. No Bond shall be valid or obligatory for any purpose or entitled to any right or benefit hereunder unless there shall be endorsed on such Bond a certificate of authentication in substantially the form set forth in Exhibit A to this indenture, duly executed by the Registrar and Paying Agent. Such certificate of authentication of the Registrar and Paying Agent upon any Bond executed on behalf of the Issuer shall be conclusive evidence and the only evidence required that the Bond so authenticated has been duly issued hereunder and that the holder thereof is entitled to the benefits of this Indenture. The certificate of the Registrar and Paying Agent may be executed by any authorized signatory of the Registrar and Paying Agent. Section 2.07. Registration and Exchange of ponds. Books for registration and the registration of transfer of Bonds shall be prepared and maintained by the Registrar and Paying Agent. If any Bond shall be surrendered to the Registrar and Paying Agent for transfer or exchange in accordance with the provisions of such Bond, the Issuer shall execute and the Registrar and Paying Agent shall authenticate and deliver in exchange for such Bond a new Bond or Bonds bearing interest at the same rate and of any denomination authorized by this Indenture, in aggregate principal amount equal to the principal amount of the Bond so surrendered, upon payment of any tax or other governmental charge to which the Issuer or the Registrar and Paying Agent is entitled in accordance with such Bond. The Registrar and Paying Agent shall not register the transfer of any Bond (other than the transfer of any Bond pursuant to a purchase of such Bond with amounts realized under the Credit Facility) (i) after a notice of the redemption of such Bond or any portion thereof has been mailed or (ii) prior to any Optional Tender Date applicable to any Bond after an Optional Tender Notice with respect to such Bond has been received by the Registrar and Paying Agent or (iii) prior to any Mandatory Tender Date after a Mandatory Tender Notice has been mailed - in each case unless the transferee acknowledges in writing to the satisfaction of the Registrar and Paying Agent the matters contained in such notice arid, if - 20 - • any Non -Tender Notice has been received by the Registrar and Paying Agent with respect to any Bond referred to in clause (iii) of this paragraph, of the delivery thereof. Section 2.08. Bonds Mutilated, Destroyed, Lost or Stolen. If any temporary or definitive Bond shall become mutilated or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon its request the Registrar and Paying Agent shall authenticate and deliver, a new Bond in exchange for the mutilated Bond, or in lieu of and rubstitution for the Bond so destroyed, lost or stolen. In every case of exchange or substitution, the applicant shall furnish to the Issuer, the Borrower, the Trustee and the Registrar and Paying Agent such security or indemnity as may be required by them to save each of them harmless from all risks, however remote, and the applicant shall also furnish to the Issuer, the Borrower, the Trustee and the Registrar and Paying Agent evidence to their satisfaction of the mutilation, destruction., loss or theft of the applicant's Bond and of the ownership thereof. Upon the issuance of any Bond upon such exchange or substitution, the Issuer, the Trustee or the Registrar and Paying Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses, including counsel fees, of the Issuer, the Trustee or the Registrar and Paying Agent. If any Bond that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Issuer may, instead of issuing a Bond in exchange or substitution therefor, pay or authorize the payment of such Bond (without surrender thereof except in the case of a mutilated Bond) if the applicant for such payment shall furnish to the Issuer, the Borrower, the Trustee and the Registrar and Paying Agent such security or indemnity as they may require to save them harmless, and evidence to the satisfaction of the Issuer, the Borrower, the Trustee and the Registrar and Paying Agent of the mutilation, destruction, loss or theft of such Bond and of the ownership thereof. Every Bond issued pursuant to the provisions of this Section in exchange or substitution for any Bond that is mutilated, destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Bonds shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits hereof equally and proportionately with any and all other Bonds duly issued under this Indenture. All Bonds shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing on the date of this Indenture or thereafter enacted to the negotiable instruments or other securities without their surrender. Section 2.09. Cancellation and Disposition of Bonds. All mutilated Bonds, all Bonds surrendered for exchange or transfer, all Bonds that have been paid at maturity or upon prior redemption and all Bonds surrendered to the Trustee by the Borrower for cancellation shall be - 21 - • cancelled and cremated or destroyed by other means by the Trustee. The Trustee Agent shall deliver to the Issuer and the Trustee a certificate of any such cremation or other destruction of any Bond, identifying the Bonds so cancelled and cremated or otherwise destroyed. Section 2.10. Book-EntrySystem. The Registrar and Paying Agent is hereby authorized to make such modifications to the form of the Bonds as may be appropriate to conform to any standard specifications for registered municipal securities which may be promulgated by any body generally recognized in the municipal securities industry (including, without limitation, the American National Standards Institute) in order to facilitate computer or other mechanical processing methods for registration of municipal Bonds, subject to the further provisions of this Section. In addition, at the written direction of the Remarketing Agent, the Registrar and Paying Agent shall initiate a system for the registration of the Bonds in book -entry form (a "Book -Entry System") and may enter into such agreements as may be necessary to provide for registration of the Bonds in book -entry form, with or without the issuance of physical Bond instruments, certificates or other writings evidencing the ownership thereof, in accordance with this Section. Before the Registrar and Paying Agent makes any change in the form of the Bonds or initiates any Book -Entry System with respect to the Bonds, the Registrar and Paying Agent shall have received an opinion of Bond Counsel to the effect that such change in form of the Bonds or initiation of such Book - Entry System is permitted under State law and by this Indenture and will not adversely affect the excludability from gross income, for federal income tax purposes, of the interest paid on the Bonds. If the Registrar and Paying Agent makes a change in the form of the Bonds or initiates any such Book -Entry System in accordance with this paragraph, it shall promptly give notice thereof to the Borrower, the Trustee, the Rating Agencies and the Credit Facility Provider. Any Book -Entry System established for the Bonds shall be established pursuant to an agreement (a "Depositary Agreement") among the depositary (the "Depositary"), the Registrar and Paying Agent and any other appropriate parties, which may include, without limitation, letters of representation delivered to and accepted by the Depositary. Each Depositary Agreement shall provide: (i) that if the Depositary determines not to continue to act as a securities depositary for the Bonds or is no longer permitted to act as a depositary with respect to municipal securities such as the Bonds, the Depositary shall give prompt written notice to that effect to the Trustee, the Remarketing Agent and the Registrar and Paying Agent and shall permit the Registrar and Paying Agent a reasonable period to locate a replacement depositary or to return to a system of certificated Bonds; (ii) that the Depositary shall provide the Registrar and Paying Agent with a written statement of the name, address and interest in the Bonds of each of the Depositary's participants and, if available, the beneficial owners of the Bonds, with days of the Registrar and Paying Agent's written request for such information; (iii) that the Depositary and each of its participants agree that neither the Issuer, the Trustee, the Remarketing Agent- nor the Registrar and Paying Agent shall be liable for any damages resulting from any failure of the 22 db Depositary to perform its obligations under the Depositary Agreement or from any failure of any participant or other nominee of the beneficial owners to perform any of its obligations to any beneficial owner; (iv) that the Registrar and Paying Agent shall have no fiduciary duties with respect to the Depositary, its participants or the beneficial owners of the Bonds; and (v) that the Depositary may be replaced and the depositary Agreement terminated, at the written direction of the Trustee or the Remarketing Agent (with the written consent of the Trustee in the case of any direction from the Remarketing Agent) if the Trustee or the Remarketing Agent (as the case may be), in its sole discretion, determines that the Depositary is incapable of discharging its duties under the Depositary Agreement or that the interest of the beneficial owners might be adversely affected by the continuation of the Book -Entry System. A Depositary Agreement may provide that payments of the principal or Redemption Price of and interest on, and the purchase price of the Bonds shall be made to the Depositary or its nominee or registered assigns at the place designated by such Depositary in accordance with the Depositary Agreement in immediately available funds on each day on which such amounts a+re due and payable and may include such other provisions as are deemed appropriate by the Registrar and Paying Agent. In addition, each Depositary Agreement shall contain such other provisions as shall be necessary or desirable, in the opinion of Bond Counsel, to assure compliance with applicable law. If the Trustee or the Remarketing Agent (with the written consent of the Trustee), in its sole discretion, determines that any Depositary is incapable of discharging its duties with respect to the Bonds or that the interest of the beneficial owners of the Bonds might be adversely affected by the continuation of any Book -Entry System, the Trustee or the Remarketing Agent (as the case may be) shall give written directions to the Registrar and Paying Agent to appoint a replacement depositary or to terminate the Book -Entry System. Promptly upon its receipt of such directions, the Registrar and Paying Agent shall appoint a replacement depositary or authenticate and deliver replacement Bonds to a replacement depositary, to participants of the Depositary removed or to the beneficial owners of the Bonds identified by such participants as shall be directed by the Trustee or the Remarketing Agent (as the case may be) in accordance with the provisions of Section 2.07. The Registrar and Paying Agent shall give notice of any determination to remove a Depositary or to terminate any Book -Entry System to the Depositary to be removed, the Borrower, the Rating Agencies and the Credit Facility Provider at least days before the effective date of such removal unless a shorter period shall be specified in the Depositary Agreement. - 23 - C ARTICLE III Redemption of Bonds• Optional and Mandatory Tender Section 3.01. Selection of Bonds to be Redeemed. The Registrar and Paying Agent shall select Bonds for redemption on the dates required by Sections 2.03 and 3.02 hereof by lot or in such other manner as the Registrar and Paying Agent in its discretion may deem proper; provided, however, that (i) if fewer than all of the Bonds are selected for redemption on any date, Credit Facility Bonds shall be selected for redemption prior to the selection of any other Bonds; (ii) the portion of any Bond to be redeemed shall be in a denomination authorized to be outstanding after the redemption date; and (iii) in selecting Bonds for redemption, the Registrar and Paying Agent shall treat each Bond as representing that number of Bonds that is obtained by dividing the principal amount of such Bond by the smallest denomination in which Bonds are authorized to be outstanding after the redemption date. The selection of Bonds to be redeemed shall be irrevocable, except that if the Borrower shall have elected to convert the interest rate borne by the Bonds from the Variable Rate to a Fixed Rate by establishing one or more Fixed Rate Periods and shall have directed the Registrar and Paying Agent to select Bonds for redemption from particular Sinking Fund Installments occurring during such Fixed Rate Periods and the Borrower shall thereafter rescind such election, the selection of such Bonds for redemption shall also be rescinded. Bonds shall have a notation of the selection of such Bonds for redemption endorsed thereon by the Registrar and Paying Agent on the earliest date after such selection on which such Bonds are presented to the Registrar and Paying Agent for purchase, endorsement, exchange or transfer. Section 3.02. Notice of Redemption. (a) Optional Redemption, Extraordinary Optional Redemption and Redemption upon Deposit of Net Proceeds. At the written direction of Authorized Officers of the Borrower and NHC made in accordance with Article VII of the Loan Agreement, the Registrar and Paying Agent shall, but, as long as a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor a demand for funds made under the Credit Facility, only with the written consent of the Credit Facility Provider, given notice in the name of the Issuer of the redemption of Bonds in accordance with Section 6(a), 6(b) or 6(e) of the Bonds. Each such notice shall be given by the Registrar and Paying Agent within five Business Days of receipt of such direction from the Borrower and NHC, or such fewer number of days as shall be acceptable to the Registrar and Paying Agent. (b) Mandatory Sinking Fund Redemption. At least 30 days before each date on which a Sinking Fund Installment for the Bonds becomes due, the Registrar and Paying Agent shall give notice in the name of the Issuer of the redemption of Bonds in accordance with Section 6(c) of such Bonds. - 24 - • (c) Mandatory Redemption upon Determination of Taxability. If, prior to the date on which the lien of this Indenture is discharged in accordance with Article IX hereof, the Trustee receives written notice from any holder or former holder of a Bond stating that (i) such holder or former holder has been notified in writing by the Internal Revenue Service that for any reason the interest on such Bond is includable in the gross income of such holder or former holder (other than during any period in which such holder or former holder is or was a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code) and (ii) such holder or former holder will afford the Borrower the opportunity to contest the same either directly or in the name of such holder or former holder, and until conclusion of any appellate review, if sought, the Trustee shall promptly give notice thereof to the Borrower, NHC, the Issuer, the Registrar and Paying Agent, the Remarketing Agent and the Credit Facility Provider and the Registrar and Paying Agent shall thereupon give notice thereof to the owner of each Bond then outstanding. The Trustee shall thereafter coordinate any similar notices it may receive from other Bondholders and shall keep informed of the progress of any administrative proceedings or litigation. Upon the occurrence of a Determination of Taxability (as defined in Section 6(d) of the Bonds) and upon receipt of written notice from an Authorized Officer of the Borrower that the Borrower will fulfill its obligation to prepay the Loan Agreement, the Trustee shall, with the written consent of NHC, direct the Registrar and Paying Agent to give notice of the redemption of Bonds, which redemption shall be effected on a Business Day designated in such notice from the Borrower within 60 days after the receipt by the Borrower of notice of such Determination of Taxability. If no such notice from the Borrower is received, such redemption shall be effected on the last Business Day that is not more than 60 days after the receipt by the Borrower of notice of such Determination of Taxability. The Trustee shall direct the Registrar and Paying Agent to give notice of such redemption 35 days before the redemption date. If there is delivered to the Trustee an opinion of Bond Counsel to the effect that, if fewer than all of the Bonds are redeemed, the interest payable on the Bonds remaining outstanding will not be includable in the gross income of any holders thereof for federal income tax purposes (other than during any period in which any such holder is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code), only the Bonds, or the aggregate principal amount of Bonds (as the case may be), specified in such opinion shall be redeemed. (d) Timing and Content of Redemption Notices. Each notice of redemption shall be given by the Registrar and Paying Agent to the Bondholders by telephone, telex or other electronic transmission one (1) Business Day before the redemption date of any Credit Facility Bonds or mailed in accordance with the terms of the Bonds at least 30 days before the redemption date of any other Bonds and shall set forth: (i) the date fixed for redemption; (ii) the Redemption Price to be paid; (iii) that such Redemption Price will be paid in accordance with Section 5 of the Bonds; (iv) in the case of Bonds to be redeemed in part only, the potion - 25 - • of the principal amount thereof to be redeemed; and (v) that on the date fixed for redemption, there shall become due and payable upon all Bonds to be redeemed the Redemption Price thereof, together with interest accrued to the date fixed for redemption, and that, from and after such date, interest thereon shall cease to accrue. If any Bond is to be redeemed in part only, the notice of redemption that relates to such Bond shall state also that on or after the date fixed for redemption, upon surrender of such Bond to the Registrar and Paying Agent, the holder will be entitled to a new Bond or Bonds, bearing interest at the same rate and of any denomination authorized by this Indenture, in aggregate principal amount equal to the unredeemed portion of the principal amount of such Bond. Section 3.03. Redemption of Portion of Bond. In case part but not all of a Bond shall be selected for redemption, upon the presentation and surrender of such Bond to the Registrar and Paying Agent for payment of the principal amount thereof so called for redemption in accordance with such Bond, the Issuer. shall execute and the Registrar and Paying Agent shall authenticate and deliver to or upon the order of the owner of such bond or his attorney - in - fact or legal representative, without charge therefor, a Bond or Bonds, bearing interest at the same rate and of any denomination authorized by this Indenture, in aggregate principal amount equal to the unredeemed portion of the principal amount of the Bond so surrendered. Section 3.04. Optional and Mandatory Tender of Bonds. (a) Notice of Optional Tender Dates. The Registrar and Paying Agent shall give notice to the Trustee, the Remarketing Agent, the Borrower, NNC and the Credit Facility Provider by telephone, telex or other electronic transmission (confirmed in writing in the case of any oral notice) of each Optional Tender Notice received by the Registrar and Paying Agent, which notice shall specify the principal amount of the Bonds to be purchased and the Optional Tender Date. (b) Notice of Conversion Dates and Termination Dates. The Trustee shall give written notice to the Registrar and Paying Agent, the Remarketing Agent and each of the Rating Agencies of each Termination Date at least 40 days before such date. The Registrar and Paying Agent shall mail in accordance with the terms of the Bonds a notice to each holder of a Bond (other than the Credit Facility Provider) at least 35 days before each Mandatory Tender Date stating: (i) if the Mandatory Tender Date is a Conversion Date (A) that the interest rate on the bonds will be converted from the Fixed Rate to the Variable Rate or that one or more Fixed Rate Periods are to be established (as the case may be) on such Conversion Date; (B) the Interest Payment Dates after such Conversion Date; (C) the basis on which the interest borne by the Bonds will be calculated after such Conversion Date; (D) the conditions set forth in Section 2.03(c) hereof under which the conversion of interest rate will be automatically rescinded and the interest rates that will be 26 - • established for the Bonds upon such automatic rescission as set forth in such Section 2.03(c), including the information with respect to such interest rates that would have been set forth in clauses (B), (C) and, if applicable, (F)(1)-(4) of this clause (i); (E) the conditions precedent for the conversion of interest rate as set forth in Section 2.03 hereof and that they have been met; and (F) if one or more Fixed Rate Periods will be established (1) the length of the immediately succeeding Fixed Rate Period including the first day of such Fixed Rate Period; last day of such Fixed Rate Period if followed by a Long Fixed Rate Period and the last day of such Fixed Rate Period if not followed by a Long Fixed Rate Period, (2) if a Long Fixed Rate Period is to be established, the preliminary interest rate or rates for the Bonds determined by the Remarketing Agent, (3) that after such Conversion Date, the Bonds may not be tendered for purchase at the option of the holders thereof as provided in Section 7(a) of such Bonds, (4) that the bonds will be subject to mandatory tender on the day following the last day of such Fixed Rate Period, (5) if the Registrar and Paying Agent has selected Bonds for redemption from one or more of the Sinking Fund Installments becoming due during such Fixed Rate Period, the numbers of the Bonds selected to be redeemed from each such Sinking Fund Installment, and (6) that under certain circumstances, the Borrower may rescind its election to establish such Fixed Rate Period prior to the Computation Date, in which event the Bonds will continue to bear interest at the Variable Rate or, if a Fixed Rate Period is then in effect, a new Fixed Rate Period will be established having the same number of months as the Fixed Rate Period then ending if such Fixed Rate Period was shorter than 12 months and otherwise having 12 months (as the case may be), and if a new Long Fixed Rate Period would be established, the interest rate preliminarily determined for such Fixed Rate Period by the Remarketing Agent; (ii) if the Mandatory Tender Date is a Termination Date (A) that the Credit Facility then in effect will expire and the date on which it will expire; (B) that after such date, the Bonds will no longer be secured by a Credit Facility or, if an Alternate Credit Facility has been provided, that such Alternate Credit Facility has been provided; and (C) the ratings, if any, that will be borne by the Bonds after such Termination Date, or if such ratings are not available, that the ratings, if any, then borne by the Bonds are expected to be reduced or withdrawn; (iii) that the holder of any Bond may elect not to tender and sell such Bond or any portion thereof on any Mandatory Tender Date, if such Bond or such portion thereof is in a denomination that will be authorized after the Mandatory Tender Date, by delivering to the Registrar and Paying Agent, 27 • not later than the tenth day of the calendar month preceding such Mandatory Tender Date (or, if such day is not a Business Day, the immediately preceding Business Day), a Non -Tender Notice in accordance with such Bond, which shall be irrevocable and shall (A) state that the holder elects not to tender and sell such Bond or portion thereof; (B) acknowledge each of the matters referred to in such Mandatory Tender Notice; and (C) contain the agreement of the holder not to tender such Bond for purchase pursuant to Section 7(a) of such Bond on or before such Mandatory Tender Date, which agreement will be irrevocable; (iv) that all Bonds (except Credit Facility Bonds and Bonds with respect to which a Non -Tender Notice is properly delivered) must be tendered for purchase at or before 10:00 a.m., New York Time, on such Mandatory Tender Date to the Registrar and Paying Agent with an instrument of transfer satisfactory to the Registrar and Paying Agent executed in blank by the registered owner with the signature guaranteed by a bank, trust company or member firm of the New York Stock Exchange, and that Bonds so tendered will be purchased on such Mandatory Tender Date at a purchase price equal to the principal amount thereof plus accrued interest thereon; and (v) that if there shall be on deposit with the Trustee an amount sufficient to pay the purchase price of the Bonds on such Mandatory Tender Date, the Bonds (other than Bonds with respect to which a Non -Tender Notice is properly delivered) will be deemed to have been purchased on such Mandatory Tender Date and shall cease to bear interest as of such Mandatory Tender Date whether or not such Bonds are tendered to the Registrar and Paying Agent on such date and that the holders of such Bonds shall have no rights with respect thereto or under this Indenture except to receive the purchase price of such Bonds. The Registrar and Paying Agent shall give notice to the Remarketing Agent and the Credit Facility Provider on or before the second Business Day following the tenth day of the calendar month preceding any Mandatory Tender Date of the aggregate principal amount of Bonds to be remarketed on such Mandatory Tender Date, which shall be equal to the aggregate principal amount of Bonds Outstanding on such Mandatory Tender Date, less the sum of (i) the aggregate principal amount of Bonds Outstanding with respect to which Non -Tender Notices meeting the requirements of this Indenture have been timely received by the Registrar and Paying Agent and (ii) the aggregate principal amount of Bonds to be redeemed on such date or purchased from amounts on deposit in the Purchase Account. (c) Purchase of Bonds. The Purchase Price of Bonds tendered for purchase on each Tender Date shall be paid from the following sources in the following order of priority: - 28 - CU First: from amounts on deposit in the Purchase Account, if the Registrar and Paying Agent shall have notified the Remarketing Agent at least 21 days before such Tender Date that such amounts are available to be applied to the payment of the principal portion of the purchase price of Bonds tendered for purchase on such Tender Date (the accrued interest on such Bonds to be paid from moneys realized by the Registrar and Paying Agent under the Credit Facility); Second: from proceeds of the remarketing of Bonds received by the Registrar and Paying Agent; Third: from any other amount on deposit in the Purchase Account; Fourth: from moneys realized by the Registrar and Paying Agent under the Credit Facility; and Fifth: from any other moneys made available by the Trustee to the Registrar and Paying Agent for such purpose. (d) Disposition of Bonds. Bonds tendered to the Registrar and Paying Agent on any Tender Date shall be registered and made available by the Registrar and Paying Agent as follows: (i) Bonds remarketed by the Remarketing Agent shall be exchanged for other Bonds, as necessary to correspond to the denominations in which such Bonds have been sold by the Remarketing Agent, shall be registered in the names of the purchasers thereof made available to such purchasers in accordance with the directions of the Remarketing Agent; (ii) Bonds the principal portion of the purchase price of which shall have been paid by the Registrar and Paying Agent from amounts realized under the Credit Facility shall be registered and made available at the direction of the Credit Facility Provider; and (iii) Bonds the principal portion of the purchase price of which shall have been paid by the Registrar and Paying Agent from any other moneys shall be registered in the name and made available at the direction of the Borrower. (e) Purchased Bonds Not Discharged. Anything in this Indenture to the contrary notwithstanding, Bonds purchased by the Registrar and Paying Agent in accordance with this Section with proceeds of the remarketing of Bonds by the Remarketing Agent or amounts realized under the Credit Facility shall not be deemed to have been redeemed, paid or discharged pursuant to this Indenture. (f) Non -Delivery of Bonds. If any Bond (other than any Bond with respect to which a Non -Tender Notice is properly delivered) is not - 29 - delivered to the Registrar and Paying Agent on any Tender Date, the Registrar and Paying Agent shall register the transfer of such Bond to the purchaser thereof and shall authenticate and deliver a new Bond or Bonds in accordance with the provisions of paragraph (d) of this Section, notwithstanding such nondelivery. (g) Remarketing of Credit Facility Bonds. On any date on which the Registrar and Paying Agent receives notice from the Remarketing Agent that the Remarketing Agent has successfully remarketed any Credit Facility Bonds, the Registrar and Paying Agent shall give notice thereof to the Credit Facility Provider. The Registrar and Paying Agent shall not register the transfer of or deliver any Bonds exchanged for any Credit Facility Bonds so remarketed until it shall have received written notice from the Credit Facility Provider, including, without limitation, notice by telex or other electronic transmission that leaves a written record that the Credit Facility Provider has received all amounts required for the reinstatement of the amount available to be realized tinder the Credit Facility, and has reinstated the amount available to be realized under the Credit Facility, by the sum of (i) the amount by which the amount available to be realized under the Credit Facility was reduced in connection with the purchase of the Bonds so remarketed with amounts realized under the Credit Facility and (ii) if the Maximum Rate has been increased in accordance with Section 2.03 hereof while such Bonds were Credit Facility Bonds, any additional amount to be reinstated in accordance with the provisions of such Credit Facility that were required to comply with the provisions of Section 2.03(h) hereof. - 30 - • ARTICLE IV Revenues and Funds Section 4.01. Creation of Funds and Accounts. The following funds and separate accounts within the funds are hereby created for the Bonds and shall be held and maintained for the holders of the Bonds and, to the extent provided herein, the Credit Facility Provider by the Trustee under this Indenture: Revenue Fund; Debt Servic,, Fund: Interest Account; Principal Account.; Purchase Account; and Rebate Fund The complete designation of each such fund or account shall consist of the words "Indian River County, Florida, Revenue Refunding Bonds, Florida Convalescent Centers Series 198- " preceding the name of such fund or account. The Debt Service Fund shall be held in the custody of the Registrar and Paying Agent in trust for the benefit of the holders of the Bonds and, to the extent provided herein, the Credit Facility Provider; provided, however, that upon the occurrence of an Event of Default, the Debt Service Fund shall be transferred to the Trustee upon the request of the Trustee. For the purposes of internal accounting, any fund or account created by this Indenture may contain one or more subaccounts, as the Trustee may deem proper. Section 4.02. Application of Proceeds of Bonds. The proceeds of the Bonds shall be received by the Trustee on behalf of the Issuer and held by the Trustee in trust for the holders from time to time of the Bonds subject to and in accordance with the terms and conditions of this Indenture. Upon receipt of a certificate from the trustee (the "Prior Bonds Trustee") under the Indenture of Trust dated as of August 1, 1986 (the "Prior Bonds Indenture") authorizing the issuance of the Issuer's $4,800,000 Industrial Development Revenue Bond Series 1986 (Florida Convalescent Centers, Inc. Project (the "Prior Bonds") to the effect that upon transfer to it of $4,800,000, the Prior Bonds Indenture will be discharged and the Prior Bonds will be deemed paid and discharged in accordance with their terms and the Prior Bonds Indenture, the Trustee shall immediately pay over and disburse to the Prior Bonds Trustee the $4,800,000 constituting the proceeds from the sale of the Bonds. Section 4.03. Bonds Not to be Arbitrage Bonds. The Issuer covenants that it will not make, or (to the extent it exercises control or direction) permit to be made, any use of the proceeds of the Bonds, or of any moneys, securities or other obligations that may be deemed to be 31 proceeds of the Bonds (collectively, "Bond Proceeds") within the meaning of Section 148 of the Code that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148. To the extent that provisions of Section 148 apply only to a portion of the Bonds, it is intended that the covenant of the Issuer contained in this paragraph be construed so as only to require the Issuer to comply with Section 148 to the extent of such applicability. The Trustee and the Registrar and Paying Agent shall hold and invest Bond Proceeds within their control in accordance with directions of the Borrower and NHC as set forth in Section 4.06 hereof; provided, however, that, as set forth in Section 4.06 hereof, the Registrar and Paying Agent may, at its option, hold any moneys uninvested despite such directions. If the Issuer is of the opinion upon receipt of advice of Bond Counsel that it is necessary to restrict or limit the yield on the investment of any Bond Proceeds in order to prevent the Bonds from being "arbitrage bonds" within the meaning of Section 148 and the arbitrage regulations, the Issuer shall take such action as is necessary to restrict or limit the yield on such investment in accordance with such opinion, irrespective of whether the Borrower or NHC is of the same or a different opinion. Upon the request of the Borrower, consented to in writing by NHC, and receipt of advice of Bond Counsel the Issuer may, and upon receipt of an approving ruling from the Internal Revenue Service or a decision of a court of competent jurisdiction the Issuer shall take such action as is necessary to remove or modify a restriction or limitation on the yield on the investment of any Bond Proceeds that was formerly deemed necessary. Neither the Issuer nor the Trustee nor the Registrar and Paying Agent shall incur any liability in connection with any action as contemplated herein so long as each acts in good faith. Upon receipt of written directions from the Borrower given in accordance with the Tax Certificate and Agreement executed and delivered by the Borrower on the date of initial delivery of the Bonds directing the transfer of amounts on deposit in any fund or account created by this Indenture to the Rebate Funds, consented to in writing by NHC, the Trustee or the Registrar and Paying Agent (as the case may be) shall make the transfer referred to therein, any other provision of this Indenture to the contrary notwithstanding; provided, however, that proceeds of the remarketing of Bonds and amounts realized under the Credit Facility shall be applied solely to the payment of the principal or Redemption Price of and interest on, or the purchase price of, Bonds secured by the Credit Facility. Amounts on deposit in the Rebate Fund from time to time regviired to be rebated to the United States of America pursuant to Section 148 of the Code shall be applied by the Trustee to the payment of such rebates in accordance with the Arbitrage Compliance Agreement and shall not be pledged to the payment of the principal or Redemption Price of or interest on, or the purchase price of, the Bonds or amounts due under the Credit Facility Agreement. - 32 - 77 Section 4.04. Deposit of Revenues: Deposit of Certain Proceeds. (a) Subject to the provisions or paragraphs (b), (c), (d) and (e) of this Section and of Section 7.04 hereof, Revenues received by the Trustee in each month shall be deposited in the Revenue Fund and shall be transferred, immediately upon receipt thereof, as follows and in the following order of priority: First: to the Interest Account, the amount, if any, necessary to make the amount then on deposit in the Interest Account and available for the payment of such interest equal to the interest payable on the Bonds (other than Credit Facility Bonds) on the next succeeding date on which interest is due on the Bonds (other than Credit Facility Bonds); and econd: to the Principal Account, the amount, if any, necessary to make the amount on deposit in the Principal Account and available for the payment of such principal equal to the principal payable on the Bonds (other than Credit Facility Bonds) on the next succeeding date on which principal is due on the Bonds (other than Credit Facility Bonds) whether at maturity, by redemption or otherwise. After making the payments required above, any balance remaining on any date shall be paid to the Principal Account. (b) Subject to the provisions of paragraph (e) of this Section, voluntary payments made by the Borrower to the Trustee in accordance with Article VII of the Loan Agreement shall be deposited in the Principal Account by the Trustee on the date of receipt thereof. (c) Amounts realized under the Credit Facility shall be applied in accordance with Section 4.07 hereof. (d) The Registrar and Paying Agent shall deposit in the Purchase Account upon receipt the proceeds of the remarketing of Bonds (other than the proceeds of any remarketing of Credit Facility Bonds, which shall be paid directly to the Credit Facility Provider), amounts realized by the Registrar and Paying Agent under the Credit Facility for the payment of all or any portion of the purchase price of any Bonds on any Tender Date and, if the Credit Facility Provider fails to honor any draft drawn under the Credit Facility in accordance with the terms thereof, all amounts paid by the Borrower to the Trustee for the payment of all or any portion of the purchase price of Bonds on the Tender Dates. (e) Notwithstanding the foregoing provisions of this Section, as long as a Credit Facility is in effect, Revenues received by the Trustee that do not constitute Available Moneys shall be retained in the Revenue Fund until such amounts become Available Moneys, after which such amounts shall be transferred by the Trustee in accordance with the provisions of this Section. - 33 - (f) The Trustee shall deliver to the Borrower prior to any date on which the Borrower is obligated pursuant to Section 3.02 of the Loan Agreement to pay to the Trustee amounts in respect of the principal or Redemption Price of or interest on, or the purchase price of, any Bonds a notice specifying the amounts becoming due on the Bonds on such date; provided, however, that the failure of the Trustee to deliver such notice or any defect in such notice shall not relieve the Issuer from any of its obligations hereunder or the Borrower from any of its obligations under the Loan Agreement. Section 4.05. Debt Service Fund: Application of Moneys. (a) On each Interest Payment Date, on the redemption or maturity date of any Bonds and on any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with Section 7.02 or 7.12 hereof, the Registrar and Paying Agent shall pay the interest due on such Bonds on such date from amounts on deposit in the Interest Account. (b) On each Tender Date, the Registrar and Paying Agent shall pay the purchase price of Bonds required to be purchased on such date from amounts on deposit in the Purchase Account. (c) On each date on which the principal or Redemption Price of any Bonds becomes due and payable, the Registrar and Paying Agent shall pay such principal or Redemption Price from amounts on deposit in the Principal Account. (d) Upon the request of the Borrower, with the written consent of NHC, the Registrar and Paying Agent shall transfer to the Purchase Account Available Moneys on deposit in the Principal Account that are not required to pay the Redemption Price of Bonds theretofore called for redemption or the purchase price of Bonds theretofore contracted to be purchased in an amount equal to a denomination in which the Bonds are then authorized to be outstanding and to apply the amount- so transferred to the purchase of Bonds tendered for purchase on any Tender Date. Upon receipt of any such request, the Registrar and Paying Agent shall give written notice to the Remarketing Agent of the amount of Available Moneys to be applied to the purchase of Bonds in accordance with this paragraph. During any period in which no Credit Facility is in effect, at the request of the Borrower, the Registrar and Paying Agent shall endeavor to purchase Bonds from amounts on deposit in the Principal Account for the most advantageous price then obtainable with reasonable diligency; provided, however, that no such purchase shall be made by the Trustee (i) within a period of 45 days immediately preceding any January 1, except from moneys other than the moneys set aside or deposited for the payment of the Sinking Fund Installment due on such date or (ii) at a price, including any brokerage or other charges, greater than the principal amount thereof and accrued interest thereon. Notwithstanding the foregoing provisions of this paragraph, if particular Bonds shall have been previously selected for redemption from the Sinking Fund Installment due on any date, no transfer referred to in this paragraph shall be made 34 do unless after such transfer, there shall remain on deposit in the Principal Account an amount equal to the aggregate principal amount of such Bonds outstanding to be redeemed on the immediately succeeding January 1. (e) Notwithstanding the foregoing provisions of this Section, so long as the Credit Facility shall be in effect (i) unless the Credit Facility Provider shall have wrongfully failed to honor a demand for funds under the Credit Facility, no moneys shall be deposited in the Debt Service Fund except moneys that constitute Available Moneys and (ii) no amount on deposit in the Debt Service Fund shall be applied to the payment of the principal or Redemption Price of or interest on, or the purchase price of, Credit Facility Bonds, which payments shall be made by the Borrower for the account of the Issuer directly to the Credit Facility Provider in accordance with the Loan Agreement. Section 4.06. Investment of Moneys. Moneys in any of the funds and accounts established pursuant to this Indenture shall be invested by the Trustee or the Registrar and Paying Agent (as the case may be) as shall be directed by the Borrower and NHC in a written order signed by Authorized Officers of the Borrower and of NHC, but only in Investment Obligations maturing or redeemable at the option of the holder in such amounts and on such dates as may be necessary to provide moneys to meet the payments from such funds and accounts; provided, however, that so long as the Credit Facility is in effect, amounts on deposit in the Debt Service Fund shall be invested only in Government Obligations maturing or redeemable at par at the option of the holder not more than 30 days after the date of purchase; and provided further that the Registrar and Paying Agent may, at its sole option, hold any moneys held by it under this Indenture uninvested, and noticing contained in this Indenture shall be construed to obligate the Registrar and Paying Agent to invest such moneys at the direction of the Borrower and NHC or otherwise. Interest earned, profits realized and losses suffered by reason of any investment of the funds and accounts created by this Indenture shall be credited or charged, as the case may be, to the fund or account for which such investment shall have been made. The Trustee and the Registrar and Paying Agent may sell or redeem any obligations in which moneys shall have been invested as in this Section provided to the extent necessary to provide cash in the respective fund or accounts, to make any payments required to be made therefrom or to facilitate the transfers of money between various funds and accounts as may be required or permitted from time to time pursuant to the provisions of this Article. In computing the value of the assets of any fund or account established hereunder, investments and accrued interest thereon shall be deemed a part thereof. Such investments shall be valued at amortized cost or current market value, whichever is the lower, or at the redemption price thereof, if then redeemable at the option of the holder (in any case net of the cost of liquidating such investments). - 35 - Neither the Trustee nor the Registrar and Paying Agent shall be liable for any depreciation in the value of any obligations or securities in which moneys of the funds or accounts created by this Indenture shall be invested as aforesaid, or for any loss arising from any investment permitted hereby. The investments authorized by this Section shall at all times be subject to the provisions of applicable law, as amended from time to time. Section 4.07. Realization of Funds under Credit Facility. (a) On each Interest Payment Date, on the maturity or redemption date of any Bonds and on any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with Section 7.02 or 7.12 hereof, the Registrar and Paying Agent (acting as the agent of the Trustee) shall draw a draft under the Credit Facility (or take such other steps as shall be necessary to realize funds thereunder), to the extent permitted thereby, in an amount calculated by the Registrar and Paying Agent to be equal to the interest due on the Bonds (other than Credit Facility Bonds) on such date, less the amount of Available Moneys on deposit in the Interest Account available for the payment of such interest on such date, which drawing shall be made or steps taken in sufficient time, as indicated in the Credit Facility, to permit the Registrar and Paying Agent to realize such amount on such date. The amount so drawn shall be deposited in the Interest Account and held in a separate subaccount therein apart from all other moneys on deposit therein. (b) On each Tender Date, the Registrar and Paying Agent (acting as the agent of the Trustee) shall draw a draft under the Credit Facility (or take such other steps as shall be necessary to realize funds thereunder), to the extent permitted thereby, in an amount calculated by the Registrar and Paying Agent to be equal to the Purchase Price of Bonds (other than Credit Facility Bonds) to be purchased on such Tender Date that have not been successfully remarketed by the Remarketing Agent, less the amount of Available Moneys on deposit in the Purchase Account available for the payment of the purchase price of such Bonds due on such date, which drawing shall be made or steps taken in sufficient time, as indicated in the Credit Facility, to permit the Registrar and Paying Agent to realize funds on such Tender Date in the amount required to pay such purchase price. The amount so drawn shall be deposited in the Purchase Account and held in a separate subaccount therein apart from all other moneys on deposit therein. (c) On each redemption date of the Bonds, the Registrar and Paying Agent (acting as the agent of the Trustee) shall draw a draft under the Credit Facility (or take such other steps as shall be necessary to realize funds thereunder), to the extent permitted thereby, in an amount calculated by the Registrar and Paying Agent to be equal to the Redemption Price of the Bonds (other than Credit Facility Bonds) due on such date, less the amount of Available Moneys on deposit in the Principal Account available for the payment of such Redemption Price on such date, which drawing shall be made or steps taken in sufficient time, as indicated in 36 40 the Credit Facility, to permit the Registrar and Paying Agent to realize such amount on such date. The amount so drawn shall be deposited in the Principal Account and held in a separate subaccount therein apart from all other moneys on deposit therein. (d) On the maturity date of the Bonds and on any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with Section 7.02 or 7.12 hereof, the Trustee or the Registrar and Paying Agent (acting as its agent) shall draw a draft under the Credit Facility (or take such other steps as shall be necessary to realize funds thereunder), to the extent permitted thereby, in an amount calculated by the Trustee or the Registrar and Paying Agent (acting as its agent) to be equal to the principal amount of the Bonds (other than Credit Facility Bonds) due on such date, less the amount of Available Moneys on deposit in the Principal Account available for the payment of such principal on such date, which drawing shall be made or steps taken in sufficient time, as indicated in the Credit Facility, to permit the Trustee or the Registrar and Paying Agent (acting as its agent) to realize such amount on such date. The amount so drawn shall be deposited in the Principal Account and held in a separate subaccount therein apart from any other moneys on deposit therein. - 37 - • ARTICLE V Particular Covenants Section 5.01. Payment of Bonds. The Issuer shall pay or cause to be paid the principal or Redemption Price of and interest on, and the purchase price of, every Bond on the date, at the place and in the manner provided herein and in the Bonds; provided, however, that the Bonds are limited obligations of the Issuer, the principal or Redemption Price of and interest on which, and the purchase price of which, are payable solely from the Revenues. The Bonds shall be secured by a lien on and pledge of the Revenues. The Bonds shall not be deemed to constitute a debt, liability or obligation of the Issuer or of the State or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer or of the State or of any such political subdivision but shall be payable solely from the Revenues. The Issuer shall not be obligated to pay the Bonds or the interest thereon except from the Revenues and neither the faith and credit nor the taxing power of the Issuer or of the State or of any political subdivision thereof is pledged to the payment of the principal of or the interest on the Bonds. Section 5.02. Performance of Covenants. Undertakings and Agreements: Representations as to Authorization and Validity of Bonds. The Issuer shall faithfully perform at all times all of its covenants, undertakings and agreements contained in the Loan Agreement or in each Bond executed, authenticated and delivered under this Indenture and in any proceedings of the Issuer pertaining thereto. The Issuer represents and covenants that: (i) it is duly authorized under the Constitution and laws of the State, particularly the Act, to issue the Bonds, to enter into the Loan Agreement, to accept the Mortgage and to pledge the Revenues in the manner and to the extent set forth in this Indenture; (ii) all action on its part for the issuance of the Bonds has been duly and effectively taken; and (iii) the Bonds in the hands of the holders thereof are and will he valid and binding limited obligations of the Issuer according to their terms. Section 5.03. Liens. Encumbrances and Charges. The Issuer shall not create and, to the extent Revenues are received for the discharge thereof, shall not suffer to remain, any lien, encumbrance or charge upon the Revenues. To the extent Revenues or other moneys are received by the Issuer therefor, the Issuer will cause to be discharged, or will make adequate provisions to satisfy and discharge, within sixty (60) days after the same shall accrue, all lawful claims and demands that, if unpaid, might by law become a lien upon any Revenues; provided, however, that nothing contained in this Section shall require the Issuer to pay or cause to be discharged, or make provision for, any such lien, encumbrance or charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. - 38 - 40 The Issuer shall not create or cause to be created any lien or charge on the Revenues, other than the lien on and pledge of the Revenues authorized by this Indenture. Section 5.04. Maintenance of Existence: Compliance with Law. The Issuer will at all times maintain its corporate existence or assure the assumption of its obligations under this Indenture by any public body succeeding to its powers under the Act; it will use its best efforts to maintain, preserve and renew all the rights and powers provided to it by the Act; and it will comply with all valid laws, rules, regulations, judgments and decrees of any legislative, executive, administrative or judicial body applicable to this Indenture, the Loan Agreement and the transactions contemplated hereby and thereby. Section 5.05. Enforcement of Obligations of Borrower. A t t h e direction of the Trustee, the Issuer will participate in the enforcement of any obligation of the Borrower to pay, or cause to be paid, all the payments and other costs and charges payable by the Borrower under the Loan Agreenent and to perform, or cause to be performed, all of the covenants and obligations of the Borrower under the Loan Agreement. The Issuer shall have no obligation to take any such action except to the extent so directed by the Trustee and unless indemnified to the Issuer's satisfaction against all costs, expenses and liabilities that may be incurred by it in taking such action. The Issuer agrees that the Trustee in its own name or in the name of the Issuer may enforce all rights of the Issuer and all obligations of the Borrower under and pursuant to the Loan Agreement for and on behalf of the Bondholders, whether or not the Issuer is in default hereunder. Section 5.06. Financing Statements. The Issuer covenants that appropriate financing statements, naming the Trustee as assignee of the accounts, contract rights and general intangibles represented by the Loan Agreement, will be executed by the Issuer and delivered to the Trustee for filing in the appropriate state and county offices as would be required by the provisions of the Uniform Commercial Code in effect in the State, as amended. The Trustee shall file such necessary continuation statements from time to time as may otherwise be required pursuant to the provisions of such Uniform Commercial Code to protect the interest of the Trustee and the Bondholders. Such continuation statements shall be executed by the Trustee and (if required by law) by the Issuer at the directing of the Trustee. Section 5.07. Credit Facility: Substitute Credit Facilities. (a) The Trustee in its name or in the name of the Issuer shall enforce all rights of the Trustee and all obligations of the Credit Facility Provider under and pursuant to the Credit Facility for the benefit of the Bondholders (including, without limitation, the obligation of the Credit Facility Provider to honor drafts duly presented in accordance with the terms of the Credit Facility), whether or not the Issuer is in default hereunder. The Trustee shall not assign or transfer .. 39 - r-. the Credit Facility except to any successor Trustee under this Indenture, except that the Trustee may transfer its rights to make drawings under the Credit Facility to the Registrar and Paying Agent. The Registrar and Paying Agent shall not transfer its rights to make drawings under the Credit Facility to any person other than the Trustee. (b) The Borrower, with the written consent of NHC, may at any time and from time to time deliver to the Trustee a Qualified Credit Facility or an Alternate Credit Facility subject to and in accordance with the provisions of Section 3.03 of the Loan Agreement. Upon the effective date of any such substitute Qualified Credit Facility or Alternate Credit Facility, the Trustee shall surrender the Credit Facility in effect prior to the delivery of such substitute Credit Facility, if any, to the provider thereof. (c) If any Credit Facility shall be delivered to the Trustee in accordance with this Section, the Trustee shall immediately notify the Registrar and Paying Agent thereof and, in the case of the delivery of any Alternate Credit Facility, the Registrar and Paying Agent shall mail a Mandatory Tender Notice to the Bondholders in accordance with Section 3.04 hereof. Section 5.08. Bonds Not to be Purchased by Issuer on Tender Dates. The Issuer shall not purchase or attempt to purchase, or permit any of its affiliates or agents to purchase or attempt to purchase any Bonds tendered for purchase on any Tender Date applicable to such Bonds. - 40 - s ARTICLE VI Concerning the Trustee Section 6.01. Trustee Entitled to Indemnity. The Trustee shall be under no obligation to institute any suit, or to undertake any proceeding under this Indenture, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall be indemnified to its satisfaction against any and all costs and expenses, outlays and counsel fees and other reasonable disbursements, and against all liability. The Trustee may, nevertheless, begin suit, or appear in and defend suit, or do anything else in its judgment proper to be done by it as the Trustee, without indemnity, and in such case the Issuer shall reimburse the trustee from the Revenues for all cost and expenses, outlays and counsel fees and other reasonable disbursements properly incurred in connection therewith. If the Issuer shall fail to make such reimbursement, the Trustee, upon at least five (5) days' prior written notice to the Borrower, may reimburse itself from any moneys in its possession under the provisions of this Indenture (other than amounts on deposit in the Debt Service Fund so long as the Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor any demand for funds under the Credit Facility) and shall be entitled to a preference therefor over any Bonds Outstanding hereunder. Section 6.02. Responsibilities of Trustee. The recitals contained in this Indenture and in the Bonds shall be taken as the statements of the Issuer or the Borrower (as the case may be) and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Bonds or in respect of the security afforded by this Indenture, and the Trustee shall incur no liability in respect thereof. Except as otherwise provided herein, the Trustee shall be under no responsibility or duty with respect to: (i) the issuance of the Bonds for value; (ii) the application of the proceeds thereof except to the extent that such proceeds are received by it in its capacity as Trustee; or (iii) the application of any moneys paid to the Issuer or others in accordance with this Indenture except as to the application of any moneys paid to it in its capacity as Trustee. The duties and obligations of the Trustee shall be determined by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture. During the existence of any Event of Default- that has not been cured the Trustee shall exercise any of the rights and powers vested in it by this Indenture. At all times the Trustee shall use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. - 41 - 0 The Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture except for its own willful misconduct or negligence. Notwithstanding any provision of this Indenture, except as specifically provided in this Indenture, the Trustee shall have no duty, obligation or responsibility to monitor the activities or actions of the Registrar and Paying Agent and shall have no liability whatsoever for any negligence or misconduct of the Registrar or Paying Agent in connection with its duties hereunder whether or not the Registrar and Paying Agent is acting as agent of the Trustee hereunder. Section 6.03. Evidence on which Trustee May Act. The Trustee may rely conclusively, and shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Indenture, upon any resolution, order, notice, request, consent, waiver, certificate, statement, affidavit, requisition, bond or other paper or document that it shall in good faith reasonably believe to be genuine and to have adopted or signed by the proper board or person or to have been prepared and furnished pursuant to any of the provisions of this Indenture, or upon the written opinion of any counsel, architect, engineer, insurance consultant, management consultant or accountant reasonably believed by the Trustee to be qualified in relation to the subject matter, and the Trustee shall be under no duty to make any investigation or inquiry into any statements contained or matters referred to in any such instrument. The Trustee shall not be under any obligation to see to the recording or filing of this Indenture, or otherwise to the giving to any person of notice of the provisions hereof except as expressly required in connection with this Indenture or Loan Agreement. Except as other wise provided in this Indenture, any request, notice, certificate or other instrument from the Issuer, the Borrower or NRC, to the Trustee shall be deemed to have been signed by the proper party or parties if signed by an Authorized Officer of the Issuer, the Borrower or NHC, as the case may be, and the Trustee may accept and rely upon a certificate signed by an Authorize Officer (i) of the Issuer, as to any action taken by the Issuer, (ii) of the Borrower, as to any action taken by the Borrower and (iii) of NHC, as to any action taken by NHC. The Trustee may consult with counsel, who may or may not be Bond Counsel or counsel to the Issuer, the Borrower, NHC or the Credit Facility Provider, and the opinion of such counsel with respect to matters of law shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. Whenever the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under this Indenture, unless other evidence in respect thereof be hereby specifically prescribed, such matter may be deemed to be conclusively proved and established by a certificate signed by an Authorized Officer of 42 w the Issuer. Such certificate shall be full warrant for any action taken or suffered in good faith under the provisions hereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as it may deem reasonable. Section 6.04. Compensation. Unless otherwise provided by contract with the Trustee, the Issuer shall pay to the Trustee, from time to time, reasonable compensation for all services rendered by it hereunder, together with all of its reasonable expenses, charges, counsel fees and other disbursements and those of its counsel, agents and employees, incurred in and about the administration and execution of the trusts hereby created and the exercise of it powers and the performance of its duties hereunder. The Issuer shall indemnify the Trustee from the Revenues against any such expenses and liabilities that the Trustee may incur in the exercise and performance of it powers and duties hereunder, and that are not due to its willful misconduct or negligence. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it. If the Issuer shall fail to make any payment required by this Section, the Trustee upon at least five (5) days' written notice to the Borrower may make such payments for any moneys in its possession under the provisions of this Indenture (other than amounts on deposit in the Debt Service Fund so long as the Credit Facility is in effect and the Credit Facility Provider has not failed to honor any draft drawn under the Credit Facility in accordance with the terms thereof), and shall have a lien therefor which shall be prior to any of the Bonds Outstanding hereunder. Section 6.05. Permitted Acts. The Trustee and its directors, officers, employees or agents may become the owner of or may in good faith buy, sell, own, hold and deal in Bonds and may join in any action that any Bondholder may be entitled to take as fully and with the same rights as if it were not the Trustee. The Trustee may act as depository for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, the Issuer or any committee formed to protect the rights of Bondholders or to effect or aid in any reorganization growing out of the enforcement of the Bonds or this Indenture, whether or not such committee shall represent the Holders of a majority in aggregate principal amount of the Bonds Outstanding. Section 6.06. Resignation of Trustee. The Trustee may at aay time resign and be discharged of its duties and obligations hereunder by giving not less than 30 days' written notice to the Issuer, the Borrower, NHC, the Remarketing Agent, and Registrar and Paying Agent, the Credit Facility Provider and eacW,of the Bondholders. Such resignation shall take effect upon the appointment of a successor Trustee and the acceptance of such appointment by such successor. 43 - • Section 6.07. Removal of Trustee. The Trustee may be removed at any time by the Holders of not less than 258 of the Bonds by an instrument or concurrent instruments in writing signed and acknowledged by such Bondholders or by their attorney-in-fact, duly authorized and delivered to the Issuer. Facsimile copies of each such instrument providing for any such removal shall be delivered by the Issuer to the Trustee. The Issuer may remove the Trustee at any time, upon the written request of Authorized Officers of the Borrower and NHC, except during the existence of an Event of Default, for such cause as shall be determined in the sole discretion of the Issuer by filing with the Trustee an instrument signed by an Authorized Officer of the Issuer. The Trustee may also be removed at any time for any breach of trust or for acting or proceeding in violation cf, or for failing to act or proceed in accordance with, any provision of this Indenture with respect to the duties and obligations of the Trustee by any court of competent jurisdiction upon the application of the Issuer, the Borrower or of the Holders of not less than ten percent of the Bonds. Such removal shall take effect upon the appointment of a successor Trustee and the acceptance of such appointment by such successor. Section 6.08. Successor Trustee. In case the Trustee shall resign, be removed, be dissolved, become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee or of its property shall be appointed, or if any public officer shall take charge of control of the Trustee, or of its property or affairs, a successor Trustee may be appointed within one (1) year after the occurrence of such event by the Holders of not less than 258 of the Bonds by an instrument or concurrent instruments in writing signed and acknowledged by such Bondholders or their attorney - in - fact, duly authorized and delivered to such successor Trustee, with notification thereof to the predecessor Trustee, the Issuer, NHC and the Borrower. Until such successor Trustee shall have been appointed by the Bondholders, The Issuer shall forthwith appoint a successor Trustee satisfactory to the Borrower and NHC. Copies of any resolution of the Issuer providing for any such appointment shall be delivered by the Issuer to the Trustee so appointed, the predecessor Trustee, NHC and the Borrower. Any appointment made by the Issuer shall, immediately and without further act, be superseded and revoked by an appointment subsequently made by Bondholders. If in a proper case no appointment of a successor shall be made within 45 days after the giving by the Trustee of written notice of resignation in accordance with Section 6.06 hereof or after the occurrence of any other event requiring or authorizing such appointment, the Trustee or any Bondholder may apply to any court of competent jurisdiction for the appointment of such a successor, and the court may thereupon, after such notice, if any, as the court may deem proper, appoint a successor. Any successor appointed under the provisions of this Sections shall be a commercial bank or trust company chartered under the laws of any state of the United States or a national banking association organized under the laws of the United States having a capital and surplus - 44 - aggregating at least $50,000,000 if there is such a bank or trust company or national banking association willing and able to accept the appointment on reasonable and customary terms and authorized by law to perform all the duties required by this Indenture. Each successor Trustee shall mail, in accordance with the provisions of the Bonds, notice of its appointment to the Remarketing Agent, the Registrar and Paying Agent, the Credit Facility Provider, the Rating Agencies and each of the Bondholders. Section 6.09. Transfer of Rights and Progerty to Successor Trusteg. Any successor Trustee appointed under the provisions of this Indenture shall execute, acknowledge and deliver to its predecessor, the Issuer, NHC and the Borrower a written instrument of acceptance of such appointment, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, immunities, powers, duties, obligations and trusts of it predecessor hereunder, with like effect as if originally appointed as Trustee. However, the Trustee then ceasing to act shall nevertheless, on request of the Issuer or of such successor, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor all the rights, immunities, powers and trusts of such Trustee and all the right, title and interest of such Trustee in and to the Trust Estate and shall pay over, assign and deliver to such successor any moneys or other properties subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the Issuer be required by such successor for more fully and certainly vesting in and confirming to it any such moneys, estates, properties, rights, powers, duties or obligations, any and all such deeds, conveyances and instruments in writing shall be executed, acknowledged and delivered by the Issuer on request and so far as may be authorized by law. Section 6.10. Merger. Conversion or Consolidation of Trustee Any Company into which the Trustee may be merged or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it ;hall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business shall be the successor to such Trustee, without any further act, deed or conveyance, provided that such company shall be a commercial bank or trust company or national banking association qualified to be a successor to such a Trustee under the provisions of Section 6.08 hereof. - 45 - ARTICLE VII Events of Default and Remedies Section 7.01. Events of Default. Each of the following events is hereby declared to constitute an Event of Default hereunder: (a) payment of the principal or Redemption Price of or interest on any Bonds shall not be made when the same shall have become due and payable, either at maturity or by proceedings for redemption or otherwise; or (b) payment of the purchase price of any Bond shall not be made on a Tender Date applicable to such Bond; or (c) the Issuer shall default in any material respect in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in this Indenture on the part of the Issuer to be performed, which default shall continue for 30 days after written notice specifying such default and requiring the same to be remedied shall have been given to the Issuer, NHC and the Borrower by the Trustee; provided, however, that if the Issuer, NHC or the Borrower shall proceed to take any curative action that, if begun and prosecuted with due diligence, cannot be completed within a period of 30 days, then such period shall be increased to such extent as shall be necessary to enable the Issuer, N11C or the Borrower to complete such curative action through the exercise of due diligence; or (d) any event of default specified in Section 6.01 of the Loan Agreement shall have occurred; or (e) final judgment for the payment of money shall be rendered against the Issuer, if such judgment is under any circumstances payable from the Revenues, and at any time after 60 days from the entry thereof (i) such judgment shall not have been discharged, or (ii) the Issuer shall not have taken and be diligently prosecuting an appeal therefrom or from the order, decree or process upon which or pursuant to which such judgment shall have been granted or entered, and shall not have caused the execution of or levy under such judgment, order, decree or process or the enforcement thereof to have been stayed pending determination of such appeal; or (f) an order or decree shall be entered with the consent or acquiescence of the Issuer appointing a receiver or receivers of the Revenues, or such order or decree, having been entered without the consent or acquiescence of the Issuer, shall not have been vacated or discharged or stayed on appeal within 60 days after the entry thereof; or 46 • (g) any proceeding shall be instituted with the consent or acquiescence of the Issuer for the purpose of effecting a composition between the Issuer and its creditors or for the purpose of adjusting the claims of such creditors, pursuant to any federal or state statute in effect on the date of this Indenture or thereafter enacted, if the claims of such creditors are under any circumstances payable from the Revenues. Notwithstanding the foregoing provisions of this Section, so long as the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, no Event of Default specified in this Section (except for the paragraphs (a) and (b) of this Section) shall be deemed to have occurred unless and until the Credit Facility Provider shall have given written notice to the Trustee of the occurrence of such Event of Default. A default under any other resolution of the Issuer or trust agreement to which the Issuer is a party or in respect of any other obligations of the Issuer shall not be or constitute a default under this Indenture. Section 7.02. Acceleration of Maturity. (a) Upon the happening and continuance of any Event of Default, then and in every such case the Trustee may, and upon the written request of the Holders of not less than 208 of the Bonds shall, by a notice in writing to the Issuer, NHC and the Borrower, declare the principal of all of the Outstanding Bonds to be due and payable. Upon the giving of notice of such declaration, (i) such principal and interest shall become and be immediately due and payable, anything in the Bonds or in this Indenture to the contrary notwithstanding and (ii) if a Credit Facility is then in effect, the Trustee (or the Registrar and Paying Agent, as its agent) shall immediately draw a draft or take such other steps as are necessary to realize funds under the Credit Facility in accordance with the provisions of Section 4.07 hereof. Notwithstanding the foregoing provisions of this paragraph, if a Credit- Facility is in effect and any Event of Default is not the result of a wrongful failure on the part of the Credit Facility Provider to honor a demand for funds under the Credit Facility, the Trustee shall not declare the principal of all Outstanding Bonds to be due and payable except on a (late on which the Trustee (or the Registrar and Paying Agent, as its agent) has sufficient time, as indicated in the Credit Facility, to draw a draft or take such other steps as are necessary to realize funds under the Credit Facility in accordance with Section 4.07 hereof. (b) At any time after the principal of the Bonds shall have been so declared to be due and payable, and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, or before the completion of the enforcement of any other remedy under this Indenture, the Trustee, by written notice to the Issuer, NHC 47 A and the Borrower, may annul such declaration and its consequences if: (i) moneys shall have accumulated in the Debt Service Fund sufficient to pay all arrears of interest, if any, upon all of the Outstanding Bonds (except the interest accrued on such Bonds since the last Interest Payment Date) and the principal of all matured Bonds (except the principal of any Bonds due solely as a result of such declaration); (ii) moneys shall have accumulated and be available sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Trustee; and (iii) every other default known to the Trustee in the observance or performance of any covenant, condition or agreement contained in the Bonds or in this Indenture (other than a default in the payment of the principal of such Bonds then due solely as a result of such declaration) shall have been remedied to the satisfaction of the Trustee; provided, however, that such declaration may be annulled (A) only with the written consent of tate Holders of not less than 208 of the Bonds if such declaration has been made upon the written request of the Holders of not less than 208 of the Bonds, and (B) only with the written consent of the Credit Facility Provider so long as the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility; and provided further that such declaration may not be annulled if amounts sufficient to pay the principal of and accrued interest on the Outstanding Bonds through the accelerated maturity date less the amount of Available Moneys available for the payment thereof were realized under the Credit Facility in accordance with Section 4.07 hereof. No such annulment shall extend to or affect any subsequent default or impair any right consequent thereon. (c) Nothing in this Section shall be construed to prohibit the Borrower or NHC from taking any action, to the extent permitted by applicable law, to remedy any Event of Default. Section 7.03. Enforcement. If any Event of Default occurs, the Trustee may proceed, and upon the written request of the Holders of not less than 208 of the Bonds shall proceed (subject to the provisions of Section 6.01 hereof), to protect and enforce its rights and the rights of the Bondholders under the laws of the State or under this Indenture by such suits, actions or special proceedings in equity or at law, either for the specific performance of any covenant contained herein or in aid or execution of any power herein granted, or for an accounting against the Issuer as if the Issuer were the trustee of an express trust, or for the enforcement of any proper legal or equitable remedy as the Trustee shall deem most effectual to protect and enforce such rights. In the enforcement of any remedy under this Indenture, the Trustee shall be entitled to sue for, enforce payment of and receive any and all amounts then or during any default becoming, and at any time remaining, due on the Bonds or otherwise under any of the provisions of this Indenture or of the Bonds, with interest on overdue payments at the rate or rates of interest specified in such Bonds, together with any and all costs and expenses of collection and of all proceedings hereunder and under such Bonds, without prejudice to any other right or remedy of the Trustee or the Bondholders, and to recover and enforce judgment or decree 48 - against the Issuer but solely as provided herein and in the Bonds and from the sources and moneys provided herein and in the Bonds for any portion of such amounts remaining unpaid, with interest, costs and expenses, and to collect in any manner provided by law the moneys adjudged or decreed to be payable. Section 7.04 Priority of Payments following Default. If an Event of Default occurs and the moneys held by the Trustee under this Indenture (other than moneys then held or set aside under this Indenture for the payment of any Bonds at maturity or on any redemption date or Tender Date that have not been presented for payment) shall not be sufficient to pay the principal or Redemption Price of and interest on, and the purchase price of, the Bonds as the same become due and payable (either by their terms or by acceleration of maturity under the provisions of Section 7.02 hereof), such moneys together with any moneys then available or thereafter becoming available for such purpose, whether through the exercise of the remedies provided for in this Article or otherwise, shall be applied by the Trustee as follows: (a) unless the principal of all the Bonds shall be due and payable, all such moneys shall be applied: est: to the payment to the persons entitled thereto of the interest then due on the Bonds and, if the amount available shall not be sufficient to pay in full all such interest, then to the payment of such interest, ratably, to the persons entitled thereto, without any discrimination or preference; Second: to the payment to the persons entitled thereto of the unpaid principal due on any of the Outstanding Bonds in the order of the due dates for such payments, with interest upon such principal from the respective dates upon which such amounts shall have become due and payable (whether upon proceedings for redemption or otherwise), and, if the amount available shall not be sufficient to pay in full the principal or Redemption Price due and payable on any particular date, together with such interest, then to the payment first, of such interest, ratably, according to the amount of interest due on such date, and then, to the payment of such principal or Redemption Price, ratably, according to the amount due on such date, to the persons entitled thereto, without any discrimination or preference; Third: to the payment of the interest on and the principal of the Bonds as the same become due and payable (whether upon proceedings for redemption or otherwise); and - 49 - MD Fourth: to the Credit Facility Provider to the extent of any amount due and unpaid under the Credit Facility Agreement in accordance with the terms thereof upon the certification to the Trustee of such amount by the Credit Facility Provider. (b) If the principal of all the Bonds shall have become due and payable, either by their terms or by a declaration of acceleration, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Outstanding Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any such Bond over any other such Bond, according to the amounts due respectively for principal and interest, to the persons entitled thereto, without any discrimination or preference. (c) Notwithstanding the foregoing provisions of this Section, if the Credit Facility Provider shall have wrongfully failed to honor a demand for funds under the Credit Facility, no moneys held under this Indenture shall be applied to the payment of interest on or the principal or Redemption Price of any Credit Facility Bond or any amounts due under the Credit Facility Agreement until all amounts payable with respect to all other outstanding Bonds shall have been paid in full. Whenever moneys are to be applied by the Trustee pursuant to the provisions of this Section, such moneys shall be applied by the Trustee at such times, and from time to time, as the Trustee in its sole discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. The setting aside of such moneys in trust for the benefit of all holders of the Outstanding Bonds shall constitute proper application by the Trustee, and the Trustee shall incur no liability whatsoever to the Issuer, to any Bondholder, to the Credit Facility Provider or to any other person for any delay in applying any such moneys, so long as the Trustee acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of this Indenture as may be applicable at the time of application by the Trustee. Whenever the Trustee shall exercise such discretion in applying such moneys, it shall fix the date (which shall be an Interest Payment Date unless the Trustee shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal of the Bonds paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the fixing of any such date. The Trustee shall not be required to make payment to the Holder of any Bond unless such Bond shall be presented to the Trustee for appropriate endorsement. Section 7.05. Effect of Discontinuance of Proceedings. In case any proceedings taken by the Trustee or the Bondholders on account of any - 50 - default in respect of the Bonds shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Bondholders, then and in every such case the Issuer, the Trustee and the, Bondholders shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Trustee shall continue as though no such proceeding had been taken. Section 7.06. Majority of Bondholders May Control Proceedings. Anything in this Indenture to the contrary notwithstanding, the Holders of a majority of the Bonds shall have the right (subject to the provisions of Section 6.01 hereof), 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 this Indenture, provided that such direction shall not be otherwise than in accordance with law or the provisions of this Indenture, and the Trustee shall have the right to decline to follow any such direction that, in the opinion of the Trustee, would be unjustly prejudicial to Bondholders not parties to such direction. Section 7.07. Restrictions upon Action by Individual Bondholders. No Bondholder shall have any right to institute any suit, action or proceeding in equity or at law for the execution of any trust hereunder or for any other remedy hereunder unless (i) such Holder previously shall have given to the Trustee written notice of the Event of Default on account of which such suit, action or proceeding is to be instituted, (ii) the Holders of not less than 208 of the Bonds shall have made written request to the Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers granted by this Indenture or to institute such action, suit or proceeding in its or their name, and (iii) there shall have been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time. Such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this Indenture or to any other remedy hereunder; provided, however, that notwithstanding the foregoing provisions of this Section and without complying therewith, the Holders of not less than 208 of the Bonds may institute any such suit, action or proceeding in their own names for the benefit of all Bondholders. It is understood and intended that, except as otherwise provided above, no one or more Bondholders shall have any right in any manner whatsoever to effect, disturb or prejudice the security of this Indenture or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the benefit of all Holders of the Outstanding Bonds, and that any individual right of action or other right given by law to one or more of such Holders is restricted by this Indenture to the rights and remedies herein; provided, however, 51 w that nothing herein shall affect or impair the right of any Holder of any Bond to enforce payment of the principal or Redemption Price of or interest on or the purchase price of such Bond at the time and place, from the source and in the manner expressed herein and in the Bonds. Section 7.08 Actions by Trustee. All rights of action under this Indenture or under any of the Bonds enforceable by the Trustee may be enforced by it without the possession of any of such Bonds or the production thereof at the trial or other proceeding relative thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in its name for the benefit of all Bondholders subject to the provisions of this Indenture. Section 7.09. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Section 7.10. No Delay or Omission Construed as a Waiver: Waiver of Default. No delay or omission of the Trustee or of any Bondholder to exercise any right or power accruing upon any default shall impair any such right or power, nor shall any such delay or omission be construed to be a waiver of any such default or an acquiescence therein. Every power and remedy given by this Article to the Trustee and the Bondholders, respectively, may be exercised from time to time and as often as may be deemed expedient. The Trustee may, and upon the written request of the Holders of not less than 208 of the Bonds shall, with respect to the Bonds, waive any default that in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of this Indenture or before the completion of the enforcement of any other remedy under this Indenture; but no such waiver shall extend to or affect any other existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. Section 7.11. Notice of Default. The Trustee shall mail to all owners of Bonds written notice of the occurrence of any continuing Event of Default known to it within 30 days after it has obtained knowledge of any such Event of Default. The Trustee shall not, however, be subject to any liability to the Issuer, the Borrower and any such Bondholder by reason of its failure to mail any notice required by this Section. Section 7.12. Special Acceleration of Bonds. As long as a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor any demand for funds under the Credit Facility, if the Credit Facility Provider shall deliver to the Trustee written notice that the Credit Facility will be terminated in accordance with the Credit Facility Agreement and a demand for acceleration, then the Trustee shall by written notice sent to the Issuer, NHC, the Borrower and the Registrar and Paying Agent on the date of receipt of such notice from the Credit - 52 - 40 Facility Provider or the next succeeding Business Day, whichever is the earlier date on which the Trustee (or the Registrar and Paying Agent as its agent) has sufficient time, as indicated in the Credit Facility, to draw a draft or take such other steps as are necessary to realize funds under the Credit Facility pursuant to Section 4.07 hereof in the amounts necessary to pay the principal of and accrued interest on the Outstanding Bonds on the accelerated maturity date, declare the principal of the Outstanding Bonds and the interest accrued thereon to be due and payable immediately, and upon such declaration the same shall become and be immediately due and payable, anything in this Indenture or in any of the Bonds contained to the contrary notwithstanding. Immediately upon the receipt of written notice from the Credit Facility Provider that the Credit Facility will be terminated in accordance with the Credit Facility Agreement, the Trustee shall notify the Registrar and Paying Agent, by celecopy or other electronic transmission that leaves a written record or by telephone (prompty confirmed in writing), of the receipt of such notice and the accelerated maturity date. Any declaration of acceleration made in accordance with this Section may not be waived, rescinded or annulled by the Trustee or the holders of the Bonds. Upon any such declaration, the Trustee (or the Registrar and Paying Agent as its agent) shall immediately (i) draw a draft or take such other steps as are necessary to realize funds under the Credit Facility in accordance with the provisions of Section 4.07 hereof and (ii) give notice thereof to the Bondholders in accordance with the terms of the Bonds. - 53 - 4D ARTICLE VIII Modification or Amendment of Indenture. Loan Agreement and Mortgage Section 8.01. Supplemental Indentures Without Consent. Notwithstanding any other provision of this Article VIII, without notice to or the consent of the Bondholders, the Issuer and the Trustee may enter into Supplemental Indentures from time to time supplementing this Indenture or any Supplemental Indenture so as to modify or amend such Indentures for one or more of the following purposes: (a) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that lawfully may be granted to or conferred upon the Trustee for the benefit of the Bondholders; (b) to add to the covenants and agreements of the Issuer contained in this Indenture other covenants and agreements thereafter to be observed relative to the application, custody, use or disposition of the proceeds of Bonds; (c) to surrender any right, power or privilege reserved to or conferred upon the Issuer by this Indenture; (d) to confirm, as further assurance, any pledge under, and the subjection to any lien on, or claim or pledge of (whether created or to be created by this Indenture), the Revenues; (e) to cure any ambiguity or to cure, correct or supplement any defect or inconsistent provisions contained in this Indenture or to make such provisions in regard to matters or questions arising under this Indenture as may be necessary or desirable and not contrary to or inconsistent with this Indenture; (f) to make any other change in this Indenture that, in the opinion of the Trustee, shall not prejudice in any material respect the rights of the holders of the Bonds outstanding at the date as of which such change shall become effective; (g) to increase the Maximum Rate in accordance with Section 2.03 hereof or to change the terms for the payment of interest on Credit Facility Bonds; (h) in connection with the delivery of any substitute Credit Facility in accordance with Section 5.07 hereof, in order to provide for (A) the realization of moneys thereunder - 54 - at times and in amounts sufficient to provide for the payment of the principal or Redemption Price of and interest on, and the purchase price of, the Bonds when due and (B) payments by the Borrower at such times and in such amounts, and the deposit of such payments in such accounts and at such times, as may be necessary to obtain such substitute Credit Facility, maintain the ratings then borne by the Bonds or otherwise protect the interests of the Bondholders; (i) to provide for the registration of the Bonds under a book -entry system; or (j) to make any other change in this Indenture, provided that such change shall not become effective with respect to any Bond until the immediately succeeding Tender Date applicable to such Bond and provision shall have been made for the giving of notice of such change to subsequent purchasers of such Bond. Section 8.02. Supplgmental Indentures Requiring Consent of Bondholders. At any time or from time to time with the consent of the holders of a majority of the Bonds, the Issuer and the Trustee may enter into a Supplemental Indenture amending or supplementing this Indenture, any Supplemental Indenture or any Bond to modify any of the provisions of this Indenture, any Supplemental Indenture or any Bond or to release the Issuer from any of the obligations, covenants, agreements, limitations, conditions or restrictions therein contained; provided, however, that nothing contained herein shall permit (i) a change in any terms of redemption or purchase of any Bond, the due date for the payment of the principal of or interest on any Bond or any reduction in the principal, Redemption Price or purchase price of or interest on any Bond without the consent of the Holder of such Bond or (ii) the creation of a claim or lien upon, or a pledge of, the Revenues ranking prior to or on a parity with the claim, lien and pledge created by this Indenture, a preference or priority of any Bond over any other Bond or a reduction in the percentage of the aggregate principal amount of Bonds the consent of the holders of which is required for any modification of this Indenture, without the unanimous consent of the Bondholders. Section 8.03. Notation on Bonds. Bonds authenticated and delivered after the effective date of any action taken as provided in this Article VIII may, and if the Trustee or the Issuer so determines, shall, bear a notation by endorsement or otherwise in form approved by the Trustee of such action, and, upon demand of the holder of any Outstanding Bond at such effective date and presentation of such Bond for such purpose to the Trustee, the Trustee shall make suitable notation on such Bond of any such action. If the Issuer or the Trustee shall so determine, new Bonds so modified as in the opinion of the Trustee conform to such action shall be prepared, authenticated and delivered, and upon demand of the Holder of any Outstanding Bond and surrender of such Bond to the Trustee, such Bond shall be exchanged, without cost to such Holder, for a new Bond so modified. - 55 - Section 8.04. Amendment of Loan Agreement or Mortgage. (a) Without the consent of or notice to the Bondholders, the Issuer may from time to time enter into any amendment, change or modification of the Loan Agreement and the Trustee may from time to time enter into any amendment, change or modification of the Mortgage (i) as may be required for the purpose of curing any ambiguity or formal defect, (ii) to change the terms for the payment of interest thereunder to reflect any change in the terms for the payment of interest on Credit Facility Bonds, (iii) in connection with the delivery of any substitute Credit Facility in accordance with Section 5.07 hereof, in order to provide for payments by the Borrower at such times and in such amounts as may be necessary to obtain such substitute Credit Facility, maintain the ratings then borne by the Bonds or otherwise protect the interests of the Bondholders, (iv) to make any other change in the Loan Agreement or the Mortgage, provided that such change shall not become effective until the immediately succeeding Mandatory Tender Date and provision shall have been made for the giving of notice of such change to subsequent purchasers of the Bonds, or (v) that, in the judgment of the Trustee, shall not prejudice in any material respect the rights of the Bondholders. (b) Notwithstanding the foregoing paragraph (a), so long as the Credit Facility shall be in effect and the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, the Trustee shall release the Mortgage if on or prior to such time, the Credit Facility Provider has released the Mortgage, and shall, at the written request of the Credit Facility Provider, enter into or consent to such amendments, changes or modifications of the Mortgage as shall be required from time to time by the Credit Facility Provider and the Borrower (with the written consent of NHC), including (without limitation) as shall be required to secure any additional indebtedness of the Borrower, it being the intention of the parties hereto that the ultimate security for the Bonds shall consist of the Credit Facility and the amounts received by the Issuer or the Trustee under the Loan Agreement. (c) Except as provided in paragraphs (a) and (b) of this Section, the Issuer shall not enter into any amendment, change or modification of the Loan Agreement without the written consent of the Trustee and the Holders of a majority of the Bonds. (d) The Trustee shall have no liability to any Bondholder or any other person for any action taken by it in good faith pursuant to the foregoing provisions. Section 8.05. Consent of Credit Facility Provider. So long as a credit Facility shall be in effect and the Credit Facility Provider shall not have wrongfully failed to honor a demand for funds under the Credit Facility, the Trustee and the Issuer shall not enter into any - 56 - d Supplemental Indenture or enter into or consent to any amendment, change or modification of the Loan Agreement or the Mortgage without the prior written consent of the Credit Facility Provider. Section 8.06. Advice to Rating Agencies of Suoplemental Indentures. The Trustee shall mail to each of the Rating Agencies (a) a copy of any Supplemental Indenture and any amendment of the Credit Facility, the Loan Agreement or the Mortgage upon the execution and delivery thereof (b) a copy of any opinion or any amendment of the Credit Facility Agreement or of any other document relating to this Indenture or the Credit Facility delivered to the Trustee in accordance with this Indenture or such documents and (c) notice of the expiration or termination of any Credit Facility or the payment in full of the Bonds as provided in Section 9.01 hereof. Section 8.07. Consent of Borrower NBC. Registrar and Paying Agent and Remarketing Agent. The Trustee and the Issuer shall not enter into any Supplemental Indenture affecting the rights, duties, obligations or liabilities of the Borrower, the Registrar and Paying Agent or the Remarketing Agent without the prior written consent of the Borrower and N11C, the Registrar and Paying Agent or the Remarketing Agent, respectively. - 57 - • ARTICLE IX Defeasance Section 9.01. Defeasance. (a) If the Issuer shall pay or cause to be paid the principal or Redemption Price of and interest on all of the Bonds, then.the pledge of the Trust Estate and all other rights granted hereby to the Trustee or the Bondholders shall be discharged and satisfied. In such event, upon the request of the Issuer or the Borrower and NHC, the Trustee shall execute and deliver to the Issuer and the Borrower all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay or deliver all moneys, securities and funds held by it pursuant to this Indenture that are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption (i) to the Credit Facility Provider to the extent of any amount due and unpaid under the Credit Facility Agreement in accordance with the terms thereof upon the certification to the Trustee of such amount by the Credit Facility Provider and (ii) after the payment required by clause (i) of this paragraph, to the Borrower or to such officer, board or body as may then be entitled by law to receive the same. In such event, the Trustee shall also return the Credit Facility to the Credit Facility Provider. (b) A Bond shall be deemed to have been paid within the meaning of and with the effect expressed in this Section if (i) sufficient money for the payment of the principal or Redemption Price of and interest on such Bond shall then be held by the Trustee (through deposit by the Issuer of moneys for such payment or otherwise regardless of the source of such moneys), whether at or prior to the maturity or the redemption date of such Bond, or (ii) if the maturity or redemption date of such Bond shall not then have arrived, provision shall have been made for the payment of the principal or Redemption Price of and interest on, and the purchase price of, such Bond on the due dates for such payments, by deposit with the Trustee (or other method satisfactory to the Trustee) of Government Obligations, the principal of and the interest on which when due will provide sufficient moneys for such payment and the Issuer shall have made provision, satisfactory to the Trustee, for one publication in a daily newspaper or a financial journal printed in the English language and having a general circulation in the Borough of Manhattan, City and State of New York (an "Authorized New York Newspaper"), that such moneys are so available for such payment; provided, however, that (A) if the Credit Facility is then in effect, such moneys shall constitute Available Moneys and such Government Obligations shall have been purchased with Available Moneys and (B) if any such Bond is to be redeemed prior to the maturity thereof, provisions satisfactory to the Trustee shall have been made for the giving of notice of such redemption. (c) Anything in this Indenture to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of - 58 - • any of the Bonds that remain unclaimed for seven years after the date on which such Bonds became due and payable either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such date, or for seven years after the date of deposit of such moneys if deposited with the Trustee after such date, shall, at the written request of the Borrower, be repaid by the Trustee to the Borrower or to such officer, board of body as may then be entitled by law to receive such moneys, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged; provided, however, that, before being required to make any such payment, the Trustee may, at the expense of the Issuer, cause to be published in an Authorized New York Newspaper a notice that such moneys remain unclaimed and that, after a date named in such notice, which date shall be not fewer than 40 nor more than 90 days after the date of publication of such notice, the balance of such moneys then unclaimed shall be returned to the Borrower. - 59 - 40 ARTICLE X The Registrar and Paying Agent: The Remarketing Agent Section 10.01. The Registrar and Paying Agent. (a) The Registrar and Paying Agent and any successor Registrar and Paying Agent shall accept the duties and obligations imposed on it under this Indenture by written instrument delivered to the Trustee as agent for the Issuer. (b) In addition to the other obligations imposed on the Registrar and Paying Agent hereunder, the Registrar and Paying Agent shall: (i) hold all Bonds delivered to it on any Tender Date in trust for the benefit of the owners thereof until the purchase price of such Bonds shall have been delivered to or for the account of or to the order of such owners; (ii) hold the purchase price of any Bonds in trust for the benefit of the persons entitled to receive the payment of such purchase price; (iii) keep such books and records as shall be consistent with prudent industry practice, which books and records shall be available for inspection by the Issuer, the Borrower and the Trustee during normal business hours; (iv) deliver to the Issuer, the Borrower and the Trustee upon request, and to any other person at the written request of the holders of not less than five percent of the Bonds, a list of the names and addresses of the Bondholders; and (v) hold Credit Facility Bonds for the benefit of the Credit Facility Provider upon the written request of the Credit Facility Provider. (c) If at any time the Registrar and Paying Agent is unable or unwilling to act as Registrar and Paying Agent, the Registrar and Paying Agent may resign, upon 60 days' prior written notice to the Issuer, the Borrower, NHC, the Trustee, the Remarketing Agent and the Credit Facility Provider. The Registrar and Paying Agent may be removed at any time by the Trustee, on behalf of the Issuer, at the written request of an Authorized Officer of the Borrower and N11C, by written notice signed by an Authorized Officer of the Trustee and delivered to the Trustee, the Registrar and Paying Agent, the Remarketing Agent and the Credit Facility Provider. Upon resignation or removal of the Registrar and Paying Agent, the Trustee, on behalf of the Issuer, shall appoint a successor Registrar and Paying Agent, satisfactory to the Borrower and NHC, which shall be a commercial bank or trust company or a national banking association - 60 - 40 maintaining an office or agency in New York, New York, that has a combined capital and surplus of at least $50,000,000. If no such successor Registrar and Paying Agent is appointed, the Trustee shall automatically become the Registrar and Paying Agent until the appointment of such a successor Registrar and Paying Agent. Upon the resignation or removal of the Registrar and Paying Agent, the Registrar and Paying Agent shall pay over, assign and deliver any moneys and Bonds held by it in trust pursuant to this Indenture to its successor. (d) The Registrar and Paying Agent shall be entitled to compensation for services rendered hereunder and to indemnification by the Issuer hereunder on the same basis and to the same extent as the Trustee for the performance of its services. (e) The duties and obligations of the Registrar and Paying Agent shall be determined by the express provisions of this Indenture, and the Registrar. and Paying Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture. The Registrar and Paying Agent shall not be liable in connection with the performance of its duties hereunder except for its own negligence or willful default. Section 10.02. The Remarketing Agent. The Remarketing Agent may be removed at any time by the Borrower and NNC, by written notice signed by Authorized Officers of the Borrower and N11C and delivered to the Trustee, the Remarketing Agent, the Registrar and Paying Agent and the Credit Facility Provider. Upon the resignation or removal of the Remarketing Agent, the Trustee shall select a substitute Remarketing Agent satisfactory to the Borrower and N11C. Section 10.03. Notice of Successors. Within 30 days of the resignation or removal of the Remarketing Agent or the Registrar and Paying Agent or the appointment of a successor Remarketing Agent or Registrar and Paying Agent, the Trustee shall mail in accordance with the terms of the Bonds notice thereof to the Bondholders and to each of the Rating Agencies. - 61 - C-1 ARTICLE XI Miscellaneous Section 11.01. Further Assurances. Upon the written request of the Trustee, the Issuer shall, so far as it may be authorized by law, pass, make, do, execute, acknowledge and deliver all and every such further indentures, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for better assuring, conveying, granting, assigning and confirming all and singular the rights and Revenues and other moneys, securities and funds hereby pledged or assigned, or intended so to be, or which the Issuer may hereafter become bound to pledge or assign. Section 11.02. Evidence of Signatures of Bondholders and Ownership of Bonds. Any request, direction, consent or other instrument that this Indenture may require or permit to be executed by the Bondholders may be in one or more instruments of similar tenor, and shall be executed by such Bondholders in person, by their attorneys duly appointed in writing or by their legal representatives. Except as otherwise expressly provided herein, proof of the execution of any such instrument or of an instrument appointing any such attorney, or the holding by any person of Bonds shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Registrar and Paying Agent with regard to any action taken by either under such instrument if made in the following manner, but the Trustee or the Registrar and Paying Agent may nevertheless in its discretion require further or other proof in cases where it deems such further or other proof desirable: (a) The fact and date of the execution by any Bondholder or his attorney or legal representative of such instrument may be proved by the certificate (which need not be acknowledged or verified) of an officer of a bank or trust company satisfactory to the Trustee or of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. The authority of any person executing any such instrument on behalf of a corporate Bondholder may be established without further proof if such instrument is signed by a person purporting to be the president or a vice president of such corporation with a corporate seal affixed and attested by a person purporting to be its secretary or an assistant secretary, or its cashier or an assistant cashier. (b) The ownership of Bonds and the amount, numbers and other identification and date of holding the same shall be proved by the registration books. - 62 - Any request, direction, consent or vote of the owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered to be done or omitted to be done by the Issuer or the Trustee in accordance therewith. Section 11.03. Preservation and Inspection of Documents. All documents received by the Trustee from the Issuer, the Borrower, the Credit Facility Provider or any Bondholders under the provisions of this Indenture, the Loan Agreement, the Mortgage or the Credit Facility shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Issuer, the Borrower, the Credit Facility Provider, any Bondholder and their agents and representatives, any of whom may make copies thereof. Section 11.04. Moneys and Funds Field for Particular Bonds. The amounts held by the Trustee or the Registrar and Paying Agent for the payment of the principal or Redemption Price of and interest on, and the purchase price of, any Bond due on any date shall, pending such payment, be set aside and held in trust by it for the Holder of such Bond, and for the purposes of this Indenture such principal or Redemption Price of and interest on, or such purchase price of, such Bond shall no longer be considered to be unpaid. Section 11.05. No Recourse on Bonds. No recourse shall be had for the payment of the principal or Redemption Price of and interest on, or the purchase price of, any Bond or for any claims based thereon or on this Indenture against the members of the Board of County commissioners of the Issuer any officer of the Issuer of any person executing the Bonds, all such liability, if any, being expressly waived and released by every Holder of each Bond by the acceptance of such Bond. Section 11.06. Issuer Protected in Acting in Good Faith. In the exercise of the powers of the Issuer and its Board of County Commissioners, officers, employees and agents under this Indenture, the Loan Agreement or the Mortgage, including (without limitation) the application of moneys and the investment of funds, the Issuer shall not be accountable to the Trustee, the Credit Facility Provider or any Bondholder for any action taken or omitted by it or by the members of the Board of County Commissionsers of the issuer or any of the Issuers officers, employees and agents in good faith and believed by it or them to be authorized or within the discretion or rights or powers conferred. The Issuer and such members of its Board of County Commissioners or any of its officers, employees or agents shall be protected in its or their acting upon any paper or document reasonably believed in good faith by it or them to be genuine, and it or they may conclusively rely upon the advice of counsel as to matters of law and may (but need not) require further evidence of any fact or matter before taking any action. No recourse shall be had by the Trustee, the Credit Facility Provider or any Bondholder for any claims based on this Indenture, the Loan Agreement or 63 - ab the Mortgage against any [INSERT TITLES OF APPROPRIATE OFFICERS OF ISSUER] officer, employee or agent of the Issuer alleging personal ability on the part of such person unless such claims are based upon the bad faith, fraud or deceit of such person. Section 11.07. Severability of Invalid Provision. If any one or more of the covenants or agreements provided in this Indenture on the part of the Issuer or the Trustee to be performed should be contrary to law, then such covenant or covenants o agreement or agreements shall be null and void an shall in no way affect the validity of any other provision of this Indenture or of the Bonds. Section 11.08. Notices. Except as otherwise expressly provided in this Indenture, all notices or other instruments required or permitted under this Indenture shall be in writing and shall be telexed, cabled, delivered by hand or mailed first class mail, postage prepaid, and addressed as follows: If to the Issuer: Board of County Commissioners of Indian River County, Florida 1840 24th Street Vero Beach, Florida 32960 with a copy to: Charles L. Sieck, Esquire Rhoads & Sinon 1200 North Federal Highway Suite 308 Boca Raton, Florida 33432 If to the Trustee: Third National Bank Financial Services Division 424 Church Street Nashville, Tennessee 37219 Attention: Corporate Trust Administrator (615) 748-4353 (615) 748-4945 (telecopy) If to the Registrar and Paying Agent: Chemical Bank 55 Water Street - Room 505 New York, New York 10041 Attention: Securities and Trust Department (212) 820-6573 (212) 363-9548 (telecopy) (212 422-2648 (telecopy) 64 40 If to the Borrower: Florida Convalescent Centers, Inc. 1111 Mockingbird Lane, Suite 1111 Dallas, Texas 75247 Attention: James 0. McCarver If to the Remarketing Agent: Alex. Brown & Sons Incorporated 14th Floor 63 Wall Street New York, New York 10005 Attention: Municipal Note Department (212) 785-7852 (212) 269-7541 (telecopy) If to the Credit Facility Provider: The Toronto -Dominion Bank, Chicago Branch Three First National Plaza Suite 1900 Chicago, Illinois 60602 Attention: Senior Manager, Credit Administration If to Moody's Investors Service, Inc.: Structured Transactions Group 99 Church Street - 2nd Floor New York, New York 10007 If to NHC: National 11ealthCorp L.P. 814 S. Church Street Murfreesboro, Tennessee 37130 Attention: Mr. Richard F. LaRoche, Jr. Any such notice, demand or request may also be transmitted to the appropriate party by telegram or telephone and shall be deemed to be properly given or made at the time of such transmission if, and only if, such transmission of notice shall be confirmed in writing and sent as specified above. Any of such addresses may be changed at any time upon written notice of such change given to the other parties by the party effecting the change. Notices and consents given by mail in accordance with this - 65 - [--A Section shall be deemed to have been given five (5) Business Days after the date of dispatch; notices and consents given by any other means shall be deemed to have been given when received. Section 11.09. Other Indentures. The Issuer expressly reserves the right to enter into one or more indentures or to adopt one or more bond resolutions and general bond resolutions and to issue bonds, notes and other obligations thereunder without compliance with the provisions hereof. Section 11.10. Business Days. Except as otherwise expressly provided herein, if any date specified herein for the payment of any Bond or the performance of any act shall not be a Business Day, such payment or performance shall be made on the next succeeding Business Day with the same effect as if made on such date, and in case any payment of the principal or Redemption Price of or interest on, or the purchase price of, any Bond shall be due on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day and not interest shall accrue on the amount of such payment during the intervening period. Section 11.11. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be deemed to be an original for all purposes; and all such counterparts shall together constitute but one and the same instrument. Section 11.12. Governipg Law. This Indenture shall be governed by and construed in accordance with the laws of the State. - 66 - r. •• IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, sealed and delivered, all as of the day and year first above written. (SEAL) ATTEST: By: (SEAL) Indian River County, Florida By: _ Chairman of the Board of County Commissioners THIRD NATIONAL BANK IN NASHVILLE, as Trustee By: 40 Acceptance of Duties By Registrar and Paying Agent Chemical Bank, a banking corporation duly organized and existing under the laws of the State of New York and having its principal office in New York, New York, hereby accepts the duties and obligations imposed upon the Registrar and Paying Agent under the foregoing Indenture of. Trust, intending hereby to create obligations under seal under the laws of the State. (SEAL) CHEMICAL BANK, as Registrar and Paying Agent By: 0 EXHIBIT A to Indenture of Trust dated as of , 1987, between Indian River County, Florida and Third National Bank in Nashville, as Trustee FORM OF BOND (Form of Face of Bond) REGISTERED UNITED STATES OF AMERICA REGISTERED No. R - STATE OF FLORIDA VARIABLE RATE DEMAND/FIXED RATE INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BOND (FLORIDA CONVALESCENT CENTERS, INC. PROJECT) SERIES 198 Reference Date Maturity Date CUSIP Registered Owner: Principal Sum: Indian River County, Florida, a political subdivision of the State of Florida (the "Issuer"), for value received, hereby promises to pay, but only from the special fund provided therefor from the Revenues (defined herein), to the Registered Owner shown above, or registered assigns or legal representative, upon presentation and surrender hereof as provided herein, the Principal Sum shoran above on the Maturity Date shown above (or earlier as hereinafter referred to), with interest thereon from and including the most recent date to which interest has been paid, until such Principal Sum shall be paid or provided for in accordance with the Indenture (defined herein), which interest shall be payable on the dates and at the rate or rates per annum set forth herein. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE SIDE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF FULLY SET FORTH HEREIN. This Bond shall not be deemed to constitute a debt, liability or obligation or the issuer or of the State of Florida or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer or of the State of Florida or of any such political subdivision, but shall be A-1 • payable solely from the Revenues (defined herein). The issuer shall not be obligated to pay this Bond or the interest hereon except from the revenues and proceeds pledged therefor, and neither the faith and credit nor the taxing power of the Issuer or of the State of Florida or of any political subdivision thereof is pledged to the payment of the principal of or the interest on this Bond. [The Issuer has no taxing power.) All acts, conditions and things required by the Constitution and laws of the State of Florida and any applicable rules of the Issuer to happen, exist and be performed precedent to and in the issuance of this Bond have happened, exist and have been performed as so required. This Bond shall not be valid or become obligatory for any purpose or be entitled to any benefit or security under the Indenture until it shall have been authenticated by the execution by the Registrar and Paying Agent (defined herein) of the Certificate of Authentication endorsed hereon. A-2 IN WITNESS WHEREOF, Indian River County, Florida has caused this Bond to be executed in its name and on its behalf by the manual or facsimile signature of the Chairman or Vice Chairman of its Board of County Commissioners and its corporate seal or a facsimile thereof to be hereunto affixed, imprinted, engraved or otherwise reproduced, attested by the manual or facsimile signature of the Clerk of its Board of County Commissioners, all as of the day of , 1987. (SEAL) ATTEST: By: [Form of Certificate of Authentication] Date of Authentication: This is one of the Bonds of the series designated herein issued under the within -mentioned Indenture. Printed on the reverse side hereof is the complete text of the opinion of Piper & Marbury, Baltimore, Maryland, co -bond counsel, signed original of which is on file with the undersigned. CHEMICAL BANK, as Registrar and Paying Agent By: Authorized Signatory A-3 w [Form of back of Bond] 1. Indenture. This Bond is one of a series of bonds designated "INDIAN RIVER COUNTY, FLORIDA, VARIABLE RATE DEMAND/FIXED RATE INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BONDS, (FLORIDA CONVALESCENT CENTERS, INC. PROJECT) SERIES 1987 aggregating Four Million Eight Hundred Thousand Dollars ($4,800,000) in principal amount (the "Bonds"), issued pursuant to (i) the Constitution and laws of the State of Florida, particularly the Florida Industrial Development Financing Act (being Part II of Chapter 159, Florida Statutes, as amended) (the "Act"), (ii) certain proceedings of the Issuer and (iii) and Indenture of Trust dated as of 11987 (together with all amendments and supplements thereto, called the "Indenture"), between the Issuer and Third National Bank in Nashville, as trustee (together with any successor trustee under the Indenture, the "Trustee"). The terms of the Bonds include those stated in the Indenture, and the Bonds are subject to all such terms. The registered owner of this Bond is referred to the Indenture (a copy or which is on file at the principal corporate trust office of the Trustee) for a complete statement of such terms, to which the owner hereof, by acceptance of this Bond, assents. 2. Loan Agreement: Revenues. The Issuer and Florida Convalescent Centers, Inc. (the "Borrower"), have entered into a Loan Agreement dated as of , 1987 (together with all amendments and supplements thereto, the "Loan Agreement"), pursuant to which the Issuer has loaned the proceeds of the Bonds to the Borrower to refinance a portion of the costs of construction and acquisition of certain projects authorized by the Act (as defined in the Loan Agreement, the "Project"). Pursuant to the Loan Agreement, the Borrower is obligated to make loan payments to the Issuer sufficient to provide for the timely payment of the principal or redemption price of and interest on, and the purchase price of, the Bonds when due. As defined in the Indenture, "Revenues" include all payments to the Issuer or the Trustee pursuant to the Loan Agreement, proceeds of the Bonds and all moneys and securities on deposit in the funds and accounts created by the Indenture and all other receipts of the Issuer attributable to the refinancing of the Project by the issuance of the Bonds. The Revenues are pledged under the Indenture for the equal and ratable benefit of the holders from time to time of the Bonds and, to the extent provided therein, to the payment of amounts due under the Credit Facility Agreement (as defined in the Indenture) in accordance with the terms thereof. 3. Credit Facility. In order to secure the timely payment of the principal or redemption price of and interest on, and the purchase price of, the Bonds, there has been delivered to the Trustee an irrevocable letter of credit dated the date of the initial delivery of the Bonds (the "Letter of Credit") issued by the Toronto -Dominion Bank, acting through its Chicago Branch (the "Bank"), in an initial stated amount equal to the aggregate principal amount of the Bonds plus 55 days' interest thereon, calculated at the rate of 158 (the "Maximum Rate", as such rate may be increased pursuant to the Indenture). The Letter of Credit expires on the fifth anniversary of the date of initial delivery of the Bonds, subject, A-4 C-` under certain circumstances, to earlier termination and to the option of the Bank to extend the Letter of Credit. PURSUANT TO THE INDENTURE, PRIOR TO THE EXPIRATION OF THE LETTER OF CREDIT OR ANY SUBSTITUTE CREDIT FACILITY (DEFINED HEREIN), THE BORROWER MAY, BUT IS NOT OBLIGATED TO, DELIVER TO THE TRUSTEE A SUBSTITUTE LETTER OF CREDIT, INSURANCE POLICY, GUARANTY, SURETY BOND, LINE OF CREDIT, BOND PURCHASE AGREEMENT OR OTHER SIMILAR CREDIT OR LIQUIDITY FACILITY, SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE INDENTURE (A "QUALIFIED CREDIT FACILITY"), WITHOUT NOTICE TO OR THE CONSENT OF THE OWNER OF THIS BOND, OR All ALTERNATE CREDIT FACILITY (AS DEFINED IN THE INDENTURE). The Letter of Credit, any Qualified Credit Facility and any Alternate Credit Facility are herein referred to as the "Credit Facility", and the Bank and the issuer of any substitute Credit Facility are herein referred to as the "Credit Facility Provider". 4. interest gAttg. The Bonds shall bear interest from and including the date of initial delivery thereof to and including the last day of the Initial Interest Period (defined in the Indenture) determined as provided in the Indenture, at the rate per annum determined as provided in the Indenture, computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and payable on the first Business Day of each month (each, an "Interest Payment Date"), Thereafter, the Bonds shall bear interest at the Variable Rate (defined herein), but the Indenture provides that the Borrower may change the interest rate borne by the Bonds from the Variable Rate to a Fixed Rate (defined herein), for one or more periods (each, a "Fixed Rate Period") and, at the expiration of any Fixed Rate Period, may establish one or more additional Fixed Rate Periods or change the interest rate borne by the Bonds from a Fixed Rate to the Variable Rate. The Indenture requires the Registrar and Paying Agent to mail notice in accordance with its terms to the owners of the Bonds prior to the commencement of each Fixed Rate Period and prior to any change from a Fixed Rate to the Variable Rate (the first day of each Fixed Rate Period and the date on which the Variable Rate takes effect other than after the Initial Interest Period, being hereinafter referred to as a "Conversion Date"). Under the Indenture, the establishment of any Fixed Rate Period may automatically be rescinded under certain circumstances and the Borrower may rescind any election to establish a Fixed Rate Period on or prior to the applicable Computation Date (defined herein). So long as a Credit Facility shall be in effect, the interest rate borne by the Bonds may not exceed the Maximum Rate. (a) Variable Rate, The Variable Rate shall be determined by Alex. Brown & Sons Incorporated, or any successor remarketing agent under the Indenture (the "Remarketing Agent"), on the day following the last day of the Initial Interest Period, on the first Business Day of each month thereafter during which the Bonds bear interest at the Variable Rate and on each Mandatory Tender Date (defined herein) after which the Bonds will bear interest at the Variable Rate (each, and "Adjustment Date"), and shall be equal to the minimum rate that, in the judgment of the Remarketing Agent, taking into account prevailing market conditions, would enable the Remarketing Agent to sell all of the Bonds on the Adjustment Date at a price equal to the principal amount thereof, plus accrued interest, if any, thereon. The Variable Rate determined by the A-5 Remarketing Agent on each Adjustment Date shall be in effect from and including such Adjustment Date to but excluding the earlier of (i) the immediately succeeding Adjustment Date and (ii) the immediately succeeding Mandatory Tender Date. So long as the bonds bear interest at the Variable Rate, the amount of such interest will be computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and the Interest Payment Dates will be the first Business Day of each month, each Mandatory Tender Date and the maturity date of the Bonds. (b) Fixed Rate. The Fixed Rate borne by the Bonds during any Fixed Rate Period shall be the interest rate determined by the Remarketing Agent on a date selected by it (the "Computation Date") that is at least seven but not more than 15 Business Days before the first day of such Fixed Rate Period (the "Fixed Rate Date"), to be the minimum rate that, in the judgment of the Remarketing Agent, taking into account prevailing market conditions, would enable the Remarketing Agent to sell all of the Bonds on the Fixed Rate Date at a price equal to the principal amount thereof plus accrued interest, if any, thereon; provided, however, that the Fixed Rate borne by the Bonds during andy Fixed Rate Period of six months or longer (a "Long Fixed Rate Period") shall be the minimum rate preliminarily determined for such period in accordance with the Indenture, notice of which is required to be given to the owner of this Bond before the Computation Date if such rate is higher than the rate determined on the Computation Date in accordance with this paragraph; and provided, further that if particular Bonds shall have been selected for redemption from particular Sinking Fund Installments (as defined in the Indenture), the Remarketing Agent may determine a different preliminary and final Fixed Rate for the Bonds to be redeemed from each such Sinking Fund Installment. Notwithstanding the foregoing, with the written consent of the Borrower an National NealthCorp L.P., a Delaware limited partnership, and its successors and assigns, the Fixed Rate determined by the Remarketing Agent on any Computation Date may be determined based upon a higher selling price not exceeding 102% of the aggregate principal amount of the Bonds, plus accrued interest, if any, thereon, if there shall be delivered to the Trustee an opinion of Bond Counsel (as defined in the Indenture) to the effect that the determination of the Fixed Rate on such basis will not adversely affect the excludability from gross income for federal income tax purposes of the interest paid on the Bonds. Each Fixed Rate determined by the Remarketing Agent for any Fixed Rate Period shall remain in effect from and including the Fixed Rate Date on which such Fixed Rate Period commences to and including the last day of such Fixed Rate Period. During any Fixed Rate Period of fewer than six months (a "Short Fixed Rate Period"), the interest payable on the Bonds will be computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and during any Long Fixed Rate Period, the interest payable on the Bonds will be computed on the basis of a 360 - day year of twelve 30 -day months. The Interest Payment Dates will be (i) for each Short Fixed Rate Period, the day following the last day of such Fixed Rate Period, (ii) for each Long Fixed Rate Period (other than a Long Fixed Rate Period described in clause (iii) of this sentence), the first day of the calendar month commencing each six calendar month period after A-6 • the commencement of such Fixed Rate Period that occurs during such Fixed Rate Period and the day following the last day of such Fixed Rate Period and (iii) for any Long Fixed Rate Period extending to the maturity date of the Bonds, January 1 and July 1 of each year. (c) Default Rate: Alternate Rates. Notwithstanding the foregoing provisions of this Section, (i) if any payment of the principal or redemption price of or interest on, or the purchase price of, any Bond shall not be made when due, the Bonds shall bear interest at the last interest rate borne by the Bonds prior to the due date for such payment until such payment is made or provided for in accordance with the Indenture and (ii) if the Remarketing Agent does not determine the Variable Rate on any Adjustment Date or a court of competent jurisdiction holds that the rate so determined is invalid or unenforceable, the Variable Rate for such Adjustment Date shall be equal to 858 of the per annum bond equivalent yield applicable to 13 -week United States Treasury bills as published by the Federal Reserve Bank of New York on the most recent date prior to the applicable Adjustment Date. (d) Business Days. As used herein, "Business Day" means a day other than (i) a Saturday, Sunday or other day on which banking institutions in the State of Florida or the city in which (A) the corporate trust office of the Registrar and Paying Agent or the Trustee, designated, in accordance with the Indenture, by the Registrar and Paying Agent and the Trustee, respectively, (B) the office of the Remarketing Agent designated, in accordance with the Indenture, by the Remarketing Agent, or (C) the office of the Credit Facility Provider at which demands for payment under the Credit Facility must be presented, is located are authorized or required to close and (ii) a day on which the New York Stock Exchange is closed. (e) Interest Rates Conclusive and Bindine. The determination of the interest rates borne from time to time by the Bonds as provided herein and in the Indenture shall be conclusive and binding on the owner of this Bond. 5. Method of Payment: Record Dates. The principal or redemption price of, or purchase price of, this Bond will be payable upon presentation and surrender of this Bond at the principal corporate trust office of Chemical Bank in New York, New York, or at the principal corporate trust office of any successor or additional registrar and paying agent under the Indenture (the "Registrar and Paying Agent"). Interest on this Bond will be paid by check mailed to the owner as of the Record Date (defined herein) for the payment of such interest. Notwithstanding the foregoing, so long as the Bonds bear interest at the Variable Rate or during a Fixed Rate Period of fewer than six months, any payment hereunder of at least $2,500 shall be made by wire transfer to any account in the United States designated by any owner of Bonds, upon at least five days' notice to the Registrar and Paying Agent. The Record Dates will be (i) when the Bonds bear interest at a Variable Rate and during any Short Fixed Rate Period, the last day before each Interest Payment Date, (ii) during any Long Fixed Rate Period, the 15th day of the calendar month A-7 Ob preceding each Interest Payment Date and (iii) in the case of the payment of any defaulted interest, the fifth Business Day before such payment. Notwithstanding the foregoing, the principal or redemption price of and interest on, and the purchase price of, Credit Facility Bonds shall be payable by wire transfer to the Credit Facility Provider. The principal or redemption price of and interest on, and the purchase price of, this Bond will be paid in any money of the United States that at the time of payment is legal tender for payment of public and private debts or by checks payable in such money. If any payment of the principal of or interest on this Bond is due on a day that is not a Business Day, such payment will be made on the next Business Day, and no interest will accrue on the amount of such payment during the intervening period. Redemption. (a) Optional Redemption During Variable Rate Period and on Mandatory Tender Dates. The Bonds are subject to redemption prior to maturity at the option of the Borrower (i) so long as the Bonds bear interest at the Variable Rate, in whole or in part on any Interest Payment Date, and (ii) in whole or in part on any Mandatory Tender Date, in each case at a redemption price equal to the principal amount of the Bonds redeemed, plus accrued interest to the date fixed for redemption. (b) Optional Redemption During Fixed Rate Period. The Bonds are subject to redemption prior to maturity at the option of the Borrower during any Fixed Rate Period that is six years or longer on or after the Interest Payment Date next succeeding the date that is the earlier of (i) the tenth anniversary of the Fixed Rate Date for such Fixed Rate Period and (ii) the anniversary of such Fixed Rate Date that approximates more closely than any other such anniversary date the date that occurs at the midpoint of such Fixed Rate Period, in whole at any time or in part on any Interest Payment Date, at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, plus a premium (expressed as a percentage of the principal amount of the Bonds to be redeemed) that for the first redemption date, is equal to the lesser of (A) three percent and (B) one-half of one percent times the number of years between the calendar year of such redemption date and the calendar year during which such Fixed Rate Period ends (including for purposes of computation the calendar year of such redemption date but excluding the calendar year during which such Fixed Rate Period ends) and that shall decline by one-half of one percent annually thereafter. (c) Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory redemption prior to maturity on January 1, 198 , and on each January 1 thereafter from Sinking Fund Installments deposited in the Principal Account (created by the Indenture) at a redemption price equal to the principal amount of the Bonds redeemed, plus accrued interest to the date fixed for redemption. (d) Mandatory Redemption Upon Determination of Taxability. The Bonds are subject to mandatory redemption prior to maturity, as a whole or, as hereinafter provided, in part, at a redemption price equal to the A-8 • principal amount of the Bonds redeemed, plus accrued interest thereon to the date fixed for redemption, on a Business Day not later than 60 days after the Borrower receives notice from the Trustee of a Determination of Taxability. As used here, "Determination of Taxability" means a final determination by the Internal Revenue Service or a court of competent jurisdiction that the interest payable on any Bond is for any reason includable for federal income tax purposes in the gross income of any holder or former holder thereof, other than during any period in which such holder or former holder is or was a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended, or, if applicable, its predecessor provisions, and the applicable regulations thereunder; provided, however, that no "Determination of Taxability" shall be deemed to have occurred unless such holder or former holder gives the Borrower and the Trustee prompt written notice of such determination and the Borrower has been afforded the opportunity to contest the same either directly or in the name of the holder or former holder of such Bond, and until a conclusion of any appellate review, if sought. Upon the occurrence of a Determination of Taxability, the Bonds shall be redeemed in whole unless, in the opinion of Bond Counsel, the interest payable on the Bonds remaining outstanding after such redemption would not be includable in the gross income of any holder thereof for federal income tax purposes (other than during any period in which such holder is a "substantial user" of the Project or a "related person"). If the Indenture is discharged as described in Section 9 below prior to the occurrence of a Determination of Taxability, the Bonds will not be redeemed as described in this paragraph. (e) Redemption Upon the Occurrence of Certain Extraordinary Events. The Bonds are subject to redemption prior to maturity as a whole at any time at a redemption price equal to the principal amount thereof, plus accrued interest to the date fixed for redemption, at the option of the Borrower upon the occurrence of any of the following events and subject to the following conditions: (i) if title to, or the permanent use of, or use for a limited period of, substantially all of the Project, is condemned or the subject of an agreement with, or action by, a public authority in the nature of or in lieu of condemnation proceedings; or (ii) if the Borrower's title to substantially all of the Project is found to be deficient to the extent that the efficient utilization thereof by the Borrower is substantially impaired; or (iii) if substantially all of the Project is damaged or destroyed by fire or other casualty; or (iv) if as a result of any changes in the Constitution of the United States of America or of the State of Florida, or of legislative or administrative action, or failure of A=9 • administrative action, by the United States or the State of Florida, or any agency or political subdivision thereof, or by reason of any judicial decision, unreasonable burdens or excessive liabilities are imposed on the Borrower, including (without limitation) federal, state or other �Ld valorem property, income or other taxes not being imposed on the date of the Loan Agreement. (f) Selection of Bonds to Be Redeemed. If fewer than all of the Bonds shall be called for redemption, the Bonds or portions thereof to be redeemed shall be selected by the Registrar and Paying Agent in the manner provided in the Indenture. (g) Notice of Redemption. At lease one (1) Business Day before the redemption date of any Credit Facility Bond, and at least 30 days before the redemption date of any other Bond, the Registrar and Paying Agent will give a notice of redemption to each owner of a Bond to be redeemed in the manner and under the terms and conditions provided herein and in the Indenture, but failure to give any notice of redemption as to any Bond or any defect therein will not affect the validity of the call for redemption of any other Bonds. (h) Effect of Call for Redemption. Bonds or portions thereof called for redemption shall become due and payable on the redemption date at the redemption price set forth herein. On the date designated for redemption, if any required notice of redemption has been given and funds sufficient to pay the redemption price have been deposited with the Trustee, interest on the Bonds or portions thereof to be redeemed shall cease to accrue, such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Indenture and the owners of such Bonds shall have no rights in respect of such Bonds or portions thereof so called for redemption except to receive payment of the redemption price thereof and accrued interest thereon solely from such funds held by the Trustee. Optional and Mandatory Tender. (a) Optional Tender. As long as the Bonds Bear interest at the Variable Rate, the Issuer will purchase or cause to be purchased (but solely from the Revenues, proceeds of the remarketing of such Bond by the Remarketing Agent and amounts realized under the Credit Facility) any Bond or portion thereof in an authorized denomination (other than any Credit Facility Bond) at a price equal to the principal amount thereof plus accrued interest thereon upon: (i) irrevocable written notice from the owner of ouch Bond to the Registrar and Paying Agent (each, an "Optional 'Fender Notice"), which notice shall set forth (A) the principal amount of such Bond or such portion thereof to be purchased and (B) the date on which such Bond or such portion thereof is to be purchased (the "Optional Tender Date"), which date shall be a Business Day not fewer than three Business A-10 40 •• Days after the date of receipt of such notice by the Remarketing Agent in the case of any Optional Tender Date that is an Interest Payment Date, or seven calendar days after the date of receipt of such notice by the Remarketing Agent in the case of any other Optional Tender Date; and (ii) delivery of such Bond (with an appropriate instrument of transfer satisfactory to the Registrar and Paying Agent executed in blank by the registered owner with the signature guaranteed by a bank, trust company or member firm of the New York Stock Exchange) to the Registrar and Paying Agent not later than 10:00 a.m., New York time, on the Optional Tender Date. (b) Mandatory Tender. Except as otherwise provided in this Section, the Bonds are subject to mandatory tender and purchase, and the Issuer will purchase or cause to be purchased (but solely from the Revenues, proceeds or the remarketing of the Bonds by the Remarketing Agent and amounts realized under the Credit Facility) the Bonds, on the Mandatory Tender Daces at a price equal to the principal amount thereof plus accrued interest thereon. The Mandatory Tender Dates are (i) each Conversion Date, (ii) unless a Qualified Credit Facility has been delivered to the Trustee prior to the expiration of any Credit Facility within the time required by the Indenture, the first Business Day of the calendar month in which the stated expiration date of any Credit Facility then in effect occurs and (iii) the effective date of any Alternate Credit Facility that replaces any Credit Facility. The Registrar and Paying Agent will give notice of each Mandatory Tender Date (each, a "Mandatory Tender Notice") to the owners of the Bonds at least 35 days prior to each Mandatory Tender Date. (c) Election Not to Tender. The owner of this Bond may elect to retain this Bond or any portion hereof on any Mandatory Tender Date (if such Bond or such portion hereof is in a denomination authorized to be outstanding after the applicable Mandatory Tender Date) by delivering to the Registrar and Paying Agent irrevocable written notice of such election (a "Non -Tender Notice") on or before the tenth day of the calendar month preceding such Mandatory Tender Date (or, if such day is not a Business Day, the immediately preceding Business Day), which notice shall (i) affirmatively acknowledge such matters as shall be specified in such Mandatory Tender Notice and (ii) contain the irrevocable agreement by such owner not to tender this Bond for purchase pursuant to paragraph (a) of this Section on or before such Mandatory Tender Date. (d) Agreement to Sell Bonds on Tender Dates. The owner of this Bond, by acceptance of this Bond (unless such owner has delivered a Non - Tender Notice with respect to any Mandatory Tender Date as provided in paragraph (c) of this Section), agrees to sell this Bond to the Remarketing Agent, the Credit Facility Provider or its designee or any other party obtained by the Remarketing Agent or otherwise on each Optional Tender Date or Mandatory Tender Date (a "Tender Date") at a price equal to the principal amount hereof plus accrued interest, if any, hereon A-11 ab to such Tender Date and agrees to surrender this Bond to the Registrar and Paying Agent on such Tender Date. (e) Non-delivery of Bonds. IF ANY BOND (OTHER THAN A BOND AS TO WHICH A NON-TENDER NOTICE IS TIMELY DELIVERED WITH RESPECT TO ANY MANDATORY TENDER DATE, AS PROVIDED IN PARAGRAPH (C) OF THIS SECTION) IS NOT TENDERED FOR PURCHASE ON ANY TENDER DATE, SUCH BOND SHALL CEASE TO BEAR INTEREST ON SUCH TENDER DATE, SHALL NO LONGER BE CONSIDERED TO BE OUTSTANDING UNDER THE INDENTURE AS OF SUCH TENDER DATE AND SHALL BE DEEMED TO HAVE BEEN PURCHASED ON SUCH DATE IF THERE SHALL HAVE BEEN IRREVOCABLY DEPOSITED WITH THE TRUSTEE AN AMOUNT SUFFICIENT TO PAY THE PURCHASE PRICE OF SUCH BOND ON SUCH TENDER DATE. 8. Flirchased Bonds Not Discharged. No purchase of Bonds by the Remarketing Agent, the Registrar and Paying Agent, the Credit Facility Provider or any other party shall be deemed a payment or redemption of such Bonds and no such purchase will operate to extinguish or discharge the indebtedness evidenced by such Bonds. 9. Acceleration: Defeasance. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds then outstanding under the Indenture may become or may be declared due and payable before the stated maturity thereof, together with the interest accrued thereon. In certain circumstances set forth in the Indenture, the owners of the Bonds will receive no prior notice of such declaration. In the event that the principal of all Bonds then outstanding under the Indenture has been declared due an payable before the stated maturity thereof, whether or not any prior notice of such declaration has been given, if funds available under the Indenture to pay the principal of an accrued interest on all such Bonds through and including the accelerated maturity date are held by the Trustee or the Registrar and Paying Agent on such accelerated maturity date, interest on such Bonds shall cease to accrue on such accelerated maturity date, such Bonds shall cease to be entitled to any benefit or security under the Indenture and the owners of such Bonds shall have no rights in respect of such Bonds except to receive payment of the principal of and accrued interest on such Bonds on the accelerated maturity date of such Bonds. The Indenture prescribes the manner in which it may be discharged and provides that Bonds shall be deemed to be paid if money or Government Obligations (as defined in the Indenture), the principal of and interest on which when due will be sufficient to pay the principal of an interest on such Bonds to the maturity or redemption date of such Bonds (as the case may be), and the purchase price of Bonds tendered for purchase by the holders thereof in accordance with the Bonds, have been deposited with the Trustee. 10. Modifications. Modifications or alterations of the Indenture or of any indenture supplemental thereto or of the Loan Agreement may be made only to the extent and in the circumstances permitted by the Indenture. A-12 40 11. Denominations: Transfer: Exchange. All of the Bonds are of like tenor except as to number, principal amount and registered owner. The Bonds are issuable only in registered form without coupons in denominations of $50,000 and any integral multiples thereof [except that one Bond may be in the denomination of $ , and] except that, during any Long Fixed Rate Period, the Bonds are issuable in denominations of $5,000 and integral multiples thereof. The transfer of this Bond is registrable by the registered owner hereof and this Bond may be exchanged for an equal aggregate principal amount of Bonds of other authorized denominations upon presentation and surrender of this Bond at the principal corporate trust office of the Registrar and Paying Agent, together with an assignment duly executed by the registered owner or his duly authorized attorney or legal representative. The Registrar and Paying Agent may require the person requesting any transfer or exchange to reimburse it for any tax or other governmental charge payable in connection therewith. The Registrar and Paying Agent is not required to register the transfer of any Bond (except any transfer pursuant to a purchase with amounts realized under the Credit Facility) (i) after a notice of the redemption of such Bond or any portion thereof has been mailed or (ii) prior to the Optional Tender Date for such Bond has been received by the Remarketing Agent or (iii) prior to the Mandatory Tender Date after a Mandatory Tender Notice has been mailed -- in each case unless the transferee acknowledges in writing to the satisfaction of the Registrar and Paying Agent the matters contained in such notice and, if any Non -Tender Notice has been received by the Registrar and Paying Agent with respect to any Bond referred to in clause (iii) of this paragraph, of the delivery thereof. 12. Persons Deemed Owners. The registered owner of this Bond shall be treated as the owner of this Bond for all purposes. 13, Notices. When the Registrar and Paying Agent or the Trustee is required to give notice to the owner of this Bond, such notice shall be mailed by first-class mail to the registered owner of this Bond at such owner's address as it appears on the registration books maintained by the Registrar and Paying Agent. Any notice mailed as provided herein will be conclusively presumed to have been given, whether or not actually received by the addressee. A-13 ,�a�516171A�r v o h NOV 19,97 0 0�1 cnQ°rynrrof„ O ysX , 161 f 6 To JCS Lu ND. -1-- DAZ/101287/107.287 IRC/FL Conv.Cen.Refund CLM - 92158-3.001 LN.AGR.Dl INDIAN RIVER COUNTY, FLORIDA AND FLORIDA CONVALESCENT CENTERS, INC. LOAN AGREEMENT Dated as of 1987 $4,800,000 Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) Series 198 0 e S a TABLE OF CONTENTS ARTICLE I DEFINITIONS SECTION PAGE 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE II REPRESENTATIONS 2.01 Representations of the Issuer . . . . . . . . . . . . . . . 2.02 Representations of the Borrower . . . . . . . . . . . . . . ARTICLE III GENERAL AGREEMENTS; AMOUNTS PAYABLE; TIMES AND MANNER OF PAYMENT 3.01 Loan of Bond Proceeds; Term of Loan Agreement . . . . . . . 3.02 Amounts Payable . . . . . . . . . . . . . . . . . . . . . . 3.03 Substitute Credit Facilities . . . .. 3.04 Loan Agreement as General Obligation 0 f �he Brrower . . . 3.05 Obligation to Make Payments Absolute . . . . . . . . . . . ARTICLE IV OPERATION OF THE PROJECT 4.01 Disposition of Bond Proceeds . . . . . . . . . . . . . . . 4.02 Right to Enter and Examine Project . . . . . . . . . . 4.03 No Warranty by Issuer . . . . . . . . . . . . . . . . . . . 4.04 Operation and Maintenance of Project . . . . . . . . . . . 4.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE V SPECIAL COVENANTS 5.01 Tax -Exempt Status of the Bonds . . . . . . . . . . . . . . 5.02 Bonds Not to be Arbitrage Bonds . . . . . . . . . . . . . . 5.03 Borrower to Provide Information . . . . . . . . . . . . . . 5.04 Annual Audit of Borrower . . . . . . . . . . . . . . . . . 5.05 Payment of Certain Taxes, Assessments, Liens and Charges . . . . . . . . . . . . . . . . . . . . . . . -i- 5.06 Indemnification of Issuer, Trustee and Registrar and Paying Agent . . . . . 5.07 Maintenance of Corporate Existence 5.08 Further Assurances by Borrower . . . . . . . . . . . . . . ARTICLE VI EVENTS OF DEFAULT AND REMEDIES; REMEDIES 6.01 Events of Default . , 6.02 Remedies . . . . . . . . . . 6.03 No Waiver of Rights . . . . 6.04 Waiver of Default . . . . . . . . . . . . . . . . . . . . . ARTICLE VII PREPAYMENTS 7.01 Redemption of Bonds by Voluntary Payment . 7.02 Mandatory Redemption of Bonds Upon Determination of Taxability . . . . . . . . . 7.03 Extraordinary Redemption of Bonds . . . . . . . . . . . . . ARTICLE VIII MISCELLANEOUS 8.01 Covenants for Benefit of Holders 8.02 Compliance with Indenture 8.03 Actions of Borrower and the Issuer . 8.04 Issuer's Liability Limited . . . . 8.05 Giving of Notice . . . . . . 8.06 Rights and Remedies of Issuer. 8.07 Amendment of Loan Agreement and Note 8.08 Counterparts . . , . , , . . . . . 8.09 Severability , . , . . . , , , , . . . . . . . 8.10 Assignment of Loan Agreement and Note by Issuer 8.11 Governing Law . . . . . . . 8.12 Registrar and Paying Agent as Beneficiary . . . . . , . . . Exhibit A - Description of the Project PAGE 40 GAWP11/LOANAGR.WP/10-3-87/#1/svg IRAN AGREEMENT THIS LOAN AGREEMENT dated as of , 198_, and effective from the time of. execution and delivery hereof,—is by and between Indian River County, Florida, a political subdivision of the State of Florida (the "Issuer"), and Florida Convalescent Center, Inc., a Corporation organized and existing under the laws of the State of Florida (the "Borrower"). RECITALS The Issuer is authorized by the Florida Industrial Development Financing Act, consisting of Part II of Chapter 159, Florida Statutes, as amended, (the "Act") to issue its revenue bonds for the purpose of financing and refinancing the costs of construction and acquisition of projects authorized by the Act. On 198_, the Issuer adopted a resolution authorizing the issuance, sale and delivery of its $4,800,000 Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) Series 198_, (the "Bonds"), and the lending of the proceeds thereof to the Borrower in order to refinance a portion of the costs of certain projects (the "Project") authorized under the Act and to refund the $4,800,000 Indian River County Industrial Development Revenue Bonds (Florida Convalescent Centers, Inc. Project). The Bonds will be issued under and pursuant to an Indenture of Trust (the "Indenture") dated as of , 198_, between the Issuer and Third National Bank in Nashville, a national banking association, as Trustee. The Indenture provides that the Borrower will execute and deliver to the Issuer a mortgage with respect to the Project and certain other property of the Borrower as security for the obligations of the Borrower under this Loan Agreement. Bonds issued pursuant to the Act do not constitute or create in any manner a debt, liability or obligation of, or a pledge of the faith and credit of, the State of Florida, or any county or any political subdivision thereof but shall be payable solely from the Revenues (defined herein). The issuance of bonds under the Act shall not obligate the State of Florida, or any county, or any political subdivision thereof or the Issuer to levy or to pledge any form of 40 taxation whatever therefor or to make any appropriation for their payment. The Bonds and all obligations to be undertaken by the Issuer pursuant to the Indenture and this Loan Agreement do not constitute general obligations of the Issuer and do not pledge the full faith and credit of the Issuer, but are limited obligations only, payable solely from the Revenues. Indian River County, Florida and Florida Convalescent Centers, Inc_ intending to be legally bound hereby and in consideration of the mutual covenants hereinafter contained, DO HEREBY AGREE as follows: 2 - 40 ARTICLE I DEFINITIONS Section 1.01. As used in this Loan Agreement, unless a different meaning clearly appears from the context: "Act" means the Florida Industrial Development Financing Act, consisting of Part II of Chapter 159, Florida Statutes, as amended, and all future acts supplemental or amendatory thereof. "Administrative Expenditures" means any expenditures of the Issuer, the Trustee and the Registrar and Paying Agent under the Indenture, this Loan Agreement or the Mortgage not otherwise paid or provided for by the Borrower, and all other expenditures reasonably and necessarily incurred by the Issuer or the Trustee by reason of the financing and refinancing of the Project, including (without limitation) legal, financing and administrative expenses and expenses incurred to compel full and punctual performance of this Loan Agreement or the Mortgage in accordance with the terms hereof and thereof. "Alternate Credit Facility" means any letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility meeting the requirements of and delivered to the Trustee in accordance with Section 3.03(b) hereof, as amended, modified or supplemented from time to time. "Authorized Officer" means (i) in the case of the Issuer, the Chairman or the Board of County Commissioners of the Issuer and any other person set forth in a certificate executed by the Chairman or the Vice Chairman of the Board of County Commissioners of the Issuer and delivered to the Trustee; (ii) in the case of the Borrower, the President, the Vice President or the Secretary of the Borrower and any other person set forth in a certificate executed by the President or the Vice President of the Borrower and delivered to the Trustee; (iii) in the case of N11C, the Senior Vice President of NHC and any other person set forth in a certificate executed by the the Senior Vice President of NHC and delivered to the Trustee; and (iv) in the case of the Trustee, the President, any Vice -President, any Assistant Vice -President , any Corporate Txust Officer or any Assistant Corporate Trust Officer of the Trustee, and any other person authorized pursuant to a resolution of the Board of Directors of the Trustee. "Bond" or "Bonds" means the Indian River County, Florida Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series 198_, authorized by Section 2.01 of the Indenture. "Bond Counsel" means a law firm having a national reputation in the field of municipal law whose legal opinions are generally accepted by purchasers of municipal bonds. "Bondholder," "holder," "owner" or any similar term, when used with reference to a Bond, means the registered owner of such Bond. - 3 - "Borrower" means Florida Convalescent Centers, Inc., a corporation, duly organized and existing under the laws of the State of Florida, and its successors and assigns. "Business Day" means a day other than (i) a Saturday, Sunday or other day on which banking institutions in the State or the city in which the Principal Office of the Trustee, the Registrar and Paying Agent, the Remarketing Agent or the Credit Facility Provider is located are authorized or required to close and (ii) a day on which the New York Stock Exchange is closed. "Code" means the Internal Revenue Code of 1986, as amended, or any applicable predecessor statutory provisions, and the applicable regulations thereunder. "Credit Facility" means the letter of credit issued by The Toronto - Dominion Bank, Chicago Branch on the date of the initial authentication and delivery of the Bonds, as amended, modified or supplemented from time to time, and any Qualified Credit Facility or Alternate Credit Facility. "Credit Facility Agreement" means the Reimbursement Agreement dated as of , 1987 between the Borrower and The Toronto -Dominion Bank, acting through its Chicago Branch, and any other agreement between the Borrower and a Credit Facility Provider pursuant to which a Credit Facility is issued, as such agreements may be amended, modified or supplemented from time to time. "Credit Facility Bond" means any Bond during the period from and including the day on which it is purchased with amounts realized under the Credit Facility to but excluding the earlier of (i) the day on which it is held other than by, on behalf of or as security for the Credit Facility Provider and (ii) the day on which the Credit Facility Provider delivers to the Registrar and Paying Agent written notice of its election not to permit the sale of such Bond following receipt of notice from the Registrar and Paying Agent that such Bond can be remarketed. "Credit Facility Provider" means the issuer of the Credit Facility then in effect, if any. "Event of Default" means any Event of Default specified in Section 6.01 hereof. "Fiscal Year" means the fiscal year of the Borrower, being the period commencing on of any calendar year and ending on of the immediately succeeding calendar year, or such other 12 -month period as the Borrower shall establish as its fiscal year by written notice to the Trustee. "Fixed Rate" means the fixed rate or rates of interest borne by the Bonds during each Fixed Rate Period, determined in accordance with Section 2.03 of the Indenture and Section 4(b) of the Bonds. "Fixed Rate Date" means the first day of each Fixed Rate Period. - 4 - 40 "Fixed Rate Period" means a period commencing on or after 19$ and established in accordance with Section 2.03 of the Indenture during which the rate of interest borne by the Bonds (other than Credit Facility Bonds) is not subject to change. "Indenture" means the Indenture of Trust dated as of 198_, between the Issuer and the Trustee, as amended, modified or supplemented from time to time by Supplemental Indenture. "Independent Counsel" means any attorney or attorneys duly admitted to practice law before the highest court of any state who have regularly engaged in the practice of law as their primary occupation for at least five years and who are not officers or full-time employees of the Issuer or the Borrower. Bond Counsel may be deemed Independent Counsel. "Independent Public Accountant" means an individual, partnership or corporation engaged in the accounting profession, either entitled to practice, or having members or officers entitled to practice, as a certified public accountant under the laws of the State and in fact independent. "Interest Payment Date" means the first Business Day of each month through , 198_ and thereafter (i) for any period during which the Bonds bear interest at the Variable Rate, the first Business Day of each month, each Mandatory Tender Date and the maturity date of the Bonds, (ii) for any Fixed Rate Period of fewer than six months, the day following the last day of such Fixed Rate Period, (iii) for any Fixed Rate Period of six months or longer (other than any such Fixed Rate Period that is described in item (iv) of this paragraph), the first day of the calendar month beginning each six calendar month period after the commencement of such Fixed Rate Period that occurs during such Fixed Rate Period and the day following the last day of such Fixed Rate Period and (iv) for any Long Fixed Rate Period extending to the maturity date of the Bonds, each January 1 and July 1. "Issuer" means Indian River County, Florida and its successors and assigns. "Loan Agreement" means this Loan Agreement, as amended, modified or supplemented from time to time. "Loan Year" means a period of twelve (12) consecutive months beginning on January 1 in any calendar year in which Bonds are Outstanding and ending on December 31 of such calendar year. "Mandatory Tender Date" means each Conversion Date and any Termination Date. "Mortgage" means the mortgage instrument dated as of 198_ pertaining to the Project executed and delivered by the Borrower to the Trustee and the initial Credit Facility Provider, as amended, modified or supplemented from time to time. 6's 40 "NHC" means National HealthCorp L.P., a Delaware limited partnership, and its successors and assigns. "Note" means the Promissory Note of the Borrower as of the date hereof executed and delivered to the Issuer in accordance with this Loan Agreement. "Optional Tender Date" means, with respect to any Bond, a date on which such Bond is required to be purchased upon the demand of the holder thereof in accordance with Section 7(a) of such Bond. "Outstanding" or "outstanding" means, when used with reference to Bonds, as of any particular date, all Bonds authenticated and delivered under the Indenture except: (i) any Bond cancelled by the Registrar and Paying Agent (or delivered to the Registrar for cancellation) at or before such date; (ii) any Bond for the payment of the principal or Redemption Price of and interest on which provision shall have been made as provided in Section 9.01 of the Indenture; and (iii) any Bond in lieu of or in substitution for which a new Bond shall have been authenticated and delivered pursuant to Article II, Section 3.04 or Section 8.03 of the Indenture. "Principal Office" means (i) when used with reference to the Issuer, the principal office of the Issuer, (ii) when used with reference to the Trustee or the Registrar and Paying Agent, the corporate trust office of the Trustee or the Registrar and Paying Agent, respectively, designated as such by written notice to the Issuer, the Borrower, N11C, the Trustee, the Registrar and Paying Agent, the Remarketing Agent and the Credit Facility Provider, (iii) when used with reference to the Remarketing Agent, the Remarketing Agent, the office of the Remarketing Agent, designated as such by written notice to the Issuer, the Borrower, NHC, the Trustee, the Registrar and Paying Agent and the Credit Facility Provider, and (iv) when used with reference to the Credit Facility Provider, the office of the Credit Facility Provider at which demands for payment under the Credit Facility must be presented. "Project" means the construction and acquisition of the facilities more particularly described in Exhibit A to this Loan Agreement, or such facilities, as the context requires. "Qualified Credit Facility" means any letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility meeting the requirements of and delivered to the Trustee in accordance with Section 3.03(a) hereof, as amended, modified or supplemented from time to time. "Rating Agency" means Moody's Investors Service, or any other securities rating agency that shall have assigned a rating that is then in 6 40 effect with respect to the Bond, and their successors and assigns, and "Rating Agencies" means each such Rating Agency. "Redemption Price" means, when used with respect to a Bond or any portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof in accordance with such Bond. "Registrar and Paying Agent" means Chemical Bank, a banking corporation organized and existing under the laws of the State of New York, and its successors and any other corporation that may at any time be substituted in its place in accordance with the Indenture. "Remarketing Agent" means Alex. Brown & Sons Incorporated and any other Remarketing Agent appointed pursuant to Section 10.02 of the Indenture and their successors. "Revenues" means (i) all payments to the Issuer or the Trustee pursuant to this Loan Agreement and the Note, (ii) proceeds of the Bonds and all moneys and securities on deposit in the funds and accounts created by the Indenture and (iii) all other receipts of the Issuer attributable to the refinancing of the Project by the issuance of the Bonds. "Sinking Fund Installment" means the amounts provided in Section 2.04 of the Indenture to redeem or pay at maturity Bonds at the times provided therein, as such amounts may be changed in accordance with Section 2.04 of the Indenture. "State" means the State of Florida. "Supplemental Indenture" means any indenture entered into by the Issuer and the Trustee amending, modifying or supplementing the Indenture, any Supplemental Indenture or any Bond in accordance with the terms of the Indenture and this Loan Agreement. "Tender Date" means an Optional Tender Date or a Mandatory Tender Date. "Termination Date" means (i) the first Business Day of the calendar month (A) in which the stated expiration date of the Credit Facility then in effect occurs, or (B) in which any date on which such Credit Facility automatically terminates without notice from the Credit Facility Provider occurs; provided that, if there shall be delivered to the Trustee a Qualified Credit Facility prior to the day that is five days before the date upon which the Registrar and Paying Agent is required to give a Mandatory Tender Notice with respect to such Termination Date in accordance with Section 3.04 of the Indenture, the Termination Date shall be determined with reference to the stated expiration date of such Qualified Credit Facility and (ii) the effective date of each Alternate Credit Facility that replaces any Credit Facility. - 7 - effect with respect to the Bond, and their successors and assigns, and "Rating Agencies" means each such Rating Agency, "Redemption Price" means, when used with respect to a Bond or any portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof in accordance with such Bond. "Registrar and Paying Agent" means Chemical Bank, a banking corporation organized and existing under the laws of the State of New York, and its successors and any other corporation that may at any time be substituted in its place in accordance with the Indenture. "Remarketing Agent" means Alex. Brown & Sons Incorporated and any other Remarketing Agent appointed pursuant to Section 10.02 of the Indenture and their successors. "Revenues" means (i) all payments to the Issuer or the Trustee pursuant to this Loan Agreement and the Note, (ii) proceeds of the Bonds and all moneys and securities on deposit in the funds and accounts created by the Indenture and (iii) all other receipts of the Issuer attributable to the refinancing of the Project by the issuance of the Bonds. "Sinking Fund Installment" means the amounts provided in Section 2.04 of the Indenture to redeem or pay at maturity Bonds at the times provided therein, as such amounts may be changed in accordance with Section 2.04 of the Indenture. "State" means the State of Florida. "Supplemental Indenture" means any indenture entered into by the Issuer and the Trustee amending, modifying or supplementing the Indenture, any Supplemental Indenture or any Bond in accordance with the terms of the Indenture and this Loan Agreement. "Tender Date" means an Optional Tender Date or a Mandatory Tender Date. "Termination Date" means (i) the first Business Day of the calendar month (A) in which the stated expiration date of the Credit Facility then in effect occurs, or (B) in which any date on which such Credit Facility automatically terminates without notice from the Credit Facility Provider occurs; provided that, if there shall be delivered to the Trustee a Qualified Credit Facility prior to the day that is five days before the date upon which the Registrar and Paying Agent is required to give a Mandatory Tender Notice with respect to such Termination Date in accordance with Section 3.04 of the Indenture, the Termination Date shall be determined with reference to the stated expiration date of such Qualified Credit Facility and (ii) the effective date of each Alternate Credit Facility that replaces any Credit Facility. - 7 - 40 "Trustee" means Third National Bank in Nashville, a national banking association, organized and existing under the laws of the United States of America, and its successors, and any other corporation that may at any time be substituted in its place in accordance with the Indenture. Section 1.02. Rules of Construction. Unless the context clearly indicates to the contrary, the following rules shall apply to the construction of this Loan Agreement: (a) Words importing the singular number include the plural number and words importing the plural number include the singular number. (b) Words of the masculine gender include correlative words of the feminine and neuter genders. (c) The headings and the table of contents set forth in this Loan Agreement are solely for convenience of reference and shall not constitute a part of this Loan Agreement nor shall they affect its meaning, construction or effect. (d) Words importing persons include any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or agency or political subdivision thereof. (e) Any reference to a particular percentage or proportion of the Holders of Bonds shall mean the Holders at the particular time of the specified percentage or proportion in aggregate principal amount of all Bonds then Outstanding under the Indenture except Bonds held by the Issuer or the Borrower (whether or not theretofore issued and whether held in the treasury of the Issuer or the Borrower or pledged to or by the Issuer or the Borrower to secure any indebtedness); provided, however, that Bonds so pledged may be regarded as Outstanding for the purposes of this,paragraph if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote on such Bonds. For the purposes of this paragraph, Credit Facility Bonds shall not be deemed to be held by or for the account of the Borrower or the Issuer. (f) Any reference to the Revenue Fund, Debt Service Fund, the Interest Account, the Principal Account, the Purchase Account, and the Rebate Fund shall be to the fund or account so designated that is created under Section 4.01 of the Indenture. - 8 - ab (g) During any period in which no Credit Facility shall be in effect, the provisions of this Loan Agreement that relate to the Credit Facility, the Credit Facility Agreement and the Credit Facility Provider shall be of no force and effect. (h) The terms "agree" and "agreement" shall include and mean "covenant," and all agreements contained in this Loan Agreement are intended to constitute covenants and shall be enforceable as such. - 9 - 40 ARTICLE II REPRESENTATIONS Section 2.01. Representations of the Issuer. The Issuer makes the following representations as the basis for the undertakings on the Borrower's part herein contained: (a) The Issuer is a political subdivision of the State created and existing under and by virtue of the Constitution and laws of the State. (b) Under the terms of the Act, the Issuer has the power to enter into this Loan Agreement and the Indenture and to accept the Note and to carry out its obligations hereunder and thereunder. (c) The Issuer is not in default under any of the provisions of the laws of the State that would affect its existence or its powers referred to in the preceding paragraph (b). (d) The Issuer has duly authorized the execution and delivery of this Loan Agreement and the Indenture and each such document, when executed and delivered on its behalf, will constitute a legal, valid and binding obligation of the Issuer, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity. (e) Under existing statutes and decisions, no taxes on income or profits are imposed on the Issuer. (f) To the best knowledge, information and belief of the Issuer, no event has occurred and no condition exists that, upon the issuance of the Bonds, would constitute an Event of Default on the part of the Issuer under this Loan Agreement or the Indenture and the Issuer is not and has never been in default under any general obligation indebtedness. Section 2.02. Representations of the Borrower. The.Borrower makes the following representations as the basis for the undertakings on the Issuer's part herein contained: (a) The Borrower is a corporation duly organized and in good standing under the laws of the State. (b) The Borrower has all requisite power to execute and deliver this Loan Agreement and the Note and to perform its obligations hereunder and thereun4er, and the Borrower by proper action has duly authorized the execution and delivery of this Loan Agreement and the Note. (c) This Loan Agreement and the Note, when executed and delivered on its behalf, will constitute legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as enforceability - 10 - do may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity. (d) The execution, delivery and performance by the Borrower of this Loan Agreement and the Note will not contravene or constitute a default under any provision of applicable law, its charter or by-laws or any judgment, order, decree, rule or regulation, or a breach of any agreement or instrument binding upon it. (e) There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Borrower, threatened before or by any court, governmental body or agency or other tribunal or authority that would, if adversely determined, have a material adverse effect on the authority or ability of the Borrower to perform its obligations under this Loan Agreement or the Note, or that question the legality, validity or enforceability hereof or thereof. (f) No authorization, consent or approval of, notice to, registration with or other action by or in respect of, any governmental body or agency or other authority is required in connection with the execution, delivery and performance by the Borrower of this Loan Agreement or the Note, except such as have been obtained. (g) The acquisition and construction of the Project by the Borrowar; including the refinancing thereof as provided in this Loan Agreement, will (i) provide gainful employment in the State, (ii) encourage the increase of industry and a balanced economy in the State, (iii) significantly contribute to the economic growth of the political subdivision of the State in which the Project is located, (iv) assist in the retention of existing industry in the State, (v) protect the environment, (vi) promote economic development and (vii) promote the health, safety and general welfare of the State and its people. I (h) The Issuer will be able to cope satisfactorily with the impact of the Project and will be able to provide or cause to be provided when needed, the public facilities, including utilities and public services that will be necessary for the operation, repair and maintenance of the Project on account of any increases in population or other circumstances resulting therefrom. (i) The Borrower presently intends to operate the Project as "health care facility" as defined in the Act. • ARTICLE III GENERAL AGREEMENTS; AMOUNTS PAYABLE; TIMES AND MANNER OF PAYMENT Section 3.01, loan of Bond Proceeds: Term of Loan Agreement. The Issuer shall loan to the Borrower the proceeds of sale of the Bonds by depositing the net proceeds of the sale of the Bonds in accordance with the Indenture. Neither the Issuer nor the Borrower shall have any legal or equitable interest in the proceeds of the Bonds or any proceeds of any investment thereof except to require their application in the manner and under the terms and conditions set forth in the Indenture. This Loan Agreement shall remain in full force and effect from the date of its execution and delivery until the date on which the principal or Redemption Price of and interest on the Bonds and all Administrative Expenditures shall have been fully paid by or on behalf of the Borrower or provision for the payment thereof shall have been made by or on behalf of the Borrower as provided by the Indenture, at which time this Loan Agreement shall terminate and the Issuer shall release and cancel this Loan Agreement. Section 3.02. Amounts Payable. (a) The Borrower shall pay or cause to be paid to the Trustee, as and when the same shall become due and payable in accordance with the terms of the Bonds, the Indenture and this Section, an amount equal to the sum of: (i) the total interest becoming due on all Bonds to the respective dates of payment thereof; (ii) the total principal amount of the Bonds; (iii) all redemption premiums (if any) payable on the redemption of Bonds prior to stated maturity dates; and (iv) the purchase price of Bonds required to be purchased on any Tender Date, in each case less any amount available for such payments from the funds and accounts established under the Indenture. (b) In addition, the Borrower shall pay the Administrative Expenditures. (c) All such amounts shall be paid to the Trustee, the Issuer or the Credit Facility Provider at the times referred to in paragraph (a) of this Section and as follows: (i) So long as the Credit Facility shall be in effect: (A) amounts realized by the Registrar and Paying Agent or the Trustee under the Credit Facility and proceeds of the remarketing of the Bonds received by the Registrar and Paying Agent for the payment of the principal or Redemption price of or interest on, or the purchase price of, the Bonds shall be credited against the obligation of the Borrower to make such payments hereunder; (B) amounts payable to the Credit Facility Provider, including (without limitation) the - 12 - 40 principal or Redemption Price of and interest on Credit Facility Bonds, shall be paid by the Borrower directly to the Credit Facility Provider for the account of the Issuer or the Borrower (as the case may be); and (C) the Administrative Expenditures shall be paid by the Borrower directly to the Issuer or the Trustee upon the written demand of an Authorized Officer of the Issuer or the Trustee, respectively. (ii) During any period in which no Credit Facility is in effect, the Borrower shall pay to the Trustee the following amounts at the following times: (A) on the Business Day immediately preceding each Interest Payment Date, and on the Business Day immediately preceding the redemption or maturity date of any Bonds, the amount, if any, necessary to make the amount then on deposit in the Interest Account and available for the payment of such interest equal to the interest payable on the Bonds on such date; (B) on the Business Day preceding the redemption date of any Bonds, on the maturity date of any Bonds and on any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with the Indenture, the amount, if any, necessary to make the amount- on deposit in the Principal Account equal to the principal amount of the Bonds due on such date; and (C) the Administrative Expenditures not otherwise paid or provided for by the Borrower, as certified to the Borrower by an Authorized Officer of the Issuer or the Trustee. (d) On the date of the initial delivery of the Bonds, the Borrower shall execute the Note. The obligations of the Borrower under the Note shall be deemed to be amounts payable under Section 3.02(a) hereof. Each payment made to the Trustee, the Issuer or the Credit Facility Provider as provided in this Section 3.02 shall be deemed to be a credit against the corresponding obligation of the Borrower under Section 3.02(a) hereof and any such payment shall fulfill the Borrower's obligation to pay such amount hereunder and under the Note. Section 3.03. Substitute Credit Facilities. (a) The Borrower, with the written consent of NHC, may at any time and from time to time deliver to the Trustee a letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or other similar agreement, provided that there shall first be delivered to the Trustee each of the following: (i) such 13 agreement, duly executed by the parties thereto; (ii) an opinion of Bond Counsel to the effect that such agreement qualifies as a Credit Facility under this Loan Agreement and that the delivery of such agreement will not adversely affect the tax-exempt status of the interest on the Bonds for federal or State income tax purposes; (iii) if any Credit Facility is then in effect, written evidence from each Rating Agency that such Rating Agency has reviewed such agreement and that is substitution for or replacement of the Credit Facility then in effect will not result in a reduction or withdrawal of its ratings on the Bonds; (iv) an opinion of counsel to the issuer of such agreement to the effect that such agreement constitutes a valid and binding obligation of the issuer thereof; and (v) an opinion of Independent Counsel to the effect that the exemption of the Bonds from the registration requirements of the Securities Act of 1933, as amended, and the exemption of the Indenture from qualification under the Trust Indenture Act of 1939, as amended, will not be impaired as a result of the delivery of such agreement. (b) In addition to any Qualified Credit Facility delivered in accordance with paragraph (a) of this Section, upon at least 40 days' notice to the Trustee, the Borrower may, with the written consent of NHC, deliver to the Trustee a letter of credit, bond purchase agreement, guaranty, line of credit, bond insurance policy, surety bond or other similar agreement, provided that there shall first be delivered to the Trustee each of the items referred to in clauses (i), (ii), (iv) and (v) of paragraph (a) of this Section. Each Alternate Credit Facility shall become effective on the first Business Day of a month and, if such Alternate Credit Facility is delivered during any Fixed Rate Period in substitution for or replacement of another Credit Facility, on a day that would otherwise be a Mandatory Tender Date. (c) The stated expiration date of any substitute Credit Facility must be on or after the 15th day of a calendar month not earlier than the earlier of (i) the date that is one year after the effective date of such substitute Credit Facility and (ii) the maturity date of the Bonds. Section 3.04. Loan Agreement as General Obligation of the Borrower. This Loan Agreement is a general obligation of the Borrower and the full faith and credit of the Borrower is pledged to the payments required hereunder. Section 3.05. Obligation to Make Payments Absolute. The obligation of the Borrower to pay or cause to be paid the amounts payable under this Loan Agreement and the Note shall be absolute, irrevocable, complete and unconditional and the amount, manner and time of payment of such amounts shall not be decreased, abated, rebated, setoff, reduced, abrogated, waived, diminished or otherwise modified in any manner or tb any extentwhatsoever regardless of any right of setoff, recoupment or counterclaim that the Borrower might otherwise have against the Issuer, the Trustee or any other person and regardless of any contingency, force ma eure, event or cause whatsoever and notwithstanding any circumstance or occurrence that may arise or take place after the completion of the Project, including (without limitation) any damage to or destruction of any part or all of the Project or any taking or damaging of any part or all of the Project by any public authority or agency in the exercise of the power of eminent domain or otherwise. - 14 - • •® ARTICLE IV OPERATION OF THE PROJECT Section 4.01. Disposition of Bond Proceeds. The Borrower agrees to the deposit of the proceeds of sale of the Bonds with the Trustee in accordance with the Indenture and further agrees that such proceeds shall be held and disbursed by the Trustee only in accordance with the provisions of the Indenture. At the written direction of Authorized Officers of the Borrower and NHC, moneys on deposit in any fund or account created by the Indenture shall be invested and reinvested by the Trustee or the Registrar and Paying Agent, as the case may be, as provided in Article V of the Indenture. Section 4.02. Right to Enter and Examine Proiect. The Issuer shall have the right, upon reasonable notice to the Borrower and NHC, to enter upon, inspect and examine the Project at any time during regular business hours in such manner as not to interfere with the normal operations of the Borrower and NHC so far as practicable. Representatives of the Borrowers or NHC may accompany the employees, members or representatives of the Issuer on the premises. Section 4.03. No Warranty y Issuer. The Issuer makes no warranty, either express or implied, of the actual or designed capacity of the Project, of the suitability of the Project for the purposes specified in this Loan Agreement, of the condition of the Project or of the suitability of the Project for the Borrower's purposes or needs. Section 4.04. Operation and Maintenance of Project. The Borrower shall cause the Project to be operated in a sound and economical manner and shall maintain, preserve and keep the Project in good condition and repair. The Borrower shall make all necessary and proper repairs, replacements and renewals so as to conduct the operation of the Project in accordance with all material governmental operating standards applicable to the Project. The Borrower shall operate the Project as a "health care facility" within the meaning of the Act. Section 4.05. Insurance. The Borrower shall keep the Project and its operations with respect thereto adequately insured at all times and shall maintain with responsible insurers insurance with respect to the Project and such operations of such types, in such amounts and against such risks as are customarily maintained with respect to comparable facilities and operations, including (without limitation) (i) full fire and extended coverage insurance on the Project providing for not less than full recovery of the insurable value (less reasonable deductibles and exclusions) of any damaged property and (ii) public liability and property damage insurance in amounts estimated to fully indemnify (less reasonable deductibles and exclusions) the estimated loss or damage. In the event that the Borrower shall at any time neglect or refuse to obtain or maintain insurance as herein required, the Trustee may obtain and maintain such insurance and the Borrower shall be obligated to reimburse the Trustee promptly for all amounts expended in connection therewith. - 15 - 40 ARTICLE V SPECIAL COVENANTS Section 5.01. Tax -Exempt Status of the Bonds. It is the intention of the parties hereto that the interest on the Bonds be and remain exempt from federal income taxation and, to that end, the Borrower covenants with the Issuer, the Trustee and each of the holders from time to time of the Bonds that (i) the Borrower shall take any and all action necessary to maintain the exemption from federal income taxation of the interest on the Bonds and (ii) the Borrower shall not perform any act or enter into any agreement, or use or permit the use of the Project or any portion thereof in a manner that shall have the effect of terminating the exemption from federal income taxation of interest on the Bonds. The Borrower shall comply with all provisions of the Tax Certificate and Agreement pertaining to the Bonds executed by the Borrower on the date of execution and delivery hereof (the "Tax Certificate and Agreement") and the representations and covenants contained therein and hereby incorporated into this Loan Agreement by reference. Section 5.02. Bonds Not to Be Arbitrage Bonds. The Borrower covenants that it will not make, or (to the extent it exercises control or direction) permit to be made, any use of the Bond Proceeds that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 and the arbitrage regulations. The Issuer will hold and shall invest Bond Proceeds within its control (if such proceeds are invested) in accordance with the expectations of the Issuer set forth in the Section 148 Certificate of the Issuer pertaining to the Bonds. If the Issuer is of the opinion upon receipt of advice of Bond Counsel that it is necessary further to restrict or limit the yield on the investment of any Bond Proceeds in order to avoid the Bonds being considered "arbitrage bonds" within the meaning of Section 148 or the arbitrage regulations, the Issuer shall take such action as is necessary to restrict or limit the yield on such investment, irrespective of whether the Borrower is of the same or a different opinion. Upon the request of the Borrower and NHC and receipt of advice of Bond Counsel the Issuer may, and upon receipt of an approving ruling from the Internal Revenue Service or a decision of a court of competent jurisdiction the, Issuer shall, take such action as is necessary to remove or modify a restriction or limitation on the yield on the investment of any Bond Proceeds that was formerly deemed necessary; provided that the Issuer shall not hold or invest any Bond Proceeds in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 and the arbitrage regulations. The Issuer shall incur no liability in connection with action as contemplated herein so long as the Issuer acts in good faith. Section 5.03. Borrower to Provide Information. Whenever requested by the Issuer or the Trustee, the Borrower shall provide and certify, at the Borrower's expense, such information concerning the Project, the Borrower, its finances and other topics as the Issuer or the Trustee reasonably considers necessary to enable it to keep Bondholders informed of financial and any other - 16 - 40 matters pertaining to the Borrower and the Project, to enable Bond Counsel to render its opinions and otherwise advise the Issuer, to enable the Issuer to make any reports required by law, governmental regulation or the Indenture. Section 5.04. Annual Audit of Borrower. The Borrower shall cause its books and accounts to be audited annually, and a report thereon to be issued, within 120 days after the end of each Fiscal year, by an Independent Public Accountant and shall cause a signed report of such audit, conducted in accordance with generally accepted auditing standards, to be filed within 30 days after the issuance of such report with the Trustee. Section 5.05. Payment of Certain Taxes, Assessments. Lien and 911&rM. The Borrower will (a) pay, or make provision for payment of, all lawful taxes and assessments, including income, profits, property or excise taxes, if any, or other municipal or governmental charges, levied or assessed by the federal, state or any municipal government upon any payments pursuant to this Loan Agreement or the Note when the same shall become due and (b) pay or cause to be discharged or make adequate provision to satisfy and discharge, within 60 days after the same shall accrue, any lien or charge upon any payments under this Loan Agreement or the Note. Section 5.06. Indemnification of Issuer. Trustee and Registrar and Paying, Agent. The Borrower releases the Issuer, the Trustee and the Registrar and Paying Agent from, agrees that the Issuer, the Trustee and the Registrar and Paying Agent shall not be liable for, and agrees to indemnify and hold the Issuer, the Trustee and the Registrar and Paying Agent harmless from, any liability for, or expense resulting from, any loss, cost or expense incurred as a result of claims or suits filed, and any loss or damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the Project or the financing or refinancing thereof, except where resulting from the negligence or willful misconduct of the Issuer, the Trustee, or the Registrar and Paying Agent or their agents or employees. Section 5.07. Maintenance of Corporate Existence. (a) The Borrower shall maintain its corporate existence, except as permitted by paragraphs (b) and (c) of this Section, and shall remain qualified to do business,in the State, or cause any successor corporation to be and remain so qualified or to file with the Trustee a consent to service of process in the State acceptable to the Trustee. (b) Subject to the provisions of Section 5.01 hereof, so long as the Credit Facility shall be in effect and the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility Agreement, with the prior written consent of the Credit Facility Provider, the Borrower may consolidate with or merge into N11C, permit NHC to consolidate or merge into it or sell substantially all of its assets to NHC provided that the surviving, rep-Iting or transferee corporation or other business entity shall be a solvent corporation or other business entity and shall assume in writing all of the obligations of the Borrower under this Loan Agreement, including all covenants herein contained. - 17 - 40 (c) Except as provided in paragraph (b) above, without the prior consent of NHC and the Trustee, the Borrower shall not dissolve or otherwise dispose of all or substantially all of its assets, consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it; provided, however, that, if no Event of Default then exists, the Borrower may, without the prior consent of NHC, consolidate with or merge into another corporation incorporated under the laws of the United States of America, one of the states thereof or the District of Columbia, or permit one or more of such corporations to consolidate with or merge into it, or sell or otherwise transfer to another such corporation all or substantially all of its assets and thereafter dissolve (i) if the Borrower is the surviving corporation or (ii) if the surviving, resulting or transferee corporation shall be a solvent corporation and shall assume in writing all of the obligations of the Borrower under this Loan Agreement, including all covenants herein contained. Section 5.08. Further Assurances by Borrower. The Borrower shall not enter into any contracts or agreements, perform any acts or required the Issuer to enter into any contracts or agreements or perform any acts that may adversely affect any of the assurances or rights of the issuer hereunder. - 18 - 40 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES; REMEDIES Section 6.01. Events of Default. The following shall be "Events of Default" under this Loan Agreement and the Note and the terms "Event of Default" or "Default" shall mean, whenever they are used in this Loan Agreement, any one or more of the following events: (a) an Event of Default as defined in Section 7.01(a) or (b) of the Indenture shall have occurred and be continuing; (b) the Borrower shall fail to pay when due any payment required to be paid under Section 3.02 hereof; (c) the Borrower shall fail to pay when due any payment required to be made under this Loan Agreement or the Note, which failure shall continue for a period of 30 days after written notice, specifying such failure and requesting that it be remedied, is given to the Borrower and N11C by the Issuer or the Trustee; (d) the Borrower shall fail to perform, observe or comply with any other of the terms, covenants, conditions or provisions contained in this Loan Agreement or the Note, which failure shall continue for a period of 30 days after written notice thereof shall have been given to the Borrower and NHC by the Issuer or the Trustee; provided, however, that if the Borrower or N11C shall proceed to take any curative action that, if begun and prosecuted with due diligence, cannot be completed within a period of 30 days, then such period shall be increased to such extent as shall be necessary to enable the Borrower or NHC to complete such curative action through the exercise of due diligence; (e) the Borrower shall become insolvent or the subject of insolvency proceedings or shall file a petition or other pleading seeking an "order for relief" within the meaning of the United States Bankruptcy Code, or shall file any petition or other pleading seeking any reorganization, composition, readjustment, liquidation of assets or similar relief for itself under any present or future law or regulation, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of the Borrower, or of substantially all of the assets of the Borrower, or shall make a general assignment for the benefit of creditors, or shall be unable or admit in writing its inability to pay its debts generally as they become due; (f) a petition or other pleading shall be filed against the Borrower seeking an "order for relief" within the meaning of the United States Bankruptcy Code or any reorganization, composition, readjustment, liquidation of assets or similar relief under any present or future law or regulation, and shall remain undismissed or unstayed for an aggregate period of 90 days (whether or not consecutive), or if, by an order or decree of a court of competent jurisdiction, the Borrower shall become the subject of an "order for relief" within the meaning of the United States Bankruptcy Code or relief shall be granted under or pursuant to any such petition or other pleading, or if, by order or decree of such court, 19 40 there shall be appointed, without the consent or acquiescence of the Borrower, a trustee in bankruptcy or reorganization or a receiver or liquidator of the Borrower or of all or any substantial part of the property of the Borrower, and any such order or decree shall have continued unvacated, unstayed on appeal or otherwise and in effect for a period of 90 days; or (g) the Borrower shall default in the payment of the principal of and interest on any evidence of indebtedness of the Borrower for borrowed money, or any event shall occur under any indenture, agreement or other similar instrument under which any such evidence of indebtedness of the Borrower for borrowed money may be issued, which default or event permits the acceleration of the maturity of such indebtedness of the Borrower outstanding thereunder. The provisions of paragraph (d) of this Section are subject to the following limitations: If by reason of acts of Cod, strikes, lockouts or other industrial disturbances, acts of public enemies, orders of any kind of the government of the United States or of the State, or any department, agency, political subdivision or official thereof, or any civil or military authority, insurrections, riots, infection, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, droughts, arrests, restrain of government and people, civil disturbances, explosions, breakage or accident to machinery, partial or entire failure of utilities, or any cause or event not reasonably within the control of the Borrower, the Borrower is unable in whole or in part to carry out its agreements referred to in paragraph (d) of this Section, the Borrower shall not be deemed in default during the continuance of such inability. The Borrower shall use its best efforts to remedy with all reasonable dispatch the cause or causes preventing it from carrying out its agreements; provided, that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Borrower, and the Borrower shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is, in the judgment of the Borrower, unfavorable to the Borrower. Any failure of the Borrower to perform its obligations under Article III of this Loan Agreement, upon any notice or lapse of time or both provided in this Section, shall constitute an Event of Default regardless of the reason for such failure to perform. Notwithstanding the foregoing provisions of this Section, so long as the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, no Event of Default specified in this Section shall be deemed to have occurred unless and until the Credit Facility Provided shall have given written notice to the Trustee of the occurrence of such Event of Default. Section 6.02. Remedies. Upon the occurrence of an Event of Default and upon written notice thereof to the Borrower and NHC, the Issuer or the Trustee may (i) accelerate the payment of the amounts payable under this Loan Agreement and the Note and all amounts due under this Loan Agreement and the Note upon notice to the Borrower, whereupon the entire unpaid amount payable under this Loan Agreement and the Note immediately shall become due and payable without further demand upon the Borrower, and (ii) take any action at law or in equity to collect the payments due and thereafter to become due, or to enforce the 20 - performance and observance of any obligation, agreement or covenant of the Borrower under this Loan Agreement and the Note. Section 6.03. No Waiver of Ri¢hts. No failure or delay by the Issuer or the Trustee in exercising any right, remedy, power or privilege hereunder, not any single or partial exercise thereof nor the exercise of any other right, remedy, power or privilege shall operate as a waiver hereof or thereof. No failure or delay by the Issuer or the Trustee in exercising any right, remedy, power or privilege under or in respect of the Bonds, the Indenture, this Loan Agreement or the Note shall affect the rights, remedies, powers or privileges of the Issuer or the Trustee hereunder or shall operate as a waiver thereof. The rights, remedies, powers and privileges of the Issuer and the Trustee hereunder are cumulative and not exclusive of any other rights, remedies, powers or privileges now or hereafter existing at law or in equity. Section 6.04. Waiver of Default. In the event that any agreement contained herein or in the Note shall be breached by either party and such breach shall thereafter be waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder or under the Note, as the case may be. - 21 - 40 ARTICLE VII PREPAYMENTS Section 7.01. Redemption of Bonds by Voluntary Payment. Upon written notice to the Registrar and Paying Agent by the Borrower and NHC, consented to in writing by the Credit Facility Provider if a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor a demand for funds under the Credit Facility, which notice shall set forth the aggregate principal amount of Bonds to be redeemed, the Registrar and Paying Agent shall give notice of the Issuer's election to redeem Bonds in the aggregate principal amount set forth in such notice in accordance with the Indenture. So long as the Credit Facility is in effect, at least 124 days before the redemption date of any Bonds during any Fixed Rate Period, the Borrower shall pay to the Trustee the amount of any premium that will be payable upon such redemption of Bonds. Section 7.02. Mandatory Redemption of Bonds Upon Determination of Taxability. In the event that the Borrower receives notice from the Trustee pursuant to Section 3.02(c) of the Indenture that a proceeding which could lead to a Determination of Taxability (as defined in Section 6(d) of the Bonds) has been instituted against a Bondholder, the Borrower shall promptly notify the Trustee whether or not it intends to contest such proceeding. In the event that the Borrower chooses to contest such proceeding, it will use its best efforts to obtain a prompt final determination or decision in such proceeding or litigation and will keep the Trustee informed of the progress of any such proceeding or litigation. The Borrower shall be obligated to prepay all amounts payable hereunder and under the Note upon the occurrence of a Determination of Taxability on a Business Day that is not more than 60 days after receipt by the Borrower of written notice of the occurrence of such Determination of Taxability; provided, however, that if there shall be delivered to the Trustee an opinion of Bond Counsel to the effect that, if fewer than all of the Bonds are redeemed, the interest payable on the Bonds remaining outstanding will not be includible in the gross income of the holders thereof for federal income tax purposes (other than during any period in which any such holder is a "substantial user" of the Facilities or a "related person" within the meaning of Section 147(a) of the Code), the Borrower shall be obligated to prepay the amounts payable hereunder and under the Note in part in an amount equal to the aggregate,principal amount of the Bonds required to be redeemed. Section 7.03. Extraordinary Redemption of Bonds. The Borrower shall have the right to require the redemption of Bonds upon the occurrence of the conditions or events described in Section 6(e) of the Bonds. Upon the occurrence of any of such events or conditions and at the written request of Authorized Officers of the Borrower and NifC, with the written consent of the Credit Facility Provider if a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor a demand for funds under the Credit Facility, and receipt by the Trustee of a resolution of the Board of Directors of the Borrower that such event or condition has occurred, the Registrar and Paying Agent shall give notice of the Issuer's election to redeem the Bonds subject to the provisions of Section 3.03 of the Indenture regarding the redemption of a portion of a Bond. - 22 - C7l •4 ARTICLE VIII MISCELLANEOUS Section 8.01. Covenants for Benefit of Holders. This Loan Agreement is executed in part to induce the purchase by others of the Bonds, and accordingly, all covenants and agreements on the part of the Borrower and the Issuer set forth in this Loan Agreement and the Note are hereby declared to be for the benefit of the Holders from time to time of the Bonds. This Loan Agreement, the Note and any property and funds held by the Issuer or the Trustee pursuant to this Loan Agreement, the Note and the Indenture are held for the benefit of the holders of the Bonds and, to the extent provided herein, in the Note and in the Indenture, the Credit Facility Provider, and shall not be available to satisfy claims of holders of other issues of the Issuer's bonds or of any other creditors of the Issuer, including, without limitation, any judgment creditors or any secured or other lien creditors, whether such claims now exist or hereafter come into existence. Nothing in this Section 8.01 shall be construed to give any Bondholder or group of Bondholders any rights to enforce any provisions hereof or to exercise any remedies herein provided. Section 8.02. Compliance with Indenture. The Borrower recognizes that the Indenture contains provisions that relate to matters affecting the payment of Costs of the Project and the administration and investment of certain funds; the Borrower has reviewed the Indenture and hereby assents to all provisions of the Indenture. The Borrower shall take such action as may be necessary in order to enable the Issuer to comply with all requirements and to fulfill all covenants of the Indenture to the extent that compliance with such requirements and fulfillment of such covenants are dependent upon any observance or performance required of the Borrower by the Indenture, the Note and this Loan Agreement. Section 8.03. Actions of Borrower and the Issuer. The Borrower agrees that all actions heretofore or'hereafter taken by it and all actions hereafter taken by the Issuer to carry out the Project upon the recommendation or request of any officer of the Borrower have been and will be in full compliance with the Indenture and this Loan Agreement. The Borrower acknowledges that any review of any such actions heretofore or hereafter taken by the Issuer's staff or counsel has been or will be solely for the protection of the Issuer. Neither such review nor any action taken by the Issuer to carry out the Project shall estop or otherwise preclude the Issuer from enforcing this Loan Agreement or the Note. Section 8.04. Issuer's Liability Limited. Neither the execution and delivery of this Loan Agreement, the Note and the Mortgage nor the carrying out of the Project shall impose any personal liability on the [INSERT TITLES OF APPROPRIATE OFFICERS], officers, employees or agents of the Issuer. No recourse shall be had by the Borrower for any claims based on the Indenture, this Loan Agreement, the Note or the Mortgage against any [INSERT TITLES OF APPROPRIATE OFFICERS), officer, employee or other agent of the Issuer in his individual capacity, all such liability, if any, being expressly waived by the Borrower by the acceptance of this Loan Agreement. - 23 - 40 In the exercise of the rights, remedies, powers and privileges of the Issuer under the Indenture, this Loan Agreement, the Note, or the Mortgage, the Issuer shall not be accountable to the Borrower for any action taken or omitted by it or its [INSERT TITLES OF APPROPRIATE OFFICERS], officers, employees and agents in good faith and reasonably believed by it or them to be authorized or within the discretion or rights, remedies, powers and privileges conferred. The Issuer and its [INSERT TITLES OF APPROPRIATE OFFICERS], officers, employees and agents shall be protected in its or their acting upon any paper or document reasonably believed by it or them to be genuine, and it or they may conclusively rely upon the advice of counsel as to matters of law and may (but need not) require further evidence of any fact or matter before taking any action. Section 8.05. Giving of Notice. All notices required to be given or authorized to be given pursuant to this Loan Agreement and the Note shall be in writing and shall be deemed to have been given when received at (provided any notice sent by telegram, cable, telex or facsimile transmission is sent charges prepaid and confirmed by letter mailed as follows), or 5 Business Days after being sent by registered or certified mail, postage prepaid, addressed to: In the case of the Issuer: Board of County Commissioners of Indian River County, Florida 1840 25th Street Vero Beach, Florida 32960 with a copy to: Charles L. Sieck, Esquire Rhoads & Sinon 1200 N. Federal Highway Suite 308 Boca Raton, Florida 33432 In the case of the Borrower: Florida Convalescent Centers, Inc. 111 Mockingbird Lane, Suite 1111 Dallas, Texas 75247 Attention: James 0. McCarver In the case of NHC: National HealthCorp L.P. 814 S. Church Street Murfreesboro, Tennessee 37130 Attention: Richard F. LaRoche, Jr. Senior Vice President and General Counsel - 24 - of In the case of the Trustee: Third National Bank in Nashville Financial Services Division Nashville, Tennessee 37244 Attention: Corporate Trust Department (615) 748-4353 (615) 748-4945 (telecopy) In the case of the Registrar and Paying Agent: Chemical Bank 55 Water Street - Room 505 New York, New York 10041 Attention: Securities and Trust Department (212) 820-6573 (212) 363-9548 (telecopy) (212) 422-2648 (telecopy) In the case of the Remarketing Agent: Alex. Brown & Sons Incorporated 14th Floor 63 Wall Street New York, New York 10005 Attention: Municipal Note Department (212) 785-7852 (212) 269-7541 (telecopy) In the case of the Credit Facility Provider: The Toronto -Dominion Bank, Check Branch Three First National Plaza Suite 1900 Chicago, Illinois 60602 Attention: Senior Manager, Credit Administration with a copy to: The Toronto -Dominion Bank U.S.A. Division Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attenrion: Senior Manager Health Care Finance or to such other address as any of such parties shall specify by notice given hereunder. - 25 - • Section 8.06. Rights and Remedies of Issuer. All rights and remedies given or granted to the Issuer in this Loan Agreement and the Note are cumulative, nonexclusive and in addition to any and all rights and remedies that the Issuer may have or be given by reason of any law, statute, ordinance or otherwise. Section 8.07. Amendment of Loan Agreement and Note. This Loan Agreement and the Note may be amended only by written agreement of the parties hereto executed pursuant to a Supplemental Indenture entered into and consented to (if required) as provided in the Indenture. Section 8.08. �jounteroarts. This Loan Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts together shall constitute but one and the same Loan Agreement. Section 8.09. Severability. I£ any clause, provision or section of this Loan Agreement is held illegal or invalid by any court, the invalidity of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof, and this Loan Agreement shall be construed and enforced as if such illegal or invalid clause, provision or section had not been contained herein. In case any agreement or obligation contained in this Loan Agreement is held to be in violation of law, such agreement or obligation shall nevertheless be determined to be the agreement or obligation of the Issuer or the Borrower, as the case may be, to the full extent permitted by law. Section 8.10. Assignment of Loan Agreement and Note by Issuer. The Issuer has assigned its rights under and interest in this Loan Agreement and the Note, and has pledged and assigned any payments, receipts and revenues receivable under or pursuant to this Loan Agreement and the Note, and income earned on the investment of funds authorized under the Indenture, as provided in the Indenture, to the Trustee pursuant to the Indenture as security for payment of the principal or Redemption Price of and the interest on, and the purchase price of, the Bonds, but such assignment and pledge is subject to this Loan Agreement and accepts the rights of the Issuer to indemnification under this Loan Agreement and to payments -to the Issuer for Administrative Expenses incurred by the Iss4er and remedies in connection therewith. Except as provided in this Section 8.10 and in the Indenture, the issuer will not sell, assign, transfer, convey or otherwise dispose of its interest in the Revenues during the term of this Loan Agreement and the Note, including (without limitation) any income earned on the investment of funds under the Indenture. Section 8.11. Governing Law. This Loan Agreement is executed and delivered with the intent that the laws of the State (including, without limitation, the Act) shall govern. Section 8.12. Registrar and Paying Agent as Beneficiary. Insofar as any provisions of this Loan Agreement Obligate any party to make payments to the Registrar and Paying Agent or otherwise impose on any party duties and - 26 - 40 obligations to the Registrar and Paying Agent, such provisions, including, without limitation, such provisions contained in Sections 3.02 and 5.06 hereof, shall be for the benefit of and enforceable by the Registrar and Paying Agent. IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed, sealed and delivered as of the day and year first written above. (SEAL) Attest: (SEAL) Attest: INDIAN RIVER COUNTY, FLORIDA By: FLORIDA CONVALESCENT CENTERS, INC. By: • STATE OF , CITY OF , TO WIT: I HEREBY CERTIFY, that on this day of in the year 198_, before the subscriber, a Notary Public in and*for said State, personally appeared of the Board of County commissioners of Indian River County, Florida, a body politic and corporate of the State of Florida, on behalf of Indian River County, Florida (the "Issuer") and on behalf of the said Issuer acknowledged the aforegoing*Loan Agreement to be the act and deed of Issuer. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. (SEAL) Notary Public My Commission Expires: STATE OF , CITY OF , TO WIT: I HEREBY CERTIFY, that on this day of in the year 198_, before the subscriber, a Notary Public in and for said State, personally appeared of Florida Convalescent Centers, Inc., a duly organized and existing under the laws of the State of Florida, and, on behalf of the said Florida Convalescent Centers, Inc., acknowledged the aforegoing Loan Agreement to be the act and deed of Florida Convalescent Centers, Inc. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. (SEAL) Notary Public My Commission Expires: 0 Exhibit A Description of the Project The Project to be refinanced with the proceeds of the Bonds (the "Indian River County Project") consists of the acquisition of certain land located at US 1 and 37th Avenue (Barber Avenues), Vero Beach, Florida and the construction, expansion and equipping thereon of a 91 -bed nursing home to provide skilled and intermediate health care. The Indian River County Project is located entirely within Indian River County, • PRELIMINARY OFFICIAL STATEMENT DATED , 1987 TWO NEW ISSUES In the opinion of Piper & Marbury, Baltimore, Maryland, Co -Bond Counsel, - under existing statutes, regulations and decisions, assuming compliance with certain covenants described herein, interest on the Bonds of each Issue is excludable from gross income for federal income tax purposes except as described herein, and the Bonds of each Issue, their transfer and the income therefrom, including any profit made on the sale thereof, shall at all times be free from taxation of every kind by the State of Florida or any local unit, political subdivision or other instrumentality of the State of Florida, except taxes imposed by Chapter 220, Florida Statutes on interest income or profits on debt obligations owned by corporations. As described herein, the interest on the Bonds of all Issues may be subject to certain other taxes. See "Tax Exemptions" herein. $1,990,000 Bonds of various Florida Issuers, each designated Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc, Project) $4,800,000 Indian River County Series 1988A Initial interest rate through 198: Due: January 1, 2011 Reference date of each Issue: $3,190,000 Polk County Industrial Development Authority Series 1987 Initial interest rate through 198_ Due: January 1, 2011 Price of each Issue: The Bonds of each Issue are limited obligations of the Issuer thereof payable solely from payments to be made under a separate Loan Agreement between such Issuer and Florida Convalescent Centers, Inc. (the "Company"). The Bonds of each Issue are secured by a separate Letter of Credit issued by ,Ex F F i 8 7- 40 THE TORONTO -DOMINION BANK Chicago Branch which will entitle Third National Bank in Nashville, as Trustee or Chemical Bank, New York, New York, Registrar and Paying Agent, as agent for the Trustee, to draw amounts sufficient to pay the principal or Redemption Price of and interest on, and the purchase price of, the Bonds of such Issue as the same become due and payable. Each Letter of Credit will expire on the fifth anniversary of the date of issuance of the Bonds secured thereby (or earlier as described herein), unless renewed, and may be replaced by a Qualified Credit Facility, without notice to or consent of the Bondholders, or by an Alternative Credit Facility as described herein. The Bonds of each Issue will bear interest from the date of initial delivery thereof at the respective ratas of interest set forth above during the Initial Interest Periods extending through and including the dates set forth above. Thereafter, the Bonds of such Issue will bear interest at the Variable Rate determined by the Remarketing Agent on the first Business Day of each month in the manner described herein, unless a Fixed Rate Period is established for such Bonds as described herein. The Bonds of each Issue will be subject to mandatory tender prior to the establishment of any Fixed Rate Period applicable to such Bonds or the re-establishment of the Variable Rate for .such Bonds following any Fixed Rate Period as described herein unless otherwise directed by the holders thereof. As long as the Bonds of an Issue bear interest at the Variable Rate, the holders of such Bonds will have the right, at the times and subject to the conditions described herein, to require the purchase of such Bonds at a purchase price equal to the principal amount thereof plus accrued interest to the purchase date. The Bonds of each Issue are subject to mandatory tender and to optional redemption prior to maturity as described herein. The Bonds of each Issue are issuable only as registered bonds in denominations that are integral multiples of $50,000, except that during any Fixed Rate Period of six months or longer applicable to such Bonds, such Bonds are issuable in denominations of $5,000 and integral multiples thereof. The principal or Redemption Price of, and the purchase price of, the Bonds of each Issue are payable at the principal corporate trust office of the Registrar and Paying Agent. Interest on the Bonds is payable by check mailed to the registered owners thereof as of the Record Date for the payment of such interest or, under certain circumstances described herein, by wire transfer. The Bonds of each Issue shall not be deemed to constitute a debt, liability or obligation of the Issuer thereof or of the State of Florida or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer thereof or of the State of Florida or of any such political subdivision • but shall be payable solely from the Revenues. The Issuer of the Bonds of each Issue shall not be obligated to pay the Bonds of such Issue or the interest thereon except from the revenues and proceeds pledged therefor, and neither the faith and credit nor the taxing power, if any, of the Issuer of the Bonds of an Issue or of the State of Florida or any political subdivision thereof is r., lrha oavment of the principal of or the interset on such Bonds. The Bonds of each Issue are offered subject to prior sale, when, as and if issued by the Issuer thereof and accepted by the Underwriter, subject to the approval of Shutts & Bowen, Miami, Florida, and Piper & Marbury, Baltimore, Maryland, Co -Bond Counsel, and to certain other conditions. Certain legal matters will be passed upon for the Company by Robenalt, Kendall Rodabaugh and Staley, Lima, Ohio, for the Underwriter by Piper & Marbury, Baltimore, Maryland, and for The Toronto -Dominion Bank by Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia, Mayer, Brown & Platt, Chicago, Illinois, and McCarthy & McCarthy, Toronto, Canada. It is expected that the Bonds of each Issue will be available for delivery in New York, New York, on or about _ , 1988, ALEX. BROWN & SONS Incorporated L: IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OF AN ISSUE AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. No dealer, broker, salesman or other person has been authorized by any Issuer or the Underwriter to give any information or to make any representation other than as contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by either of the foregoing. The information set forth herein has been obtained from the Issuers, the Bank, the Company and other sources that are deemed to be reliable, but is not guaranteed as to accuracy or completeness by the Underwriter, and is not to be construed as a representation by the Underwriter or, as to information from sources other than the Issuer of any Bonds, by such Issuer, or, as to information from sources other than the Bank, by the Bank, or, as to information from sources other than the Company, by the Company. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement is not to be construed as an agreement or contract between any Issuer and the purchasers or holders of any Bonds. All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete and reference is made to such laws and documents for full and complete statements of their provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinions and not as representations of fact. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale of any Bonds shall under any circumstances create any implication that there has been no change in the affairs of the Issuer of such Bonds, the Bank or the Company. TABLE OF CONTENTS Page Introductory Statement........... Application of Proceeds.......... The Bonds ........................ Security and Sources of Payment for the Bonds .................. TheCompany ...................... Definitions of Certain Terms..... Summary of Certain Provisions of the Indentures .............. Summary of Certain Provisions of the Loan Agreements......... 1 Underwriting .................... 3 Ratings ......................... 4 Tax Exemptions .................. Legal Matters ................... 16 Miscellaneous ................... 21 Appendix A - The Toronto -Dominion 21 Bank .......................... Appendix B - Proposed Form of 25 Bonds ......................... Appendix C - Proposed Form of 39 Opinions of Bond Counsel...... Appendix D - Summary of Certain Provisions of the Bank Security Documents ..................... Appendix E - The Issuers, the Enabling Legislation, the Projects, the Sinking Fund Installments and Special Denomiraticns................. Page 45 45 45 47 48 A-1 B-1 C-1 D-1 C-1 OFFICIAL STATEMENT relating to Bonds of various Florida Issuers designated Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) INTRODUCTORY STATEMENT This Official Statement, including the cover page (excluding the price) and appendices, is provided to furnish certain information in connection with the offering of the separate issues (each, an "Issue") of Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) issued by the Issuers, in the amounts and of the series set forth on the cover page of this Official Statement (collectively, the "Bonds"). The Bonds of each Issue will be entirely separate from the Bonds of each other Issue and will be secured by a separate Credit Facility (defined herein). The Bonds of each Issue, however, contain substantially the same terms and provisions as the Bonds of each other Issue, except as noted herein. The Bonds of each Issue are authorized pursuant to the Enabling Legislation described in Appendix E and will be issued under and secured by a separate Indenture of Trust (each, an "Indenture") between the Issuer of such Bonds and Third National Bank in Nashville, as Trustee. Chemical Bank, New York, New York, has been appointed Registrar and Paying Agent for the Bonds of each Issue. The proceeds of the Bonds of each Issue will be loaned to Florida Convalescent Centers, Inc. (the "Company"), pursuant to a separate loan agreement between the Issuer of such Bonds and the Company (each, a "Loan Agreement") in order to provide funds necessary to redeem at par, on or shortly after the date of issuance of such Bonds, certain industrial development bonds previously issued by such Issuer to finance a portion of the cost of the construction and acquistion by the Company of a nursing home facility (each, a "Project") located in the State of Florida. Each Project is managed by National HealthCorp L.P. CWHC") pursuant to a separate management agreement between the Company and NHC. Appendix E includes a description of each of the Projects. The Bonds of each Issue initially will bear interest at the respective rates set forth on the cover page of this Official Statement for the respective Initial Interest Periods set forth on the cover page of this Official Statement. Thereafter, the Bonds of each Issue will bear interest at the Variable Rate, which will be determined by the Remarketing Agent on the first Business Day of each month. As long as the Bonds of an Issue bear interest at the Variable Rate, such Bonds will be purchased on the demand of the holders thereof at the times and subject to the conditions described under -1- • •• "The Bonds - Optional and Mandatory Tender" at a price equal to the principal thereof plus accrued interest thereon. The Company and NHC may change the interest rate borne by the Bonds of any Issue from the Variable Rate to a Fixed Rate during one or more periods (each, a "Fixed Rate Period") and, at the expiration of any Fixed Rate Period applicable to the Bonds of any Issue, may establish one or more additional Fixed Rate Periods for such Bonds or change the interest rate borne by such Bonds from a Fixed Rate to the Variable Rate. The first day of each Fixed Rate Period applicable to the Bonds of an Issue and each date on which the Variable Rate takes effect following any Fixed Rate Period applicable to such Bonds (but not following the Initial Interest Period for such Bonds) is referred to herein as a "Conversion Date." Notice of each Conversion Date applicable to the Bonds of an Issue will be mailed to the holders of such Bonds, and such Bonds will be subject to mandatory tender on each such Conversion Date unless the holders thereof elect to retain such Bonds as described under "The Bonds - Optional and Mandatory Tender - Mandatory Tender on Conversion Dates." ' The interest rates borne by the Bonds from time to time will be determined separately for each Issue. The Bonds of some Issues may bear interest at a Variable Rate while those of other Issues bear interest at a Fixed Rate, and Fixed Rate Periods of different lengths may be established for Bonds of separate Issues bearing interest at a Fixed Rate. Various factors, including the fact that interest on the Bonds of the Issues indicated on the cover page of this Official Statement with an asterisk, if any, will be treated as a specific preference item subject to both the individual and corporate alternative minimum tax, may cause the interest rates determined by the Remarketing Agent to vary between Issues in the same interest mode. See "The Bonds -- Interest." In order to secure the timely payment of the principal or Redemption Price of and interest on, and the purchase price of, the Bonds of each Issue, The Toronto -Dominion Bank, acting through its Chicago Branch (the "Bank"), will issue to the Trustee on the date of the initial delivery of the Bonds of each Issue a separate irrevocable letter of credit securing such Issue (each, a "Letter of Credit"). Each Letter of Credit will be in an initial stated amount equal to the aggregate principal amount of the Bonds of the Issue secured thereby plus 58 days' interest thereon, calculated at the rate of 15% per annum. All of the Letters of Credit will be issued pursuant to a single Reimbursement Agreement between the Bank and the Company (the "Reimbursement Agreement"). See "Security and Sources of Payment for the Bonds -- Letters of Credit." Each Letter of Credit will automatically terminate on the earliest of (i) the date that is five years after the date of initial delivery of the Bonds of the Issue secured thereby (the "Stated Expiration Date"), (ii) the date of payment by the Bank of the final drawing available to be made under such Letter of Credit, or (iii) the 15th day after the date (occurring after the Initial Interest Period) on which the Bonds secured by such Letter of -2- r - Credit begin to bear interest at a rate other than the Variable Rate. Prior to the expiration of any Letter of Credit or any other Credit Facility securing the Bonds of an Issue, the Company, with the consent of UHC, may deliver to the Trustee a Qualified Credit Facility without notice to or the consent of the holders of the Bonds of such Issue, or an Alternate Credit Facility, as described under "Security and Sources of Payment for the Bonds - Substitute Credit Facilities." The Bonds of each Issue will be subject to mandatory tender if the Company does not deliver to the Trustee a Qualified Credit Facility prior to the expiration of the Letter of Credit or any other Credit Facility securing such Bonds unless the holders thereof elect to retain such Bonds as described under "The Bonds - Optional and Mandatory Tender - Mandatory Tender Upon Expiration of Credit Facility." Each Letter of Credit and any Qualified Credit Facility or Alternate Credit Facility replacing such Letter of Credit are herein referred to as a "Credit Facility." The Bank and the issuer of any substitute Credit Facility are herein referred to as a "Credit Facility Provider," and the Reimbursement Agreement and each agreement pursuant to which any substitute Credit Facility is issued are herein referred to as a "Credit Facility Agreement." Brief descriptions of the application of the proceeds of the Bonds, the Bonds, the security and sources of payment for the Bonds and the Company, as well as the definitions of certain terms used in this Official Statement and summaries of certain provisions of the Indentures and the Loan Agreements, are included in this Official Statement. Information with respect to the Bank is included in Appendix A. The proposed form of the Bonds is included in Appendix B. The proposed forms of the approving opinions of Piper & Marbury and Shutts & Bowen, Co -Bond Counsel, are included in Appendix C. Appendix D includes summaries of certain provisions of the Bank security documents. Descriptions of the Issuers, the Enabling Legislation, the Projects, the Sinking Fund Installments for the Bonds of each Issue and the special denominations, if any, for the Bonds of certain Issues are included in Appendix E. The descriptions of documents contained herein are qualified in their entirety by reference to such documents and to laws and principles of equity relating to or affecting the enforcement of creditors' rights. Copies of the Letters of Credit, the Indentures and the Loan Agreements may be obtained from the Trustee. . APPLICATION OF PROCEEDS The proceeds of sale of the Bonds of each Issue will be applied on or shortly after the date of initial delivery of such Bonds to the Payment of the outstanding principal amount of another issue of industrial development bonds previously issued by the Issuer of such Bonds in order to finance a portion of the cost of constructing and acquiring a Project. The Trustee may be the owner of some of these industrial development bonds previously issued by the Issuers. See Appendix E for a description of the Projects and the Bonds, if any, issued to refund industrial development bonds held by the Trustee. -3- 40 THE BONDS General The Bonds of each Issue will be dated as of the first day of the month in which such Bonds are initially delivered. The Bonds of each Issue will bear interest from the date of initial delivery and will mature on the dates set forth on the cover of this Official Statement, subject to optional and mandatory tender and redemption prior to maturity, and acceleration of maturity, as described below. The Bonds are issuable only in registered form without coupons in denominations that are integral multiples of 550,000, except as described in Appendix E and except that during any Fixed Rate Period of six months or longer (each, a "Long Fixed Rate Period") established for the Bonds of an Issue such Bonds will be issuable in denominations that are integral multiples of $5,000. . The principal or Redemption Price of, and the purchase price of, the Bonds will be payable upon presentation and surrender at the Principal Office of the Registrar and Paying Agent. Interest on the Bonds will be paid by check mailed to the registered owners thereof as of the Record Date for the payment of such interest. Notwithstanding the foregoing, during the Initial Interest Period for the Bonds of an Issue, during any period in which such Bonds bear interest at the Variable Rate and during any Fixed Rate Period of fewer than six months (each, a "Short Fixed Rate Period") applicable to such Bonds, if the amount of any payment due a holder of any such Bond is $2,500 or more, such payment shall be made by wire transfer to any account in the United States designated by such Bondholder upon at least five days' prior written notice to the Registrar and Paying Agent. The Record Dates for the Bonds of each Issue will be (i) when such Bonds bear interest at the Variable Rate and during any Short Fixed Rate Period applicable to such Bonds, the last day before each Interest Payment Date for such Bonds, (ii) during any Long Fixed Rate Period applicable to such Bonds, the fifteenth day of the calendar month immediately preceding each Interest Payment Date applicable to such Bonds and (iii) in case of the payment of any defaulted interest, the fifth Business Day before such payment. If any payment of the principal or Redemption Price of or interest on, or the purchase price of, the Bonds is due on a day that is not a Business Day, such payment will be made on the next Business Day, and no interest will accrue on the amount of such payment during the intervening period. The proposed form of Bond is included as Appendix B to this Official Statement. Interest Each Issue of Bonds is independent of each other Issue and the rate of interest from time to time borne by the Bonds will be determined separately for each Issue. -4- e• The Bonds of each Issue will bear interest for an Initial Interest Period extending from the date of their initial delivery through and including the date set forth on the cover page of this Official Statement at the respective rate or rates set forth on the cover page of this Official Statement, payable on the first Business Day of each month (computed on the basis of the actual number of days elapsed over a year of 365 days [366 days in leap years)). Thereafter, the Bonds of each Issue will bear interest at the Variable Rate established separately for such Issue, which will be determined by the Remarketing Agent- as described below under "Variable Rate," unless a Fixed Rate Period is established for the Bonds of such Issue as described below under "Fixed Rate." Before each date on which the interest rate borne by the Bonds of an Issue is changed from the Variable Rate to the Fixed Rate or from the Fixed Rate to the Variable Rate (but not following the Initial Interest Period set forth on the cover page of this Official Statement), and before each date on which one or more Fixed Rate Periods are established for such Bonds, the Company must deliver to the Trustee an opinion of Bond Counsel to the effect that such change or the establishment of such Fixed Rate Period (as the case may be) will not adversely affect the excludability from gross income of interest paid on such Bonds for federal income tax purposes. Each Indenture requires the Registrar and Paying Agent to mail notice of each Conversion Date applicable to the Bonds of an Issue to the owners of such Bonds at least 35 days before such Conversion Date. The interest rate borne by the Bonds of each Issue may not exceed 15% per annum (the "Maximum Rate") as long as a Credit Facility securing the Bonds of such Issue remains in effect, unless the Issuer of such Bonds, upon the written request of the Company and NHC, increases the Maximum Rate for the Bonds of such Issue by delivering to the Trustee for such Bonds, among other things (i) an opinion of Bond Counsel to the effect that such increase in the Maximum Rate will not adversely affect the excludability from gross income, for federal income tax purposes, of interest paid on the Bonds of such Issue and (ii) an amendment of the Credit Facility securing such Bonds or other evidence satisfactory to the Trustee that the amount that can be realized under such Credit Facility for the payment of interest on Bonds of such Issue will be sufficient, after adding all amounts, if any, that will be available for the payment of interest on any Credit Facility Bonds of such Issue when such Bonds cease to be Credit Facility Bonds, to pay up to the same number of days interest on Bonds of such Issue that are not Credit Facility Bonds (calculated at the increased Maximum Rate) as could have been paid prior to such increase (calculated at the prior Maximum Rate). The interest rate from time to time borne by the Bonds is further limited as described below under "Default Rate; Alternate Rates." The determination of the interest rates borne by the Bonds of each Issue from time to time as provided therein and in the Indenture under which such Bonds were issued will be conclusive and binding on the owners of such Bonds. -5- 40 Variable Rate The Remarketing Agent will determine the Variable Rate for the Bonds of each Issue 9n the day following the last day ofthe Initial Interest Period for such Bonds, on the first Business Day of rich month thereafter during which such Bonds bear interest at the Variable date and on each Mandatory Tender Date a#tar which such Bonds will bear interest at the Variable Rats (each, an "Adjustment bate"), The Variable Rate for the Bonds of each Issue will be equal 1 to the minimum rate of interest that, in the judgment Of the Remarketing A4snt, taking into account prevailing market conditions, would enable the ReMcketing Agent to $ell all of the Bonds of such Issue on the applicable Adjustment Pate �t a price equal to the principal amount thereof, plus accrued interest,, if any, thereon. The Variable Rate for the Bonds of each issue detecwined ---- :cting. Agsnt .oe+..se�b..du�h..�d1YMnt „Data shall remain in effect from and including such Adjustment Date to but excluding the earlier of (i) the immediately succeeding Adjustment Data relating to spch Bonds and (ii) tbp immediately succeeding Mandatory Tender Date applicable to such Bonds. So long as the Bonds of an Issue bear interest at the Variable Rate, such interest will be computed on thebasis Y years) actual number of days elaps}d over a year of 365 days (366 days in and the Interest Payment Dotes for such Bonds will be the first Business Day of each month, each Mandatory Tender Date applicable to such bonds and the maturity date of such Bonds. Various factors, including the fact that the interest on Bqnds of the Issuer indicated on the cover page of this Official Statement with an asterisk, if any, will be treated as a specific preference item subject to both the individual and corporate alternative minimum tax, may cause the Variable Rates letermined by the Remarketing Agent to vary between Issues. Fixed Rate Periods` Each indenture provides that the Company and NIC U) ) may change the interest rate' borne by the Bonds issued thereunder from the Variable Rate to one or more 'Vixed Rates by establishing one or more consecutive Fixed Rate Periods for such Donafixed R, and, (ii) at the expiration of any such Fixed Rate Period, may establish one or more additional ate Periods for such Bonds, Fixed Rate Periods so established may be of the same or different lengths, but lath such period shall commence on the day following the last day of a Fixed Rate Period or, if the Variable Rate is then in effect for such Bonds, the first Busi"Ss bay of a month. Long Fixed Rate Periods applicable to the fonds of an Issue shall end on the last calendar day of a month unless followed by a Short Fixed Rate Period or a Conversion Data after which such Bonds will bear interest at the Variable Rate, in which case the Long Fixed Rate Period shall and on the day preceding the first Business Day of a month. Short Fixed Rate Periods shall end on the day immediately preceding the first Business Day of a month. The Fixed Rate borne by the Bonds of an Issue during any Fixed Rate Period applicable to such Bonds shall be determined by the Remarketing Agent on a date selected by it ,(the "Computation Date") that is at least seven but -6- not more than 15 Business Days before the first day of such Fixed Rate Period (the "Fixed Rate Date"), to be the minimum rate of interest that, in the judgment of the Remarketing Agent, taking into account prevailing market conditions, would enable the Remarketing Agent to sell all of the Bonds of that Issue on the Fixed Rate Date at a price equal to the principal amount thereof plus accrued interest, if any, thereon. Notwithstanding the foregoing, with the consent of the Company and NHC, the Fixed Rate determined by the Remarketing Agent for the Bonds of an Issue on any Computation Date may be based upon a higher selling price not exceeding 102% of the aggregate principal amount of such Bonds if there shall be delivered to the Trustee for such Bonds an opinion of Bond Counsel to the effect that the determination of the Fixed Rate on such basis will not adversely affect the excludability from gross income of interest paid on such Bonds for federal income tax purposes. In such event, the premium received by the Remarketing Agent from the sale of such Bonds on .such Fixed Rate Date is expected to be retained by the Remarketing Agent as compensation for remarketing such Bonds. Prior to each Long Fixed Rate Period applicable to the Bonds of an Issue, the Remarketing Agent shall preliminarily determine the lowest interest rate that, in its judgment, will be the Fixed Rate for such Bonds determined on the Computation Date for such Fixed Rate Period, based upon historical trends and projections of the interest rates on such Bonds and comparable securities or any other information deemed appropriate by such Remarketing Agent, and notice thereof shall be included in the notice of such Fixed Rate Period that is mailed to the holders of such Bonds. The Fixed Rate borne by Bonds during any Long Fixed Rate Period shall not be lower than the minimum rate of interest preliminarily determined for such Bonds as described above. In connection with the establishment of one or more Fixed Rate Periods for the Bonds of an Issue, the Company and NHC, may direct the Registrar and Paying Agent to select particular Bonds of such Issue to be redeemed from Sinking Fund Installments for such Bonds becoming due during such Fixed Rate Periods, and notice of such selection shall be included in the notice of the Fixed Rate Period that is mailed to the affected Bondholders. If particular Bonds of an Issue shall have been selected to be redeemed from particular Sinking Fund Installments occurring during such Fixed Rate Period, the Remarketing Agent may determine a different preliminary and final Fixed Rate for such Bonds that are to be redeemed from each Sinking Fund Installment. At any time prior to the Computation Date for any Fixed Rate Period applicable to an Issue, the Company, with the written consent of NHC, may rescind its election to establish such Fixed Rate Period, provided, however, if such Fixed Rate Period was to be the second or any subsequent Fixed Rate Period in a succession of Fixed Rate Periods previously established by the Company, there must first be delivered to the Trustee for such Bonds an opinion of Bond Counsel to the effect that such rescission will not adversely affect the excludability from gross income for federal income tax purposes, of interest paid on the Bonds of such Issue. If the Company rescinds its election to establish a Fixed Rate Period for the Bonds of an Issue as described in this paragraph, such Bonds will continue to bear interest at the -7- M Variable Rate then in effect for such Bonds, as if such notice had not been given or, if a Fixed Rate Period for such Bonds is then in effect, a new Fixed Rate Period for such Bonds shall be established as described below. The Registrar and Paying Agent is required under the Indenture to mail notice immediately of any such rescission to the holders of such Bonds. If, 40 days before the last day of any Fixed Rate Period applicable to the Bonds of an Issue for which a successor Fixed Rate Period has not been established, the Company shall not have elected to change the interest rate applicable to such Bonds to the Variable Rate or to establish a new Fixed Rate Period for such Bonds by delivery of the notice and opinion described above, or if the Company rescinds its election to establish a new Fixed Rate Period for such Bonds at the end of any Fixed Rate Period, a new Fixed Rate Period shall be deemed to have been established for such Bonds having the same number of months as the Fixed Rate Period then ending if the Fixed Rate Period then ending had fewer than 12 months and otherwise having 12 months (or such fewer number of months as shall remain until the maturity date of the Issue), and a new Fixed Rate shall be determined for such Issue as described above. If any Fixed Rate Period established as described in this paragraph (other than any such Fixed Rate Period established upon any rescission by the Issuer of its election to establish a Fixed Rate Period of different length) ends after the due date for the payment of any Sinking Fund Installment for that issue of Bonds, at least 35 days before the Fixed Rate Date for such Bonds on which such Fixed Rate Period begins, the Registrar and Paying Agent shall select the Bonds of the affected Issue to be redeemed from such Sinking Fund Installment. Each Fixed Rate determined by the Remarketing Agent for any Fixed Rate Period applicable to the Bonds of an Issue shall remain in effect from and including the Fixed Rate Date on which such Fixed Rate Period commences to and including the last day of such Fixed Rate Period. During any Short Fixed Rate Period, interest will be computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and during any Long Fixed Rate Period, interest will be computed on the basis of a 360 -day year of twelve 30 -day months. The Interest Payment Dates applicable to the Bonds of an Issue to which a Fixed Rate Period applies will be (i) for each Short Fixed Rate Period, the day following the last day of such Fixed Rate Period, (ii) for each Long Fixed Rate Period (other than described in clause (iii) of this sentence), the first day of the calendar month beginning each six calendar month period following the first day of such Fixed Rate Period and (iii) for any Fixed Rate Period that extends to the maturity date of such Issue, January 1 and July 1 of each year. Default Rate; Alternate Rates If any payment of the principal or Redemption •Price of, or interest on, or the purchase price of, any Bonds is not made when due, such Bonds will bear interest at the last interest rate borne by such Bonds prior to the due date for such payment until such payment is made or provided for in accordance with the applicable Indenture. -8- rr, If for any reason the Remarketing Agent does not determine the Variable Rate applicable to the Bonds of any Issue on any Adjustment Date applicable to such Bonds or the Fixed Rate applicable to the Bonds of any Issue on any Computation Date applicable to such Bonds, or a court of competent jurisdiction holds that the rate so determined is invalid or unenforceable, (A) the Variable Rate for such Adjustment Date will be equal to 85: of the per annum bond equivalent yield applicable to 13 -week United States Treasury bills as published by the Federal Reserve Bank of New York, on the most recent date prior to the applicable Adjustment Date and (B) the Fixed Rate for such Computation Date shall be equal to 95% of the per annum bond equivalent yield applicable to United States Treasury obligations having the same number of months to maturity as the number of months in the applicable Fixed Rate Period (determined by linear interpolation between the yields for instruments having the next shorter and next longer number of months to maturity if no yield is announced for Treasury obligations having the number of months to maturity prescribed herein) as published by the Federal Reserve Bank of New York on the most recent date prior to the applicable Computation Date. Automatic Rescission of Conversion Upon Failure to Remarket In the event that not later than 5:00 p.m., New York City time, on any proposed Conversion Date applicable to the Bonds of an Issue the Remarketing Agent delivers to the Trustee a certificate to the effect that all of such Bonds have not been successfully remarketed on such Conversion Date, the conversion of the interest rate borne by such Bonds shall automatically be rescinded and such Bonds will bear interest from and after such date at the Variable Rate until converted to a Fixed Rate as described above: provided, however, that unless there shall be delivered to the Trustee an opinion of Bond Counsel to the effect that the automatic conversion of the interest rate borne by the Bonds to the Variable Rate in accordance with this paragraph will not adversely affect the excludability from gross income, for federal income tax purposes, on interest paid on the Bonds, if the Bonds bore interest at a Fixed Rate prior to such proposed Conversion Date, a new Fixed Rate Period shall be established for the Bonds as described above under "Fixed Rate Periods" as if the Company had not elected to change the interest rate on the Bonds or to establish a new Fixed Rate Period, and the Computation Date for such Fixed Rate Period shall be the first day of such Fixed Rate Period (or, if not a Business Day, the immediately preceding Business Day), and provided further that such proposed Conversion Date shall be a Mandatory Tender Date notwithstanding such automatic rescission. Optional and Mandatory Tender Optional Tender During Variable Rate Period As long as the Bonds of an Issue bear interest at the Variable Rate, the Issuer will purchase or cause to be purchased (but solely from the applicable Revenues, remarketing proceeds and amounts realized under the Credit Facility securing such Bonds) any such Bond or portion thereof in an authorized denomination (other than any Credit Facility Bonds) at a price equal to the principal amount thereof plus accrued interest thereon upon: -9- 40 F (i) irrevocable written notice from the owner of such Bond to the Registrar and Paying Agent, (each, an "Optional Tender Notice"), stating the principal amount of such Bond or portion thereof to be purchased and the date on which such Bond or portion thereof is to be purchased (the "Optional Tender Date"), which must be a Business Day not fewer than three Business Days after the date of receipt of such Optional Tender Notice by the Registrar and Paying Agent if the Optional Tender Date is an Interest Payment Date for that Issue, or seven calendar days after the date of receipt of such Optional Tender Notice by the Registrar and Paying Agent in the case of any other Optional Tender Date for such Bonds; and (ii) delivery of such Bond (with an appropriate instrument of transfer satisfactory to the Registrar and Paying Agent executed in blank by the registered owner with the signature guaranteed by a bank, trust company or member firm of the New York Stock Exchange) to the Registrar and Paying Agent not later than 10:00 a.m., New York City time, on the Optional Tender Date established for such Bonds. Mandatory Tender on Conversion Dates The Bonds of each Issue are subject to mandatory tender and purchase, and the Issuer will purchase such Bonds or cause such Bonds to be purchased (but solely from the Revenues, remarketing proceeds and amounts realized under the Credit Facility securing such Bonds), on each Conversion Date (including each Fixed Rate Date) established for such Bonds at a price equal to the principal amount thereof plus accrued interest, if any, thereon to such Conversion Date. The Registrar and Paying Agent will mail notice of each such Conversion Date (a "Mandatory Tender Notice") to the Bondholders of such Bonds at least 35 days before each such Conversion Date. The owner of any Bond subject to Mandatory Tender on a Conversion Date may elect to retain his Bond or any portion thereof, if such Bond or such portion thereof is in a denomination authorized to be outstanding after such Conversion Date, by delivering to the Registrar and Paying Agent irrevocable written notice of such election (a "Non -Tender Notice") on or before the tenth day of the calendar month preceding such Conversion Date (or, if such day is not a Business Day, the immediately preceding Business Day), which notice shall be irrevocable and must affirmatively acknowledge the matters specified in the Mandatory Tender Notice. Mandatory Tender Upon Expiration of Credit Facility The Bonds of an Issue are subject to mandatory tender, and the Issuer will purchase such Bonds or cause such Bonds to be purchased (but solely from -10- I the applicable Revenues, remarketing proceeds and amounts realized under the Credit Facility securing such Bonds), at a price equal to the principal amount thereof plus accrued interest, if any, thereon on each Termination Date established for such Issue. The Termination Dates for each Issue will be (i) the date that is the first Business Day of the calendar month in which the stated expiration date of the Credit Facility securing such Bonds, or in which such Credit Facility automatically terminates without notice from the Credit Facility Provider, occurs, unless there is delivered to the Trustee a Qualified Credit Facility securing such Issue as described harein under "Security and Sources of Payment for the Bonds - Substitute Credit Facilities" before the date on which the Registrar and Paying Agent is required to mail notice of such Termination Date as described herein and (ii) the effective date of any Alternate Credit Facility that replaces any Credit Facility securing such Issue. The Registrar and Paying Agent will mail notice of each Termination Date established for an Issue to the affected Bondholders at least 35 days before such Termination Date. The owner of any Bond subject to mandatory tender on a Termination Date may elect to retain such Bond or any portion thereof, if such Bond or such portion thereof is in a denomination authorized to be outstanding after the Termination Date, by delivering to the Registrar and Paying Agent irrevocable written notice of such election (a "Non -Tender Notice") on or before the 10th day of the calendar month preceding the Termination Date established for such Bonds (or, if such day is not a Business Day, the immediately preceding Business Day), which notice shall be irrevocable and must affirmatively acknowledge the matters specified in the Mandatory Tender Notice. Non-delivery of Bond If any Bond (other than a Bond as to which a Non -Tender Notice is timely delivered with respect to any Mandatory Tender Date as described above) is not tendered for purchase on any Optional Tender Date applicable to such Bond or on any Mandatory Tender Date applicable to such Bond, including any Conversion Date or Termination Date applicable to such Bond, such Bond will cease to bear interest on such Tender Date, will no longer be considered to be outstanding under the applicable Indenture as of such Tender Date and will be deemed to have been purchased on such Tender Date if there shall have been irrevocably deposited with the applicable Trustee an amount sufficient to pay the purchase price of such Bond on such Tender Date. Redemption Optional Redemption During Initial Interest Period, Variable Rate Period and on Mandatory Tender Dates The Bonds of each Issue are subject to redemption prior to maturity at the option of the Company and NHC and, so long as the Credit Facility Provider has not wrongfully failed to honor a demand for funds under the Credit Facility, only with the consent of the Credit Facility Provider (i) -11- during the Initial Interest Period and during any period in which such Bonds bear interest at the Variable Rate, in whole or in part on any Interest Payment Date applicable to such Bonds, and (ii) in whole or in part on any Mandatory Tender Date applicable to such Bonds, in each case at a Redemption Price equal to the principal amount of such Bonds redeemed, plus accrued interest to the date fixed for redemption, Optional Redemption During Fixed Rate Period The Bonds of each Issue are subject to redemption prior to maturity at the option of the Company and NHC and, so long as the Credit Facility Provider has not wrongfully failed to honor a demand for funds under the Credit Facility, only with the consent of the Credit Facility Provider during any Fixed Rate Period applicable to such Issue that is six years or longer on any Interest Payment Date on or after the Interest Payment Data applicable to such Bonds next succeeding the date that is the earlier of (i) the tenth anniversary of the Fixed Rate Date for such Fixed Rate Period and (ii) the anniversary of such Fixed Rate Date that approximates more closely than any other such anniversary date the date that occurs at the midpoint of such Fixed Rate Period, in whole at any time or in part on any Interest Payment Date applicable to such Bonds, at a Redemption Price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, plus a premium (expressed as a percentage of the principal amount of such Bonds redeemed) that, for the first redemption date of an issue of Bonds, is equal to the lesser of (A) three percent and (ii) one-half of one percent times the number of years between the calendar year of such redemption date and the calendar year during which such Fixed Rate Period applicable to such Bonds ends (including for purposes of computation the calendar year of such redemption date but excluding the calendar year during which such Fixed Rate Period ends) and that shall decline by one-half of one percent annually thereafter. Mandatory Sinking Fund Redemption The Bonds of each Issue are subject to mandatory sinking fund redemption on each January 1 (but, during the Initial Interest Period, during any Short Fixed Rate Period or any period during which such Bonds bear interest at the Variable Rate, on the first Business Day in January) of the years and in the amounts indicated under the caption "Sinking Fund Installments" in Appendix E, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. At the election of the Company the Sinking Fund Installment due on any date with respect to an Issue shall be reduced by an amount equal to the aggregate principal amount of the Bonds of such Issue surrendered uncancelled by the Company to the Registrar and Paying Agent, purchased with amounts on deposit in the Principal Account created by the Indenture relating to such Bonds or redeemed prior to such date and not theretofore credited against a Sinking Fund Installment for such Bonds. -12- • In addition, as to any Issue, so long as a Credit Facility is in effect as to such Issue, with the written consent of such Credit Facility Provider, or on any Fixed Rate Date applicable to the Bonds of such Issue on which a Fixed Rate Period that extends to the maturity date of such Bonds begins, the Company and NHC may elect to increase or decrease the Sinking Fund Installment due on any date for such Issue, but only if such increase or decrease does not lengthen the average weighted maturity of the Bonds of such Issue, and only if there shall first be delivered to the Registrar and Paying Agent for such Bonds an opinion of Bond Counsel to the effect that such increase or decrease will not adversely affect the excludability from gross income for federal income tax purposes, of interest paid on Bonds of such Issue. Notwithstanding the foregoing, the amount of any Sinking Fund Installment for Bonds of an Issue due on any date may not be reduced to an amount less than the outstanding amount of such Bonds that have been previously selected for redemption on such date in connection with the establishment of a Fixed Rate Period for such Bonds as described above under "Interest - Fixed Rate Periods." Mandatory Redemption Upon Determination of Taxability The Bonds of any Issue are subject to mandatory redemption prior to maturity, as a whole or, as hereinafter described, in part, at a redemption price equal to the principal amount of the Bonds redeemed, on a Business Day not later than 60 days after the Company receives notice from the Trustee of a Determination of Taxability. The Trustee shall direct the Registrar and Paying Agent to give notice of such redemption 35 days before the redemption date. "Determination of Taxability" means, with respect to any Issue, a final determination by the Internal Revenue Service or a court of competent jurisdiction that the interest payable on any Bond of such Issue is for any reason includable for federal income tax purposes in the gross income of any holder or former holder thereof, other than during any period in which such holder or former holder is or was a "substantial user" of the Project refinanced by such Issue or a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (or any applicable predecessor provisions); provided, however, that no "Determination of Taxability" shall be deemed to have occurred unless such holder or former holder gives the Company and the Trustee prompt written notice of such determination and the Company has been afforded the opportunity to contest the same either directly or in the name of the holder or former holder of such Bond, and until a conclusion of any appellate review, if sought. Upon the occurrence of a Determination of Taxability, the Bonds shall be redeemed in whole unless, in the opinion of Bond Counsel, the interest payable on the Bonds remaining outstanding after such redemption would not be includable in the gross income of any holder thereof for federal income tax purposes (other than during any period in which such holder is a "substantial user" of the Project or a "related person"). If the Indenture relating to such Issue is discharged as described herein under "Summary of Certain Provisions of the Indentures -Defeasance" prior to the occurrence of a Determination of -13- Taxability, the Bonds of such Issue will not be redeemed as described in this paragraph. Redemption Upon the Occurrence of Certain Extraordinary Events The Bonds of an Issue are subject to redemption as a whole at any time or in part on any Interest Payment Date applicable to such Bonds at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, at the option of the Company and NHC and, so long as the Credit Facility Provider has not wrongfully failed to honor a demand for funds under the Credit Facility securing such Bonds, only with the consent of the Credit Facility Provider, upon the occurrence of any of the following events: (i) if title to, or the permanent use of, or use for a limited period of, substantially all of any portion of the Project refinanced by such Issue, is condemned or the subject of an agreement with, or action by, a public authority in the nature of or in lieu of condemnation proceedings; or (ii) if the Company's title to substantially all of any portion of the Project refinanced by such Issue is' found to be deficient to the extent that the efficient utilization thereof by the Company is substantially impaired; or (iii) if substantially all of any portion of the Project refinanced by such Issue is damaged or destroyed by fire or other casualty; or (iv) if as a result of any changes in the Constitution of the United States of America or of the State of Florida, or of legislative or administrative action, or failure of administrative action, by the United States or the State of Florida, or any agency or political subdivision thereof, or by reason of any judicial decision unreasonable burdens or excessive liabilities are imposed on the Company, including (without limitation) federal, state or other ad valorem property, income or other taxes not being imposed on the date of the Loan Agreement relating to such Issue. Selection of Bonds to Be Redeemed The Registrar and Paying Agent shall select Bonds of an Issue for redemption by lot or in such other manner as the Registrar and Paying Agent in its discretion may deem proper except that (i) if fewer than all of the Bonds of any Issue are selected for redemption on any date, Credit Facility Bonds of such Issue shall be selected for redemption prior to the selection of other Bonds of such Issue; (ii) the portion of any Bond to be redeemed shall be in a denomination authorized to be outstanding after the redemption date; and (iii) in selecting Bonds for redemption, the Registrar and Paying Agent shall treat each Bond as representing that number of Bonds that is obtained by dividing the principal amount of such Bond by the smallest denomination authorized to be outstanding after the redemption date. The selection of Bonds to be redeemed shall be irrevocable except that if the Company shall have elected to -14- J XEROX TELECOP i ER 495 212 98b J01)0+ convert the interest rate borne by Bonds of an Issue frau the Variable Rata to a fixed Rate by establishing one or more fixed Rate periods applicable to such Bonds and shall have directed the Registrar and Paying Agent to select Bonds for redemption from particular Sinking Fund Installments occurring during such Fixed Rate Periods and the Company thereafter rescinds such election, the lso be redectionmption of Bonds for redemption shall particular Sinking fundInstallmentsshadll haave ads selected notationfor of redemption froion pa Agent on the such salvation endorsed thereon by the Registrar and Pare �ea�need to the earliest date after such selection on which such Bonds D Registrar end Paying Agent for purchase, endoresment, exchange or transfer, Notice of Redemption The Registrar and Paying Agent shall mail a notice of the redemption of Bonds (other then Credit Facility Bonds) at least 30 days prior to the date named for redemption to the holders of such Bonda or portions of the Bonds to be redeemed, but failure duly to mail any such notice or any defect in such mailing will not affect the validity of any proceedings for the redemption of any other Bonds. Special Acceleration So long as any Credit Facility securing the Bonds of an Issue is in effect and the Credit Facility Provider has not wrongfully failed to honor any demand for funds under the Credit Facility, the due date for the payment of the principal of or Redemption Price of, or interest on such Bonds will b• accelerated within one Business Day from the date on which the Trusts• receives notice from the Credit raciiity Provider stating that the Credit Facility will be terminated in accordance with its terms and demanding the acceleration of such Bonds. Holders of such Bonds will receive no prior notice of the occurrence of the accelerated maturity data, but the Trustee will, on such date, mail notice of the accelerated maturity date to each affected Bondholder, See "Summary of Certain Provisions of the Reimbursement Agreement - 8xpiration and Termination of Letters of Credit" in Appendix D hereto. Remarketing Agent The Company, NHC and Alex. Brown S Sons Incorporated have entered into a Remarketing Agreement dated as of December 1, 1987 (the "Remarketing Agreement"), pursuant to which Alex. Brown & Sons Incorporated has agreed to serve aow■ Remarketing Agent for each issue of Bonds. The principal office of Alex. Brn & Sons Incorporated in New York is located at 14th Floor, 63 Wall Street, New York, Now York. The Remarketing Agent will separately determine the interest rates from time to time borne by bonds of each Issue as described above under "The Bonds - interest." In addition, the Remarketing Agent will use its beat -15- 40 efforts to market the Bonds (other than Bonds as to which a Non -Tender Notice is given as described herein with respect to any Mandatory Tender Date applicable to such Bonds) on the Tender Dates applicable to such Bonds. The Remarketing Agent is not required to remarket any Bonds of an Issue after any Event of Default has occurred under the applicable Indenture and under certain other Circumstances specified in the Remarketing Agreement. The Remarketing Agent, in its individual capacity, may become the owner of or may in good faith buy, sell, own, hold and deal in any Bonds with the same rights as if it were not the Remarketing Agent. The Remarketing Agent may resign or may be removed under each separate Indenture by the Company and NHC at any time or from time to time. Following any resignation or removal of the Remarketing Agent under any Indenture, the Trustee is required to appoint a successor Remarketing Agent satisfactory to the Company and NHC. Registration and Exchange of Bonds The transfer of Bonds is registrable by the registered owners thereof and the Bonds may be exchanged for an equal aggregate principal amount of Bonds of the same Issue of other authorized denominations upon presentation and surrender of the Bonds at the corporate trust office of the Registrar and Paying Agent designated in accordance with the Indenture, together with an assignment duly executed by the respective registered owners or their duly authorized attorneys or legal representatives. The Registrar and Paying Agent may require the person requesting any transfer or exchange to reimburse it for any tax or other governmental charge payable in connection therewith. The Registrar and Paying Agent is not required to register the transfer of any Bonds (except any transfer of a Bond pursuant to a purchase of such Bond with amounts realized under a Credit Facility) (i) after a notice of the redemption of such Bond or any portion thereof has been mailed or (ii) prior to the Optional Tender Date for such Bond after an Optional Tender Notice with respect to such Bond has been received by the Registrar and Paying Agent or (iii) prior to the Mandatory Tender Date applicable to such Bonds after a Mandatory Tender Notice has been mailed --in each case unless the transferee delivers to the Registrar and Paying Agent a written acknowledgement of the matters contained in such notice. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds of each Issue are special obligations of the Issuer thereof, the principal or Redemption Price of and interest on which, and the purchase price of which, are payable solely from the applicable Revenues and, to the extent provided in each separate Indenture, proceeds of the remarketing of such Bonds and amounts realized under the Credit Facility securing such -16- • Bonds. The Bonds of an Issue are not payable from amounts realized under any Credit Facility securing any other Bonds. The Revenues are defined in each Indenture to include with respect to the Issue of Bonds secured thereby (i) all payments to the Issuer or the Trustee pursuant to the applicable Loan Agreement and the Note (excluding only payments in respect of the Administrative Expenditures and indemnification of the Issuer), (ii) proceeds of the Bonds and all moneys and securities on deposit in the funds and accounts created by the Indenture and (iii) all other receipts of the Issuer attributable to the refinancing of the Project by the issuance of such Bonds. It is not contemplated that there will be any such "other receipts." The Revenues (as defined in each Indenture) are pledged solely to the payment of the principal or Redemption Price of and interest on, and the purchase price of, the Bonds secured by such Indenture, and no other Bonds, as the same become due and, to the extent provided in the Indenture, to the payment of amounts due under the Credit Facility Agreement relating to such Bonds. The Bonds of each Issue shall not be deemed to constitute a debt, liability or obligation of the Issuer thereof or of the State of Florida or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer thereof or of the State of Florida or of any such political subdivision but shall be payable solely from the Revenues. The Issuer of the Bonds of each Issue shall not be obligated to pay the Bonds of such Issue or the interest thereon except from the revenues and proceeds pledged therefor, and neither the faith and credit nor the taxing power, if any, of the Issuer of the Bonds of an Issue or of the State of Florida or any political subdivision thereof is pledged to the payment of the principal of or the interest on such Bonds. Letters of Credit Each Letter of Credit will operate independently of each other Letter of Credit. The Letters of Credit contain similar terms. A summary of certain identical provisions of the Letters of Credit follows. This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the respective Letters of Credit. On the date of delivery of the Bonds of an Issue, the Bank will issue to the Trustee the Letter of Credit securing such Bonds in an initial stated amount (the "Stated Amount") equal to the initial aggregate principal amount of such Bonds and 58 days' interest thereon calculated at the rate of 15% per annum, which is the initial Maximum Rate. A separate Letter of Credit will be issued for each Issue. Drawings under the Letter of Credit Each Letter of Credit will be an irrevocable obligation of the Bank to pay to the Trustee, upon presentation of the draft and certificates -17- • required by the terms thereof, up to (i) an amount equal to the aggregate outstanding principal amount of the Issue secured thereby to pay the principal of the Bonds of such Issue when due and payable (whether at maturity, upon the redemption of such Bonds or on any date on which the principal amount due on such Bonds is accelerated) or the portion of the purchase price of such Bonds representing such principal (the "Principal Component"), and (ii) an amount equal to 58 days' interest on such Bonds calculated at a rate equal to 15% per annum, computed on the basis of the actual days elapsed in a 365 or 366 day year (the "Interest Component"). Except as described in this paragraph, only the Trustee will be entitled to make a drawing under any Letter of Credit. The Trustee will appoint the Registrar and Paying Agent as the Trustee's agent for the purpose of making demands for payment under each Letter of Credit. Until the Trustee gives the Bank written notice of the revocation of such agency appointment, only the Registrar and Paying Agent may make a drawing under the Letter of Credit. Any references below to the Trustee in connection with draws on any Letter of Credit should be understood to be references to its agent. ' Reduction and Reinstatement of Stated Amount Each drawing under a Letter of Credit securing the Bonds of an Issue with respect to any payment of the principal amount of such Bonds, whether at maturity, upon acceleration or upon the redemption thereof la "Principal Drawing"), honored by the Bank will automatically and irrevocably reduce, (i) the Principal Component by an amount equal to such Principal Drawing and (ii) the Interest Component by an amount equal to 58 days' interest (computed at the rate of 15% per annum and on the basis of the actual days elapsed in a 365 or 366 day year) on the amount by which such Principal Component is so reduced. Each drawing under a Letter of Credit with respect to any payment of the interest on the Bonds of the Issue secured thereby when due and payable by the Issuer thereof (an "Interest Drawing") honored by the Bank will automatically reduce (subject to reinstatement as described below) the Interest Component applicable to such Bonds by an amount equal to such Interest Drawing, and such reduction shall automatically result in a corresponding reduction (subject to reinstatement as described below) in the amounts available to be drawn under such Letter of Credit in respect of interest on such Bonds by subsequent drawings. Each drawing made under a Letter of Credit with respect to the payment of the purchase price of Bonds secured thereby, representing the principal amount thereof and accrued interest thereon, on any Tender Date applicable to such Bonds (a "Purchase Drawing") honored by the Bank under such Letter of Credit will automatically reduce (subject to reinstatement as described below), with respect to such Bonds, (i) the Principal Component by an amount equal to the portion of such Purchase Drawing made with respect to the payment of the portion, of the purchase price of such Bonds representing principal of such Bonds, and (ii) the Interest Component by an amount equal to 58 days' accrued interest (computed at the rate of 15% per annum and on the basis of the actual days elapsed in a 365 or 366 day year) on the amount by which such Principal Component is so reduced. -18- 40 If the Trustee has not received from the Bank, within fifteen calendar days after the honoring by the Bank of any Interest Drawing applicable to the Bonds of the Issue secured thereby, notice to the effect that the Bank will terminate the Letter of Credit in accordance with its terms and demanding acceleration of such Bonds as described herein under "The Bonds - Special Acceleration," the Interest Component equal to the amount of such Interest Drawing on such Letter of Credit, will be automatically reinstated, effective on the sixteenth calendar day after the honoring by the Bank of such Interest Drawing. In no event, however, will such Interest Component be reinstated to an amount in excess of 58 days' accrued interest (computed at the rate of 15% per annum and on the basis of the actual days elapsed in a 365 or 366 day year) on the then effective Principal Component applicable to that issue of Bonds. The Interest Component and the Principal Component of any Letter of Credit reduced as a result of a Purchase Drawing under such Letter of Credit will be automatically reinstated concurrently with the receipt by the Bank of immediately available funds in reimbursement of any such Purchase Drawing, together with interest thereon as provided in the Reimbursement Agreement in the amount of principal so reimbursed plus 58 days' accrued interest per annum (computed at the rate of 15% per annum and on the basis of the actual days elapsed in a 365 or 366 day year) on the amount of such principal reimbursed. In no event, however, will such Interest Component be reinstated to an amount in excess of 58 days' accrued interest (computed at the rate of 15: per annum and on the basis of the actual days elapsed in a 365 or 366 day year) on the then effective Principal Component applicable to that issue of Bonds. Expiration and Termination of Letters of Credit Each Letter of Credit will automatically terminate on the earliest of (i) the fifth anniversary of the date of issuance of the Bonds of the Issue secured thereby (the "Stated Expiration Date"), (ii) the payment by the Bank of the final drawing available to be made under such Letter of Credit, or (iii) the fifteenth day after the effective date after the Initial Interest Period on which such Bonds began to bear interest at a rate other than the Variable Rate. Each Letter of Credit may be terminated by the Bank prior to the Stated Expiration Date upon not less than 14 days' prior written notice to the Trustee upon the occurrence of certain events described in the Reimbursement Agreement. Upon receipt by the Trustee of any such notice of termination with respect to any Letter of Credit the Bonds secured thereby shall be accelerated as described herein under "The Bonds - Special Acceleration," the Trustee shall thereupon be entitled to draw the entire then remaining Stated Amount of such Letter of Credit on or before the termination date set forth in such notice of termination. See "Summary of Cartain Provisions of the Reimbursement Agreement - Expiration and Termination of Letter of Credit" in Appendix D. Enforceability The enforceability of each Letter of Credit may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other -19- • similar laws affecting the enforcement of creditor's rights in general, as such laws would apply in the event of the bankruptcy, insolvency, reorganization or liquidation of, or other similar occurrence with respect to, the Bank or in the event of any moratorium or similar occurrence affecting the Bank. Any judgment against the Bank rendered by a court of the United States or a court of one of the states thereof may not be enforceable in the Province of Ontario, Canada if such judgment was not final or conclusive, or was obtained by fraud or through proceedings contrary to natural justice. In addition, the Currency Act precludes a court in Canada from giving a judgment in any currency other than Canadian currency. Substitute Credit Facilities The Company may at any time and from time to time, with the written consent of NHC, deliver to the Trustee in substitution for any Credit Facility a Qualified Credit Facility, which may be a letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility. In connection with the delivery of any Qualified Credit Facility, there must be delivered to the Trustee, among other things, (i) an opinion of Bond Counsel to the effect that the delivery of such Qualified Credit Facility will not adversely affect the excludability from gross income of the interest paid on the Bonds secured thereby for federal income tax purposes, and (ii) written evidence from each securities rating agency then assigning a rating to the Bonds secured by such Credit Facility that such rating agency has reviewed such Qualified Credit Facility and that the substitution of such Qualified Credit Facility for the Credit Facility then in effect will not result in a reduction or withdrawal of its ratings on the Bonds secured thereby. In lieu of delivering to the Trustee a Qualified Credit Facility as described in the preceding paragraph, the Company may from time to time, with the written consent of NHC, deliver to the Trustee an Alternate Credit Facility, which may be a letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility. In connection with the delivery of such Alternate Credit Facility, there must be delivered to the Trustee the opinion of Bond Counsel referred to in clause (i) of the preceding paragraph, but the Company is not required to deliver to such Trustee any evidence that the ratings on the Bonds secured thereby will be maintained after the delivery of such Alternate Credit Facility. Such Bonds will be subject to mandatory tender as described above under "The Bonds - Optional and Mandatory Tender - Mandatory Tender Upon Expiration of Credit Facility" prior to the expiration of the Credit Facility securing such Bonds then in effect if the Company delivers to the Trustee an Alternate Credit Facility in lieu of a Qualified Credit Facility. Each Alternate Credit Facility shall become effective on the first Business Day of a month and, if such Alternate Credit Facility is delivered during any Fixed Rate Period applicable to the issue of Bonds to be secured -20- L., thereby in substitution for or replacement of another Credit Facility, on a day that would otherwise be a Mandatory Tender Date for such Bonds. The Trustee is required under the Indenture to return any Credit Facility on the effective date of any Qualified Credit Facility replacing it and 15 days after the effective date of any Alternate Credit Facility replacing it. The stated expiration date of any substitute Credit Facility must be on or after the 15th day of a calendar month not earlier than the earlier of (i) the date that is one year after the effective date of such substitute Credit Facility and (ii) the maturity date of the Bonds secured thereby. THE COMPANY The owner of the Projects is Florida Convalescent Centers, Inc., a Florida corporation which was incorporated in March, 1983. The Company was formed by James 0. McCarver for the purpose of developing nursing home facilities, and since its incorporation he has been its sole activedirector, president and owner of all of the outstanding common stock. Beginning in 1983, the Company filed numerous applications principally in the State of Florida seeking to obtain certificates of need to develop nursing home facilities. 20 certificates of need have been issued by the Department of Health and Rehabilitative Services of the State of Florida, and NHC has entered into various agreements to provide the Company with assistance in arranging and providing the financing to construct and manage up to 18 of the facilities in the State of Florida, including the Projects. The principal asset of the Company consists of the certificates of need and the nursing home facilities. James 0. McCarver, age 62, graduated in 1952 from The University of Texas with a Bachelor of Business Administration with a major in accounting and in 1954 from The University of Texas School of Law with a Bachelor of Laws Degree. Mr. McCarver began in 1965 to provide professional legal services to clients in the nursing home industry and, since 1975, he has devoted full time in the health care industry as a consultant, developer, owner -developer or manager of nursing homes and retirement facilities. DEFINITIONS OF CERTAIN TERMS In addition to the terms defined elsewhere in this Official Statement, the following are definitions of certain terms used in this Official Statement. Terms used but not defined in this Official Statement shall have the meanings set forth with regard to the Bonds of each Issue in the respective Indentures and Loan Agreements. "Available Moneys" means moneys held by or on behalf of the Trustee or the Registrar and Paying Agent for the Bonds of an Issue (i) that constitute proceeds of such Bonds; (ii) that were received by the Trustee or the Registrar and Paying Agent from the remarketing of such Bonds by the Remarketing Agent; (iii) that were realized by the Trustee or the Registrar -21- • and Paying Agent under the Credit Facility securing such Bonds; (iv) that were received by the Trustee from or on behalf of the Issuer or the Company and that have been on deposit with the Trustee for at least 124 days during which no proceeding by or against the Issuer or the Company (as the case may be) under any federal or state bankruptcy or insolvency law or any similar law in effect on the date of this Indenture or thereafter enacted shall have been dismissed and such dismissal shall be final and not subject to appeal; (v) that constitute proceeds (including, without limitation, investment earnings) of any of the foregoing; and (vi) with respect to which there shall have been delivered to the Trustee an opinion of nationally -recognized counsel experienced in bankruptcy matters to the effect that the payment of such moneys to the holder of any such Bond will not be avoidable under the preference avoidance powers of a trustee in bankruptcy of the Issuer or the Company under Section 547 of the United States Bankruptcy Code (or any section amendatory of, supplemental to or replacing such Section) in the• event that the Issuer or the Company becomes the subject of a case thereunder. For the purposes of this definition, moneys shall be deemed to have been r$ceived by or deposited with the Trustee only when cash or its equivalent is so received or deposited (as the case may be) or in the case of checks or drafts, when final payment thereof has been made to the Trustee by the payor bank. "Business Day" means a day other than (i) a Saturday, Sunday or other day on which banking institutions in the State of Florida or the city in which (A) the corporate trust office of the Trustee or the Registrar and Paying Agent, designated in accordance with the applicable Indenture by the Registrar and Paying Agent and the Trustee, respectively, (B) the office of the Remarketing Aqent, designated in accordance with the applicable Indenture by the Remarketing Agent or (C) the office of the Credit Facility Provider at which demands for payment under the Credit Facility must be presented is located are authorized or required to close and (ii) a day on which the New York Stock Exchange is closed. "Code" means the Internal Revenue Code of 1986, as amended, or any applicable predecessor statutory provisions, and the applicable regulations thereunder. "Computation Date" means, with respect to each Issue and except as described above under "The Bonds - Interest - Automatic Rescission of Conversion Upon Failure to Remarket," the date selected by the Remarketing Agent on which a Fixed Rate for the Bonds of such Issue is determined by the Remarketing Agent in accordance with the Indenture under which such Bonds were issued, which shall be a date that is at least seven but not more than 15 Business Days before the first day of the Fixed Rate Period for which such Fixed Rate is determined. "Conversion Date" means, with respect to each Issue, each Fixed Rate Date applicable to the Bonds of such Issue and each date after the Initial Adjustment Date on which the interest rate on such Bonds converts from a Fixed Rate to the Variable Rate. -22- e0 'XEROX TELECOPIER 495 212 986 30004 ;� 3 �.�... ...a....._ .....i._... ... "Credit Facility" means, with respect to the Bonds of any Issue, the letter of credit issued by The Toronto -Dominion Bank, acting through its Chicago Branch, on the date of the initial authentication and delivery of such Bonds, as amended, modified or supplemented from time to time, and any Qualified Credit Facility or Alternate Credit Facility delivered as security for such Bonds an described above under "Security and Sources of Payment for the Bonds - Substitute Credit Facilities," "Credit Facility Agreement" means the Reimbursement Agreement dated as of December 1, 1967 between the Borrower and The Toronto-D*minion Bank, acting through its Chicago Branch and any other agreement between the Company and a Credit Facility Provider pursuant to which a Credit Facility is issued, as such agreements may be amended, modified or supplemented from time to time. "Credit Facility Bond" means any Bond during the period from and including the day on which it is purchased with amounts realised under the Credit Facility securing such Bond to, but excluding, the day on which it is purchseed by any person other than the Credit Facility P;ovider and transferred to such person under the conditions not forth in the indenture pertaining to the remarketing of Credit.Facility Bonds. "Fixed Rate Date" means the first day of each Fixed Rate Period. "Fixed Rate Period" means, with respect to the Bonds of any Issue, a period commencinq after the Initial Interest Period for such Bonds during which the rate of interest borne by such Bonds is not subject to change as further described herein under "The Bonds - Interest - Fixed Rate Periods." "Government Obligations" massa direct obligations of, or obligations the timely payment of the principal of and the interest on which are unconditionally guaranteed by the United States of America, including (without limitation) any certificate evidencing an interest in any such obligation. "Initial Adjustment Date" means, with respect to any Issue, the day following the last day of the Initial Interest Period for the Bonds of such Issue. "Initial Interest Period" means, with respect to any Issue, the initial interest period determined by the Remarketing Agent during which the Bonds of such Issue bear interest at the initial rate determined by the Remarketing Agent in accordance with the Indenture. The Initial Interest Period for the Bonds of each Issue begins on the date of initial delivery of such Bonds. The last day of the Initial Interest Period and the initial interest rate for the Bonds of each Issue are set forth on the cover page of this Official Statement. "Interest Payment Date" means, with respect to the Bonds of an Issue (i) for the Initial Interest Period set forth on the cover of this Official Statement for such Bonds and any period during which such Bonds bear interest at the Variable Rate, the first Business Day of each month, each Mandatory -23- 40 Tender Date and the maturity date of such Bonds, (ii) for any Short Fixed Rate Period applicable to such Bonds the day following the last day of such Fixed Rate Period, (iii) for any Long Fixed Rate Period applicable to such Bonds (other than any such Fixed Rate Period described in item (iv)), the first day of the calendar month beginning each six calendar month period after the commencement of such Fixed Rate Period that occurs during such Fixed Rate Period and the day following the last day of such Fixed Rate Period and (iv) for any Long Fixed Rate Period applicable to such bonds extending to the maturity date of such Bonds, each January 1, and July 1. "Long Fixed Rate Period" means a Fixed Rate Period of six months or longer. "Mandatory Tender Date" means each Conversion Date and any Termination Date. "Maximum Rate" means 15% per annum, or such higher maximum rate as shall be established for the Bonds of an Issue in accordance, with the applicable Indenture. "NHC" means National HealthCorp L.P., a Delaware limited partnership, and its successors and assigns. "Non -Tender Notice" means a notice given to the Registrar and Paying Agent by the holder of any Bond in accordance with such Bond of such holder's election not to tender such Bond for purchase on any Mandatory Tender Date. "Optional Tender Date" means with respect to any Bond, a date on which such Bond is required to be purchased upon the demand of the holder thereof in accordance with such Bond and as described herein under "The Bonds - Optional and Mandatory Tender - Optional Tender During Variable Rate Period." "Redemption Price" means, when used with respect to a Bond or any portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof in accordance with such Bond. The definition of "Revenues" is set forth above under "Security and Sources of Payment for the Bonds - Limited Obligations." "Short Fixed Rate Period" means a Fixed Rate Period of fewer than six months. "Sinking Fund Installment" means the amounts provided in the Indenture to redeem or pay at maturity Bonds of an Issue at the times provided in the Indenture authorizing the issuance of such Bonds, as such amounts may be changed in accordance with such Indenture. The initial Sinking Fund Installments for the Bonds of each Issue are set forth in Appendix E hereto. -24- 40 "Tender Date" means an Optional Tender Date or a Mandatory Tender Date. The definition of "Termination Date" is set forth above under "The Bonds - Optional and Mandatory Tender - Mandatory Tender Upon Expiration of Credit Facility." "Variable Rate" means the rate of interest borne by the Bonds during any period commencing after the Initial Interest Period other than a Fixed Rate Period, determined from time to time in accordance with the Indenture and the Bonds and as described herein under "The Bonds - Interest - Variable Rate." SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURES The following is a summary of certain provisions of the Indentures. Each Indenture will operate independently of each other Indenture and a default under one Indenture will not necessarily constitute a default under any other Indenture. The Indentures contain similar terms, and the following is a summary of certain provisions which are common to all of the Indentures. All references in this summary are to the documents, parties, actions, Issuer, Bonds, Project, Credit Facility and Credit Facility Provider relating to an Indenture for the Bonds of a single Issue. This is not a complete recital of the terms of each Indenture and reference should be made to the Indentures for a complete statement of the provisions of particular Indentures. Application of Proceeds of Bonds (Section 4.02) The proceeds of the Bonds shall be received by the Trustee on behalf of the Issuer. Upon receipt of a certificate from the trustee (the "Prior Bonds Trustee") under the Indenture of Trust (the "Prior Bonds Indenture") authorizing the issuance of the bonds to be refunded from the proceeds of the Bonds (the "Prior Bonds") to the effect that, among other things, (a) upon transfer to it of amounts constituting the proceeds of the Bonds, the Prior Bonds will be deemed paid and discharged in accordance with their terms the Prior Bonds Indenture and (b) that the Prior Bonds have been presented to it for payment, the Trustee shall immediately pay over and disburse to the Prior Bonds Trustee the amounts constituting the proceeds of the Bonds. The receipt of such certificate is a condition precedent to the issuance of the Bonds. Establishment of Funds and Accounts (Section 4.01) The following funds and separate accounts within the funds are created for the Bonds by the Indenture and shall be held and maintained by the Trustee for the holders of the Bonds and, to the extent provided in the Indenture, the Credit Facility Provider: Revenue Fund, Debt Service Fund (Interest Account, Principal Account and Purchase Account) and Rebate Fund. -25- 40 Deposit of Revenues: Deposit of Certain Proceeds (Section 4.04) Except as described below. Revenues received by the Trustee in each month shall be deposited in the Revenue Fund and shall be transferred, immediately upon receipt thereof, as follows and in the following order of priority: FIRST: to the Interest Account, the amount, if any, necessary to make the amount then on deposit in the Interest Account and available for the payment of such interest equal to the interest payable on the Bonds (other than Credit Facility Bonds) on the next succeeding date on which interest is due on the Bondi (other than Credit Facility Bonds): and SECOND: to the Principal Account, the amount, if any, necessary to make the amount on deposit in the Principal• Account and available for the payment of such principal equal to the principal payable on the Bonds (other than Credit Facility Bonds) on the next succeeding date on which principal is due on the Bonds (other than Credit Facility Bonds) whether at maturity, by redemption or otherwise. After making the payments required above, any balance remaining on any date shall be paid to the Principal Account. Except as described below, voluntary payments made by the Company to the Trustee in accordance with the Loan Agreement will be deposited in the Principal Account by the Trustee on the date of receipt thereof. Amounts realized under the Credit Facility shall be applied as described below under "Realization of Funds under Credit Facility." The Registrar and Paying Agent shall deposit in the Purchase Account upon receipt the proceeds of the remarketing of Bonds by the Remarketing Agent (other than the proceeds of any remarketing of Credit Facility Bonds, which shall be paid directly to the Credit Facility Provider), amounts realized by the Registrar and Paying Agent under the Credit Facility for the payment of all or any portion of the purchase price of any Bonds on any Tender Date and if the Credit Facility Provider fails to honor any draft drawn under the Credit Facility in accordance with the terms thereof, all amounts paid by the Company to the Trustee for the payment of all or any portion of the purchase price of Bonds on the Tender Dates. Notwithstanding the foregoing provisions relating to the transfer of moneys from the Revenue Fund, as long as a Credit Facility is in effect, Revenues received by the Trustee that do not constitute Available Moneys shall be retained in the Revenue Fund until such amounts become Available Moneys, after which such amounts shall be transferred by the Trustee in accordance with the provisions of the Indenture. -26- Application of Moneys in the Debt Service Fund (Section 4.05) So long as the Credit Facility shall be in effect (i) unless the Credit Facility Provider shall have wrongfully failed to honor a demand for funds under the Credit Facility, no moneys shall be deposited in the Debt Service Fund except moneys that constitute Available Moneys and (ii) no amount on deposit in the Debt Service Fund shall be applied to the payment of the principal or Redemption Price of or interest on, or the purchase price of, Credit Facility Bonds, which payments shall be made by the Company for the account of the Issuer directly to the Credit Facility Provider in accordance with the Loan Agreement. On each Interest Payment Date, on the redemption or maturity date of any Bonds and on any date on which the due date for the payment of the principal amount of the Bonds shall be. -accelerated in accordance with the Indenture, the Registrar and Paying Agent shall pay the interest due on such Bonds on such date from amounts on deposit in the Interest Account., On each Tender Date, the Registrar and Paying Agent shall pay the purchase price of Bonds required to be purchased on such date from amounts on deposit in the Purchase Account. On each date on which the principal or Redemption Price of any Bonds becomes due and payable, the Registrar and Paying Agent shall pay such principal or Redemption Price from amounts on deposit in the Principal Account. Upon the request of the Company, with the written consent of NHC, the Registrar and Paying Agent shall transfer Available Moneys on deposit in the Principal Account that are not required to pay the Redemption Price of Bonds theretofore called for redemption or the purchase price of Bonds theretofore contracted to be purchased in an amount equal to a denomination in which the Bonds are then authorized to be outstanding and to apply the amount so transferred to the purchase of Bonds tendered for purchase on any Tender Date. During any period in which no Credit Facility is in effect, at the request of the Company, the Registrar and Paying Agent shall endeavor to purchase Bonds from amounts on deposit in the Principal Account for the most advantageous price then obtainable with reasonable diligence; provided, however, that no such purchase shall be made by the Trustee (a) within a period of 45 days immediately preceding any January 1, except from moneys other than moneys set aside or deposited for payment for the payment of the Sinking Fund Installment due on such date or (b) at a price, including any brokerage or other charges, greater than the principal amount thereof. Notwithstanding the foregoing, if particular Bonds shall have been previously selected for Redemption from the Sinking Fund Installment due on any date, there shall remain on deposit in the Principal Account an amount equal to the aggregate principal amount of such Bonds then outstanding to be redeemed on the immediately succeeding January 1. Notwithstanding the foregoing, if particular Bonds shall have been previously selected for redemption from the Sinking Fund Installment due on any date, no transfer referred to in this -27- paragraph shall be made unless after such transfer, there shall remain on deposit in the Principal Account an amount equal to the aggregate principal amount of such bonds outstanding to be redeemed on the immediately succeeding January 1. Investment of Moneys (Section 4.05) Moneys in any of the funds and accounts established by the Indenture will be invested by the Trustee or the Registrar and Paying Agent as directed by the Company and NHC only in the Investment Obligations maturing or redeemable at the option of the holder in such amounts and on such dates as may be necessary to provide moneys to meet the payments required from such funds and accounts, except that, so long as the Credit Facility is in effect, amounts on deposit in the Debt Service Fund will be invested only in Government Obligations maturing or redeemable at the option of the holder not more than 30 days after the date of purchase. Notwithstanding the foregoing, the Registrar and Paying Agent may, at its sole option, hold any moneys held by it under this Indenture uninvested, and nothing contarined in th9 Indenture shall be construed to obligate the Registrar and Paying Agent to invest such moneys at the direction of the Company and NHC or otherwise. Interest earned, profits realized and losses suffered by reason of any investment of the funds and accounts created by the Indenture shall be credited or charged, as the case may be, to the fund or account for which such investment is made. In computing the value of the assets of any fund or account established under the Indenture, investments and accrued interest thereon shall be deemed a part of the fund or account. Such investments will be valued at (i) the lower of amortized cost and current market value or (ii) at their redemption price thereof if then redeemable at the option of the holder (in any case net of the cost of liquidating such investments). Neither the Trustee nor the Issuer nor the Registrar and Paying Agent is liable for any depreciation in the value of any investments made from moneys in the funds or accounts created by the Indenture or for any loss arising from any investment permitted by the Indenture. Realization of Funds under Credit Facility (Section 4.07) The Trustee or the Registrar and Paying Agent (acting as the agent of the Trustee) in the case of paragraphs (i) and (iv) below and the Registrar and Paying Agent (acting as agent for the Trustee) in the case of paragraphs (ii) and (iii) below shall draw a draft under the Credit Facility (or take such other steps as shall be necessary to realize funds thereunder), to the extent permitted thereby, in the following amounts, on the following dates and in sufficient time, as indicated in the Credit Facility, to permit the -28- db realization of such amounts on such dates, for deposit into the following funds or accounts: (i) on each Interest Payment Date, on the maturity date or redemption date of any Bonds, and on any date on which the due date for the payment of the principal amount of the Bonds is accelerated in accordance with the Indenture, an amount equal to the interest due on the Bonds (other than Credit Facility Bonds) on such date, less the amount of Available Moneys on deposit in the Interest Account available at the time of the drawing or the taking of such other steps for the payment of such interest on such date, which amount shall be deposited in the Interest Account and held in a separate subaccount therein apart from all other moneys on deposit therein; (ii) on each Tender Date, an amount equal to the purchase price of Bonds (other than Credit Facility Bonds) to be purchased on such Tender Date, less the amount of Available Moneys on deposit in the Purchase Account available at the time of the drawing or the taking of such other steps for the Payment of the purchase price of Bonds due on such date, which amount shall be deposited in the Purchase Account and held in a separate subaccount therein apart from all other moneys on deposit therein; (iii) on each redemption date of the Bonds, an amount equal to the Redemption Price of the Bonds (other than Credit Facility Bonds) due on such date, less the amount of Available Moneys on deposit in the Principal Account available at the time of the drawing or the taking of such other steps for the payment of such Redemption Price on such date, which amount shall be deposited in the Principal Account and held in a separate subaccount therein apart from all other moneys on deposit therein; and (iv) on the maturity date of the Bonds, and on any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with the Indenture, an amount equal to the principal amount of the Bonds (other than Credit Facility Bonds) due on such date, less the amount of Available Moneys on deposit in the Principal Account available at the time of the drawing or the taking of such other steps for the payment of such principal on such date, which amount shall be deposited in the Principal Account and held in a separate subaccount therein apart from all other moneys on deposit therein. Liens, Encumbrances and Charges (Section 5.03) The Issuer covenants that it will not create and, to the extent Revenues are received for the discharge thereof, will not suffer to remain, any lien, encumbrance or charge upon the Revenues. To the extent Revenues or other moneys are received by the Issuer therefor, the Issuer will cause to be discharged, or will make adequate provisions to satisfy and discharge, within 60 days after the same shall accrue, all lawful claims and demands that, if unpaid, might by law become a lien upon any Revenues; provided, however, that the Issuer shall not be required to pay or cause to be discharged, or make -29- • provision for, any such lien, encumbrance or charge so long, as the validity thereof is contested in good faith and by appropriate legal proceedings. The Issuer covenants that it will not create or cause to be created any lien or charge on the Revenues, other than the lien on and pledge of the Revenues authorized by the Indenture. Events of Default and Remedies Events of Default (Section 7.01) Events of Default under the Indenture include, among others: (i) payment of the principal or Redemption Price of or interest on any Bond shall not be made when due and payable, either at maturity or by proceedings for redemption or otherwise: or (ii) payment of the purchase price of any Bond shall not be made on a Tender Date applicable to such Bond; or (iii) the Issuer shall default in any material respect in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Indenture on the part of the Issuer to be performed, which default shall continue for 30 days after written notice shall have been given to the Issuer, NHC and the Company by the Trustee (except that if the Issuer, NHC or the Company shall proceed to take any curative action that, if begun and prosecuted with due diligence, cannot be completed within a period of 30 days, then such period shall be increased to such extent as shall be necessary to enable the Issuer, NHC or the Company to complete such curative action through the exercise of due diligence); or (iv) any event of default under the Loan Agreement or (v) final judgment for the payment of money shall be rendered against the Issuer, if such judgment is under any circumstances payable from the Revenues, and at any time after 60 days from the entry thereof (a) such judgment shall not have been discharged, or (b) the Issuer shall not have taken and be diligently prosecuting an appeal therefrom or from the order, decree or process upon which or pursuant to which such judgment shall have been granted or entered, and shall not have caused the execution of or levy under such judgment, order, decree or process or the enforcement thereof to have been stayed pending determination of such appeal; or (vi) an order or decree shall be entered with the consent or acquiescence of the Issuer appointing a receiver or receivers of the Revenues, or such order or decree having been entered without the consent or acquiescence of the Issuer, shall not have been vacated or discharged within 60 days after the entry thereof; or (vii) any proceeding shall be instituted with the consent or acquiescence of the Issuer for the purpose of effecting a composition between the Issuer and its creditors or for the purpose of adjusting the claims of such creditors, pursuant to any federal or state statute in effect on the date of the Indenture or thereafter enacted, if the claims of such creditors are under any circumstances payable from the Revenues. Notwithstanding the foregoing, so long as the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, no Event of Default described in the preceding paragraph (except for clauses (i) and (ii) of the preceding paragraph) shall be deemed -30- s to have occurred unless the Credit Facility Provider gives written notice to the Trustee of the occurrence of such Event of Default. Acceleration of Maturity (Section 7.02) Upon the happening and continuance of any Event of Default under the Indenture the Trustee mny, and upon the written request of the Holders of not less than 20: of the Bonds shall, by a notice in writing to the Issuer, NHC and the Company, declare the principal of all of the Outstanding Bonds to be due and payable. Upon the giving of notice of such declaration, (i) such principal and interest shall become and be immediately due and payable, anything in the Bonds or in the Indenture to the contrary notwithstanding and (ii) if a Credit Facility is then in effect, the Trustee (or the Registrar and Paying Agent, as its agent) shall immediately draw a draft or take such other steps as are necessary to realize funds under the Credit Facility in accordance with the provisions of the Indenture. Notwithstanding the foregoing provisions of this paragraph, if a Credit Facility is in,effect and any Event of Default is not the result of a wrongful failure on the part of the Credit Facility Provider to honor a demand for funds under the Credit Facility, the Trustee shall not declare the principal of all Outstanding Bonds to be due and payable except on a date on which the Trustee (or the Registrar and Paying Agent, as its agent) has sufficient time, as indicated in the Credit Facility, to draw a draft or take such other steps as are necessary to realize funds under the Credit Facility in accordance with the Indenture. At any time after the principal of the Bonds shall have been so declared to be due and payable, and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, or before the completion of the enforcement of any other remedy under the Indenture, the Trustee, by written notice to the Issuer, NHC and the Company, may annul such declaration and its consequences if: (a) moneys shall have accumulated in the Debt Service Fund sufficient to pay all arrears of interest, if any, upon all of the Outstanding Bonds (except the interest accrued on such Bonds since the last Interest Payment Date) and the principal of all matured Bonds (except the principal of any Bonds due solely as a result of such declaration); (ii) moneys shall have accumulated and be available sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Trustee; and (iii) every other default known to the Trustee in the observance or performance of any covenant, condition or agreement contained in the Bonds or in the Indenture (other than a default in the payment of the principal of such Bonds then due solely as a result of such declaration) shall have been remedied to the satisfaction of the Trustee; provided, however, that such declaration may be annulled (A) only with the written consent of the Holders of not less than 20% of the Bonds if such declaration has been made up the written request of the Holders 'of not less than 20% of the Bonds, and (B) only with the written consent of the Credit Facility Provider so long as the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility; and provided further that such declaration may not be annulled if amounts sufficient to pay the principal of and accrued interest on the Outstanding -31- ab Bonds through the accelerated maturity date less the amount of Available Moneys available for the payment thereof were realized under the Credit Facility in accordance with the Indenture. No such annulment shall extend to or affect any subsequent default or impair any right consequent thereon. Notwithstanding the foregoing, the Borrower or NHC may take any action, to the extent permitted by applicable law, to remedy any Event of Default. Special Acceleration (Section 7.12) As long as a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor any demand for funds under the Credit Facility, if the Credit Facility Provider shall deliver to the Trustee written notice that the Credit Facility will be terminated in accordance with the Credit Facility Agreement and a demand for acceleration, then the Trustee shall, by written notice to the Issuer, NHC, the Company and the Registrar and Paying Agent on the date of receipt of such notice from the Credit Facility Provider or the next succeeding Business Day, whichever is the earlier date on which the Trustee (or the Registrar and Paying Agent as its agent) has sufficient time, as indicated in the Credit Facility, to draw a draft or take such other steps as are necessary to realize funds under the Credit Facility in the amounts necessary to pay the principal of and accrued interest on the Outstanding Bonds on the accelerated maturity date, declare the principal of the Bonds and the interest accrued thereon to be due and payable immediately. and upon such declaration the same shall become and be immediately due and payable. Immediately upon the receipt of written notice from the Credit Facility Provider that the Credit Facility will be terminated in accordance with the Credit Facility Agreement, the Trustee shall notify the Registrar and Paying Agent, by telecopy or other electronic transmission that leaves a written record or by telephone (promptly confirmed in writing), of the receipt of such notice and the accelerated maturity date. Any declaration of acceleration made as described in this paragraph may not be waived, rescinded or annulled by the Trustee or the holders of the Bonds. Upon any such declaration, the Trustee (or the Registrar and Paying Agent as its agent) shall immediately (i) draw a draft under the Credit Facility as described above under "Realization of Funds under Credit Facility" and (ii) give notice thereof to the Bondholders in accordance with the terms of the Bonds. Enforcement (Section 7.03) If any Event of Default under the Indenture occurs, the Trustee may proceed, and upon the written request of the Holders of not less than 200 of the Bonds shall proceed (upon receipt of indemnification satisfactory to the Trustee), to protect and enforce its rights and the rights of the Bondholders under the laws of the State of Florida or under the Indenture by such suits, actions or special proceedings in equity or at law as the Trustee shall deem most effectual to protect and enforce such rights. -32- 40 Priority of Payments following Default (Section 7.04) If an Event of Default under the Indenture occurs and the moneys held by the Trustee under the Indenture (other than moneys then held or set aside under the Indenture for the payment of any Bonds at maturity or on any redemption date or Tender Date that have not been presented for payment) shall not be sufficient to pay the principal or Redemption Price of and interest on, and the purchase price of, the Bonds as the same become due and payable (either by their terms or by acceleration of maturity under the Indenture), such moneys, together with any moneys then available or thereafter becoming available for such purpose, whether through the exercise of the remedies provided for in the Indenture or otherwise, shall be applied as follows: (a) Unless the principal of all the Bonds shall be due and payable, all such moneys shall be applied: FIRST: to the payment to the persons entitled thereto of the interest then due on the Bonds and, if the amount available shall not be sufficient to pay in full all such interest, then to the payment of such interest, ratably, to the persons entitled thereto, without any discrimination or preference; SECOND: to the payment to the persons entitled thereto of the unpaid principal or Redemption Price due on any of the Outstanding Bonds in the order of the due dates for such payments, with interest upon such principal or Redemption Price from the respective dates upon which such amounts shall have become due and payable (whether upon proceedings for redemption or otherwise), and, if the amount available shall not be sufficient to pay in full the principal or Redemption Price due and payable on any particular date, together with such interest, then to the payment first of such interest, ratably, according to the amount of interest due on such date, and then to the payment of such principal or Redemption Price, ratably, according to the amount due on such date, to the persons entitled thereto, without any discrimination or preference; THIRD: to the payment of the interest on and the principal of the Bonds as the same become due and payable (whether upon proceedings for redemption or otherwise); and FOURTH: to the Credit Facility Provider to the extent of any amount due and unpaid under the Credit Facility Agreement in accordance with the terms thereof upon the certification to the Trustee of such amount by the Credit Facility Provider. (b) If the principal of all the Bonds shall, have become due and payable, either by their terms or by a declaration of acceleration, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Outstanding Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any such Bond over -33- Mb any other such Bond, according to the amounts due respectively for principal and interest, to the persons entitled thereto, without any discrimination or preference. Notwithstanding the foregoing paragraphs (a) and (b), if the Credit Facility Provider shall have wrongfully failed to honor a demand for funds under the Credit Facility, no moneys held under the Indenture shall be used for the payment of interest on or the principal or Redemption Price of any Credit Facility Bond or any amounts due under the Credit Facility Agredment until after all amounts payable with respect to all other Outstanding Bonds shall have been paid in full. Whenever moneys are to be applied by the Trustee a described above, such moneys shall be applied by the Trustee at such time, and from time to time, as the Trustee in its sole discretion shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. The setting aside of such moneys in trust for the benefit of all Holders of the Outstanding Bonds shall constitute proper application by the Trustee, and the Trustee shall incur no liability whatsoever to the Issuer, to any Bondholder, to the Credit Facility Provider or to any other person for any delay in applying any such moneys, so long as the Trustee acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of the Indenture as may be applicable at the time of application by the Trustee. Whenever the Trustee shall exercise such discretion in applying such moneys, it shall fix the date (which shall be an Interest Payment Date unless the Trustee shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal of the Bonds paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the fixing of any such date. The Trustee shall not be required to make payment to the Holder of any Bond unless such Bond shall be presented to the Trustee for appropriate endorsement. Restrictions upon Action by Individual Bondholders (Section 7.07) No Bondholder shall have any right to institute any suit, action or proceeding in equity or at' law for the execution of any trust under the Indenture or for any other remedy under the Indenture unless (i) such Holder previously shall have given to the Trustee written notice of the Event of Default on account of which such suit, action or proceeding is to be instituted, (ii) the Holders of not less than 20: of the Bonds shall have made written request to the Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers granted by the Indenture or to institute such action, suit or proceeding in its or their name, and (iii) there shall have been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time. -34- LJ Notwithstanding the foregiong and without complying therewith, the Holders of not less than 20% of the Bonds may institute any such suit, action or proceeding in their own names for the benefit of all Bondholders. Except as otherwise provided in the Indenture, no one or more Bondholders shall have any right in any manner whatsoever to affect, disturb or prejudice the security of the Indenture or to enforce any right thereunder except in manner provided in the Indenture, and all proceedings at law or in equity must be constituted, had and maintained as provided in the Indenture and for the benefit of all Holders of the Outstanding Bonds, and any individual right or action or other right given by law to one or more of such Holders is restricted by the Indenture to the rights and remedies provided in the Indenture; provided however that the foregoing shall not affect or impair the right of any Holder of any Bond to enforce payment of the principal or Redemption price of or interest on or the purchase price of such Bond at the time and place, from the source and in the manner expressed in the Indenture and in the Bonds. Waiver of Default (Section 7.10) The Trustee may, and upon the written request of the Holders of not less than 20% of the Bonds shall, with respect to the Bonds, waive any default that in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of the Indenture or before the completion of the enforcement of any other remedy thereunder; but no such waiver shall extend to or affect any other existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. Supplemental Indentures Without Consent of Bondholders (Section 8.01) Without notice to or the consent of the Bondholders, the Issuer and the Trustee may enter into Supplemental Indentures from time to time for one or more of the following purposes: (a) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that lawfully may be granted to or conferred upon the Trustee for the benefit of the Bondholders; (b) to add to the covenants and agreements of the Issuer contained in the Indenture other covenants and agreements thereafter to be observed relative to the application, custody, use or disposition of the proceeds of Bonds; (c) to surrender any right, power or privilege reserved to or conferred upon the Issuer by the Indenture; (d) to confirm, as further assurance, any pledge under, and the subjection to any lien on, or claim or pledge of, (whether created or to be created by the Indenture) the Revenues; (e) to cure any ambiguity or to cure, correct or supplement any defect or inconsistent provisions contained in the Indenture or to make such provisions in regard to matters or questions arising under the Indenture as may be necessary or desirable and not contrary to or inconsistent with the Indenture; (f) to make any other change in the Indenture that, in the opinion of the Trustee, shall not prejudice in any material respect the rights of the holders of the Bonds outstanding on the date such change shall become -35- 40 effective; (g) to increase the Maximum Rate or to change the terms for the payment of interest on Credit Facility Bonds; (h) in connection with the delivery of any substitute Credit Facility in order to provide for (A) the realization of moneys thereunder at times and in amounts sufficient to provide for the payment of the principal or Redemption Price of and interest on, and the purchase price of, the Bonds when due and (B) the payment by the Company at such times and in such amounts, and the deposit of such payments in such accounts and at such time, as may be necessary to obtain such Substitute Credit Facility, maintain the ratings then borne by the Bonds or otherwise protect the interests of the Bondholders; (i) to provide for the registration of, the Bonds under a book -entry system; or (j) to make any other change in the Indenture, provided that such change shall not become effective with respect to any Bond until the immediately succeeding Tender Date applicable to such Bond and provision shall have been made for the giving of notice of such change to subsequent purchasers of such Bond. Supplemental Indentures Requiring Consent of Bondholders (Section 8.02) At any time or from time to time with the consent of the holders of a majority of the Bonds, the Issuer and the Trustee may enter into a Supplemental Indenture to modify any of the provisions of the Indenture, any Supplemental Indenture or any Bond or to release the Issuer from any of the obligations, covenants, agreements, limitations, conditions or restrictions therein contained; provided, however, that nothing contained in the Indenture shall permit (i) a change in any terms of redemption or purchase of any Bond, the due date for the payment of the principal of or interest on any Bond or any reduction in the principal, Redemption Price or purchase price of or interest rate on any Bond without the consent of the holder of such Bond or (ii) the creation of a claim or lien upon, or a pledge of, the Revenues ranking prior to or on a parity with the claim, lien and pledge created by the Indenture, a preference or priority of any Bond over any other Bond or a reduction in the percentage of the aggregate principal amount of Bonds the consent of the holders of which is required for any modification of the Indenture, without the unanimous consent of the Bondholders. Amendment of the Loan Agreement and the Mortgage (Section 8.04) Without notice to or the consent of the Bondholders, the Issuer may from time to time enter into any amendment, change or modification of the Loan Agreement and the Trustee may from time to time enter into any amendment, change or modification of the Mortgage (see "Summary of Certain Provisions of the Bank Security Documents - Summary of Certain Provisions of the Mortgages" herein) (i) as may be required for the purpose of curing any ambiguity or formal defect, (ii) to change the terms for the payment of interest therevnder to reflect any change in the terms for the payment of interest on Credit Facility Bonds, (iii) in connection with the delivery of any substitute Credit Facility in order to provide for payments by the Company at such times and in such amounts as may be necessary to obtain such substitute Credit Facility, maintain the ratings then borne by the Bonds or otherwise protect the interests of the Bondholders, (iv) to make any other change in the Loan -36- 40 Agreement or: the Mortgagi, provided that such change shall not become effective until the immediately succeeding Mandatory Tender Date and provision shall have been made for the giving of notice of such change to subsequent purchasers of the Bonds, or. (v) that, in the judgment of the Trustee shall not prejudice in any material respect the rights of the Bondholders. So long as the Credit Facility shall be in affect and the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, the Trustee shall release the Mortgaqe if on or prior to such time, the Credit Facility Provider has released the Mortgage and shall, at the written request of the Credit Facility Provider, or enter into or consent to such amindments, changes or modifications of the Mortgage as shall be required from time to time by the Credit Facility Provider and the Company (with the written consent of NHC), it being the intention that the ultimate security for the Bonds shall consist of the Credit Facility and the amounts received by the Issuer and the Trustee under the Loan Agreement. , Except as described in the preceding paragraphs, the Issuer may not enter into any amendment, change or modification of the Loan Agreement without the written consent 0! the Trustee and the holders of a majority of the Bonds. The Trustee shall have no liability to any Bondholder or any other person for any such action taken by it in good faith. Book -Entry System (Section 2.10) The Indenture authorizes the Register and Paying Agent to make such modifications to the form of the Bonds as may be appropriate to conform to any standard specifications f9r registered municipal securities which may be promulgated by any body generally recognized in the municipal securities industry (including the "rican National Standards Institute) in order to facilitate computer or othir mechanical processing methods for registration of municipal bonds. In addition, at the written direction of the Remarketing Agent, the Registrar and Paying Agent shall initiate a system for the registration of the Bonds in book -entry form (a "Book -Entry System") and may enter into such agreements a■ may be necessary to provide for registration of the Bonds in book -entry foim, with or without the issuance of physical Bond instruments, 4tertificates or other writings evidencing the ownership thereof. Before the Registrar and Paying Agent makes any change in the form of the Bonds or initiates any Book -Entry System with respect to the Bonds, the Registry and Paying Agent shall have received an opinion of Bond Counsel to the effect that such change in form of the Aonds or initiation of such Book -Entry System is permitted under the laws of the State of Florida and by the Indenture and will not adversely affect the excludability from gross income, for federal income tax purposes, of the interest paid on the Bonds. Defeasance (Section 9.01) if the issuer shall pay or cause to be paid the principal or Redemption Price of and 'interest on all of the Bonds, then the pledge of the Trust Estate tnd all other rights granted to the Trustee or the Bondholders -37- • under the Indenture shall be discharged and satisfied. In such event, upon the request of the Issuer or the Company and NHC, the Trustee shall execute and deliver to the Issuer and the Company all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay or deliver all moneys, securities and funds held by it pursuant to this Indenture that are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption (i) to the Credit Facility Provider to the extent of any amount due and unpaid under the Credit Facility Agreement in accordance with the terms thereof upon the certification to the Trustee of such amount by the Credit Facility Provider and (ii) after the payment required by clause (i) of this paragraph, to the Company or to such officer, board or body as may then be entitled by law to receive the same. In such event, the Trustee shall also return the Credit Facility to the Credit Facility Provider. A Bond shall be deemed to have been paid within the meaning of and with the effect expressed in this Section if (i) sufficient money for the payment of the principal or Redemption Price of and interest on such Bond shall then be held by the Trustee (through deposit by the Issuer of moneys for such payment or otherwise, regardless of the source of such moneys), whether at or prior to the maturity or the redemption date of such Bond, or (ii) if the maturity or redemption date of such Bond shall not then have arrived, provision shall have been made for the payment of the principal or Redemption Price of and interest on, and the purchase price of, such Bond on the due dates for such payments, by deposit with the Trustee (or other method satisfactory to the Trustee) of Government Obligations, the principal of and the interest on which when due will provide sufficient moneys for such payment and the Borrower shall have made provision, satisfactory to the Trustee, for one publication in a daily newspaper or a financial journal printed in the English language and having a general circulation in the Borough of Manhattan, City and State of New York (an "Authorized New York Newspaper"), that such moneys are so available for such payment; provided, however, that (A) if a Credit Facility is then in effect, such moneys shall constitute Available Moneys and such Government Obligations shall have been purchased with Available Moneys and (B) if any such Bond is to be redeemed prior to the maturity thereof, provisions satisfactory to the Trustee shall have been made for the giving of notice of such redemption. Anything in this Indenture to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of any of the Bonds that remain unclaimed for seven years after the date on which such Bonds became due and payable tither at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such date, or for seven years after the date of deposit of such moneys if deposited with the Trustee after such date, shall, at the written request of the Company, be repaid by the Trustee to the Company or to such officer, board or body as may then be entitled by law to receive such moneys, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged; provided, however, that, before being required to make any such payment, the Trustee may, at the expense of the Borrower, cause to be published in an -38- • Authorized New York Newspaper a notice that such moneys remain unclaimed and that, after a date named in such notice, which date shall be not fewer than 40 nor more than 90 days after the date of publication of such notice, the balance of such moneys then unclaimed shall be returned to the Company. Issuer Protected in Acting in Good Faith (Section 11.06) In the exercise of the powers of the Issuer and its members, officers, employees and agents under the Indenture, the Loan Agreement or the Mortgage, including (without limitation) the application of moneys and the investment of funds, the Issuer shall not be accountable to the Trustee, the Credit Facility Provider or any Bondholder for any action taken or omitted by it or its members, officers, employees and agents in good faith and believed by it or them to be authorized or within the discretion or rights or powers conferred. The Issuer and such members, officers, employees or agents shall be protected in its or their acting upon any paper or document reasonably believed in good faith by it or them to be genuine, and it or -they may conclusively rely upon the advice of counsel as to matters of law and may (but need not) require further evidence of any fact or matter before taking any action. No recourse shall be had by the Trustee, the Credit Facility Provider or any Bondholder for any claims based on the Indenture, the Loan Agreement or the Mortgage, against any member, officer, employee or agent of the Issuer alleging personal liability on the part of such person unless such claims are based upon the bad faith, fraud or deceit of such person. Business Days (Section 11.11) Except as otherwise expressly provided in the Indenture, if any date specified for the payment of any Bond or the performance of any act shall not be a Business Day, such payment or performance shall be made on the next succeeding Business Day with the same effect as if made on such date, and in case any payment of the principal or Redemption Price of or interest on any Bond shall be due on a date that is not a Business Day, such payment shall be made on the immediately succeeding Business Day and no interest shall accrue on the amount of such payment during the intervening period. SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS The following is a summary of certain provisions of the Loan Agreements. Each Loan Agreement will operate independently of every other Loan Agreement and a default under one Loan Agreement will not necessarily constitute a default under any other Loan Agreement. The Loan Agreements contain similar terms, except as herein noted, and the following is a summary of certain provisions which are common to all of the Loan Agreements. All references in this summary are to the documents, parties, actions, Issuer, Bonds, Project, Credit Facility and Credit Facility Provider relating to the Loan Agreement for the Bonds of a single Issue. This is not a complete recital of the terms of each Loan Agreement and reference should be made to -39- the respective Loan Agreements for a complete statement of the provisions thereof. Term of Loan Agreement (Section 3.01) The Loan Agreement shall remain in full force and effect from the date of its execution and delivery until the date on which the principal or Redemption Price of and interest on the Bonds and all Administrative Expenditures shall have been fully paid by or on behalf of the Company or provision for the payment thereof shall have been made by or on behalf of the Company as provided by the Indenture, at which time the Loan Agreement shall terminate and the Issuer shall release and cancel the Loan Agreement. Amounts Payable (Section 3.02) The Company is required under the Loan Agreement to pay or cause to be paid to the Trustee, as and when due and payable in accordance with the terms of the Bonds, the Indenture and the Loan Agreement an amount equal to the sum of: (i) the total interest becoming due on all Bonds to the respective dates of payment thereof; (ii) the total principal amount of the Bonds; (iii) all redemption premiums (if any) payable on the redemption of Bonds prior to stated maturity dates; and (iv) the purchase price of Bonds required to be purchased on any Tender Date, in each case less any amount available for such payments from the funds and accounts established under the Indenture. In addition, the Company shall pay the Administrative Expenditures of the Issuer, the Trustee and the Registrar and Paying Agent. All amounts provided above shall be paid to the Trustee, the Issuer or the Credit Facility Provider (as the case may be) at the times specified above and as follows: (i) so long as the Credit Facility shall be in effect: (A) amounts realized by the Registrar and Paying Agent or the Trustee under the Credit Facility and proceeds of the remarketing of the Bonds received by the Registrar and Paying Agent for the payment of the principal or Redemption Price of or interest on or the purchase price of, the Bonds shall be credited against the obligation of the Company to make the payments required under the Loan Agreement; (B) amounts payable to the Credit Facility Provider, including (without limitation) the principal or Redemption Price of and interest on Credit Facility Bonds, shall be paid by the Company directly to the Credit Facility Provider for the account of the Issuer or the Company (as the case may be); and (C) the Administrative Expenditures shall be paid by the Company directly to the Issuer; the Trustee or the Registrar and Paying Agent upon the written demand of an Authorized officer of the Issuer, the Trustee or the Registrar and Paying Agent, respectively; and (ii) during any period in which no Credit Facility is in effect, the Company shall pay to the Trustee the following amounts at the following times: (A) on the Business Day immediately preceding each Interest Payment Date, and on the Business Day immediately -40- dw preceding the redemption or maturity date of any Bonds or any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with the Indenture, the amount, if any, necessary to make the amount then on deposit in the Interest Account and available for payment of such interest equal to the interest payable on the Bonds on such date; (B) on the Business Day preceding the redemption date of any Bonds, the maturity date of any Bonds and any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with the Indenture, the amount, if any, necessary to make the amount on deposit in the Principal Account equal to the principal amount of the Bonds due on such date; and (C) the Administrative Expenditures not otherwise paid or provided for by the Company, as certified to the Company by an Authorized Officer of the Issuer, the Trustee or the Registrar and Paying Agent. Operation and Maintenance of Project (Section 4.04) The Company shall cause the Project to be operated in a "sound and economical manner and shall maintain, preserve and keep the Project in good condition and repair and shall make all necessary and proper repairs, renewals and replacements so as to conduct the operation of the Project in accordance with all material governmental operating standards applicable to the Project. The Company shall operate the Project as a "health care facility" within the meaning of the Enabling Legislation. Insurance (Section 4.05) The Company shall keep the Project and its operations with respect thereto adequately insured at all times and shall maintain with responsible insurers insurance with respect to the Project and such operations of such types, in such amounts and against such risks as are customarily maintained with respect to comparable facilities and operations, including (without limitation) (i) full fire and extended coverage insurance on the Project providing for not less than full recovery of the insurable value (less reasonable deductibles and exclusions) of any damaged property and (ii) public liability and property damage insurance in amounts estimated to fully indemnify (less reasonable deductibles and exclusions) the estimated loss or damage. In the event that the Company shall at any time neglect or refuse to obtain or maintain insurance as required by the Loan Agreement, the Trustee may obtain and maintain such insurance and the Company shall be obligated to reimburse the Trustee promptly for all amounts expended in connection therewith. -41- s preceding the redemption or maturity date of any Bonds or any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with the Indenture, the amount, if any, necessary to make the amount then on deposit in the Interest Account and available for payment of such interest equal to the interest payable on the Bonds on such date; (B) on the Business Day preceding the redemption date of any Bonds, the maturity date of any Bonds and any date on which the due date for the payment of the principal amount of the Bonds shall be accelerated in accordance with the Indenture, the amount, if any, necessary to make the amount on deposit in the Principal Account equal to the principal amount of the Bonds due on such date; and (C) the Administrative Expenditures not otherwise paid or provided for by the Company, as certified to the Company by an Authorized Officer of the Issuer, the Trustee or the Registrar and Paying Agent. Operation and Maintenance of Project (Section 4.04) The Company shall cause the Project to be operated in a "sound and economical manner and shall maintain, preserve and keep the Project in good condition and repair and shall make all necessary and proper repairs, renewals and replacements so as to conduct the operation of the Project in accordance with all material governmental operating standards applicable to the Project. The Company shall operate the Project as a "health care facility" within the meaning of the Enabling Legislation. Insurance (Section 4.05) The Company shall keep the Project and its operations with respect thereto adequately insured at all times and shall maintain with responsible insurers insurance with respect to the Project and such operations of such types, in such amounts and against such risks as are customarily maintained with respect to comparable facilities and operations, including (without limitation) (i) full fire and extended coverage insurance on the Project providing for not less than full recovery of the insurable value (less reasonable deductibles and exclusions) of any damaged property and (ii) public liability and property damage insurance in amounts estimated to fully indemnify (less reasonable deductibles and exclusions) the estimated loss or damage. In the event that the Company shall at any time neglect or refuse to obtain or maintain insurance as required by the Loan Agreement, the Trustee may obtain and maintain such insurance and the Company shall be obligated to reimburse the Trustee promptly for all amounts expended in connection therewith. -41- r-. Maintenance of Corporate Existence (Section 5.07) The Company shall maintain its corporate existence, except as permitted below, and shall remain qualified to do business in the State of Florida, or cause any successor corporation to be and remain so qualified or to file with the Trustee a consent to service of process in the State of Florida acceptable to the Trustee. Subject to the provisions of the Loan Agreement, so long as the Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor any demand for funds under the Credit Facility, with the prior written consent of the Credit Facility Provider, the Company may consolidate with or merge into NHC or permit NHC to consolidate with or merge into it or may sell substantially all of its assets to NHC, provided that the resulting corporation or other business entity shall be a solvent corporation or other business entity and shall assume in writing all of the obligations of the Company under the Loan Agreement, including all covenants therein contained. Except as provided in the immediately preceding paragraph of this Section, without the prior consent of NHC and the Trustee, the Company shall not dissolve or otherwise dispose of all or substantially all of its assets, consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it; provided, however, that, if no Event of Default then exists, the Company may without the prior consent of NHC consolidate with or merge into another corporation incorporated under the laws of the United States of America, one of the states thereof or the District of Columbia, or permit one or more of such corporations to consolidate with or merge into it, or sell or otherwise transfer to another such corporation all or substantially all of its assets and thereafter dissolve (i) if the Company is the surviving corporation or (ii) if the surviving, resulting or transferee corporation shall be a solvent corporation and shall assume in writing all of the obligations of the Company under the Loan Agreement, including all covenants therein contained. Payment of Certain Taxes, Assessments, Liens and Charges (Section 5.05) The Company shall (a) pay, or make provision for payment of, all lawful taxes and assessments, including income, profits, property or excise taxes, if any, or other municipal or governmental charges levied or assessed by the federal, state or any municipal government upon any payments pursuant to the Loan Agreement when the same shall become due and (b) pay or cause to be discharged or make adequate provision to satisfy and discharge, within 60 days after the same shall accrue, any lien or charge upon any payments under the Loan Agreement. -42- 40 Events of Default (Section 6.01) Events of Default under the Loan Agreement include, among others, the following events: the Company shall fail to pay when due the principal, Redemption Price or purchase price of or interest on any Bond; the Company shall fail to pay when due any other payment required to be paid under the Loan Agreement which failure shall continue for a period of 30 days after written notice; subject to force majeure, the Company shall fail to perform, observe or comply with any other of the terms: covenants, conditions or provisions contained in the Loan Agreement, which failure shall continue for a period of 30 days after written notice; provided, however, that if the Company or NHC shall proceed to take any curative action that, if begun and prosecuted with duo diligence, cannot be completed within a period of 30 days, then such period shall be increased to such extent as shall be necessary to enable the Company or NHC to complete such curative action through the exercise of due diligence; certain events of insolvency of the Company shall occur; the Company shall default in the payment of the principal of and interest on any evidence of indebtedness of the Company for borrowed money, or any event shall occur under any indenture, agreement or other similar instrument under which any indebtedness of the Company for borrowed money may be issued, which default or event permits the acceleration of the maturity of such indebtedness of the Company outstanding thereunder. Notwithstanding the foregoing provisions, so long as the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, no Event of Default specified above shall be deemed to have occurred unless and until the Credit Facility Provider shall have given written notice to the Trustee of the occurrence of such Event of Default. Remedies (Section 6.02) Upon the occurrence of an Event of Default and upon written notice thereof to the Company and NHC, the Issuer or the Trustee, may (i) accelerate the payment of the amounts payable under the Loan Agreement and all amounts due under the Loan Agreement upon notice to the Company, whereupon the entire unpaid amount payable under the Loan Agreement immediately shall become due and payable without further demand upon the Company, and (ii) take any action at law or in equity to collect the payments due and thereafter to become due, or to enforce the performance and observance of any obligation, agreement or covenant of the Company under the Loan Agreement. Redemption of Bonds by voluntary Payment (Section 7.01) Upon written notice to the Registrar and Paying Agent by the Company and NHC, consented to in writing by the Credit Facility Provider if a Credit Facility is in effect and the Credit Facility Provider has not wrongfully failed to honor a demand for funds under the Credit Facility, which notice -43- F] shall set forth the aggregate principal amount of Bonds to be redeemed, the Registrar and Paying Agent shall give notice of the Issuer's election to redeem Bonds in the aggregate principal amount set forth in such notice in accordance with the Indenture. So long as the Credit Facility is in effect, at least 124 days before the redemption date of any Bonds during any Fixed Rate Period, the Company shall pay to the Trustee the amount of any premium that will be payable upon such redemption of Bonds. Mandatory Redemption Upon Determination of Taxability (Section 7.02) In the event the Company receives notice from the Trustee that a proceeding which could lead to a Determination of Taxability (as defined in the Bonds) has been instituted against a Bondholder, the Company shall promptly notify the Trustee whether or not it intends to contest such proceeding. In the event that the Company chooses to contest such proceeding, it will use its best effort to obtain a prompt final determination or decision in such proceeding or litigation and will keep the Trustee informed of the progress of any such proceeding or litigation. The Company shall be.obligated to prepay all amounts payable under the Loan Agreement upon the occurrence of a Determination of Taxability on a Business Day that is not more than 60 days after receipt by the Company of written notice of the occurrence of such Determination of Taxability; provided, however, that if there shall be delivered to the Trustee an opinion of Bond Counsel to the effect that, if fewer than all of the Bonds are redeemed, the interest payable on the Bonds remaining outstanding will not be includable in the gross income of the holders thereof for federal income tax purposes (other than during any period in which any such holder is a "substantial user" of the Facilities or a "related person" within the meaning of Section 147(a) of the Code), the Company shall be obligated to prepay the amounts payable under the Loan Agreement in part in an amount equal to the aggregate principal amount of the Bonds required to be redeemed. Issuer's Liability Limited (Section 8.04) Neither the execution and delivery of the Loan Agreement nor the carrying out of the Project shall impose any personal liability on the members, officers, employees or agents of the Issuer. No recourse shall be had by any person for any claims based on the Indenture, the Loan Agreement or the Mortgage against any member, officer, employee or other agent of the Issuer in his individual capacity, all such liability, if any, being expressly waived by the Company by the acceptance of the Loan Agreement. In the exercise of the rights, remedies, powers and privileges of the Issuer under the Indenture or the Loan Agreement, the Issuer shall not be accountable to the Company for any action taken or omitted by it or its members, officers, employees and agents in good faith and reasonably believed by it or them to be authorized or within the discretion or rights, remedies, powers and privileges conferred. The Issuer and its members, officers, -44- employees and agents shall be protected in its or their action upon any paper or document reasonably believed by it or them to be genuine, and it or they may conclusively rely upon the advice or counsel as to matter of law and may (but need not) require further evidence of any fact or matter before taking any action. UNDERWRITING The Bonds of each Issue are being purchased by Alex. Brown S Sons Incorporated (the "Underwriter"). The Underwriter has agreed to purchase the Bonds of each Issue pursuant to separate purchase contracts. Each purchase contract provides that the Underwriter will receive a fee in connection with the purchase of the Bonds of each Issue of 1.25% of the initial aggregate principal amount of the Bonds of such Issue. The purchase contract applicable to each Issue provides that the Underwriter will purchase all the Bonds of such Issue if any are purchased, but the purchase of the Bonds'of any one Issue is not contingent upon and does not require the purchase of the Bonds of any other Issue. The Company and NHC have agreed to indemnify the Underwriter against certain losses, claims, damages and liabilities arising out of any incorrect statements or information, contained in this Official Statement. The Underwriter may offer to sell the Bonds to certain dealers (including the Underwriter and other dealers depositing such Bonds into investment trusts, certain of which may be sponsored or managed by the Underwriter) and others at prices lower than the public offering price stated on the cover page hereof. The public offering price of the Bonds of any Issue may be changed from time to time by the Underwriter. RATINGS Moody's Investors Service ("Moody's") has assigned ratings to the Bonds of each Issue which may be obtained from the Underwriter or Moody's. Any explanation of the significance of these ratings may be obtained only from Moody's. The Company furnished to Moody's certain material and information respecting the Bonds and the Bank furnished to Moody's certain material and information about the Bank. Generally, Moody's bases its ratings on such materials and information, and on investigations, studies and assumptions by Moody's. There is no assurance that such ratings will be maintained for any given period of time or that they will not be lowered or withdrawn entirely by Moody's if, in its judgment, circumstances so warrant. A downward change in or withdrawal of the ratings, or either of them, with respect to any Issue may have an adverse effect on the market price of the Bonds of such Issue. TAX EXEMPTIONS Piper b Marbury, Baltimore, Maryland, and Shutts & Bowen, Miami, Florida, Co -Bond Counsel, are of the opinion that, assuming compliance with -45- E71 certain covenants described herein, interest on the Bonds of each Issue is excludable from gross income for purposes of federal income taxation under existing statutes, regulations and decisions, except with respect to any Bond of an Issue, during the period such Bond is held by a "substantial user" of the Project refinanced by such Issue or a "related person" (as such terms are used in Section 147(a) of the Code or any applicable predecessor provisions) and that by the terms of the Act, the Bonds of each Issue, their transfer and the income therefrom, including any profit made on the sale thereof, shall at all times be free from taxation of every kind by the State of Florida or any local unit, political subdivision or other instrumentality of the State of Florida, except taxes imposed by Chapter 220, Florida Statutes on interest income or profits on debt obligations owned by corporations; no opinion is expressed as to estate or inheritance taxes, taxes on financial institutions measured by income, any alternative minimum tax imposed on corporations or any other taxes not levied or assessed directly on the Bonds, their transfer or the income therefrom. In rendering its opinions, Co -Bond Counsel have relied upon certain Tax Certificate and Agreements made on behalf of the Company by its President with respect to certain material facts within the knowledge of the Company and upon the assumption that all information contained' therein is complete and accurate. The Code provides that the interest on the Bonds of an Issue will become includable in the gross income of the holders thereof for purposes of federal income taxation, in certain cases effective from the date of issuance of such Bonds, (a) if certain capital expenditures are paid or incurred in excess of those permitted by the Code or (b) the outstanding face amount of tax exempt bonds allocable to any "test -period beneficiary" (as defined in the Code) exceeds the amount permitted by the Code. There are certain other restrictions that must be met subsequent to the delivery of any Bonds in order for interest on such Bonds to remain excludable from gross income for federal income tax purposes, including a requirement that certain earnings received from the investment of the proceeds of such Bonds be rebated to the United States of America and other requirements applicable to the investment of the proceeds of such Bonds. The Company has covenanted in the Loan Agreement to take all action necessary to comply with the foregoing requirements and restrictions. Interest on the Bonds of the Issues indicated on the cover page o this Official Statement with an asterisk, if any, will be treated as specific preference item subject to both the individual and the corporate alternative minimum tax. Co -Bond Counsel are of the opinion that interest on the Bonds of the other Issues will not be treated as a specific preference item or other specific adjustment for purposes of either the individual or corporate alternative minimwn tax. However, for purposes of calculating the corporate alternative minimum tax for taxable years beginning in 1987, 1988 and 1989, a corporation will be required to increase its alternative minimum tax taxable income by one-half of the amount by which its "adjusted net book income" exceeds its alternative minimum tax taxable income (computed without regard to this book income adjustment) and for taxable years beginning after 1989, a corporation will be required to increase its alternative minimum tax taxable income by 75% of the amount by which its "adjusted current earnings" exceeds its alternative minimum tax taxable income (computed without regard to -46- • XEROX TELECOPIER 496 , 1 212 286 1786+ :• 4 this current earnings, adjustment).* For such purposes, "adjusted net book income" and "adjusted current earnings" would include, among other items, interest incor" from the Boru:a of such other Isiuss. In addition, interest income on the. Bonds of each Issue will be subject to the environmental tax imposed on cdrporations •wider the Code, for taxable years beginning after December 31, ;986, an4 before January 1, 1992, and to the branch profits tax imposed on foreign eorporAlons engaged in a trade or business in the United States for taxable years beoinning after December 31, 1986. Thendentures provide that prior to the conversion of the interest rate for Bons of an Issue from the Variable Rate to a Fixed Rata by the establishment:of one Or more Fixed Rate Periods, there must be delivered to the Trustee an opinion of'Bond Counsel to the effect that such conversion will not have an adverse iffect on the excludability from gross income of interest paid.on such Bondi for federal income tax purposes• Accordingly, no opinion is expressed by Co -Bond Counsel as to federal income taxation of the interest on any Bond 'after any such conversion of the interest rate on such Bonds by establishment,of +or more Fixed Rate Periods for such Bonds. See Appendix C•for�the proposed forms of opinions of Co -Bond Counsel. LEGAL MATTERS Legal matters incident to the authorization and issuance of the Bonds of each Issue will be passed upon by Piper & Marbury, Baltimore, Maryland, and Shutt$ & Bowan, Miami, Florida, Cc -Bond Counsel. The approving opinion of Piper & Marbury with respect to each Issue, the proposed forms of which appear in Appendix C hereto, will be printed on the Bonds of such Issue. Certain legal matters will be passed upon for the Company by John F. Robenalt, Esquire, Lima, Ohio, for NHC by Richard F. LaRoche, Jr., General Counsel to MC, for the Underwriter by Piper & Marbury, Baltimore, Maryland, and for the Hank, by Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia, Mayer, Brown.& Platt, Chicago, Illinois, and McCarthy & McCarthy, Toronto, Canada. ti *On October 14, 1987, the House Ways and Means Committee adopted a proposal that, if en}cteI into law, would require a corporation to increase its alternative minimum tax taxable income by 100% of the amount by which its (a) "adjusted book income" for taxable years beginning in 1988 and 1999 and (b) "adjusted current earningsO for taxable years beginning after 1989 exceeds its alternative minimum tax taxable income. -47- C1 MISCELLANEOUS This Official Statement includes descriptions of the common terms of the Bonds, the Indentures, the Loan Agreements, the Letters of Credit, the Reimbursement Agreement and certain other agreements. Such descriptions do not purport to be complete and all such descriptions and references thereto are qualified in their entirely by references to each such document, copies of which may be obtained from the Trustee. Any statements made in this Official Statement involving matters Of opinion or estimates, whether or not expressly so stated, are set forth as such and not as representations of fact, and no representation is made that any of such estimates will be realized. The attached Appendices A through E are integral parts of this Official Statement and should be read in their entirety together with the foregoing information. The Company, represented by certain of its officers, administrative staff and counsel, has reviewed the information contained herein and the Board of Directors of the Company has approved this Official Statement. The execution and delivery of this Official Statement by the Issuers of each issue of Bonds has been duly authorized by such Issuers. ISSUER ISSUER By: APPROVED: Florida Convalescent Centers, Inc. By: By: -48- • APPENDIX A The infcrMation contained in this Appendix A to the Official Statement has been obtained frim The Tbrcnto-Daninion Bank. All aRounts in this Appendix A to the Official Statement are expressed in Canadian dollars (CNS) or in U.S. dollars (T5$). Unless otherwise stated, translations of Canadian dollar amounts into U.S. dollar arounts in this dollar, Appendix have been made at the rate of 71.90 U.S. cents per Canadian the Bank of Canada closing rate for U.S. dollars on October 31, 1986, the date of the Bank's most recent audited financial statements. Ch October 14, 1987 such closing rate was 75.76 U.S. cants per Canadian dollay. The collar amounts in the tables on pages A-10 through A-22 are stated in Canadian dollars. THE BA14K General The Toranto-Daninicn Bank (the "Bank") , a chartered bank subject to the provisions of the Bank Act of Canada (the "Bank Act"), was formed through the amalgamation on February 1, 1955 of The Bank of Toronto (established 1855 ) and The Dominion Bank (established 1869) . The Bank offers a wide range of financial services to individuals, camrercial enterprises, financial institutions and governnennts throughout Canada. internationally, the Bank offers a broad range of credit and nn -credit services to multinational corporations, foreign governments and their agencies, eorrespordent banks and large foreign corporations. Geographic decentralization enables the Bank to provide its services sand to respond tmarkets, new opportunities reeds of these constantly changing market as they arise. Overall policy is directed from the Bank's Head Office in Toronto. At October 31, 1986, 85.98 of the Bank's major assets were obligations of residents of Canada or the United States of America. As of October 31, 1986, the Bank had total assets of CN;51.4 billion (US%37.0 billion), total loans of CN$38.1 billion (US$27.4 billion), shareholders equity and appropriations for contingencies of CNS3.3 billion (US32.4 billion) and total capital funds (including shareholders equity, approp;-iations or contingencies and debentures which are subordinated to claims of depositors and other creditors) of CN $3.6 billion (US$2.6 billion). On the basis of total assets as of Oetcber 31, 1986, the Bank was the fifth largest bank in Canada and the 16th largest bails in North America. As of October 31, 1986, the Bank had a total of 954 branches in Canada and 334 foreign brach, agency, representative and other banking companny staff of the Bank and its subsidiaries consisted of 20,211 employees as of October 31, 19 86 . The Bank's principal executive offices are located in the 'Toronto Dominion Bank Tower, Tbronto-Dominion Centre, King and Bay Streets, Toronto, Ontario, and its telephone number is (416) 982-8222. A-1 w Chicago Brant: The Branch of the Bank was licensed by the commissioner of Banks and Trust Ca*a►ies of Illinois an November 1, 1982 to conduct a eoamercial banking business. As of October 31, 1986, the Branch had total assets of QN$773.9 million. The Branch is an unincorporated branch of the Bails and is rot a separate subsidiary. Available Information copies of the Bank's 1986 Annual Deport and the third quarter report to shareholders for the nine months ended July 31, 1987 are available, without charge upon request by telephone or mail from The Toronto -D minion Bank, U.S.A. Division, Paris Avenue Plaza, 55 fast 52nd Street, New York, New York 10055, Attention: Canptroller, Telephone (212) 407-0600. FiE1GULATICN The Bards Act The Bank Act is the charter of the Bank and the operations of the Bank are governed by it. Under the Bank Act, the Bank may engage in and carry on such business generally as appertains to the business of banking. The Act contains specific examples of authority including the power to control leasing, factoring, mortgage, loan arra venture capital corporations in Canada. Tine Bank carries on leasing operations through Toronto Dominion Leasing Ltd., mortgage lending through M Mortgage Corporation and venture capital operations through the Bails directly and through TD Capital Grote Limited. The investment powers of the Bank are restricted by the Bank Act. Subject to specific exemptions, the Bads Act limits the Banc to ownership of 10% of the voting shares of Canadian corporations and permits ownership of shares in any foreign corporation provided such foreign corporation does not control more than 108 of the voting sharps of any Canadian corporation. Inspection Under recent legislation a new office of the Superintendent of Financial Institutions (the "Superintendent") has been established to exercise supervision over both banks and federally regulated non-bank financial institutions. It combines the former office of the Inspector General of Barks and that of other federally regulated authorities. The Bank Act provides that the Superintendent is responsible for examination and inquiry into the affairs and business of each chartered bank for the purpose of satisfying himself that the provisions of the Bank Act, paying particular regard to the safety of the depositors, creditors and shareholders of the Bank, are being duly observed and that the bank is in sound financial condition. In order to fulfill this responsibility the Superintendent or a person acting under his direction is empowered by the Bank Act with the right of access to all assets and records pertaining to the business of a bank and is ent it led to require the directors, officers and auditors of the bank to furnish such information and explanations as may be required in the circumstances. Using such powers, the Superintendent will, from time to time but not less than once a year, examine the affairs of each chartered bails after which a report is presented to the Minister of Finance. in addition, the Superintendent is now A-2 40 vested with certain restricted powers to take control of the assets of a bank or direct a bank to take or refrain flan taking a course of action for the protections of its depositors and creditors. Primary and Secondary Reserve Requirements The Bank Act requires that a bank maintain a prinary reserve in the form of specified coinage and rotes of, and deposits in Canadian currency with, the Bank of Canada. This reserve shall not be less on the average during any nmth than an amount equal to specified percentages of certain deposit liabilities. The assets comprising the primary reserve ase non -insane producing. Under recent policy proposals, non-interest beating reserves will be phased art beginning in 1990. The Sink Act also acpowers the Bank of Canada to require a bank to maintain, in addition to the primary reserve, a secondary reserve in the foam of treasury bills arra day Loans to investment dealers at such percentage of its deposit liabilities subject to primary reserve requirements as may be fixed by the Bank of Canada pursuant to the Bank of Canada Act. The Bank continues to be in carpl.iance with its primarl and secordary reserve requirements. Recent legislation The Government of Canada made policy proposals in December, 1986 concerning revised powers of Canadian financial institutions. While separation of institutions would be retained for supervisory purposes, the policy would permit comron ownership of banks, trust and loan ccapanies, insurance canpanies and investment dealers. Trust, loan and insurance canpanies would have full powers to undertake oonsumer and oomriercial lending. All federally regulated financial institutions would be permitted to offer investment advice, portfolio management services and to engage in corporate urderwriting. Barks and insurance canpanies would be given fiduciary powers. Under recent legislation, sore of these new policies have been phased in comrencing July 1, 1987. In June, 1987, the Goverrment of Ontario enacted detailed anendments to securities legislation with respect to the role of banks in Ontario in the securities industrv, which is provincially regulated. 'The am=endments permit chartered banks to own up to 100 per cant of a Canadian securities dealer effective July 1, 1987. Securities -related activities of a bank, other than those permitted to be carried on through a subsidiary or an affiliate, wi11 remain under federal regulation. The overall result of these changes will be an increase in carpetition ancg finarcial institutions, while at the sane time providing new opportunities for banks such as the Toronto -Dominion Bank. FINADC 1AL REPORTING The Bank Act and related instructions prescribed by the Minister of Finance stipulate the format of the finarrial statements and the significant accounting policies to be used in Canadian bank financial statements. Generally Accepted Accounting Prirciples for banks in the United States are determired by various accounting policy boards and cenmittees, the Securities arra Exchange Commission and banking regulatory agencies. The following describes the major differences between accounting principles applicable to the Bank and generally accepted accounting principles applicable to U.S. banks. A-3 40 provision for Loan Tosses Loans are stated net of unearned incW8 and any provisions for anticipated Losses. The provision f= loan losses included in the Consolidated statement of income is detenained by a;pLying to the outstandrng eligible loans at the year end, the weighted average ratio of actual loan loss e.%q>erience to eligible leans outstanding for the past ave fiscal years. The actual loan loss experience for the year consists of the net change to provisions established to recognize anticipated losses, and writs -offs less recoveries on loans previously written off. The difference between actual loan leas w4mienee for the year and the provision for loan lasses included in the Consolidated statement of income is reflected in the Consolidated statement of appropriations for contingencies. Under U.S. bank accounting principles the the income statement represents adiitiams possible losses. Actual loan losses are subsequent recoveries are added. 8Mropriations for Cantingencies provision for loan losses included in for the year to the allowance for deducted from the allowance and This is a reserve created through transfers from retained earnings to provide for unforeseen future losses. This reserve is in addition to the provisions that have already been deducted from the value of loads reflected in the Consolidated statement of assets and liabilities and takes into account the difference between actual loan loss experience and the provision for loan losses reflected in the Consolidated statement of income. The reserve consists of two elements: tax allowable and tax -paid. The tax -allowable portion consists of transactions, including transfers from retained earnings, which are not subject to tax until their cuv lative amount exceeds a limit prescribed by regulation of the Minister of Finance. 'This limit, known as Prescribed Aggregate Reserve, is an amount calculated as the sum of 1.58 of the first CN$2.0 billion (US;1.4 billion) of eligible assets and 1% of the remaining eligible assets. The tax -paid portion of appropriations for contingencies reflects the net of actual loan lass experience and provision for loan losses as they related to subsidiaries, and discretionary transfers to or from retained earnings on oihich full taxes have been provided. Under U.S. bank accounting principles there is no comparable appropriations account. The allowance for possible loan losses, established by charges to income, is deducted from the face amount of the loans on the Balance Sheet. Securities Investment securities other than those that qualify as loan substitutes are carried at cost or amortized cost. Realized gains and losses on disposal of debt securities in the Investment account other than treasury bills are amortized to inane over five years. Cerins and losses realized on disposal of treasury bills and other investment securities and writedowns to reflect permanent impairment in value of investment securities other than loan substitutes are included in income in the year in which they occur. Trading account securities are carried at market values. Cerins and losses cn disposal and adjustments to market are included in i.rcamre in the year in which they occur. A-4 • Separate disclosure of investment securities and trading account securities is not required in Canada as it is in the United States. Under U.S. bank accounting principles, there is no deferral of gains and losses on disposal of fixed maturity debt securities. Profits and losses on the disposition of all securities are reflected in the incase statement. U.S. banks are required to value investment securities at amortized cost and disclose the market value. The other prirciples mentioned above are consistent with U.S. principles in all material respects. Pension Costs The basic approach to aomconnting for pension costs under the accounting prirciples in effect at the Bank's last fiscal year and was similar in the United Stages and Canada. However, pension fund actuarial gains and losses under United Statues generally accepted accounting principles were amortized over a period that reflected the long-term nature of a pension fund (usually minimum of ten years); in Canada the rmxinum period was three years. the required disclosure of pension information is more extensive in the United States where financial statements must include details on the actuarial present value of vested and nan-vested accunulated plan benefits, the plans' net assets available for benefits, assumed rages of return used in determining actuarial present values and the date as of ohich the benefit information was determined. Bogs Canada and the United States have introduced, under similar timetables, new standards of accounting for pension costs. Sane United States banks have already implemented the new United States standards; the Bank must implement the Canadian standards no later than November 1, 1987. Other All other accounting principles used in the preparation of the financial statements of the Bank are consistent with Generally Accepted Aeccuntimq Principles applicable to U.S. banks in all material respects. For a more ccmplete surnary of significant accounting policies of the Bank, see "Summary of Significant Account lbhcies" curler "Notes to Financial Stateren.ts" on page A-15. A-5 • CAPIDwIz;CXN (1) The following table sets forth the consolidated capitalization of the Bank as at July 31, 1987: Originally Issued Outstanding (000's) (0001s) Bank Debentures: 78 Sinking Rand Debentures due Nov. 2, 1987 CNS 12,500 CNS 5,000 10.459 Debentures due March 15, 1989 75,000 75,000 89 Sinking Fund Debentures due July 1, 1991 30,000 2,558 462 7-1/29 Sinking Eland Debentures due March 1, 1993 30,000 169 Sinking fund Debentures dine July 15, 19% 57,000 51,300 7-3/49 Sinking Fund Debentures due Feb. 1, 1997 25,000 19,500 CN;153,820 Total ........................... Appropriations for Contingencies ............... 809,819 293,576 Shareholders' Equity: Class A First Preferred :snares, CN$25 par value, 25,000,000 shares authorized. 1,965,250 C101.835 Cum. Redeemable shares o/s 49,131 2,878,100 CN$2.375 Cum. Redeemable shares o/s 71,952 6,000,000 Vhriable Rate Cum. Redeemable 150,000 Series D shares o/s (2) Class B First Preferred Snares, no par value, 25,000,000 shares authna:ized 1,500 Price Adjusted Floating Rate 150,000 . deenable Series I shares o/s (3) GamFFe Camsm Shares, no par value, 300,000,000 shares authorized, 148,209,020 shares issued and 809,819 outstanding 1,791,316 Retained Earnings Total Capital Funds .............. IN;3,469,614 (1) For details on capitalization see "Basis of Consolidation" under "Sunnary of Significant Accounting policies" on page A-15. See "FinarCial Reporting" herein. (2) Dividends are determined quarterly by applying to IN;25 a rate equal to 71 per cent of the Bank's average prime lending rate for stated periods. (3) Stated value is CN;100 per share. Dividends are paid nmthly and are deterrdned by applying to IN$100 a rate equal to 70 per cant of the Bank's average prime landing rate for stated periods plus an adjustment rate, subject to a minimum of 65 per cent and a maximm of 71 per cent of the Bank's prise lending rate. A-6 40 SUbj4A t OF INTERIM RESULTS The following is a summary of the consolidated income and expenses of the Bank for the nine months ended July 31, 1986 and 1987. This sum►ary information has not been examined by independent pnhlic accountants but reflects, in the opinion of the management of the Bank, all adjustments necessary for a fair presentation of the results of operations for such periods. The results of operations for the nine months ended July 31, 1987 are not necessarily indicative of the results which may be expected for the full 1987 fiscal year or any other interim period. All dollar amounts in the following table and crnumntary and under "Recent Develqwmts" are in Canadian dollars: Net Income (Loss) Applicable to cc== Shares Nine Months ended $ 283,723 July 31 (1) 283,773 — 1997 1986 ($ in thousands except $ 2.44 per share amounts) Before Special Provision .................. $3,336,997 $3,692,845 Interest Income ................................. 2 099 151 2,589,836 Interest bcpense................................ $ 0.63 1,103,009 Net Interest Income ................... .••••••• ,237,846 2161936 263,474 Provision for Loin Losses .................. Inane after Loan Loss Provision ••• 1,020,910 839,535 Net Interest 430 863 327,603 Other Inane.• ......•..•..•••••• """""' 1,45 1167 138 , Net Interest and Otho: Income ................... ,713 820,474 733,642 Non -Interest pcpenses........................... 433,496 Net Incare Before Income Taxes..................63 ,299 249,500 135,000 Provision for Inane Taxes ................. Net Incare Before Special Provision (2) ......... 381,799 298,496 Special Provision (net of inane 475,000 - taxes of $415,000) ......................... $ (93,201) $ 298,496 Net Income UDss) ............................... Net Income (Loss) Applicable to cc== Shares $ 359,494 $ 283,723 Before Special Provision ................ ( 115,506) 283,773 After Special Provision ................... Net Inane per Common Share $ 2.44 $ 2.05 Before Special Provision .................. ( 0.78) 2.05 After Special Provision ................... Dividends per Carron Share ..................... $ 0.63 $ 0.63 (1) See "Basis of Consolidation" under ,SWTnary of Significant Accounting Policies" on page A-15. (2) Special provision on trans -border claims on 34 countries designated by the Superintendent of Financial Institutions. A-7 El operating perfounance for the nine months ended July 31, 1987 reflects the Bank's decision to increase its prudential reserves against loans to borrowers in 34 countries designated by the SUPerintendent of Financial Institutions (the "Superintendent"). Mis decision followed an extensive analysis of the Bank's portfolio arcs discussions with the superintendent. The Superintendent's issued guidelines permit banks to better reflect the lower econw= value of loans to the 34 countries. The Bails established a special provision for losses on trans -border claims (Special provision) of $475 million. This raises the prudential reserves against lows to these countries to $1.04 billion or 40 per cent. Further, the Bank has significantly reduced its overall exposure to developing countries through the disposition of #411 million of lcaas in the first nine months of the fiscal year. The Special provision represents a charge against earnings and resulted in a loss of $325 million for the third quarter and $93 million for the year to date. However, underlying earnings applicable to�camwn shares fore the a 1 for the provysarner and the year to date were exceptionally strong. third quarter restated net income grew to $124 million frau $96 million a year ago. For the nine month period, earnings were $359 million, compared to $284 million for the same period a year ago. The strong underlying earnings were a major consideration in the recent increase in the quarterly common share dividend from 21 to 23 cents. As a result of the strong underlying earnings and $100 million carman share issue early in the fiscal year, shareholders equity and appropriations for contingencies increased $21 million to reach $3,316 million during the nine months ended July 31, 1987. At July 31, owcon shareholders' equity and appropriations for contingencies equalled 5.40 per cent of total assets, near the level of 5.58 per cent at October 31, 1986. The Bank continues to have one of the highest c moron equity to total assets ratios of the major North American banks. At July 31, 1987 total assets were $53.6 billion canpared to $51.4 trillion at October 31, 1986. Strang growth in mortgages and lows to individuals was partially offset by a decline in offshore loans. Return on assets, before the cocouparredial pto 00.76 peracent95 per cent for the firstthe nine ninemonths omonths fisccaldJuly 1986. 31, 1987, Net non -accrual loans at July 31 were $928 million, down $324 million since October 31, 1986. A decline in nal -accrual loans to North American borrowers and the Special provision, which had the effect of reducing non -accrual loans, were partially offset by the classification of Brazil as non -accrual in the second quarter. More than one half of the remaining non -accrual loans are in the energy sector. Excluding the Special provision, the Bank est-imates its Loan loss experience for 1987 at $100 million, compared to $448 million in 1986, which included $59 million relating to sovereign risk loans. The ens lri current rentWeste171 Canada. tes reflects continued i.rprovement in the quality of NLv federal and provincial regulations allow Canadian banks entry into new areas of investment and securities activity. In response to these changes, two Barlk subsidiaries have been formed. Since July 30, Toronto Dominion Securities Inc. has participated in several underwritings. careen Line Investor Services Inc. has purchased seats on the Toronto, Montreal, Alberta and Vancouver swcx exchanges and is the largest discount broker in Canada. A-8 40 Litigation The Bank and 22 other banks were named as defendants in two lawsuits eawrenced in the United States District Court in Dallas, Texas by Placid oil Carpany ("Placidse third Drilrges of the debtsCCMpdny Placid and Penrod rod7), and the to the defendants and clat brothers. The actim d sage , including U.S. $13.8 billion. The claim damages, inclu�9 treble damages, aggregating Bank's 3.56 per cent participation in the syndicated hire -year tern loan to Placid tas made in 1983 and has been reduced from U.S. $44,463,510 to a present balance of U.S. $25,424,911. The Bank is defending these claims, denying liability. It is the opinion of the Bank that the ultinmte disposition of these actions will not have a material adverse effect on the financial condition of the Bank. Recent DeveloAtent Dare Petrolaun In April 1986, Dane Petroleum Limited ("Dune Petroleum") signed an interim agreement with lenders whereby it would defer interest and principal payments to most of its unsecured lenders until October 29, 1986. This agreement was subsequently extended to June 30, 1987 with no payments to unsecured lenders except in certain events related to increased oil and aprices. Under crash flew the extended agreement, secured lenders will receive payms a Y frau the respective assets securing their loans. Although the extended agreement has expired, Date Petrolaan continues to meet the provisions of that agreement. Since May 1, 1986, Dcme Petroleum has been unable to meet in full itstereesst me paynts and principal repayments to lenders because of the collapse in energY prices. The Bank has CN$588 million of secured loans and CN$1O7 million of unsecured loans which are affected by the agreement. Tnese loans were placed in ren -accrual status at April 30, 1986 in the rec=ognition that at prevailing oil and gas price levels, the catpany will have insufficient cash flow to fully service these loans. Dome Petroleum has made certain proposals regarding principal refinar>ring and repayment deferral which are being studied by its lenders. Amoco Cannata Petroleum ampany Ltd. has presented a proposal to purchase Dare Petroleum, but to date the proposal has not been well received by the Bank and most other major lenders. The Dane Petroleum situation is not expected to be resolved during the current calendar year. Due to the continued unpredictability of energy prices, in fiscal 1986 the Bank allocated CN$278 million against its total exposure of approximately ai$1.9 billion in energy related loans Where the ability to service the debt is directly related to changes in oil and gas prices. Brazil In February, 1987, the Goverment of Brazil announced it weuld suspend interest payments on the country's medium and long term foreign currency debt pending the outcome of negotiations with foreign banks regarding the further restructuring of the debt. During the second quarter, all of the Bank's medium and long term outstanding loans to Brazil, amounting to 0:1$836 million, were classified as non accrual. Negotiations with creditors have been scheduled and the Bank is hopeful that overdue interest on its Brazilian loans will be paid arra the loans returned to accrual sTatirs in fiscal 1988. A-9 40 dollar amounts in the tables on pages A. 10 through A-22 are stated in Canadian dollars. The Customers' lability under 3.990,345 2.708.306 2.389.534 47 1 acceptances Land. buildings and equipment c,orisotidatedsnrament 263.746 241.451 11 a Other assets !Nate Gl 1,026,589 734,635 of assets and liabilities 5 ,309,806 3.706.887 3.360,740 a3 1. f51,447,088 1986 1985 1984 „ +" Assets Ubsrsoads of dr&rs) Crab resources Cash and deposits with S 544.332 f 450.943 f 487,392 21 '1 Hank of Canada Deposits with other banks +:ti'are it 2,230,437 3,447,814 3.688,534 1351 1 Cheques and other items — 542,633 174.781 11001 45 in transit. net 2.774.769 4.441.390 .4.550,707 1381 21 Securities (Nau.4)1.934,117 Issued or guaranteed by Canada 1,868,323 1.840,341 2 5 i Issued or guaranteed by provinces and municipal or 123,891 561.452 477,244 '(78) 18 school (of porattons 3,304,785 3.364.020 2.706.006 (2) 24 Other securities 5.296.999 5.765,814 5.117,367 l81 I t Loans (Nom 5) Day, call and short loans to investment dealers brokers, secured 487,687 224,232 349.153 117 16+ and Loans to banks 1,708,185 1.870,84. 1.935.553 (9) 26 i1' I l Mortgage loans 7,313,337 5.813.691 5.165.640 l Otherloans 28.556.305 28.395.440 26.117,656 38.065,514 36.304.203 33.568.002 5 y Other Customers' lability under 3.990,345 2.708.306 2.389.534 47 1 acceptances Land. buildings and equipment 292,872 263.746 241.451 11 a Other assets !Nate Gl 1,026,589 734,635 729,755 40 5 ,309,806 3.706.887 3.360,740 a3 1. f51,447,088 $50,218.294 M.N.s$46.596.816 ...m A-10 A -II Liabilities 1986 1985 1984 w „� Deposita (Nou 1) Payable on demand 3 3.219,353 3 3.514,005 f 2.750.331 Payable aFer notice 13,745,818 11.463.396 10.066.105 20 1. Payable on a fixed date 25,726,437 28.512.845 77,853.06' 101 - 42,691,608 43,490.246 40.669 601 2, - Other Cheques and other items in transit, net 93,178 — _ _ u Acceptances 3.990,345 2,708,506 2.389.534 47 1; Liabilities of subsidiaries. other than deposits (Nou 9) 54,865 63,051 19.334 ( l 1) 226 Other liab)bues (Nou 10) 11018,100 945.199 843,205 8 12 5,156,488 3,716.756 3,252.073 19 14 Subordinated debt Bank debentures (Noor 111 304,220 303,964 300,582 0 I Capital and reserves Appropriations for contingencies 205,959 199,382 152,558 3 11 Shareholder' equity Capital stock: Wort 11) preferred 421,706 193,369 195,397 118 common 674,631 529,581 491,789 2' K Retained earnings 1.992,476 1,784,996 1,534,814 12 3,294,772 2,707,328 2,374,558 22 14 851,447,088 $50,218.294 $46.596.816 A -II U Consolidated statement r- w w.,.Wa + n W 480,131 7 10 ofincome .,e..,r.•.,,.ur.n,. r.ra, .w„ t(horsond; of doNarrl 1986 1985 1984 Interest income Loans S 3,949,484 S 4.040.269 f 3.954,007 (2) 2 Leasefinauung 40,873 18.180 14.677 125 24 Securities 0N;d r 1 i) $65.549 506.471 465.751 12 9 Deposits with banks 226,309 376.410 407,487 (40) (8) 4,782,215 4.941.330 4.841322 (3) 1 Interest expense Deposits 3,258,660 3.533.977 3.584.546 (8) (I) Bank debentures 30,736 33.571 39,033 (8) (14) Liabilities other than deposits 7,700 6,280 1,298 23 384 3.297,096 1.573,828 3.624,877 (8) (L) Net interest income 1,485,119 1,367,502 1,217,045 9 12 Provision for loan losses 341,712 261,513 199.230 31 31 Net interest income after loan Average number of common 9 loss provision 1.143,347 1.105.989 1,017,815 3 Other income (Non, 14) 445,626 415.269 333,559 7 24 Net interest and other income 1,588,973 1,521,258 1,351,374 4 13 Non-interest expenses 563,600 527,020 480,131 7 10 Salaries Pension and other staff benefits 'Not 10), 1,796 28.8"9 12.532 (94) t I Premises and equipment. 196.092 171,193 154,459 IS II including depreciation Ocher 226,897 118.081 166.413 21 988,385 905.174 8;3.535 9 9 Net income before provision for 600.588 616.084 517.839 income taxes Provision for income taxes iNorr '( 198,000 200.500 162.000 Net income S 402.588 S 415.584 S 355.819 i Net income applicable to common sharesf.%on,15) S 381,801 S 398.626 S 338,661 X41 ly Average number of common shares outstanding 139,51'.090 115.4-6.835 128.510.664 v Net income per common share \ute 151 S 2.'4 S ' 94 S 2 64 ; Common share dividends Dederrd in the year S 11',049 S 107.015 S 99,516 9 4 Per share S 0.84 S 0-9 $ 0-6 6 4 A-12 • Consolidated statements of appropriations for contingencies and changes inshareholders* equity Appropriations for contingencies (thoataadf o%dollart) Balance at beginning of year (tax•allowablei Add: provision for loan losses included in the Consolidated statement of income Deduct: net loss experience on loans Transfer from retained earnings Balance at end of year (tax -allowable) Changes in shareholders' equity Oboauadt o%dollaru Capital stock(Note 12) Balance at beginning of year Add: increases during the year Deduct: redemptions during the year Ualance at end of year Retuned earnings Balance at beginning of year Share issue expenses. net of income taxes Net income for the year Dividends — preferred —common Gain on preferred shares purchased for cancellation Transfer to appropriations for contingencies Income taxes related to the above transfer Unrealized net foreign currency translation gains. net of income taxes Balance at end of year A-13 .,v.,y..,u,. tit.... �.. e.....,.. �� ...,. 1986 1985 1941 S 199.382 S 152.558 S 1444.2 341.772 261.51; 191).2:11 447.588 ;25.494 291'x-6 112.393 108.805 1111. ;"2 S 205.959 $ 199.382 S Is2_Ss4 S 722.950 S 687.186 Y 419.;-9 445.050 47.792 '-1.11)- 1,663 2.028 ni $1.096.337 S 722.950 S 6S- 146 31.784.996 $1.514.814 31.+12 ;si (4.376) 129) 2 402.588 415.584 (22.717) (16.958) I" (117.049) 1 U7,015) 99 55 225 + (112.393) (108.805) lo •'_ 57.575 5-4.159 3.797 14.021 $1.992.476 S I .'84.996 S1 S• 1 ! 40 Consolidated statement of f. 4,,,ad(kI.W 1! 19wi rug ny...nw� n,r r,.r .. w• changes in financial position 1966 1985 1984 (rbaell)t4 4404rs) _ Operating activities 3 402,588 3 415.584 f 355.839 Net income 341,772 261,513 199.230 provision for losses 47,175 43.179 37,682 Depreciation (5,837) (5.415) (4.902) Amortization of loan fees (1,070) 2.812 (26.905) Deferred income taxes Tax credit related to transfer to 57,575 54.159 49.774 appropriations (291,954) (4,880) (133.9821 Change in other assets 79.908 104,597 Change to other liabilities (76,193) (17,807) (29.463) Net gain on disposal of securities Unrealized net foreign currency 3,797 13.021 7.716 translation guns 557,661 866.763 529.724 Funds from operations (139.766) (123.973) (116.694) Dividends (798,638) 2.820.643 • 3.608.145 Change in deposits (380.743) 3.563.433 4,021.175 Financing activities 445,050 37,792 ,-1.197 Capital stock issues (8,186) 43,717 (2,188) Change to liabilities of subsidiaries (71,608) (1,803) (3.004( Redemption of preferred shares 256 3,382 168.'651 Change in debentures (4.3'6) (29) 12 9911 Share issue expenses 361.136 83.059 19;.649 Funds from financing activities Funds available for (provided by) S (19,607) $3.646.492 34�� investment activities Investment activities Change to earning assets $2,208.899 $3,059.695 3 3 04, SO i Loans, net (545,008) 630.640 5-' A60 Securities. net (1.217,377) (240.720) Deposits with other banks 446.514 3.449.615 4._956(; Change to non -earning assets 93.389 (36,449) ;6;,x85, Cash and deposits with Bank of Canada (635,811) 167,852 ='9 = 19 Cheques and other items in transit, net 76.301 65.474 5; y; - Land, buildings and equipment (466.121) 196.877 'xii 8u91 Funds used 1n tprovtded by) f (19,607) $3.646.492 investment activities .-v ® A-14 I Summary of significant accounting policies Bank Aa The Bank Au and related instructions pre• scribed by the Minister of Finance stipulate the format of the financial statements and the significant accounting policies. The accounting principles followed in determining net income conform with accounting principle generally accepted in Canada escape for: (i) the accounting for foreign currency Translation gams and losses (note 1(b)), no the defertal of guns and losses on the disposal of terrain debt securities (note 1(0). Ino the accounting for losses on loans mote 1(d)). The significant accounting policies and practices followed by the Bank are. (a) Basis of consolidation The financial statements include the assets and liabilities and results of operations of subsidiaries, namely corporations in which the Bank owns more than 50% of the voting shares. Corporations in which the Bank owns 2056 to 50% of the voting shares are reported in other securities in the Console dated statement of assets and liabilities and are accounted foe using the equsry method of accounting. The Bank's there of tunings of such corporations is reported in income from securities in the Consolidated state• ment of income. (b) Translation of foreign currencies Foreign currency assets and liabilities, other than investments in foreign currency secute ties and fixed assets which were purchased with Canadian dollars and which are ca tied at historical cost, are translated into Canadian dollars at prevailing year end rates. Foreign currency income and expenses are translated into Canadian dol• las at The average exchange rates prevailing throughout the year. Unrealised translation gains and losses related to the Bank s net investment pose tions in foreign operations, net of any offsetting gains or losses arising from eco• nomic hedges of these positions and appli• cable income taxes. are included in retained tunings. Unrealized and realized gains and losses on instruments designated as hedges are deferred and amortized over the remaining life of the hedged item All other unrealized translation gains and losses and all realized gains and losses are in.luded in other income in the Consolidated sratemenc of income. (c) Securities Investment securities, other than Those that qualify as loan substitutes according to The definition of the Minister of Finance, are carried at cost or amortized cost. Where applicable, such securities are adjusted to recognize permanent impairment in the underlying value. Loan subsciruces are car ried at cost less any provisions established to recognize anticipated credit losses. such losses are included in loan loss experience Realized gains and lostes on dnpi»al oil debt securities held in the Investment account, other than treasury hills, ,ire drier mined on the average cost method and deferred and amortized to income ever tits, yeah Gains and losses realized on daryis,d of treasury bills and other mvcstment kc renes which are determined on an ateuge Inst basis. and write-downs to reflect pct manent impairment in value .d mtestment securities other than loan substitutes. ars. included in income trom securities in the yese in which they o fur Trading account secunnrs are carried at market values Gains and losses on disposal and adjustments to market are rcpoticd in income from securities in the year in which they occur. (d) Loans Loans are stated net ufuneatned income and of any specstic or general provisions established to recognize anttupateJ losses The general provisions, which are pruden• (til in nature. ate in respect of dams on a number of countries which are expcuent• ing ditticulry servicing these claims. Guide• lines issued by the Inspector General of Banks require the Bank to carry pruvmuns At October 51. 1996 of at least MIT of else related claims on a prescribed group of s2 countries Interest income is recorded on the accrual bins until such time as the loan is classified as non accrual At that Time any uncollected interest is rc, crted and charged against current income Interest on nom accrual loans subwquenrtv received is recorded as interest muime only when man. agemenr has determined .hat the ultimate collectibilim of the loan is no longer in doubt, otherwise the amount is offset against the principal balance owing. A nomaccrual loan is any loan. where in management s opinion there is doubt as to the ultimate vollectibdiry, of some portion of the principal or interest In addition. any Icon. where mrereit is contractually past due 90 days is classified as numacsrud. other than a consumer insi—ent or VISA loan or a loan that is guaranteed by Canada. the provinces or an agency controlled by these governments, or is insured Consumer instalment loans are placed on a nun -accrual basis when a pavment is contractually past due 51 days VISA loans remain on an accrual basis until the point of write off or 100 per cent provision which occurs when payment is contractually pas, due 190 days Actual loan loss experience for the vest consists of direct write-offs and increased provisions established in recognize antics, pared losses. less reversals of previously established provisions no longer required and recoveries on loans previously written off. The provision for loan losses included in the Consolidated statement of income is determined by applying to the outstanding eligioie loans at the end of the year, the weighted average ratio of actual loan loss experience to eligible loans outstanding for A-15 n (he past rise f'iut Years The dooeren.e between the actual loan loss experience for the year and the provision for loan losses included in the Consolidated statement of income is reflected in the Consolidated start' ment of appropriations for contingencies. Loan fees are included in other income In the you in which they arise only when they rola, to expenses incurred or services pot• formed. Loan rescheduling fees and fees received in Item of interest are deferred and amortised to interest income over the term of the loan. (t) Direct financing [tun Leases are included in other loans in the Consolidated statement of ,sen and habdr ,its. Income. computed as the difference between total amounts receivable and the cost of the stated property, is deferred and reflected in income over the leant term to yield a constant rate of return On the investment in the lease (f) Acceptances The pocenual liability of the Bank under acceptances is feportedu a habihty in the Consolidated statement of assets and lubilr ties. The Bank I recourse against the cut• towner m the even of a call on my of three commitments a reported as an offseetmg asset of the same amount. (g) Land, buildings and equipment Land is reported at cost Buildings, equip- ment and leasehold improvement$ ere reported at coil Ins accumulated deprecu• tion or smortinuon Buildings and tqutpment act depreciated over their estimated useful lives using the reducing balance method and leasehold improvements Are amonised on the straight-line basis ihf Appropriations for contingencies Thee is a reserve created through transfers from retained earnings to provide for unforeseen future losses. This reserve ',in addition to the provisions that have already been deducted from the value of loans 2 Provision for income taxes rent,tto in the -11-c- , assets and liabilities, and includes the differ trice between actual ban lose experience and the provision for loan loun reflected in the Consolidated statement of tncome. The maumvm amount of the transfer (torn retained earnings which may be deductible for sex purposes is prescribed by regulations of the Minister of Finance. III Financial futures and fisturr fur agreements Financial futures and future rte, Were. men.. ace used to protect the Bank against the risk of adverse interest tart fluctuutons and may also be part of trading activities. The principal smounet ourstandmg under financial futures and future rase agreements represent future commitments and are not included in the Consolidated statement of users and babditin Gains and losses on any of these instruments which are destgnattd is hedges of user and liabilities Are deferred and recognised in income over the remaining lift of the hedged item. Where dhest instruments ate used in trading activities, any guns or losses are tecogniud in income as they accrue. (If Cron ciarrency and inseeeat tate swaps The Bank enters into rrou currency and interest rate swaps to either tun fee income u an intermediary befweencoun,tparges or to manage its own funding r"tremeno and foreign currency exposure. The fen for acting u an Intermediary act mcludtd in other income as earned: for norrin,rmedr airy swaps the usoctued income or expense is accrued o•er the life of the swap As an adjustment to interest income or expense As appropriate (k) Provision for income tarts The Bank follows she tax 00carton method of providing for income taxes. The cumuli live differences between cu calculated on such basis and tuts currently payable are essentially timing differences and result In deferred income uses Net income before provision lot income taxes Domestic International Total The provision for income taxes is included in the following financial statements. Consolidated statement of Income Domestic International Total Consolidated retained earnings Transfer to appropriations for contingencies Unrealized net foreign currency translation gains Share issue expenses Net provision for income taxes Current income taxes Deferred income taxes Capital cost allowance and depreciation Other A-16 1986 1985 1984 $376.259 1377.386 1321.248 222.329 238.698 196.591 1600.388 $616.084 $117.9W min� $ 96.500 $ 99.600 $ 80.000 101.500 100.900 82.000 198.000 200.500 162.000 (57.575) 154.159) (49."4) (182) ( 5.709) t 1.206) (4.554) (28) 42.873) g® $® 1l® $136.719 $137.792 $135.052 (),2531 (2.442) t16.553) 2.163 1.254 (10.352) 6li1,6"1® ®ate $® 40 The provision for income taxes shown In the Consolidated statement of income is less then that obtained by applying statutory tax rates Canadian statutory income tax late Decre see restslskig has Tu exempt dierieleoda hom tuable Canadian eorporaeiau Tax exempt interest on income debentures and small business development bonds Gains from sale of securities nor subject to full Canadian tax Income from foreign subsidiaries not subject to Canadian tax. net of non -Canadian taxes payable by foreign subsidiaries Other - net Effective income tax rate The recovery of income taxes shown to the retained earnings section of the Consolidated statement of changes in shareholders" equity includes an income tax reduction related to 3 Deposits with Other Banks Included in deposits with other banks are interest besting deposits of 12.029.482 (1985-S5.392.837. 1984 -1 i.5 36.2 30) to the net income before provision for income tarts for the following reasons: 1986 1965 1984 51.0% 49.7% 49.2% (12.3) (11.1) (11.8) 11.1) (1.5) (2.7) (2.1) (0.6) (0.4) 12.5) (2 6) (2.6) — 11.4) (0.4) 33"0% 32.5% 313% +ter rass�aso the transfer from retained earmny to the appropriations for contingencies for the year which. for income tax purposes. is deduct. ible to the current year or to future years. and federal funds told of Wil (1985- $55: 1984-$4.259). UI Securities maturity schedule at year end tier 1 Over 1 Over 5 • -- No Within 1. to rn 0ver10 speuhc 1986 04% ;984 wrl6e.r oaall.rm l year I rn 5 tis IOrn wean muunry TuW Tru U,ul Securities issued or guaranteed by. _ Canada 1 9107 1 911 1489 1 149 1 - 1 - $1.066.0 $1 t+l $1'159 Pr,.unces 09 2% 9 22 S 4 3 0 1 65 2 116.8 "' + sf's I Other debt securities Securities of Mum—pal Corpurumns 2 _' o6 0 8 i 1 - - 69 _ 9 2 In,ume debentures Flwtmg rue 08 5 4 - - - - 6 2 Fixed rate 15 1-1 - - - - 186 Small business development bands and small business bunds 82 6 11 5 1; 2 - - - 11 1 3 •• 2 t4 2 x11,of rather Can,Jun issuers i 4 _'0 2 __ 2 5 4 9; 1 - Srs urines ul ❑suers other than Canadian �esuntics of the L S Treasury and other C S gusernment agenues and corporations 1 4 2 + - - :8' - .: t` l •9 1 )ewnties of states of the U S and political subdivisions thereof - 0 4 0 4 0 1 - - Other 12; 6 142 0 't, t 118 5 2' 0 - 46' 4 --� - Equity securities Term preferred shares Floating rue Li" 8 408 9 64' 4 69 3 18 4 - 1.191 8 2 s s 6 FFxed rate 5 ' - 1 29 _' - _' 4 - 64 6 Taral fixed term securities 1.280 6 'S5 1 840 9 215 8 149 - 65 2 3.30' 3 9 Assocuarad corporations 0 8 1 5 1 5 2 4 - 11 ' 1' 9 : J 9 Preterred shares -other - - - - - 5 15 1 5151 0'', Common shares - - - - - 41' 2 41'.2 s Total investment securities 1.281 4 '56 6 442 4 218 2 149.' 1.009 2 4.2S' 5 Trading secunues 949 1 14 2 1 i 1 22 0 40.0 0 9 1.039 S 4.1 n Total securities $2.2;0 5 8"08 $855' easstr�� $240 2 �� $189 7 11.010 t rrraa— rat. 85.29'.0 11 '^' + � rrrrrra.r 3` 11' 4 Percentage sae 42 I visit® 14 StE 4 5"f t 61i W 1'i 100.09E ® sala�sss� ® es® ®tear �® taaasaaa® A•17 40 (b) Loan substmstd Loan substitutts are securities which have been structured as after-tax instruments rather than conventional loans to order to provide the Issuers with a borrowing race advantage. and are tdent,ul in risk Term preferred shares' Income debentures' Small busmen development bonds and small business bonds 'Drf tied .s 1— nrretred snares enu ("O''lun He, nN a IIJen Ni 4, 'N from the ewer "r'n'_ t3 and security to bank loans of comparable term. These securities less any provisions established to recognize anticipated credit losses. are tn,juded to the following care. ¢ones 1986 1985 1984 31.0'1.8'6 31.263.168 31.02x.856 24.743 44.'57 51.591 111.34' 188.772 244.126 31.2n7.966 11.496.69' 31.320.673 i�un ��1n t Cr�rlle Cntemt�. �• . �1N3 p.rrW ril` N, 19u�tsna •4•.r ine uses. A. to Estimated market value of securities at year end Securities issued or guaranteed by Canada. the provinces and Canadian municipalities Securities of l' 5 Tteasury and other U S. government agencies and corporations Securities of Sates of the L• 5 and pulit"I subdtvtswm thereof Other securities Total Total book value Where the market value of a security is not readily determinable. the book value has been used. Other stcuntia Include the book value of the Bank s interest in Toronto' Dominion Centre (50¢ ). Toronto Eaton Centre ;_5011 and PauGc Centre 135' -%I_ S Loans net of unearned income and provision for loan losses Domestic Personal Resident, at mortgages Service. tlnanual, retail and wholesale trade Manufacturing and industrial Cunstructiun and real estate All other loans International Deductpruvttion fur !oat, iwses Provision for loan losses Balance it beginning of vear Balance Irom uqusred subsldlary Write-offs agalost the pruvsvun Reversals of provisions no longer required New provolons Balance at end of vear 1986 1985 1984 SIASS.9S5 $1.981.399 $2.191.307 23.296 66.092 139.081 BSO 1.495 1.665 4.159.813 3.780.261 2.767.211 35.369.914 35.8 $5-0 35.296.999 $5ta�367 earalrara whete, to the view of mansgement, the ,urrent market v Ilue of the underlying assets represents . substantial multiple of the recorded bo- value of 39,6 million 11985-36 2 mtG1»n. 1984-15 million) 1986 1985 1984 3 4."9.505 3 4.402.598 3 3.7"4.056 066.821 5.5"9.285 4.949.368 5.214.150 4.210.638 4,139.96- 4.4 58.464 .139.96'4,458.464 4.558.305 4.511,040 1.959.841 1,830.301 1.56' 81' 2.699. 1 ' 1 3.806.905 2.665.841 26,151,9S2 23.38'.928 21,608.089 12.608.'89 l;.}95.12 12.33',408 58•166.'41 ;(,.'91.055 13,945.49' '01.22' 4'6.952 31" 495 538.065.514316® S;;,568.002 1986 1985 1984 5 4"6.852 $ t" 495 3 330-68- - 8,692 — 1 1.325) 187671) 1123.5;91 t 47.169) 146.'1,81 154.5851 342.869 '-25.074 224.9;0 3 01.22' 3® 3® spa+• A•18 C71 6 Other "am 1986 1983 1984 Accrued interest $ 460,268 8338,223 $377,244 Unainorttaed to see on disposal of debt securing$ 2,842 724 891 Netvalw of sweps contracts 337,132 22,029 18,343 Other laws" issduding prepaid expenses 206,327 133.639 133.073 oma $734.635i ss 7 Deposits 1986 1983 1964 Deposits by Canada 8 66,941 $ 323,827 1 238.167 Provinces 111,836 76.009 161,448 Banka 7,446,249 10,002,117 10, 371,483 Individuals 18,767,326 17,Mg.%1 13,602,272 Others 16,299,236 15,876.732 14,2%.233 142.691,608 843.490,246 $40,669.603 Interest truing deposits ei�rset aaa®sr Domestic 122,719.763 120.981,743 $20,040,078 International 17,635,346 20,488.467 18,681,982 40,375.311 41,470.210 38.722.060 Non•mierest bearing deposits Domestic 2,066,290 1,932,360 1,843,872 International 250,007 87,476 101.671 . 2.316,297 2,020.036 1.947,543 142,691,608 �� 143.490, 246 140.669,603 riaa� ea_aaar_ Short-term borrowings 1984-13.195.3G6) and commercial paper Included in deposits are federal funds put. of 1618.786 1198 5-1367,052; 1984– chamd of 1753.000 11985-8 3.811.'34: 136.3361. 8 Contingent liabilities and commitments The contingent liabilities of the Bank under not reported in the Consolidated statement guarantees and letters of credit and the of assets and liabilities and are as follows - Bank s recourse against the customer are 1986 1985 1984 Guarantees 12,231,379 $2,051.127 11.682.305 Letters of credir 2.321.910 1.138.928 1.322.594 Included in the above are guarantees and letters of credit issued by the Bank on behalf of corporations. of which the Bank owns more than IOq but not more than The Bank has obligations under longterm non cancellable leases for premises and equipment. The rental expense charged to earnings for the year ended October 31. 1986 war 1160,41611985-151.094, 1984-145.5151 1987 1988 1989 1990 1991 1992 and thereafter The Bank and its subsidiaries are involved in various legal actions. the outcome of which is indeterminable In managements $4,559.489 13.'90.055 $3,004.899 50% of the voting shares amounting to 1698.5 94 1198 5 –5701.527. 1984 – $717.6a51 Future minimum lease commitments for premises. and equipment where the annual rental is in excess of twenry-five thousand dollars are as follows 1 39.237 – — -- -- 37,'56 35,'03 34.372 28.835 183,382 _-1359.287 opinion. the ultimate disposition of these actions will not have a material adverse effect an the financial condition of the Bank. A-19 • 9 Liabilities of subsidiaries other then deposits 1966 1985 1984 ToronmDominion Realty Co. Limited 4.85% First mortgage Sinking Fund Bonds due 1990. Toronto Dominion Leasing Ltd. Demand note payable to Scotia• Toronto Dominion Leastng Ltd. Subordinated notes payable at various terms to maturity to 1994 and beating interest fares from 10.5 % to 14.25 % $11,196 $11.487 $11.501 6,469 6.833 7.x33 37,200 44,731 - 163.051 119.534 ® eaov® under the terms of the issue. ore The aggregate sinking fund requirements maturity follows: and mamrines of theliabilities listed above. as assuming the earliest possible dam of 1714.096 123,034 818.106 Within I year 5,487 From l to 2 yeah 12,037 From 2 rt. 3 yeah 14,235 From 3 to 5 years 5.000 From 5 to 10 year _ Over 10 years $54,865 10 Other liabilities Accrued interest Securities told under agreements to repurchase Defatted income taut (net) Defected pension plan credits Deferred fee revenue Unamortited gains on disposal of debt securities Accounts payable and other items 1966 198_ S 1984 8 649.619 8664.287 1714.096 123,034 51,821 - 9.978 11.049 8.236 31.677 25,943 19.205 34.953 20.107 22.662 20.350 7,098 3.087 141489 . 164.895 75.919 11.011.100 1�� 1-84�� 11 Bank debentures The debentures are direct unsecured obfigand certun other creditors sight of payment to the claims ofreditors of tM Bank. Bank.ron cions of the Bank and are subordinated in Outstanding October 31 The aggregate sinking fund requirements and maturities of the Bank's debentures. Within 1 year From 1 to 2 years From 2 to 3 years From 1 to 5 years From 5 to 10 years Over 10 years A-20 assuming the earliest possible dates of mammy under the terms of slueare as follow - 8 11,987 10.687 81.337 14.752 170.457 15.000 $304,22-- 0 --- asn»� Year of 1966 1985 1984 Rate maturity 8 1 5.650 1 6.300 6% 111 1987 5,000 5.650 6,300 7% 111 1987 75.000 75.000 75.000 1045% 1989 2.678 2.918 3.038 8% (1) 1991 139.010 136.750 131.440 Floating rare (2) 1992 462 496 504 71/r% (1) 1993 57,000 57000 57.000 16% (l) 1996 20.000 20.500 21.000 7Vt% 111 1997 6 220 $303.964 6300.582 siSvhleclwnnama fund ib Tiw lbruna nn dlbint-res IU S. 1100 u 1rutd Wa( prmixum -11-1 rill, moral 14 1bo•1 me Land-- 1-1110-1 Offered 6l,1(LIBOR) The aggregate sinking fund requirements and maturities of the Bank's debentures. Within 1 year From 1 to 2 years From 2 to 3 years From 1 to 5 years From 5 to 10 years Over 10 years A-20 assuming the earliest possible dates of mammy under the terms of slueare as follow - 8 11,987 10.687 81.337 14.752 170.457 15.000 $304,22-- 0 --- asn»� • 12 Gpitd stack This time capital of the Bank consists of. These shuts ate issuable in uric., and rank as a class equally in Al rtspects with Addictued the Clssa A First Preferred Shares. 25.000,000 Clara A First Preferred 100.000.000 waimun shuts, without Shane. pat value 821 each, suitable in psi value, provided that the aggregate wrws. consideration for which all tush •ommon 25.000,000 Class B First Preferred shares may be issued shall not euecd Shun, without par value, provided that 12 billion. dw aggregate consideration for which a0 such Clea B first Preferred Shoes may be issued shall be 1625 million Issued and fully paid as at October 31 1986 1985 1984 1,M.1 50 $1.955 Cumulanve Redeemable Class A First Preferred Shue%(1985- 2,063.650; 1984-2,144,950) 2,878,100 82.375 Cumulative Redeemable Class A Firm Preferred Shun (1985 and 1984-2,878.100) Nil Variable Rau Cumulative Redeemable Class A First Preferred Shares, Senn C (1985 and 1984-2.792,825) 6,000,000 Variable Raw Cumulative Redeem- able Clan A First Preferred %hues. Servet D 6.000.000 Cumulative Redeemable Class A First Preferred Sham, Sersn E 142,566,138 Common them (1985- 136,567,431; 1984-134,705,883) Dividend run on variable rue shahs The dividend rams, on an annual buts. for the variable rate shun are; for Serra D, 7196 of the average prime lending ran of dw Bank. and for Series E. determined monthly baud upon an auction bidding process. The maximum dividend tau 0 .7096 of the prntw lending rate of the Bank on the auction dam. Sham roaw rod for isssw as at October 31, 1966 6,288,839 common shares. for possible issue under dw Bank's Shareholder Divi. dend and Share Purchase Plans. 1,500.000 Cumulative Redeemable Class B First Warred Shares, stria 1, for possible issue under the conversion feature of the Cumulative Redeemable Class A First Pre. farted Shun. Series E. During the ytu (i) 73,700 of 81 831 Cumulative Redeemable Clats A First Preferred Shares and NIL of 12.375 Cumulative Redeemable A•21 1 49,754 1 51,596 1 54,614 71,952 71.952 71.952 69.821 69.821 110.000 150.000 — — 674,631 5 29.5 81 491.789 81.096337 8722,950 8687,186 Class A Finc Preferred shares were acquired and redeemed under the condi- tions attaching to the issues (1985 —81.100 and NIL; 198,1-81.600 and 54.000). (ti) 2.792,825 of Varubk Rue Cumulative Redeemable Class A First Preferred shares. Series C were acquired and redeemed at a price of 125 per share (1985 and 1984— NIL). (m) 6.000.000 Variable Rate Cumulative Redeemable Class A Finc Preferred shares. Series D were issued. (iv) 6.000.000 Cumulative Redeemable Clara A First Preferred Shares. Series E were issued. (v) 5.996.707 additional common shares were issued for the total amount of 1145.050 (1985 —1.861.548 shun. 1984— 18.515.087 shares). Of these sharet. 4.000.000 were issued under a public offering in the Japanese capital markets and listed on the Tokyo stock exchange. and 1,998,707 were issued under the Bank's Shareholder Dividend and Shue Purchase Plana. 0 13 interm income from Wutitin 1966 Iva) 1994 Interest frau investment securities 8267,944 8277,369 8249.911 Taxable Non•tutbk 17,040 23,286 32.944 Dividends from lnvesantnt14cunties !46.125 139.269 126,236 Investment securities gains and losses" 76.193 17,807 29.463 Trading account income 58.147 10.740 17,197 856S.549 8506.471 8465.751 gognsommm s�tsawl �e •set rnar lul ver dn.'p oi..W. 124 OV -19a/ -$5M 1964 - en methM .rid tnaurirnr of te.i,.ed Ili 1141 ,or, avid I .— The tel.<rd ,n<ame 14 Other income Service charges on deposit accounts Commissions and fees from customer services Other 1966 1985 1984 8110,131 8 98.181 8 84.118 221,406 183.015 163.613 114,089 134.072 85,618 8445,626 8415.269 8333.559 eetsorso domm n �r— IS Euninp applicable to common shares Net income applicable to common shares 817.1781. on cm Gass A First Preferred for the year ended October 31, 1986 Shorn. The per Shue figures have been reflects a deduction for total dividends of calculated on die daily overage equivalent of 820.787 (1985 - $16.958. 1984 - fully paid sharesoutuanding. 16 Pension Plain The Bank's principal pension plan is the Pension Fund Society of The Toronto - Dominion Bank for which membership is voluntary and funding is provided by con• tnbunont by the Bank and the members of the Plan. At least every three years actuarial valuations are made of the pension plant maintained by the Bank. Based on these valuations, any plan deficiencies are funded in accordance with applicable pension benefits legislation. As at October 31. 1985. the date of the last valuation, the actuarial value of the ascan of the Plan exceeded the actuarial liabilities by 872.265. 17 Related piny transanions In rhe ordinary course of business the Bank provides normal banking services to corpo- 18 Subsequent event On November 14. 1986. the Bank issued 4.370.000 common shares for net proceeds of 897 million. These shares were issued pursuant to an underwnting agreement with Pension cats. based on actuarial reviews. are reported in the Consolidated statement of income net of the currenc ye at a &mor oration of any actu arul surplus from prior years. In 1986. the Bank received a refund of 846.127 which reduced the surplus and this refund will be amorstted to Income over the two years ending October 31. 1987 The 1966 net pension coal reflects credits relating to the 1986 and prior year refunds of 833.421. The net pension cost for 1986 was a credit of 8 31.781 c 1985 - 81.958. 1984 -net charge of 82.4781 rations where the Bank owns 204E to 50% of the voting shares. McLeod Young Weir Limited. Wood Gundv Inc . Burns Fry Limited. Dominion Secum ties Inc and Gordon Capital Corporation A-22 r - APPENDIX B PROPOSED FORM OF BONDS [Form of face of Bond] REGISTERED UNITED STATES OF AMERICA REGISTERED No. R - STATE OF FLORIDA VARIABLE RATE DEMAND/FIXED RATE INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BOND (FLORIDA CONVALESCENT CENTERS, INC. PROJECT) SERIES 198_ Reference Date Maturity Date CUSIP Registered Owner: Principal Sum: of the State of Florida (the "Issuer"), for value received, hereby promises to pay, but only from the special fund provided therefor from the Revenues (defined herein), to the Registered Owner shown above, or registered assigns or legal representative, upon presentation and surrender hereof as provided herein, the Principal Sum shown above on the Maturity Date shown above (or earlier as hereinafter referred to), with interest thereon from and including the later of the date of initial delivery of the bonds of the Series designated above and the most recent date to which interest on such bonds has been paid, until such Principal Sum shall be paid or provided for in accordance with the Indenture (defined herein), which interest shall be payable on the dates and at the rate or rates per annum set forth herein. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE SIDE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF FULLY SET FORTH HEREIN. B-1. r7 This Bond shall not be deemed to constitute a debt, liability or obligation of the Issuer or of the State of Florida or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer or of the State of Florida or of any such political subdivision, but shall be payable solely from the Revenues. The Issuer shall not be obligated to pay this Bond or the interest hereon except from the revenues and proceeds pledged therefor, and neither the faith and credit nor the taxing power of the Issuer or of the State of Florida or of any political subdivision thereof is pledged to the payment of the principal of or the interest on this Bond. (The Issuer has no taring power.] All acts, conditions and things required by the Constitution and laws of the State of Florida and any applicable rules of the Issuer to happen, exist and be performed precedent to and in the issuance of this Bond have happened, exist and have been performed as so required. This Bond shall not be valid or become obligatory for any purpose or be entitled to any benefit or security under the Indenture until it -shall have been authenticated by the execution by the Registrar and Paying Agent (defined herein) of the Certificate of Authentication endorsed hereon. B -Z 40 IN WITNESS WHEREOF, has caused this Bond to be executed in its name and on its behalf by the manual or facsimile signature of its or and its corporate seal or a facsimile thereof to be hereunto affixed, imprinted, engraved or otherwise reproduced, attested by the manual or facsimile signature of its or all as of the _ day of , 1987. (Seal] Attest: By: (Form of Certificate of Authentication] Date of Authentication: This is one of the Bonds of the series designated herein issued under the within -mentioned Indenture. Printed on the reverse side hereof is the complete text of the opinion of Piper & Marbury, Baltimore, Maryland, and Shutts b Bowen, Miami, Florida, co -bond counsel, a signed original of which is on file with the undersigned. B-3 CHEMICAL BANK, as Registrar and Paying Agent By: Authorized Signatory (Form of back of Bond) 1. Indenture. This Bond is one of a series of bonds designated VARIABLE RATE DEMAND/FIXED RATE INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BONDS, (FLORIDA CONVALESCENT CENTERS, INC. PROJECT) SERIES 1987_," aggregating ( ) in principal amount (the "Bonds"), issued pursuant to (i) the Constitution and laws of the State of Florida, particularly the (being Florida Statutes, as amended) (the "Act"), (ii) certain proceedings of the Issuer and (iii) an Indenture of Trust dated as of 1987 (together with all amendments and supplements thereto, called the "Indenture"), between the Issuer and Third National Bank in Nashville, as trustee (together with any successor trustee under the Indenture, the "Trustee"). The terms of the Bonds include those stated in the Indenture, and the Bonds are subject to all.such terms. The registered owner of this Bond is referred to the Indenture (a copy of which is on file at the principal corporate trust office of the Trustee) fora complete statement of such terms, to which the owner hereof, by acceptance of this Bond, assents. . 2. Loan Agreement; Revenues. The Issuer and Florida Convalescent Centers, Inc. (the "Borrower"), have entered into a Loan Agreement dated as of , 1987 (together with all amendments and supplements thereto, the "Loan Agreement"), pursuant to which the Issuer has loaned the proceeds of the Bonds to the Borrower to refinance a portion of the costs of construction and acquisition of certain facilities authorized by the Act (as defined in the Loan Agreement, the "Project"). Pursuant to the Loan Agreement, the Borrower is obligated to make loan payments to the Issuer sufficient to provide for the timely payment of the principal or redemption price of and interest on, and the purchase price of, the Bonds when due. As defined in the Indenture, "Revenues" include all payments to the Issuer or the Trustee pursuant to the Loan Agreement, proceeds of the Bonds and all moneys and securities on deposit in the funds and accounts created by the Indenture and all other receipts of the Issuer attributable to the refinancing of the Project by the issuance of the Bonds. The Revenues are pledged under the Indenture for the equal and ratable benefit of the holders from time to time of the Bonds and, to the extent provided therein, to' the payment of amounts due under the Credit Facility Agreement (as defined in the Indenture) in accordance with the terms thereof. 3. Credit Facility. In order to secure the timely payment of the principal or redemption price of and interest on, and the purchase price of, the Bonds, there has been delivered to the Trustee an irrevocable letter of credit dated the date of the initial delivery of the Bonds (the "Letter of Credit") issued by The Toronto -Dominion Bank, acting through its Chicago Branch (the "Bank"), in an initial stated amount equal to the aggregate principal amount of the Bonds plus 58 days' interest thereon, calculated at the rate of 15: per annum (the "Maximum Rate," as such rate may be increased pursuant to the Indenture). The Letter of Credit expires on the fifth anniversary of the date of initial delivery of the Bonds, subject, under B-4 40 certain circumstances, to earlier termination and to the option of the Bank to extend the Letter of Credit. PURSUANT TO THE INDENTURE, PRIOR TO THE EXPIRATION OF THE LETTER OF CREDIT OR ANY SUBSTITUTE CREDIT FACILITY (DEFINED HEREIN), THE BORROWER MAY, BUT IS NOT OBLIGATED TO, DELIVER TO THE TRUSTEE A SUBSTITUTE LETTER OF CREDIT, INSURANCE POLICY, GUARANTY, SURETY BOND, LINE OF CREDIT, BOND PURCHASE AGREEMENT OR OTHER SIMILAR CREDIT OR LIQUIDITY FACILITY, SUBJFCT TO CERTAIN CONDITIONS SET FORTH IN THE INDENTURE (A "QUALIFIED CREDIT FACILITY"), WITHOUT NOTICE TO OR THE CONSENT OF THE OWNER OF THIS BOND, or an Alternate Credit Facility (as defined in the Indenture). The Letter of Credit, any Qualified Credit Facility and any Alternate Credit Facility are herein referred to as the "Credit Facility," and the Bank and the issuer of any substitute Credit Facility are herein referred to as the "Credit Facility Provider." 4. Interest Rate. The Bonds shall bear interest from and including the date of initial delivery thereof to and including the last day of the Initial Interest Period (defined in the Indenture), at the rate per annum determined as provided in the Indenture, computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and payable on the first Business Day of each month (each, an "Interest Payment Date"). Thereafter, the Bonds shall bear interest at the Variable Rate (defined herein), but the Indenture provides that the- Borrower and National HealthCorp L.P., a Delaware limited partnership and its successors and assigns ("NHC"), may change the interest rate borne by the Bonds from the Variable Rate to a Fixed Rate (defined herein) for one or more periods (each, a "Fixed Rate Period") and, at the expiration of any Fixed Rate Period, may establish one or more additional Fixed Rate Periods or change the interest. rate borne by the Bonds from a Fixed Rate to the Variable Rate. The Indenture requires the Registrar and Paying Agent to mail notice in accordance with its terms to the owners of the Bonds prior to the commencement of each Fixed Rate Period and prior to any change from a Fixed Rate to the Variable Rate (the first day of each Fixed Rate Period and each date on which the Variable Rate takes effect following a Fixed Rate Period (which shall not include the Initial Interest Period], being hereinafter referred to as a "Conversion Date"). Under the Indenture, any election of the Borrower and NHC to convert the interest rate on the Bonds may automatically be rescinded under certain circumstances. Notwithstanding any other provision of this Bond, so long as a Credit Facility shall be in effect, the interest rate borne by the Bonds may not exceed the Maximum Rate and shall equal the Maximum Rate during such period as it would otherwise exceed the Maximum Rate in accordance with the further provisions of this Section. (a) Variable Rate. The Variable Rate shall be determined by Alex. Brown 6 Sons Incorporated, or any successor remarketing agent under the Indenture (the "Remarketing Agent"), on the day following the last day of the Initial Interest Period, on the first Business Day of each month thereafter during which the Bonds bear interest at the Variable Rate and on each Mandatory Tender Date (defined herein) after which the Bonds will bear interest at the Variable Rate (each, an "Adjustment Date"), and shall be equal to the minimum rate that, in the judgment of the Remarketing Agent, taking B-5 r. into account prevailing market conditions, would enable the Remarketing Agent to sell all of the Bonds on the Adjustment Date at a price equal to the principal amount thereof, plus accrued interest, if any, thereon. The Variable Rate determined by the Remarketing Agent on each Adjustment Date shall be in effect from and including such Adjustment Date to but excluding the earlier of (i) the immediately succeeding Adjustment Date and (ii) the immediately succeeding Mandatory Tender Date. So long as the Bonds bear interest at the Variable Rate, the amount of such interest will be computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and the Interest Payment Dates will be the first Business Day of each month, each Mandatory Tender Date and the maturity date of the Bonds. (b) Fixed Rate. The Fixed Rate borne by the Bonds during any Fixed Rate Period shall be the interest rate determined by the Remarketing Agent on a date selected by it (the "Computation Date") that is at least seven but not more than 15 Business Days before the first day of such Fixed Rate Period (the "Fixed Rate Date") or on any other Computation Date established pursuant to the Indenture, to be the minimum rate that, in the judgment of the Remarketing Agent, taking into account prevailing market conditions, would enable the Remarketing Agent to sell all of the Bonds on the Fixed Rate Date at a price equal to the principal amount thereof plus accrued interest, if any, thereon; provided, however, that the Fixed Rate borne by the Bonds during any Fixed Rate Period of six months or longer (a "Long Fixed Rate Period") shall be the minimum rate preliminarily determined for such period in accordance with the Indenture, notice of which is required to be given to the owner of this Bond before the Computation Date if such rate is higher than the rate determined on the Computation Date in accordance with this paragraph; and provided further that if particular Bonds shall have been selected for redemption from particular Sinking Fund Installments (as defined in the Indenture), the Remarketing Agent may determine a different preliminary and final Fixed Rate for the Bonds to be redeemed from each such Sinking Fund Installment. Notwithstanding the foregoing, with the written consent of the Borrower and NHC, the Fixed Rate determined by the Remarketing Agent on any Computation Date may be determined based upon a higher selling price not exceeding 102: of the aggregate principal amount of the Bonds, plus accrued interest, if any, thereon, if there shall be delivered to the Trustee an opinion of Bond Counsel (as defined in the Indenture) to the effect that the determination of the Fixed Rate on such basis will not adversely affect the excludability from gross income for federal income tax purposes of the interest paid on the Bonds. Each Fixed Rate determined by the Remarketing Agent for any Fixed Rate Period shall remain in effect from and including the Fixed Rate Date on which such Fixed Rate Period commences to and including the last day of such Fixed Rate Period. During any Fixed Rate Period of fewer than six months (a "Short Fixed Rate Period"), the interest payable on the Bonds will be computed on the basis of the actual number of days elapsed over a year of 365 days (366 days in leap years) and during any Long Fixed Rate Period, the interest payable on the Bonds will be computed on the basis of a 360 -day year of twelve 30 -day months. The Interest Payment Dates with respect to Fixed Rate Periods will be (i) for each Short Fixed Rate Period, the day B-6 r-. following the 'last day of such Fixed Rate Period, (ii) for each Long Fixed Rate Period (other than a Long Fixed Rate Period described in clause (iii) of this sentence), the first day of the calendar month commencing each six calendar month period after the commencement of such Fixed Rate Period that occurs during such Fixed Rate Period and the day following the last day of such Fixed Rate Period and (iii) for any Long Fixed Rate Period extending to the maturity date of the Bonds, January 1 and July 1 of each year. (c) Default Rate.; Alternate Rates. Notwithstanding the foregoing provisions of this Section, (i) if any payment of the principal or redemption price of or interest on, or the purchase price of, any Bond shall not be made when due, the Bonds shall bear interest at the last interest rate borne by the Bonds prior to the due date for such payment until such payment is made or provided for in accordance with the Indenture and (ii) if the Remarketing Agent does not determine the Variable Rate on any Adjustment Date or the Fixed Rate on any Computation Date or a court of competent jurisdiction holds that the rate so determined is invalid or unenforceabler (A) the Variable Rate for such Adjustment Date shall be equal to 85% of the per annum bond equivalent yield applicable to 13 -week United States Treasury bills and (B) the Fixed Rate for such Computation Date shall be equal to 95: of the per annum bond equivalent yield applicable to United States Treasury obligations having the same number of months to maturity as the number of months in the applicable Fixed Rate Period .(determined by linear interpolation between the yields for instruments having the next shorter and next longer number of months to maturity if no yield is announced for Treasury obligations having the number of months to maturity prescribed herein), in each case as published by the Federal Reserve Bank of New York on the most recent date prior to the applicable Adjustment Date or Computation Date (as the case may be). (d) Business Days. As used herein, "Business Day" means a day other than (i) a Saturday, Sunday or other day on which banking institutions in the State of Florida or the city in which (A) the corporate trust office of the Registrar and Paying Agent or the Trustee, designated, in accordance with the Indenture, by the Registrar and Paying Agent and the Trustee, respectively, (B) the office of the Remarketing Agent designated, in accordance with the Indenture, by the Remarketing Agent, or (C) the office of the Credit Facility Provider at which demands for payment under the Credit Facility must be presented, is located are authorized or required to close and (ii) a day on which the New York Stock Exchange is closed. (e) Interest Rates Conclusive and Binding. The determination of the interest rates borne from time to time by the Bonds as provided herein and in the Indenture shall be conclusive and binding on the owner of this Bond. 5. Method of Payment• Record Dates. The principal or redemption price of, or purchase price of, this Bond will be payable upon presentation and surrender of this Bond at the principal corporate trust office of Chemical Bank in New York, New York, or at the corporate trust office of any successor or additional registrar and paying agent under the Indenture (the "Registrar and Paying Agent"). Interest on this Bond will be paid (by check mailed] to B-7 40 the owner as of the Record Date (defined herein) for the payment of such interest. The principal or redemption price of and interest on, and the purchase price of, this Bond will be paid in any money of the United States that at the time of payment is legal tender for payment of public and private debts or by checks payable in such money. Notwithstanding the foregoing (i) during the Initial Interest Period and during any period in which the Bonds bear interest at the Variable Rate and during any Short Fixed Rate Period, any payment of at least $2,500 to any owner of Bonds shall be made by wire transfer to any account in the United States designated by such owner and (ii) the principal or redemption price of and interest on, and the purchase price of, Credit Facility Bonds (defined in the Indenture) shall be payable by wire transfer to the Credit Facility Provider upon at least five days' notice to the Registrar and Paying Agent. The Record Dates will be (i) during the Initial Interest Period and during any period in which the Bonds bear interest at a Variable Rate and during any Short Fixed Rate Period, the last day before each Interest Payment Date, (ii) during any Long Fixed Rate Period, the 15th day of the calendar month preceding each Interest Payment Date and (iii) in the case of the payment of any defaulted interest, the fifth Business Day before such payment. If any payment of the principal of or interest on this Bond is due on a day that is not a Business Day, such payment will be made on the next Business Day, and no interest will accrue on the amount of su payment during the intervening period. 6. Redemption. (a) Optional Redemption During Variable Rate Period and on Mandatory Tender Dates. The Bonds are subject to redemption prior to maturity at the option of the Borrower and NHC (i) during the Initial Interest Period and during any period in which the Bonds bear interest at the Variable Rate, in whole or in part on any Interest Payment Date, and (ii) in whole or in part on any Mandatory Tender Date, in each case at a redemption price equal to the principal amount of the Bonds redeemed, plus accrued interest to the date fixed for redemption. (b) Optional Redemption During Fixed Rate Period. The Bonds are subject to redemption prior to maturity at the option of the Borrower and NHC during any Fixed Rate Period of six years or longer in whole or in part on any Interest Payment Date on or after the Interest Payment Date next succeeding the date that is the earlier of (i) the tenth anniversary of the Fixed Rate Date for such Fixed Rate Period and (ii) the anniversary of such Fixed Rate Date that approximates more closely than any other such anniversary date the date that occurs at the midpoint of such Fixed Rate Period, in whole at any time or in part on any Interest Payment Date, at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, plus a premium (expressed as a percentage of the principal amount of the Bonds to be redeemed) that for the first redemption date 'is equal to the lesser of (A) three percent and (B) one-half of one percent times the number of years between the calendar year of such redemption date and the calendar year during which such Fixed Rate Period ends (including for purposes of computation the calendar year of such redemption date but B-8 El excluding the calendar year during which such Fixed Rate Period ends) and that shall decline by one-half of one percent annually thereafter. (c) Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory redemption prior to maturity on January 1 (or during the Initial Interest Period, during any Short Fixed Rate Period or during any period in which the Bonds bear interest at the Variable Rate, on the first Business Day in January) of the years set forth in the Indenture from Sinking Fund Installments deposited in the Principal Account (created by the Indenture) at a redemption price equal to the principal amount of the Bonds redeemed, plus accrued interest to the date fixed for redemption. (d) Mandatory Redemption Upon Determination of Taxability. The Bonds are subject to mandatory redemption prior to maturity, in whole or, as hereinafter provided, in part, at a• redemption price equal to the principal amount of the Bonds redeemed, plus accrued interest thereon to the .date fixed for redemption, on a Business Day not later than 60 days after the Borrower receives notice from the Trustee of a Determination of Taxability. As used herein, "Determination of Taxability" means a final determination by the Internal Revenue Service or a court of competent jurisdiction that the interest payable on any Bond is for any reason includable for federal income tax purposes in the gross income of any holder or former holder thereof, other than during any period in which such holder or former holder is or was a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended, or, if applicable, its predecessor provisions, and the applicable regulations thereunder; provided, however, that no "Determination of Taxability" shall be deemed to have occurred unless such holder or former holder gives the Borrower and the Trustee prompt written notice of such determination and the Borrower has been afforded the opportunity to contest the same either directly or in the name of the holder or former holder of such Bond, and until a conclusion of any appellate review, if sought. Upon the occurrence of a Determination of Taxability, the Bonds shall be redeemed in whole unless, in the opinion of Bond Counsel, the interest payable on the Bonds remaining outstanding after such redemption would not be includable in the gross income of any holder thereof for federal income tax purposes (other than during any period in which such holder is a "substantial user" of the Project or a "related person"). If a Determination of Taxability occurs after the indenture is discharged as described in Section 9 below the Bonds will not be redeemed as described in this paragraph. (e) Redemption Upon the Occurrence of Certain_ Extraordinary Events. The Bonds are subject to redemption prior to maturity in whole at any time at a redemption price equal to the principal amount thereof, plus accrued interest to the date fixed for redemption, at the option of the Borrower and NHC upon the occurrence of any of the following events and subject to the following conditions: B-9 w (i) if title to, or the permanent use of, or use for a limited period of, substantially all of the Project is condemned or the subject of an agreement with, or action by, a public authority in the nature of or in lieu of condemnation proceedings; or (ii) if the Borrower's title to substantially all of the Project is found to be deficient to the extent that the efficient utilization thereof by the Borrower is substantially impaired; or (iii) if substantially all of the Project is damaged or destroyed by fire or other casualty; or (iv) if as a result of any changes in the Constitution of the United States of America or of the State of Florida, or of legislative or administrative action, or failure of administrative action, by the United States or the State of Florida, or any agency or political subdivision thereof, or by reason of any judicial decision, unreasonable burdens or excessive liabilities are imposed on the Borrower, including (without limitation) federal, state or other ad valorem property, income or other taxes not being imposed on the date of the Loan Agreement. (f) Selection of Bonds to Be Redeemed. If fewer than all of the Bonds shall be called for redemption, the Bonds or portions thereof to be redeemed shall be selected by the Registrar and Paying Agent in the manner provided in the Indenture. (g) Notice of Redemption. At least one Business Day before the redemption date of any Credit Facility Bond, and at least 30 days before the redemption date of any other Bond, the Registrar and Paying Agent will give a notice of redemption to each owner of a Bond to be redeemed in the manner and under the terms and conditions provided herein and in the Indenture, but failure to give any notice of redemption as to any Bond or any defect therein will not affect the validity of the call for redemption of any other Bonds. (h) Effect of Call for Redemption Bonds or portions thereof called for redemption shall become due and payable on the redemption date at the redemption price set forth herein. On the date designated for redemption, if any required notice of redemption has been given and funds sufficient to pay the redemption price have been deposited with the Registrar and Paying Agent or the Trustee, interest on the Bonds or portions thereof to be redeemed shall cease to accrue, such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Indenture and the owners of such Bonds shall have no rights in respect of such Bonds or portions thereof so called for redemption except to receive payment of the redemption price thereof and accrued interest thereon solely from such funds. Optional and Mandatory Tender. (a) Optional Tender. During any period in which the Bonds bear interest at the Variable Rate, the Issuer will purchase or cause to be B-10 40 purchased (but solely from the Revenues, proceeds of the remarketing of such Bond by the Remarketing Agent and amounts realized under the Credit Facility) any Bond or portion thereof in an authorized denomination (other than any Credit Facility Bond) at a price equal to the principal amount thereof plus accrued interest thereon upon: (i) irrevocable written notice from the owner of such Bond to the Registrar and Paying Agent (each, an "Optional Tender Notice"), which notice shall set forth (A) the principal amount of such Bond or such portion thereof to be purchased and (B) the date on which such Bond or such portion thereof is to be purchased (the "Optional Tender Date"), which date shall be a Business Day not fewer than three Business Days after the date of receipt of such notice by the Registrar and Paying Agent in the case of any Optional Tender Date that is an Interest Payment Date, or seven calendar days after the date of receipt of such notice by the Registrar and Paying Agent in the case of any other Optional Tender Date; and (ii) delivery of such Bond (with an appropriate instrument of transfer satisfactory to the Registrar and Paying Agent executed in blank by the registered owner with the signature guaranteed by a bank, trust company or member firm of the New York Stock Exchange) to the Registrar and Paying Agent not later than 10:00 a.m., New York City time, on the Optional Tender Date. (b) Mandatory Tender. Except as otherwise provided in this Section, the Bonds are subject to mandatory tender and purchase, and the Issuer will purchase or cause to be purchased (but solely from the Revenues, proceeds of the remarketing of the Bonds by the Remarketing Agent and amounts realized under the Credit Facility) the Bonds, on the Mandatory Tender Dates at a price equal to the principal amount thereof plus accrued interest thereon. The Mandatory Tender Dates are (i) each Conversion Date, (ii) unless a Qualified Credit Facility has been delivered to the Trustee prior thereto within the time required by the Indenture, the first Business Day of the calendar month in which (A) the stated expiration date of any Credit Facility then in effect occurs or (B) in which any other date on which the Credit Facility automatically terminates without notice from the Credit Facility Provider occurs and (iii) the effective date of any Alternate Credit Facility that replaces any Credit Facility. The Registrar and Paying Agent will give notice of each Mandatory Tender Date (each, a "Mandatory Tender Notice") to the owners of the Bonds at least 35 days prior to each Mandatory Tender Date. (c) Election Not to Tender. The owner of this Bond may elect to retain this Bond or any portion hereof on any Mandatory Tender Date ( if such Bond or such portion hereof is in a denomination authorized to be outstanding after the applicable Mandatory Tender Date) by delivering -to the Registrar and Paying Agent irrevocable written notice of such election (a "Non -Tender Notice") on or before the tenth day of the calendar month preceding such Mandatory Tender Date (or, if such day is not a Business Day, the immediately preceding Business Day), which notice shall (i) affirmatively acknowledge such matters as shall be specified in such Mandatory Tender Notice B-11 and (ii) contain the irrevocable agreement by such owner not to tender this Bond for purchase pursuant to paragraph (a) of this Section on or before such Mandatory Tender Date. (d) Agreement to Sell Bonds on Tender Dates. The owner of this Bond, by acceptance of this Bond (unless such owner has delivered a Non -Tender Notice with respect to any Mandatory Tender Date as provided in paragraph (c) of this Section), agrees to sell this Bond to the Remarketing Agent, the Credit Facility Provider or its designee or any other party obtained by the Remarketing Agent or otherwise on each Optional Tender Date or Mandatory Tender Date (a "Tender Date") at a price equal to the principal amount hereof plus accrued interest, if any, hereon to such Tender Date and agrees to surrender this Bond to the Registrar and Paying Agent on such Tender Date. (e) Non-delivery of Bonds. IF ANY BOND (OTHER THAN A BOND AS TO WHICH A NON-TENDER NOTICE IS TIMELY DELIVERED WITH RESPECT TO ANY MANDATORY TENDER DATE, AS PROVIDED IN PARAGRAPH (C) OF THIS SECTION) IS NOT TENDERED FOR PURCHASE ON ANY TENDER DATE, SUCH BOND SHALL CEASE TO BEAR INTEREST ON SUCH TENDER DATE, SHALL NO LONGER BE CONSIDERED TO BE OUTSTANDING UNDER THE INDENTURE AS OF SUCH TENDER DATE AND SHALL BE DEmm TO HAVE BEEN PURCHASED ON SUCH DATE IF THERE SHALL HAVE BEEN IRREVOCABLY DEPOSITED WITH THE TRUSTEE OR REGISTRAR AND PAYING' AGENT AN AMOUNT SUFFICIENT TO PAY THE PURCHASE PRICE OF SUCH BOND ON SUCH TENDER DATE. 8. Purchased Bonds Not Discharged. No purchase of Bonds by the Remarketing Agent, the Registrar and Paying Agent, the Credit Facility Provider or any other party shall be deemed a payment or redemption of such Bonds and no such purchase will operate to extinguish or discharge the indebtedness evidenced by such Bonds. 9. Acceleration; Defeasance. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the Bonds then outstanding under the Indenture may become or may be declared due and payable before the stated maturity thereof, together with the interest accrued thereon. In certain circumstances set forth in the Indenture, the owners of the Bonds will receive no prior notice of such declaration. In the event that the principal of all Bonds then outstanding under the Indenture has been declared due and payable before the stated maturity thereof, whether or not any prior notice of such declaration has been given, if funds available under the Indenture to pay the principal of and accrued interest on all such Bonds through and including the accelerated maturity date are held by the Trustee or the Registrar and Paying Agent on such accelerated maturity date, interest on such Bonds shall cease to accrue on such accelerated maturity date, such Bonds shall cease to be entitled to any benefit or security under the Indenture and the owners of such•Bonds shall have no rights in respect of such Bonds except to receive payment of the principal of and accrued interest on such Bonds on the accelerated maturity date of such Bonds. B-12 40 The Indenture prescribes the manner in which it may be discharged and provides that Bonds shall be deemed to be paid if money or Government Obligations (as defined in the Indenture), the principal of and interest on which when due will be sufficient to pay the principal of and interest on such Bonds to the maturity or redemption date of such Bonds (as the case may be), and the purchase price of Bonds tendered for purchase by the holders thereof in accordance with the Bonds, have been deposited with the Trustee. 10. Modifications. Modifications or alterations of the Indenture or of. the Loan Agreement may be made only to the extent and in the circumstances permitted by the Indenture. 11. _Denominations; Transfer; Exchange. All of the Bonds are of like tenor except as to number, principal amount and registered owner. The Bonds are issuable only in registered form without coupons in denominations of $50,000 and any integral multiples thereof [except that one Bond may be in a denomination equal to $ or the sum of such amount and any integral multiple of $50,000, and] except that, during any Long Fixed Rate Period, the Bonds are issuable in denominations of $5,000 and integral multiples thereof. The transfer of this Bond is registrable by the registered owner hereof and this Bond may be exchanged for an equal aggregate designated amount of Bonds of other authorized denominations upon presentation and surrender of this Bond at the designated corporate trust office of the Registrar and Paying Agent, together with an assignment duly executed by the registered owner or his duly authorized attorney or legal representative. The Registrar and Paying Agent may require the person requesting any transfer or exchange to reimburse it for any tax or other governmental charge payable in connection therewith. The Registrar and Paying Agent is not required to register the transfer of any Bond (except any transfer pursuant to a purchase of such Bond with amounts realized under the Credit Facility) (i) after a notice of the redemption of such Bond or any portion thereof has been mailed or (ii) prior to the Optional Tender Date for such Bond after an Optional Tender Notice with respect to such Bond has been received by the Registrar and Paying Agent or (iii) prior to the Mandatory Tender Date after a Mandatory Tender Notice has been mailed -- in each case unless the transferee acknowledges in writing to the satisfaction of the Registrar and Paying Agent the matters contained in such notice and, if any Non -Tender Notice has been received by the Registrar and Paying Agent with respect to any Bond referred to in clause (iii) of this paragraph, of the delivery thereof. 12. Persons Deemed Owners. The registered owner of this Bond shall be treated as the owner of this Bond for all purposes. 13. Notices. when the Registrar and Paying Agent or the Trustee is required to give notice to the owner of this Bond, such notice shall be mailed by first-class mail to the registered owner of this Bond at such owner's address as it appears on the registration books maintained by the Registrar and Paying Agent. Any notice mailed as provided herein will be conclusively presumed to have been given, whether or not actually received by the addressee. B-13 U XEROX TELECOPIER 495 212 966 3000+ :f 4 NOV. 19 81 13:.5 E- APPMMIX C PROPOSED FORMA OF OPINIONS OT CO -BOND CO(JNSSL (A separate opinion will be rendered with respect to the Bonds of each Issue. Alternative language is indicated in brackets.) [Closing Date] Ladies and Gentlemen: in connection with the issuance by(the "Issuer") of its A variable Rate D*mvWFixed Rate industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) , Series 198_, dated as of , 198_ (the "Bonds") , we have examined: (i) Parts] II (and III] of Chapter 159 (and Part III of Chapter 1541, Florida Statutes, as amended (the "Act")) (ii) certain proceedings of the Issuer; (iii) an Indenture of Trust dated as of 198_ (the "Indenture"), between the Issuer and Third National Bank in Nashville, as trustee (the "Trustee")) (iv) a Loan Agreement dated as of 198 (the "Loan Agreement"), between the Issuer and Florida Convalescent Centers, Inc, (the "Borrower"), providing, among other things, for the refinancing by the Issuer of the costs of a certain nursing home facility defined in the Loan Agreement (the "Project")) (v) a Reimbursement Agreement dated as of December 1, 1987 (the "Reimbursement Agreement"), between the Borrower and The Toronto -Dominion Dank, acting through its Chicago Branch (the "Bank"); (vi) the Letter of Credit pertaining to the Bonds issued by the Bank pursuant to the Reimbursement Agreement (the "Letter of Credit"); (vii) an executed and authenticated Bond; (viii) relevant provisions of the Tax Reform Act of 1986 (the "Tax Reform Act"), the Internal Revenue Code of 1986, as amended (the "Code"), and any C-1 s :0 2 applicable predecessor provisions contained in the Internal Revenue Code of 1954 as in effect iinsediately prior to the enactment of the Tax Reform Act (the "1954 Code"); (ix) relevant provisions of the Constitution and laws of the State of Florida; and W other proofs submitted to us relative to the issuance and sale of the Bonds. The terms of the Bonds are contained in the Indenture ani the Bonds. John F. Robenalt, Esquire, Lima• Ohio, counsel to the Borrower, has rendered an opinion dated this date regarding, among other things, the obligations of the Borrower under th■ Lcan Agreement. Such opinion is in a form satisfactory to us. In rendering our opinion, we are relying on such opinion with respect to all matters addressed therein, including (i) the•due incorporation of the Borrower and its good standing in the State of Florida• (ii) the corporate power and authority of the Borrower to enter into and perform its obligations under the Loan Agreement, and (iii) the due execution and delivery by the Borrower of the Loan Agreement. Counsel to the Trustee has rendered an opinion of even date herewith regarding, among other things, the obligations of the Trustee under the Indenture, Such opinion is in a form satisfactory to us. In rendering our opinion, we are relying on such opinion with respect to all matters addressed therein, including (i) the corporate power and authority of the Trustee to perform its obligations under the Indenture and (ii) the due execution and delivery by the Trustee of the Indenture. we have made no investigation of, and are rendering no opinion regarding, the title to, liens on, or security interests in real or personal property. There have been delivered to you and to the Trustee opinions of counsel to the Bank of even date herewith with respect to the validity and enforceability of the Letter of Credit. we express no opinion a■ to such matters or any other matters relating to the obligations of the Bank under the Letter of Credit. Based upon the foregoing, it is our opinion that: (a) The Indenture has been duly authorized, executed and delivered by the Issuer and the Trustee and constitutes the valid and binding obligation of the Issuer and the Trustee. (b) The Loan Agreement has been duly authorized, executed and delivered by the Issuer and the Borrower and constitutes the valid and binding obligation of the Issuer and the Borrower. (c) The Issuer is duly authorized and entitled to issue the Bonds. Bonds executed and authenticated as provided in the Indenture have been duly C-2 0 and validly issued and constitute valid and binding special obligations of the Issuer, payable solely from the Revenues (as defined in the Indenture). (d) The Indenture, the Loan Agreement and the Bonds are subject to bankruptcy, insolvency, moratorium, reorganization and other state and federal laws affecting the enforcement of creditors' rights and to general principles of equity. (e) By the terms of the Act, the Bonds shall not be deemed to constitute a debt, liability, or obligation of the Issuer or of the State of Florida or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer or of the State of Florida or of any such political. subdivision, but shall be payable solely from the Revenues. (f) By .the terms of the Act, the Bonds, their transfer and the income therefrom, including any profit made on the sale thereof, shall at all times be free from taxation of every kind by the State of Florida or any local unit, political subdivision or other instrumentality of the State of Florida, except taxes imposed by Chapter 220, Florida Statutes on interest income or profits on debt obligations owned by corporations; no opinion is expressed as to State of Florida or local taxes after the interest rate on the Bonds has been converted from the Variable Rate to the Fixed Rate (each, as defined in the Indenture) or as to estate or inheritance taxes, taxes on financial institutions measured by income, any alternative minimum tax imposed on corporations or any other taxes not levied or assessed directly on the Bonds, their transfer or the income therefrom. (g) Assuming compliance with certain covenants described herein, interest on the Bonds is and will be excludable from the gross income of the holders thereof for federal income tax purposes under existing statutes, regulations and decisions, except, with respect to any Bond, during any period in which such Bond is held by a "substantial user" of the Project or a "related person" (as such terms are used in Section 147(a) of the Code, or any applicable predecessor statutory provisions). In rendering this opinion, we have relied upon the Tax Certificate and Agreement of even date herewith, made on behalf of the Borrower by its President, with respect to certain material facts within the knowledge of the Borrower, and upon the assumption that all information contained therein is complete and accurate. We advise you that the interest on the Bonds will become includable in the gross income of the holders thereof for purposes of federal income taxation, in certain cases effective from the date of issuance of the Bonds, (1) if certain capital expenditures are paid or incurred in excess of those permitted by Section [103(b)(6)(D) of the 1954 Code] (144(a)(4) of the Code] or (2) the outstanding face amount of tax exempt bonds allocable to any "test -period beneficiary" within the meaning of Section (103(b)(18) of the 1954 Codej [144(a)(10) of the Code] exceeds the amount permitted by such Section [103(b)(18)] [144(a)(10)]. There are certain other restrictions that must be met subsequent to the delivery of the Bonds in order for interest on the Bonds to remain excludable from gross income for federal income tax purposes, including a requirement that certain earnings received from the investment of the proceeds of the Bonds be rebated to the United States of America and other requirements C-3 0 XEROX TELECOPIER 496 . 212 286 1786+ :0 2 applicable to the investment of the proceeds of the Bonds. The Borroweras covenanted in the Loan Agreement to take all action necessary to comply w ith the foregoing requirements and restrictions. The Indenture provides that prior to any conversion of the interest rate borne by the Bonds from the Variable Hato to a Fixed Rate, there must be delivered to the Trustee an opinion of Bond Counsel (as defined in the Indenture) to the effect that such conversion will not adversely affect the excludability from gross income of the interest paid on the Bonds for federal income tax purposes. Accordingly, no opinion is expressed as to the federal income taxation of interest on any Bond after the interest rate on the Bonds has been converted from the Variable Rate to a Fixed Rate. (h) [Interest on the Bonds will be treated as a specific preference item subject to both the individual and the corporate alternative minimum tax']* (Interest on the Bonds is not included in corporate or individual alternative minimum taxable income as an enumerated item of tax preference or other specific adjustment. However, foe purposes of calculating the corporate alternative minimum tax for taxable years beginning in 1987, 1988 and 1989, a corporation will be rgquired to increase its alternative minimum tax taxable income by one-half of the amount by which its "adjusted net book income" exceeds its ♦lternative minimum tax taxable income (computed without regard to this book income adjustment) and for taxable years beginning after 1989 a corporation will be required to increase its alternative minimum tax taxable income by 75% of the amount by which its "adjusted current earnings" exceeds its alternative minimum tax taxable income (computed without regard to this current earnings adjustment).. For such purposes, "adjusted net book income" and "adjusted current earnings" would include, among other items, interest income from the Bonds.] In addition, interest on the Bonds will be includable in the applicable taxable base for the purposes of determining the environmental tax imposed by the Code on corporations for taxable years beginning after December 31,. 1986, and before January 1, 1992, and the branch profits tax imposed by the Code on foreign corporations engaged in a trade or business in the United States for taxable years beginning after December 31, 1986. In conniction with the issuance of the Bonds, Piper b Marbury has acted as counsel to the underwriter for the Bonds and not as counsel to the issuer. Very truly yours, *This alteraptive will be used in the opinions rendered with respect to the Bonds of the Issues indicated on the cover page of this official Statement with an astaTisk, if any. E-1 XEROX TELECOPIER 496 , 212 286 1786+ ;f 2 applicable to the invest"nt of the proceeds of the Bonds. The Borrower has covenanted in the Loan Agreement to take all action necessary to comply w ith the foregoing requirements and restrictions. The Indenture provides that prior to any conversion of the interest rate borne by the Bonds from the Variable Ratti to a Fixed Rate, there must be delivered to the Trustee an opinion of Bond Counsel (as defined in the Indenture) to the effect that such conversion will not adversely affect the excludability from gross income of the interest paid on the Bonds for federal income tax purposes. Accordingly, no opinion is expressed as to the federal income taxation of interest on any Bond after the interest rate on the Bonds has been converted from the Variable Rate to a Fixed Rate. (h) (Interest on the Bonds will be treated as a specific preference item subject to both the individual and the corporate alternative minimum tax.]* (Interest on the Bonds is not included in corporate or individual alternative minimum taxable income as an enumerated item of tax preference or other specific adjustment. However, for purposes of calculating the corporate alternative minimum tax for taxable years beginning in 1987, 1980 and 1989, a corporation will be required to increase its alternative minimum tax taxable income by one-half of the amount by which its "adjusted net book income" exceeds its +lternative minimum tax taxable income (computed without regard to this book income adjustment) and for taxable years beginning after 1989 a corporation will be required to increase its alternative minimum tax taxable income by 75% of the amount by which its "adjusted current earnings" exceeds its alternative minimum tax taxable income (computed without regard to this current earnings adjustment).. For such purposes, "adjusted net book income" and "adjusted current earnings" would include, among other items, interest income from the Bonds.] In addition, interest on the Bonds will be includable in the applicable taxable base for the purposes of determining the environmental tax imposed by the Code on corporations for taxable years beginning after December 31,. 1986, and before January 1, 1992, and the branch profits tax imposed by the. Code on foreign corporations engaged in a trade or business in the United States for taxable years beginning after December 31, 1986. In conn;ction with the issuance of the Bonds, Piper 6 Marbury has acted as counsel to the underwriter for the Bonds and not as counsel to the issuer. Very truly yours, *This alternptive will be used in the opinions rendered with respect to the Bonds of the Issues indicated on the cover page of this Official Statement with an astaTisk, if any. em XEROX TELECOPIER 495 • NCV. 19 87 13:16 212 986 3000+ h.. _^,.. . ..i.7: .....I _.,v N SUMMARY 01 CERTAIN PROVISIONS OF THE BANK SECURITY DOCUMENTS I. Stn"Y OF CERTAIN PROVISIONS of THE REIM03UR ZNM AGREEMENT :• 5 All of the Letters of Credit will be issued under the same Reimbursement Agreement and a default under the Reimbursement Agreement with respect to any Project or any Letter of Credit could result in the termination by the Bank of any or all of the Letters of Credit and a corresponding acceleration of the Bonds of any or all of the Issues. Certain provisions of the Reimbursement Agreement are summarised below. %hese summaries do not purport to be complete or definitive and are qualified in their entirety by reference to the full terms of the Reimbursement Agreement. Reimbursement and Other Payment■ by the Company Under the Reimbursement Agreement, the Company has agreed to reimburse the Bank for all amounts that are drawn under each Letter of Credit. Such reimbursement is required to be made on the date on which the Bank honors a draw under such Letter of Credit, except that the Company has until the earlier of the ninetieth (90th) day after such draw is honored or the expiration or termination date of the Letter of Credit to reimburse the Bank for liquidity drawn honored by the Bank to pay the purchase price of Bonds tendered pursuant to the Indenture. The Company also agrees to pay to the Bank (i) an initial and thereafter periodic fees with respect to each Letter of Credit based on the available amount of such Letter of Credit, (ii) certain increased costs incurred by the Dank in issuing or maintaining any Letter of Credit resulting from changes in applicable law or regulations, (iii) interest on Letter of Credit draws funded by the Bank until reimbursement thereof by the Company, and (iv) all other expenses of the Bank incurred in enforcing its rights under the Reimbursement Agreement. All costs and expenses incurred by the Bank in connection with the preparation and issuance of the Letters of Credit and the Reimbursement Agreement, the Mortgages, the Pledge and Security Agreement and the Guaranty Agreement are also to be paid by the Company. Pledge of Credit Facility Bonds As security for the payment of the obligations of the Company under the Reimbursement Agreement, the Company will pledge to the Bank any and all Credit Facility Bonds pursuant to the terms of the Reimbursement Agreement and the Pledge and Security Agreement dated as of December 1, 1987 (the "Pledge and Security Agreement") between the Company and the Bank. Credit Facility Bonds will be released from such pledge and delivered to the Company or on its order upon payment to the Bank of the amount of the drawing under the Letter of Credit made with respect to payment of the purchase price of such Credit Facility Bonds, plus the amount of the drawing fee related to such drawing and all interest on such drawing as provided in the Reimbursement Agreement to and through the data of such payment to the Bank. D-1 40 Covenants Vader the Reimbursement Agreement The ComP4ny covenants under the Reimbursement Agreement, among other things: (i) to preserve and maintain its existence, rights, franchises, licenses and privileges in its state of incorporation and to qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorisation, (ii) to couply with the requirements of all laws applicabls to the Company, (iii) to keep its properties in good repair, working order and condition., and to maintain such insurance with respect to its propertisi and business as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated, (iv) to use its b}st efforts to maintain adequate medical malpractice liability insurance, (v) to keep complete and accurate books, records and to permit access by the Bank to the books and records of the Company and to permit the Bank to inspect the properties and operations of the Company, (vi) to pay, when due, all material taxes, assessments and Other liabilities, (vii) to deliver to the Bank from time to time certain financial statements, schedules and reports, and (viii) to remain engaged in business in substantially the same field as its business conducted on the date of the Reimbursement Agreement. In addition to the covenants set forth above, the Reimbursement Agreement contains certain restrictions and limitations applicable to the Company with respect to (i) the sale of other disposition of any of the Projects, (iii) mergers and c$nsolidations involving the Company and the sale by the Company of all or substantially 'all of its assets, (iv) its ability to incur indebtedness, (v) its ability to make certain investments, (vi) its ability to enter into leases and guaranties, (vii) its ability to declare dividends or make other distributions with respect to its capital stock, (viii) its compliance with environmental laws relating to the Projects, (ix) its ability to authorize the redemption of any of the Bonds of any Issue; and (x) its ability to #mend certain documents relating to the Bonds and certain management an¢ other agreements relating to the Projects. ANY AND ALL OF THE ABOVE COVENANTS AND AGREEMENTS OF THE COMPANY MAY BE AMENDED, WAIVED OR MODIFIED AT ANY TIME BY AND BETWEEN THE BANK AND THE COMPANY WITHOyT THE CONSENT OF THE TRUSTEE OR THE BONDHOLDERS. NEITHER THE TRUSTEE NOR 'TfM BONDHOLDERS ARE THIRD PARTY BENEFICIARIES OF OR UNDER, OR ARE IN ANY WAY ENTITLED TO RELY ON, THE REIMBURSEMENT AGREEMENT OR THE COVENANTS OF THE COMPANY CONTAINED THEREIN. Expiration ane` Termination'of Letters of Credit Each Letter of Credit' shall expire as described in "Security and Sources of Payment for the Bonds - Expiration and Termination of Letters of Credit" hereinabove. In addition, each Letter of Credit may be terminated by the Sank prior to the' Stated Expiration Data by delivering to the Trustee a written Notice of To�minatiori in the form set forth in the Reimbursement Agreement. Pursuant to the terms, of the Reimbursement Agreement, the Bank is entitled to t i i • f tters of deliver a Notice he occur snc Termination of an Event respect Of Default undo the the Reimbursement Credit Uponof the Projects, or Agreement, or upon the aal or ether disposition of any orth in the termination or assignment of the management agreement relating to any of the Projects �ithout compliance wsuchith tNotiche ouoi Terminaicements tion mustherefor sba delet f i aced the Raimbursament Agreement. F+nYfor to the Trust%e not less than h14Trustae ofys oanytsuch Noo the tice Ofetorminatiorh Termination. Upon receipt. by the Trustee ,ill thereupon be entitled to draw the entire than remaining Stated Amountof each Lotter of Credit with respect to which such Notice of Termination ii delivered on or before the termination dace act forth in sSch Notice of Tengination. f Company by National fiaalthCorp L.P., and Jamas 0. Guaranty of Obligations o McCarver. Credit, National tadn•As a oPnershipGuarantor", HealthCorpLho Dalawar�limitapartnrhip e and James 0. (deCarver, An ?ndividual resident of the State o(the"Indi d dual owner of 100% of the outstanding capital stock of the Company Guarantor"), 'fill jointly,. severally and unconditionally guaranty payment of the amounts owing by the Company under the Reimbursement Agreement from time to time, payment of certain other amounts owing by the Company from time to time under the provisions of the Mortgages nt to the Guaranty Agr•am ntthe performance of edated other obligations of the Company, all Pursuant as of December 1, 1987 (thy "Guaranty Agreement") by and among the Individual uar, nt r, the Partnership' rt ership'tGuarantor and eing herein rafe redhtolcollectivelyuasnthe and"Guarantors"), Sea "Summary of Certain Provisions of the Guaranty Agreement" herein. I Events of DafJult The following events constitute th.' vnes of Default" under the Reimbursement Agreement unless waived by (a) any representation or warranty made by the Company in the Reimbursement Agreement or in any ce terother financial or tothe Reimbursement Agreement statement furltishad by the Company pursuant lete in any material respect when shall prove �o have been untrue or income made; or. (b) the Company shall fail to pay when duo any amount owed under the Reimbursement Agreement and any such failure shall remain unremedied for ten (10) days after the date on which such payment is due; or (c) the Company shall fail to perform Or observe any other term, in the ent contained respecttto certain or menumerat d failures, such failure shaent llremainunremedieement and, ed for thirty (30) days after written notice thereof shall have been given to the Company by the Hank; or i U-3 s (d) any material provision of the Reimbursement Agreement shall at any time for any reason cease to be valid and binding on the Company, or shall be declared to be null and void, or the validity or enforceability thereof shall be contested by the Company or any governmental authority having jurisdiction, or the Company shall deny that it has any or further liability or obligation under the Reimbursement Agreement; or (e) the Company shall fail to pay when due and payable, after giving effect to any applicable grace period, the principal of or interest on any indebtedness in an aggregate amount exceeding $50,000 (excluding indebtedness under the Reimbursement Agreement and certain indebtedness owing by the Company to the Partnership Guarantor) or the maturity of any such indebtedness shall have been accelerated or been required to be prepaid prior to the stated maturity thereof or any event shall have occurred and be continuing which with the passage of time onthe giving of notice or both, would permit any holder or holders of such indebtedness, any trustee or agent acting on behalf of such holder or holders or any other person so to accelerate such maturity, unless the Company's obligation to pay, or the acceleration or required prepayment of, such indebtedness is being contested or any right of set-off is being asserted by the Company in good faith by appropriate proceedings and reserves in respect thereof deemed adequate by the Company have been established on the books of the Company in accordance with generally accepted accounting principles consistently applied; or (f) a judgment or order for the payment of money shall be entered against the Company by any court or a warrant of attachment or execution or similar process shall be issued or levied against property of the Company, which in the aggregate exceeds $50,000 in value over any applicable issuance coverage or reserve previously established on the books of the Company and such judgment, order, warrant or process shall continue undischarged or unstayed for thirty (30) consecutive days; or (g) (1) the Company shall (A) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, (B) admit in writing its inability to pay its debts generally as they become due, (C) make a general assignment for the benefit of creditors, (D) be adjudicated a bankrupt or insolvent, or (E) commence a voluntary case under the Federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or corporate action shall be taken by it for the purpose of effecting any of the foregoing; or (2) if without the application, approval or consent of the Company, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of the Company an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, D-4 • liquidator or custodian or the like of the Company or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by the Company in good faith, the same shall (A) result in the entry of an order for relief or any such adjudication or appointment or (B) continue undismissed, or pending and unstaged, for any period of sixty (60) days; or (h) certain described events occur with respect to any employee benefit plan or other plan maintained by the Company for its employees including the termination thereof under the provisions of the Employee Retirement Income Security Act of 1974, as amended; or (i) the occurrence of an "event of default" under the provisions of the Guaranty Agreement, the Pledge and Security Agreement, any Indenture, any Loan Agreement, any Mortgage, any Remarketing Agreement or any other document evidencing or securing the Company's obligations under the Reimbursement Agreement or evidencing, securing or executed in connection with any•Issue. A FAILURE BY THE COMPANY OR THE GUARANTORS TO REIMBURSE THE BANK WITH RESPECT TO A DRAW MADE UNDER ANY LEITER OF CREDIT OR A FAILURE BY THE COMPANY TO COMPLY WITH ITS OBLIGATIONS UNDER THE REIMBURSEMENT AGREEMENT AND THE MORTGAGES WITH RESPECT TO ANY PROJECT OR A DEFAULT BY THE GUARANTORS UNDER THE GUARANTY AGREEMENT MAY RESULT IN THE TERMINATION BY THE BANK OF ANY OR ALL OF THE LETTERS OF CREDIT AND IN A CORRESPONDING ACCELERATION OF ANY OR ALL OF THE ISSUES SECURED BY THE LETTERS OF CREDIT SO TERMINATED. Liability of the Bank and Indemnification The Company assumes all risks of the acts or omissions or misuse of any Letter of Credit by the beneficiary thereof. The Company agrees to indemnify and hold harmless the Bank from and against all claims, liabilities, tosses, costs and expenses claimed against or incurred by the Bank in connection with the Letter of Credit. II. SUMMARY OF CERTAIN PROVISIONS OF THE GUARANTY AGREEMENT Certain provisions of the Guaranty Agreement are summarized below. These summaries do not purport to be complete or definitive and are qualified in their entirety by reference to the full terms of the Guaranty Agreement. Guaranty The Guarantors have jointly, severally, absolutely, unconditionally and irrevocably guaranteed to the Bank the full and prompt payment of all amounts owing from time to time to the Bank by the Company under the provisions of the Reimbursement Agreement, the Mortgages, the Pledge and Security Agreement and under any of the other documents evidencing or securing the Company's obligations under the Reimbursement Agreement. D-5 40 Right to Proceed against Guarantors First In the event of a default in the payment of any amount owed to the Bank from time to time the payment of which is guaranteed by the Guarantors under the provisions of the Guaranty Agreement, the Bank, in its sole discretion, will have the right to proceed first and directly against the Guarantors, or either of them, under the Guaranty Agreement without proceeding against the Company or exhausting any other remedies which it may have and without resorting to any other security held by the Bank. Covenants under the Guaranty Agreement The Guarantors covenant and agree under the Guaranty Agreement, among other things: (i) that the Partnership Guarantor and each of its subsidiaries will preserve and maintain their. respective existences, rights, franchises, licenses and privileges in their respective states of incorporation and will qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization; (ii) that the Partnetship Guarantor will comply with the requirements of all laws applicable to it; (iii) that the Partnership Guarantor will keep its properties in good repair, working order and condition, will maintain such insurance with respect to its properties and business as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated, and will cause its subsidiaries to do the same with respect to their own properties; (iv) that the Partnership Guarantor will keep complete and accurate books and records, will permit the Bank access to such books and records and will permit the Bank to inspect the properties and operations of the Partnership Guarantor and its subsidiaries; (v) that the Partnership Guarantor will use its best efforts to maintain adequate medical malpractice liability insurance; (vi) that the Guarantors and each of the subsidiaries of the Partnership Guarantor will pay, when due, all material taxes and assessments; D-6 • (vii) that the Partnership Guarantor and each of its subsidiaries will pay, when due, all material liabilities; and (viii) that the Guarantors will deliver to the Bank from time to time certain financial statements, schedules and reports, and will notify the Bank of defaults under the Guaranty Agreement and of certain litigation and other matters of which the Guarantors, or either of them, has knowledge. In addition to the covenants set forth above, the Partnership Guarantor is required to comply with certain financial covenants, which include the obligation to maintain a specified ratio of current assets to current liabilities, a specified ratio of funded debt to net worth and certain minimum working capital and net worth requirements. The Partnership Guarantor is also subject to certain limitations and restrictions with respect to mergers, consolidations and the sale of assets. ANY AND ALL OF THE ABOVE COVENANTS AND AGREEMENTS OF THE GUARANTORS MAY BE AMENDED, WAIVED OR MODIFIED AT ANY TIME BY AND BETWEEN THE BANK AND THE GUARANTORS WITHOUT THE CONSENT OF THE TRUSTEE OR THE BONDHOLDERS. NEITHER THE TRUSTEE NOR THE BONDHOLDERS ARE THIRD PARTY BENEFICIARIES OF OR UNDER, OR ARE IN ANY WAY ENTITLED TO RELY ON, THE GUARANTY AGREEMENT OR THE COVENANTS OF EITHER OF THE GUARANTORS CONTAINED THEREIN. Subordination The Partnership Guarantor has entered into, or will enter into management agreements with the Company with respect to the Projects. :n addition, the Partnership Guarantor has entered into, or will enter into, certain agreements requiring the Partnership Guarantor to extend certain financial accommodations to the Company, for a fee, to guarantee certain debt incurred by the Company in connection with the Projects. The Partnership Guarantor has agreed that all amounts owing from time to time to the Partnership Guarantor under all such agreements will be subordinated in right of payment to the prior payment in full of all amounts owed under the Guaranty Agreement, the Reimbursement Agreement, the Pledge and Security Agreement, the Mortgages and other related documents. Events of Default The following events constitute "Events of Default" under the Guaranty Agreement unless waived by the Bank: (a) any representation or warranty made by the Guarantors, or either of them, in the Guaranty Agreement or in any certificate or financial or other written statement furnished by such Guarantors pursuant to the Guaranty Agreement shall prove to have been untrue or incomplete in any material respect when made; or D-7 El (b) The Guarantors shall fail to pay any amount owed by the Company or perform any obligation required to be performed by the Company the payment or performance of which is guaranteed by the Guarantors under the Guaranty Agreement; or (c) The Guarantors, or either of them, shall fail to perform or observe any other term, covenant or agreement contained in the Guaranty Agreement to which such Guarantors are subject and, with respect to certain enumerated failure9, such failure shall remain unremedied for thirty (30) days after written notice thereof shall have been given to the Guarantors by the Bank; or (d) any material provision of the Guaranty Agreement shall at any time for any reason cease to be valid and binding on the Guarantors, or either of .them, or shall be declared to be null and void, or the validity or enforceability thereof shall be contested by the Guarantors, or either of them, or any governmental authority having jurisdiction, or the Guarantors, or either of them, shall deny that they have any or further liability or obligation under this Guaranty Agreement; or (e) the Partnership Guarantor shall fail to pay when due and payable, after giving effect to any applicable grace period, the principal of or interest on any indebtedness in an aggregate amount over $100,000 (excluding indebtedness guaranteed under the Guaranty Agreement) or the maturity of any such indebtedness shall have been accelerated or been required to be prepaid prior to the stated maturity thereof or any event shall have occurred and be continuing which with the passage of time or the giving of notice or both, would permit any holder or holders of such Indebtedness, any trustee or agent acting on behalf of such holder or holders or any other person so to accelerate such maturity, unless the Partnership Guarantor's obligation to pay, or the acceleration or required prepayment of, such indebtedness is being contested or any right of set-off is being asserted by the Partnership Guarantor in good faith by appropriate proceedings and reserves in respect thereof deemed adequate by the Partnership Guarantor have been established on the books of the Partnership Guarantor in accordance with generally accepted accounting principles consistently applied; or (f) a judgment or order for the payment of money shall be entered against the Partnership Guarantor by any court or a warrant of attachment or execution or similar process shall be issued or levied against property of the Partnership Guarantor, which in the aggregate exceeds $100,000 in value over any applicable issuance coverage or reserve previously established on the books of the Partnership Guarantor and such judgment, order, warrant or process shall continue undischarged or unstayed for thirty (30) consecutive days; or (g) (1) either Guarantor shall (A) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, (B) admit in writing its inability to pay its debts generally as they become due, (C) make a general assignment for the benefit of 0-8 0 creditors, (D) be adjudicated a bankrupt or insolvent, or (E) commence a voluntary case under the Federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or corporate action shall be taken by it for the purpose of effecting any of the foreqoing; or (Z) if without the application, approval or consent of such Guarantor a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of such Guarantor an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of such Guarantor or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by such Guarantor in good faith, the same shall (A) result in the entry of an order for relief or any such adjudication or appointment or (B) continue undismissed, or pending and unstayed, for any period of sixty (60) days; or (h) an "event of default" shall occur under the provisions of a certain Revolving Credit Loan Agreement executed by the Partnership Guarantor; or (i) certain described events occur with respect to any employee benefit plan or other plan maintained by the Partnership Guarantor or an affiliate of the Partnership Guarantor, including the termination thereof under the provisions of the Employee Retirement Income Security Act of 1974, as amended. A FAILURE BY THE COMPANY OR THE GUARANTORS TO REIMBURSE THE BANK 'WITH RESPECT TO A DRAW MADE UNDER ANY LETTER OF CREDIT OR A FAILURE BY THE COMPANY TO COMPLY WITH ITS OBLIGATIONS UNDER THE REIMBURSEMENT AGREEMENT AND THE MORTGAGES WITH RESPECT TO ANY PROJECTOR A DEFAULT BY THE GUARANTORS UNDER THE GUARANTY AGREEMENT MAY RESULT IN THE TERMINATION BY THE BANK OF ANY OR ALL OF THE LETTERS OF CREDIT AND IN A CORRESPONDING ACCELERATION OF ANY OR ALL OF THE ISSUES SECURED BY THE LETTERS OF CREDIT SO TERMINATED. III. SUMMARY OF CERTAIN PROVISIONS OF THE MORTGAGES The following is the summary of certain provisions of the Mortgages. Each Mortgage will operate independently of every other Mortgage; however, a default under one Mortgage could result in a default under the Reimbursement Agreement and the acceleration of the Bonds of any or all of the Issues. The Mortgages contain similar terms and the following is a summary of certain similar provisions of the Mortgages. These summaries do not purport to be complete or definitive and are qualified in their entirety by refer=nce to the full terms of the Mortgages. D-9 e General Each Mortgage secures payment of (i) the principal of, premium (if any) and interest on the Bonds of the Issue relating to the Project described in such Mortgage and (ii) all amounts owed by the Company to the Bank under the Reimbursement Agreement. So long as the Credit Facility shall be in effect and the Credit Facility Provider shall not have wrongfully failed to honor any demand for funds under the Credit Facility, the security of the Mortgage shall be for the sole benefit of the Credit Facility Provider, it being the intent of the Issuer, the Borrower, and the Bank that the ultimate security for the Bonds shall consist of the Credit Facility and the amounts received by the Issuer or the Trustee under the Loan Agreeement. The Indenture provides that the Trustee must release or modify the Mortgage at the request of the Credit Facility Provider under conditions described under "Summary of Certain Provisions of the Indentures - Amendment of the Loan Agreement and the Mortgage." , Administration of the Mortgages Prior to the time the Bonds secured by any Mortgage shall have been paid in full, and so long as such Bonds are secured by a Letter of Credit or any amounts are owed by the Company to the Bank under the Reimbursement Agreement, the Bank will be entitled to administer, enforce, waive and release any and all of the rights and remedies of the mortgagee under such Mortgage (other than acceleration of the secured indebtedness), without the participation, consent or approval of the Trustee or the bondholders; provided, however, that the administration, enforcement, waiver and release of such rights and remedies shall require the consent of the Trustee so long as the Bank is in default with respect to its obligations under such Letter of Credit. Payment of Taxes and other Charges The Company agrees to pay under the terms of each Mortgage all taxes, assessments and other charges assessed against the property covered by such Mortgage or the obligations secured by such Mortgage and all premiums on the policies of fire and other hazard liability and other insurance covering or relating to such mortgaged property which are required to be maintained in the Mortgage. Care of Mortgaged Property The Company agrees in each Mortgage to maintain the property covered by such Mortgage in good condition and repair, making from time to time the necessary repairs thereto and renewals and replacements thereof. Insurance Throughout the term of each Mortgage, the Company agrees to keep the property covered by such Mortgage continuously insured against such risks as D-10 40 XEROX TELECOPIER 496 212 286 1786+ %s 3 t i are customarily insured against with respect to property similar to such mortgaged property by businesses of like size and type (other than business interruption pr products liability insurance). r I Damage, Destruction and Condemnation Each' Mortgage provides that if the property covered thereby is destroyed in whole or in part or damaged by fire or other casualty, the following provisions will apply: Prior' to the tim4 the Bonds secured by such Mortgage have been paid in full and so long as the Bonds are secured by a Letter of Credit or any amounts owed by the Company under the Reimbursement Agreement remain unpaid, the Company will be required to repair, rebuild or resters the property damaged or destroyed to substantially the same cord#tion as existed prior to the event causing such damage or destfuction and all net proceeds of insurance resulting from claims for losses resultnq from such damage od destruction will be applied to ouch repair, rebuilding or restoration, unless the mortgagor directs the Company to apply available insurance proceeds to redeem Bonds relating to'such Project. Prior to the time the Bonds secured by such Mortgage have been paid in full, and so lonq as there is no Letter of Credit outstanding and no amounts owed by the Company under the Reimbursement Agreement are unpaid,in the event such damage or destruction results from an uninsured casualti and such damage or dtstruetien impairs the ability of the Company to:operate its business at the same level and capacity at which it was operating prior to such damage or destruction, the Company will repair, rebuild or restore the property damaged or destroyed at its own expense to substantially the same condition as existed prior to the event causing such damage or destruction. In the event such ;damage or destruction results from an insured casualty, all net proceeds of insurance resulting from claims for such losses will be applied at the direction of the Company either to the redemption of; the Bonds or to the restoration of the mortgaged property to substantially the same condition as existed prior to such damage or destruction. In the event of tihe condemnation of any mortgaged property, proceeds from such condemnation shall be applied as follows: (a) Prior to the time the Bonds secured by the Mortgage covering such mortgaged property shall have been paid in full, and so long as any amounts remain unpaid under the Reimbursement Agreement or any Letter of Credit remains outstanding, the 1 condemnation proceeds will be applied to the altering, restoring oe rebuilding of any part of the mortgaged property which may have been altered, damiged or destroyed 42 result of any such taking or for any other purpose orobject D-11 satisfactory to the Bank. Any amount remaining after such application will be applied first to a reduction of the amounts owed to the Bank under the Reimbursement Agreement and then shall be paid over to the Company. (b) Prior to the time the Bonds secured by the Mortgage covering such mortgaged property shall have been paid in full, and so long as there is no fetter of Credit outstanding and no amounts are owed to the Bank under the Reimbursement Agreement, all condemnation proceeds shall be applied at the direction of the Company, either to the redemption of Bonds oc to the alteration, restoration or rebuilding of any part of the mortgaged property which may have been altered, damaged or destroyed as a result of any such taking or for any other purpose or object satisfactory to the Trustee. Transfer of Property Except as specifically permitted in the Reimbursement Agreement, the Company will be prohibited in each Mortgage from selling, conveying, transferring, leasing or further encumbering any interest in or any part of the property covered by such Mortgage without the prior written consent of the Bank and, under certain circumstances, the Trustee. D-12 APPENDIX E VARIABLE RATE DEMAND/FIXED RATE INDUSTRIAL DEVELOPMENT REVENUE REFUNDING BONDS (Florida Convalescent Centers, Inc. Project) Sinking Fund Installments The Bonds of each Issue set forth on the cover page to the Official Statement are subject to mandatory sinking fund redemption on January 1 (but, during any Short Fixed Rate Period or any period during which such Bonds bear interest at the Variable Rate, on the first Business Day in January) of the years and in the amounts indicated below, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. The amounts indicated below are subject to change as described in the Official Statement under "The Bonds - Mandatory Sinking Fund Redemption." $4,800,000 Indian River County, Florida, Series 1988A Issue $3,190,000 Polk County Industrial Development Authority, Series 1988A Issue Sinking Fund Sinking Fund Sinking Fund Year Installment Year Installment Year Installment 1989 200,000 1997 150,000 2005 200,000 1990 200,000 1998 200,000 2006 200,000 1991 200,000 1999 250,000 2007 200,000 1992 250,000 2000 200,000 2008 200,000 1993 200,000 2001 200,000 2009 200,000 1994 250,000 2002 250,000 2010 200,000 1995 200,000 2003 200,000 2011 200,000 1996 250,000 2004 200,000 $3,190,000 Polk County Industrial Development Authority, Series 1988A Issue E-1 Sinking Fund Sinking Fund Sinking Fund Year Installment Year Installment Year Installment 1990 90,000 1998 100,000 2006 150,000 1991 100,000 1999 150,000 2007 150,000 1992 100,000 200Q 150,000 2008 150,000 1993 150,000 2001 200,000 2009 150,000 1994 150,000 2002 150,000 2010 150,000 1995 200,000 2003 1501000 2011 150,000 1996 150,000 2004 150,000 1997 150,000 2005 150,000 E-1 J APPENDIX E The Projects, the Enabling Legislation and the Issuers $4,800,000 Indian River County, Florida, Series 1988A Issue The Project. The Project (the "Indian River County Project") to be refinanced with the proceeds of the above -referenced Indian River County, Florida Bonds (the "Indian River County Bonds") consists of the acquisition of certain land located at US 1 and 37th Avenue (Barber Avenue), Vero Beach, Florida and the construction, expansion and equipping thereon of a 91 -bed nursing home facility to provide skilled and intermediate nursing home care. The Indian River County Project is located in Indian River County, Florida. Enabling Legislation. The Indian River County Bonds are being issued pursuant to Part II of Chapter 159, Florida Statutes, as amended (the "Act") and certain resolutions adopted by the Issuer (collectively, the "Resolutions") (the Act and the Resolutions are collectively referred to in the Official Statement as the "Enabling Legislation"). The Issuer. Indian River County, Florida is a political subdivision of the State of Florida and a body politic created and existing under the laws of the State of Florida. The Issuer is authorized by the Enabling Legislation to issue the Indian River County Bonds and lend the proceeds thereof to the Company for the purpose of refinancing the Indian River County Project. $3,190,000 Polk County Industrial Development Authority, Series 1988A Issue The Project. The Project (the "Polk County Project") to be refinanced with the proceeds of the above -referenced Polk County Industrial Development Authority Bonds (the "Polk County Industrial Authority Bonds") consists of the acquisition of certain land located on the north side of Cypress Gardens Boulevard and the east side of 10th Street, S.E., Winter Haven, Polk County, Florida and the construction and equipping thereon of a 60 -bed nursing home facility to provide skilled and intermediate nursing home care. The Polk County Project is located in Polk County, Florida. Enabling Legislation. The Polk County Industrial Development Authority Bonds are being issued pursuant to Parts II and III of Chapter 159, Florida Statutes, as amended (colllectively, the "Act") and certain resolutions of the Issuer (collectively, the "Resolutions") (the Act and the Resolutions are collectively referred to in the Official Statement as the "Enabling Legislation"). E-?. 40 APPENDIX E The Issuer. Polk County Industrial Development Authority is a public body corporate and politic and a public instrumentality of the State of Florida. The issuer is authorized by the Enabling Legislation to issue the Polk County Industrial Development Authority Bonds and lend the proceeds thereof to the Company for the purpose of refinancing the Polk County Project. E-3 • XHI+BITJD 70E-sow-noo A No. 'R"1-13,7 t� $4,800,000 v" Indian River CountV, Florida Oariable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) Series 198_ h16111�?97Q����, '' NOV 198 1' BOND PURCHASE AGREEMENT O Ca}miy ht�orney'v � ;,7, c C (yam rL 198_ BOARD OF COUNTY COMMISSIONERS OF INDIAN RIVER COUNTY, FLORIDA 1840 25th Street Vero Beach, Florid 32960 FLORIDA CONVALESCENT CENTERS, INC. 1111 Mockingbird Lane, Suite 1111 Dallas, Texas 75247 NATIONAL HEALTHCORP L.P. 814 South Church Street Murfreesboro, Tennessee 37130 Ladies and Gentlemen: Alex. Brown & Sons Incorporated (the "Underwriter"), hereby offers to enter into this Bond Purchase Agreement with Indian River County, Florida (the "Issuer") and with Florida Convalescent Centers, Inc. (the "Borrower") and National HealthCorp L.P. ("NHC") for the purchase by the Underwriter of the issue of bonds specified below. This offer is made subject to acceptance by the Issuer prior to 5:00 p.m., local time in Baltimore, Maryland, on the date hereof and, upon such acceptance, this Bond Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the Issuer, the Underwriter, the Borrower and NHC. If this offer is not so accepted, it is subject to withdrawal by the Underwriter upon written notice delivered to the Issuer, NHC and the Borrower at any time prior to such acceptance. 1. Purchase of Bonds; Description. Upon the terms and conditions and upon the basis of the representations herein set 4330x:10/23/87 3002-353 Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 2 forth, the Underwriter, hereby agrees to purchase all (but not less than all) of the issue of bonds described on Exhibit A hereto and made a part hereof (the "Bonds"), at a purchase price of 100% of the principal amount thereof. The Bonds shall be dated as of the first day of the month in which such Bonds are initially delivered and will mature on such dates and in such amounts as set forth on Exhibit A. The Bonds shall bear interest from the•date of their initial delivery at the initial rates and shall have such other terms and provisions as are described in the official Statement hereinafter mentioned. As compensation for the purchase of the Bonds, the Borrower, and NHC shall pay to the Underwriters at the Closing (defined herein) from sources•other than the proceeds of the Bonds an underwriting fee in the amount of one and one-quarter percent (1-1/4%) of the initial aggregate face amount of the Bonds. The proceeds of the Bonds will be loaned by the Issuer to the Borrower pursuant to a Loan Agreement dated as of , 198_ (the "Loan Agreement") in order to_refund currently the (the "Prior Bonds") previously issued by the Issuer to finance the construction and acquisition of a nursing home facility (the "Project") located in the State of Florida. The Bonds shall be issued under and pursuant to (i) the enabling legislation described on Exhibit A (the "Act"), (ii) the authorizing resolution adopted by the Issuer described on Exhibit A (the "Authorizing Resolution") and (iii) an Indenture of Trust dated as of , 198 (the "Indenture"), between the Issuer and Third National Bank in Nashville (the "Trustee"). The Bonds are limited obligations of the Issuer, the principal of and premium, if any, and interest on which are payable solely from the Revenues (defined in the Indenture). The Underwriter agrees to make a bona fide public offering of the Bonds at the initial offering price for the Bonds set forth on the cover page of the Official Statement (as defined in Section 2 hereof), but the Underwriter reserves the right to change such price as the Underwriter may deem necessary or desirable in connection with the marketing of the Bonds and to sell the Bonds to dealers (including dealer banks and dealers depositing Bonds into investment trusts) and others at prices different from the public offering prices. The Underwriter also reserves the right (i) to over -allot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market and (ii) to discontinue such stabilizing, if commenced, at any time. 4330x:10/23/87 3002-353 Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 3 2. Official Statement. The Borrower and NHC shall deliver or cause to be delivered to the Underwriter, promptly upon its acceptance hereof, two copies of the Official Statement of the Issuer, as approved by the Borrower, relating to the Bonds (such Official Statement, including the cover page and all appendices, reports and statements included therein or attached thereto being herein called the "Official Statement"), which Official Statement shall be substantially in the form of the Preliminary Official Statement dated , 198, with respect to the offering of the Bonds (the "Preliminary Official Statement"), with only such changes therein as shall have been accepted by the Underwriter. The Issuer, the Borrower and NHC authorize the use of copies of the Preliminary Official Statement, the Official Statement, the Indenture and the Loan Agreement in connection with the public offering and sale of the Bonds. 3. Certain Representations and Covenants of the Issuer. The Issuer represents and covenants to and with the Underwriter, both at the time of its acceptance hereof and on the date of Closing, as follows: (a) The Issuer is a political subdivision of the State of Florida duly organized and existing under the Constitution and laws of such State. (b) The Issuer has full power and authority to adopt the Authorizing Resolution, to approve the Official Statement, to enter into the Indenture, the Loan Agreement and this Bond Purchase Agreement, to apply the proceeds from the sale of the Bonds as described in the Official Statement, to perform and observe the covenants and agreements on its part contained in this Bond Purchase Agreement, the Indenture and the Loan Agreement and any other agreement or instrument to which the Issuer is a party, used or contemplated for use in the consummation of the transactions contemplated hereby and by the Official Statement and to carry out and consummate all transactions contemplated hereby and by the Official Statement. (c) The statements and information contained in. Appendix E to the Official Statement pertaining to the Issuer are true and correct in all material respects. The Issuer consents to the use of such statements and information in the Official Statement. (d) The Issuer has duly and properly authorized all necessary action for (i) the offering and sale of the Bonds upon the terms set forth herein and in the Official Statement, (ii) the use of the proceeds of the Bonds in the manner set forth in the Official Statement, (iii) the approval and 4330x:10/23/87 3002-353 • Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 4 execution by the Issuer of the Official Statement, (iv) the execution and delivery of the Bonds, the Indenture, the Loan Agreement, this Bond Purchase Agreement and each other agreement or instrument to which the Issuer is a party, contemplated for use in the offering of the Bonds as contemplated hereby and by the Official Statement and (v) the taking of any and all such action as may be required by the Issuer to carry out, give effect to and consummate the transactions to which the Issuer is a party contemplated hereby and by the Official Statement. (e) When delivered to and paid for by the Underwriter in accordance with the terms of this Bond Purchase Agreement, the Bonds will be duly authorized, executed, authenticated, issued and delivered and constitute valid and binding limited obligations of the Issuer in conformity with, and entitled to the benefit and security of, the Indenture. (f) The Issuer will cooperate with the Underwriter and its counsel in taking all necessary action to qualify the bonds for offer and sale under the securities or 'blue sky" laws of such jurisdictions as the Underwriter may reasonably request; provided, however, that the Issuer will not be required to execute a special or general consent to service of process or qualify as a foreign corporation in connection with any such qualification. (g) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or, to the knowledge of the Issuer, threatened, against or affecting the Issuer, wherein an unfavorable decision, ruling or finding would materially adversely affect the transactions contemplated hereby and by the Official Statement, or which, in any way, would adversely affect the validity or enforceability of this Bond Purchase Agreement, the Bonds, the Loan Agreement, the Indenture or any other agreement or instrument to which the Issuer is a party, used or contemplated for use in connection with the transactions contemplated hereby and by the Official Statement. (h) Any certificate signed by any official of the Issuer and delivered to the Underwriter shall be deemed to be a representation by the Issuer to the Underwriter as to the statements made therein. (i) The Issuer has not been notified of any listing or proposed listing of the Issuer by the Internal Revenue Service as an issuer whose arbitrage certifications may not be relied upon. 4330x:10/23/87 3002-353 ILI Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 5 (j) The execution and delivery of this Bond Purchase Agreement, the Loan Agreement, the Indenture and any other agreement or instrument to which the Issuer is a party, used or contemplated for use in the consummation of the transactions contemplated hereby or by the Official Statement, the compliance with the terms and conditions hereof and thereof and the consummation of the transactions herein, therein and in the Official Statement contemplated, do not and will not violate any law or any regulation, order, injunction or decree of any court, governmental body, agency or other public instrumentality or result in a breach of any of the terms and conditions of, or constitute a default under any indenture, mortgage, agreement or other instrument to which the Issuer is a party or by which the Issuer or any of its properties is bound. No approval of, notice to, registration or filing with or other action by any governmental authority or agency is required in connection with the execution or performance of any of such documents by the Issuer except such as have been obtained or such as may be required under the securities or "blue sky" laws of any jurisdiction in connection with the offering and sale of the Bonds. (k) The Issuer will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Official Statement, the Indenture and the Loan Agreement. 6. Representations Warranties and Agreements of the Borrower. The Borrower represents, warrants, covenants and agrees with the Underwriter, both on the date hereof and on the date of Closing, as follows: (a) The Borrower is a corporation duly organized and existing and in good standing under the laws of the State of Florida, has full power and'authority to own its property and to conduct its business and possesses all material licenses and approvals necessary for the conduct of its business, including the ownership and operation of the Project. (b) The Borrower has full power and authority to take all actions required to be taken by it by or under, and to perform and observe the covenants and agreements on its part contained in, this Bond Purchase Agreement, the Remarketing Agreement dated as of , 1987 among the Borrower, NHC and Alex. Brown & Sons Incorporated (the "Remarketing Agreement"), the Loan Agreement, the Reimbursement Agreement dated as of 1 1987 between The Toronto -Dominion Bank, acting through its Chicago Branch and the Borrower (the "Reimbursement Agreement"), and each other agreement and 4330x:10/23/87 3002-353 Board of County Commissioners of Indian River County, Florida, et al. , 1987 Page 6 instrument relating to any of the foregoing to which the Borrower is a party (the "Borrower Documents"). The Borrower has taken all action necessary to be taken by it for the execution, delivery and performance of the Borrower Documents. On the date hereof, this Bond Purchase Agreement has been, and on the date of Closing each of Borrower Documents will have been, duly authorized, executed and delivered by the Borrower and each of the Borrower Documents constitutes the legal, valid and binding obligation of Borrower enforceable in accordance with its terms. (c) The execution and delivery of Borrower Documents by the Borrower, the compliance with the terms, conditions and provisions hereof and thereof and the consummation of the transactions herein and therein contemplated by the Borrower do not and will not violate any law or any regulation, order, writ, injunction or decree of any court, governmental body, agency or other public instrumentality, or result in a breach in any of the terms, conditions or provisions of, or constitute a default under or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower pursuant to the terms of the Borrower's articles of incorporation, bylaws or any mortgage, indenture, agreement or instrument to which Borrower is a party or by which Borrower or any of its properties is bound. (d) All authorizations, consents and approvals of, notices to, registrations or filings with, or actions in respect of any governmental body, agency or other public instrumentality or court required in connection with the execution, delivery and performance by Borrower of Borrower Documents have been obtained, given or taken and all are in full force and effect, provided that no representation is made with respect to compliance with the securities or "blue sky" laws of any state. (e) There is no action,. suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any of its properties except such as has been disclosed in writing to the Underwriter. (f) The Borrower hereby confirms to the Underwriter the representations and warranties made by Borrower in Section 5 of the Reimbursement Agreement, all of which, for such purpose, are hereby incorporated herein by reference. (g) The Borrower has not taken or omitted to take and the Borrower will not take or omit to take, any action that 4330x:10/23/87 3002-353 Board of County Commissioners of Indian River County, Florida, et al. , 1987 Page 7 would have the effect of causing the interest on the Bonds to be includable in the gross income of the holders thereof for federal income tax purposes. (h) Any certificate executed by an authorized officer of the Borrower and delivered to the Underwriter shall be deemed a representation of the Borrower as to the statements made therein. (i) In connection with the issuance of the Prior Bonds, the Borrower furnished to the Issuer certain certificates setting forth certain facts, estimates and certifications concerning the Project and other matters affecting the tax exempt status of the Prior Bonds, which facts, estimates and certifications were relied upon by bond counsel to the Issuer for the Prior Bonds in rendering its opinion with respect to the Prior Bonds. Such facts, estimates and certifications were true and correct as of the respective dates on which they were furnished to the Issuer. On the date of the initial delivery of the Bonds the Borrower will provide to the Issuer and Piper & Marbury, co—bond counsel, a Tax Certificate and Agreement concerning the Project and other matters affecting the tax exempt status of the Bonds (the "Tax Certificate and Agreement"). The Borrower covenants that the facts, estimates and certifications contained in the Tax Certificate and Agreement shall be true, correct and complete. (j) The statements and information in the Of Statement concerning the Borrower, its operations and facilities, the documents and agreements to which it is a party and the Project, are true, correct and complete in all material respects. With respect to such matters, the Official Statement does not omit any information that is necessary to make the statements and information relating thereto not misleading. The Borrower consents to the use of such statements and information in the Official Statement. (k) The Borrower will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate and to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds. 4330x:10/23/87 3002353 40 Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 8 (1) The Borrower has authorized the use of the Official Statement, including all amendments and supplements thereto, by the Underwriter in connection with the public offering and sale of the Bonds and consented to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering and sale of the Bonds. 5. Representations, Warranties and Agreements of NHC. NHC represents, warrants, covenants and agrees with. the Underwriter, both on the date hereof and on the date of Closing, as follows: (a) NHC is a limited partnership duly organized and existing and in good standing under the laws of the State of Delaware, has full power and authority to own.its property and to conduct its business and possesses all material licenses and approvals necessary for the conduct of its business, including the operation of the Project. (b) NHC has full power and authority to take all actions required to be taken by it by or under, and to perform and observe the covenants and agreements on its part contained in, this Bond Purchase Agreement, the Remarketing /198eement, the Guaranty Agreement dated as ofA 7 (the "Guaranty Agreement") between The Toronto -Dominion Bank, acting through its Chicago Branch, and NHC and each other agreement and instrument relating thereto to which NHC is a party (the "NHC Documents"). NHC has taken, all action necessary to be taken by it for the execution, delivery and performance of the Documents. On the date hereof, this Bond Purchase Agreement has been, and on the date of the Closing each of the NHC Documents will have been, duly authorized, executed and delivered by NHC and each of the NHC Documents constitutes the legal, valid and binding obligation of NHC enforceable in accordance with its terms. (c) The execution and delivery of NHC Documents, the compliance with the terms, conditions and provisions hereof and thereof and the consummation of the transactions herein and therein contemplated do not and will not violate any law or any regulation, order, writ, injunction or decree of any court, governmental body, agency or other public instrumentality, or result in a breach in any of the terms, conditions or provisions of, or constitute a default under or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of NHC pursuant to the terms of NHC's partnership agreement or any mortgage, indenture, agreement or instrument to which NHC is a party or by which NHC or any of its properties is bound. 4330x:10/23/87 3002-353 dw Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 9 (d) All authorizations, consents and approvals of, notices to, registrations or filings with, or actions in respect of any governmental body, agency or other public instrumentality or court required in connection with the execution, delivery and performance by NHC of the NHC Documents have been obtained, given or taken and all are in full force and effect, provided that no representation is made with respect to compliance with the securities or "blue sky" laws of any state. (e) There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of NHC, threatened against or affecting NHC or any of its properties except such as has been disclosed in writing to the Underwriter. (f) NHC hereby confirms to the Underwriter the representations and warranties made by NHC in Article III of the Guaranty Agreement, all of which, for such purpose, are hereby incorporated herein by reference. (g) NHC has not taken or omitted to take and NHC will not take or omit to take, any action that would have the effect of causing the interest on the Bonds to be includable in the gross income of the holders thereof for federal income tax purposes. The representations of the Borrower in Section 4(i) are true and correct and those contained in the Tax Certificate and Agreement are true and correct. (h) Any certificate executed by an authorized officer of NHC and delivered to the Underwriter -shall be deemed a representation of NHC as to the statements made therein. (i) The statements and information in the Official Statement concerning NHC, the documents and agreements to which it is a party and the Project, are true, correct and complete in all material respects. With respect to such matters, the Official Statement does not omit any information that is necessary to make the statements and information relating thereto not misleading. NHC consents to the use of such statements and information in the Official Statement. (j) NHC will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate and to determine the eligibility of the Bonds for investment under the laws of such states and 4330x:10/23/87 3002-353 40 Board of County Commissioners of Indian River County, Florida, et al. , 1987 Page 10 other jurisdictions and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds. (k) NHC has authorized the use of the Official Statement, including all amendments and supplements thereto, by the Underwriters in connection with the public offering and sale of the Bonds and consented to the use by the Underwriter, prior .to the date hereof of the Preliminary Official Statement in connection with the public offering and sale of the Bonds. 6. Closin . At 10:00 a.m., local time in Baltimore, Maryland, on, the Borrower at and such other NHC mutuallymeshall agree on which the Underwriter, (herein called the "Closing"), the Issuer will deliver or cause to be delivered to the Underwriter, at the offices of the Underwriter, in New York, New York, or at such other place upon which the Underwriter, the Borrower and NHC mutually agree, the Bonds in definitive form (all the Bonds to be printed on steel engraved borders and imprinted with CUSIP numbers), duly executed and authenticated. At the time of such delivery, the Bonds shall be registered in such names and in such denominations as the Underwriter shall have requested in writing not less than two (2) business days before the Closing. Bonds for which no instructions are received by such date will be registered in the name of Alex. Brown & Sons Incorporated and will be in the denomination of $50,000 or any special denomination authorized by the Indenture. At the time of the Closing, there will be delivered to the Underwriter at the offices of Piper & Marbury, in Baltimore, Maryland, or at such other place upon which the Underwriter, the Borrower and NHC mutually agree, the other documents hereinafter mentioned. At the Closing, the Underwriter will accept delivery of the Bonds and pay the purchase price thereof to the Trustee by check payable in federal or other immediate funds, or by wire transfer of such funds to the order of the Trustee. Simultaneously therewith, the Borrower or NHC shall pay to the Underwriter the underwriting fee referred to in Section 1 hereof by check payable in federal or other immediate funds, or by wire transfer of such funds to the order of the Underwriter. The Bonds will be made available to the Underwriter for checking and packaging at least one (1) business day prior to the Closing. 7. Conditions to Obligations of the Underwriter_. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations and agreements of the -Issuer, the Borrower and NHC herein. The obligation of the Underwriter to purchase the Bonds is subject to (i) the performance by the Issuer, the Borrower and NHC of their respective obligations to 4330x:10/23/87 3002-353 40 Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 11 be performed hereunder, both on the date hereof and at and prior to the Closing, and (ii) the accuracy of the representations of the Issuer, the Borrower and NHC herein, as of the date hereof and as of the Closing. In the Underwriter's discretion, such obligation is also subject to the following further conditions: (a) At the time of Closing (i) the Official Statement shall.be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter, (ii) the Indenture, the Loan Agreement, the Mortgage, the irrevocable Letter of Credit securing the Bonds issued by The Toronto -Dominion Bank, acting through its Chicago Branch (the "Bank") in the initial stated amount equal to the aggregate principal amount of the Bonds plus 58 days' interest thereon calculated at the rate of 15% per annum (the "Letter of Credit"), the Reimbursement Agreement and the Remarketing Agreement shall be in full force and effect, shall be in the form provided to the Underwriter on the date of this Bond Purchase Agreement with only such changes as have been approved by* the Underwriter and shall not have been amended, modified or supplemented in any other manner except as shall have been approved by the Underwriter, (iii) the Issuer shall have duly adopted and there shall be in full force and effect such further resolutions, orders and other proceedings as, in the opinion of Shutts & Bowen, Miami, Florida, and of Piper & Marbury, Baltimore, Maryland, co -bond counsel, (collectively, "Bond Counsel") shall be necessary in connection with the transactions contemplated hereby, and (iv) the Official Statement shall be in the form provided to the Underwriter on the date of this Bond Purchase Agreement, with only such changes as shall have been approved by the Underwriter. (b) At or prior to the Closing, the Underwriter shall receive (i) two certified copies of the Authorizing Resolution and any other proceedings of the Issuer pertaining to the authorization of the transactions contemplated hereby and by the Official Statement, (ii) two certified copies of the Indenture, the Loan Agreement, the Reimbursement Agreement and the Remarketing Agreement, (iii) two copies of the Official Statement executed by the Issuer and the Borrower and two copies of the Preliminary Official Statement, (iv) two specimen copies of the Letter of Credit, and (v) two signed copies of all reports of consultants included in the Official Statement. (c) At the Closing, the Underwriter shall receive each of the following: 4330x:10/23/87 3002-353 Ll Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 12 (i) the approving opinion of Bond Counsel, addressed to the Issuer and dated the date of Closing, substantially in the form set forth in Appendix C to the Official Statement, accompanied by (A) opinions and letters of Bond Counsel, dated the date of the Closing and addressed to the Underwriter, substantially in the forms set forth in Exhibit B hereto, (B) an opinion of harles R. Vitunac Count Attorneyof the Issuer, substantially in the form set ort 3.n Exhibit 13 Hereto," and tu) a letter from Bond Counsel, dated the date of Closing and addressed to the Underwriter, to the effect that the approving opinion of Bond Counsel may be relied upon by the Underwriter to the same extent as if such opinion was addressed to the Underwriter; (ii) an opinion of John F. Robenalt, Esquire, Lima, Ohio, counsel to the Borrower, dated the date of Closing and addressed to the Underwriter, substantially in the form of Exhibit C hereto; (iii) an opinion of Harwell, Barr, Martin & Steagall, Nashville, Tennessee, counsel to NHC, dated the date of Closing and addressed to the Underwriter, substantially in the form of Exhibit D hereto; (iv) opinions of Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia, special counsel to the Bank, dated the date of Closing and addressed to the Underwriter, substantially in the form of Exhibits E and F hereto; (v) an opinion of Mayer, Brown & Platt, Chicago, Illinois, Illinois counsel to the Bank, dated the date of Closing and addressed to the Underwriter, substantially in the form of Exhibit G hereto; (vi) an opinion of McCarthy & McCarthy, Toronto, Ontario, Canada, Canadian counsel to the Bank, dated the date of Closing and addressed to the Underwriter, substantially in the form of Exhibit H hereto; (vii) an opinion of Piper & Marbury, Baltimore, Maryland, counsel to the Underwriter, dated the date of Closing and addressed to the Underwriter, in form and substance satisfactory to the Underwriter; (viii) a certificate of the Borrower, dated the date of Closing, signed for and on behalf of the Borrower by an authorized officer of the Borrower in form and substance satisfactory to the Underwriter to the effect that (A) the Borrower has duly performed all of its obligations and has satisfied all conditions on its part to be performed or 4330x:10/23/87 3002-353 0 Board of County Commissioners of Indian River County, Florida, et al. , 1987 Page 14 certified by the appropriate officials of the State of Delaware; and (B) partnership agreement of NHC; (xiii) written confirmation satisfactory to the Underwriter from Moody's Investors Service that the Bonds have been assigned a short-term rating of "VMIG-1" or "P-1" and a long-term rating of "Aaa" by such rating agency; (xiv) executed copies of the Issuer's certifications as to arbitrage and other matters relative to the tax status of the Bonds under the Internal Revenue Code of 1986, as amended; (xv) executed copies of the Borrower's Tax Certificate and Agreement; and (xvi) such additional legal opinions, certificates and documents as the Underwriter may reasonably request, in form and substance satisfactory to the Underwriter and its counsel. 8. Amendments or Supplements to Official Statement. The Issuer and the Borrower agree not to issue any amendment to the Official Statement which has not been accepted by the Underwriter. NHC and the Borrower agree that if, prior to Closing and before a period of 90 days shall have elapsed after the Closing (or for such longer period as may be requested by the Underwriter prior to the expiration of such 90 day period if the Official Statement is required by law to be delivered in connection with sales by the Underwriter or any securities dealer after the expiration of such period of 90 days), any event shall occur as a result of which the Official Statement (as then amended or supplemented) would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading, NHC and the Borrower shall so notify the Underwriter and, if such event has occurred in the judgment of the Underwriter, shall, prepare and furnish without charge to the Underwriter and to any such securities dealer a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to the Underwriter and its counsel)'that will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the' statements therein, in light of the circumstances existing at the time it is delivered to a purchaser, not misleading. 9. Cancellation of Agreement. The Underwriter shall have the right to cancel this Bond Purchase Agreement by notification to the Issuer, NHC and the Borrower if, at any 4330x:10/23/87 3002-353 • Board of County Connissioners of Indian River County, Florida, et al. , 1987 Page 13 satisfied hereunder at or prior to the Closing and that each of the representations of the Borrower herein is true and correct in all material respects as of the date of the Closing; and (B) to the best of his knowledge, no Event of Default, as defined in the Indenture, the Loan Agreement or the Reimbursement Agreement, or any default under the Remarketing Agreement or event that, with the lapse of time or the giving of notice or both, would constitute such an Event of Default or default has occurred and is continuing; (ix) a certificate of the Issuer, dated the date of Closing, signed for and on behalf of the Issuer by an authorized officer of the Issuer in form and substance satisfactory to the Underwriter to the effect that (A) the Issuer has duly performed all of its obligations and has satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing and that each of the representations of the Issuer herein is true and correct in all material respects as of the date of the Closing; and (B) to the best• of his knowledge, no Event of Default, as defined in the Indenture or event that, with the lapse of time or the giving of notice or both, would constitute such an Event of Default has occurred and is continuing; (x) two certified copies of each of the following: (A) resolutions of the board of directors of the Borrower consenting to the distribution of the Preliminary Official Statement,approving the Official Statement and authorizing the execution and delivery of each of the Borrower Documents; (B) articles of incorporation of the Borrower certified by the appropriate officials of the State of Florida and (C) bylaws of the Borrower; (xi) a certificate of NHC, dated the date of Closing, signed for and on behalf of NHC by an authorized officer of NHC in form and substance satisfactory to the Underwriter to the effect that (A) NHC has duly performed all of its obligations and has satisfied all conditions on its part to be performed or satisfied hereunder at or prior to Closing and that each of the representations of NHC herein is true and correct in all material respects as of the date of the Closing and (B) to the best of his knowledge, no Event of Default, as defined in the Indenture, the Loan Agreement, the Reimbursement Agreement, or any default under the Remarketing Agreement or the Guaranty Agreement, or event that, with lapse of time or the giving of notice or both, would constitute such an Event of Default of default has occurred and is continuing; (xii) two certified copies of each of the following: (A) certificate of limited partnership of NHC 4330x:10/23/87 3002-353 40 Board of County Commissioners of Indian River County, Florida, et al. , 1987 Page 15 time subsequent to the date of this Bond Purchase Agreement and at or prior to the Closing: (i) the market for the Bonds or the market generally for obligations of the general character of the Bonds or the ability of the Underwriter to sell the Bonds at the contemplated offering prices shall, in the reasonable opinion of 'the Underwriter, have been materially adversely affected by (A) an amendment to or proposal to amend the Constitution of the State of Florida or any Federal or Florida legislation or proposed legislation or any decision of any Federal or state court or any ruling or regulation (final, temporary or proposed) or official statement on behalf o£' the Treasury Department of the United States, the Internal Revenue Service or other Federal authority or authority of the State of Florida, or any other action or event affecting, directly or indirectly, the Federal or Florida tax status of the Issuer or bonds of the Issuer (including the Bonds) or the interest thereon, or the Federal or Florida tax consequences of any of the transactions contemplated hereby and by the Official Statement; or (B) an engagement in hostilities by the United States of America or other national or international emergency or calamity; or (C) a general suspension of or material limitation on trading on the New York Stock Exchange or other national securities exchange, the establishment of minimum or maximum prices on such exchange or the declaration of a general banking moratorium by the authorities of the United States of America, the State of Florida or the State of New York; or (D) the establishment of any new restrictions on transactions in securities materially affecting the free market for securities or the extension of credit by, or the charge to the net capital requirements of, underwriters established by the New York Stock Exchange or other national securities exchange, the Securities and Exchange Commission, any other Federal or state agency or the Congress of the United States of America, or by Executive Order of the President of the United States of America; or (E) the withholding of registration, exemption, or clearance of the offering of the Bonds by the "blue sky" or securities commission or commissioner of any state; or (F) a supplement tc or amendment of the Official Statement; or (ii) any Federal or state court decision or ruling or regulation (final, temporary or proposed) of the Securities and Exchange Commission or other governmental agency shall have been made or issued to the effect that (i) the Bonds or any securities of a type similar to the bonds of the Issuer or any similar body or any instrument pertaining thereto are subject to the registration requirements of the Securities Act of 1933, as amended, or (ii) the qualification of the Indenture or any other agreement in respect of the Bonds is required under the Trust Indenture Act of 1939, as amended; or 4330x:10/23/87 3002-353 L Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 16 (iii) there shall exist any event or condition that, in the reasonable opinion of the Underwriter, either (A) makes untrue or incorrect in any material respect any statement or information contained in the Official Statement or (B) is not reflected in the official Statement but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect; or (iv) there shall have been any materially adverse change in the affairs of NHC or the Borrower; or (v) a supplement to or amendment of the Official Statement shall have been made subsequent to the date hereof that, in the reasonable judgment of the Underwriter, materially and adversely affects the market price or the marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale of the Bonds. If the Issuer, the Borrower or NHC shall be unable to satisfy the conditions to the obligation of the Underwriter contained in this Bond Purchase Agreement, or if the obligations of the Underwriter hereunder shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement may be cancelled by the Underwriter, and, upon such cancellation, neither the Underwriter, the Borrower, NHC nor the Issuer shall be under any further obligation hereunder except as provided in paragraph 12 hereof. 10. Expenses. (a) The Borrower and NHC, on behalf of themselves and the Issuer, shall pay all costs and expenses incident to the performance of the obligations of the Issuer, the Borrower and NHC under this Bond Purchase Agreement, including (without limitation) (i) the cost of. preparing (including printing and distributing) this Bond Purchase Agreement, the Indenture, the Loan Agreement, the Letter of Credit, the Remarketing Agreement, the Reimbursement Agreement, the Preliminary Official Statement, the Official Statement, the Blue Sky memoranda and legal investment surveys (in such reasonable quantities as the Underwriter shall request); (ii) the cost of preparing, printing and delivering the Bonds; (iii) any fees charged by rating agencies for rating the Bonds; and (iv) the fees and disbursements of Shutts & Bowen and Piper & Marbury, as co -bond counsel, and any other expert or consultant retained by the Issuer, the Borrower or NHC. (b) The Underwriter shall pay (i) all advertising expenses in connection with their public offering and distribution of the Bonds; (ii) the CUSIP Service Bureau 4330x:10/23/87 3002-353 7 - Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 17 charge; and (iii) all out-of-pocket expenses of the Underwriter related to the purchase and sale of the Bonds, including the fees and disbursements of counsel for the Underwriter. 11. Limited Liability of fssuer; Immunity of officers of the Issuer. (a) No amounts shall be payable by the Issuer hereunder. (b) No recourse shall be had for the payment of any amount due hereunder or for any claim based thereon or otherwise in respect thereof or of this Bond Purchase Agreement against any officer or employee of the Issuer whether past, present or future, whether by virtue of any constitution, statute or rule of law, all such liability (if any) being hereby expressly waived and released by the other parties hereto. 12. Indemnification. (a) The Borrower and NHC jointly and severally agree to indemnify and hold harmless the Issuer, its officers and employees and members of its legislative body, and the Underwriter and each person who controls any Underwriter within the meaning of Section 15 of the Securities Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act or under any other statute or common law and to reimburse each such person for any legal or other expenses (including, to the extent hereinafter provided, reasonable counsel fees) incurred by them in connection with investigating any such losses, claims, damages or liabilities or in connection with defending or settling (if settled with the written consent of the Borrower and NHC) any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon the assertion that the information contained in the Preliminary Official Statement or the Official Statement (excluding any information under the headings "Underwriting" and "Legal Matters"), contains any untrue statement, or alleged untrue statement, of a material fact or omits or allegedly omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the indemnity agreement contained in this Section shall not apply to any such losses, claims, damages, liabilities, expenses or actions arising out of, or based upon any .such untrue statement or alleged untrue statement or omission was made in reliance upon and in conformity with information furnished in writing to 4330x:10/23/87 3002353 40 Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 18 the Borrower and NHC by the Underwriter expressly for use in the Official Statement; and provided, further, that the indemnity agreement contained in this Section shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) on account of any such losses, claims, damages, liabilities, expenses or actions arising from the sale of Bonds to any person if such Underwriter failed to send or give a copy of the Official Statement (as it may have been amended or supplemented) (excluding documents incorporated by reference) to such person with or prior to the written confirmation of the sale involved. The indemnity agreement of the Borrower and NHC contained in this Section and the covenants, representations and warranties of the Borrower and NHC contained in Sections 4 and 5 hereof, respectively, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any such controlling person and shall survive the delivery of the Bonds. The Underwriters agree promptly to notify the Borrower and NHC of the commencement of any litigation or proceedings against them or any of them' or any such controlling person in connection with the sale of the Bonds. The foregoing indemnity agreement is in addition to any further liability which the Borrower and NHC may have to any Underwriter, the Issuer or any of their directors, officers or controlling persons. In addition to the foregoing, the Borrower and NHC will indemnify the Issuer and each officer, employee or member of the legislative body thereof,, according to the foregoing terms, against claims asserted against them, if such claims arise out of or are based on the assertion that there is any untrue statement, or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in the Preliminary Official Statement or. Official Statement, required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) The Issuer, its officers and employees and members of its legislative body, and the Underwriter agree that, upon the receipt of notice of the commencement of any action against it, its officers and employees, or members of its legislative body, or any person controlling it as aforesaid in respect of which indemnity may be sought on account of any indemnity agreement contained herein, it will promptly 'give written notice of the commencement thereof to the party or parties against whom indemnity shall be sought hereunder.' The omission so to notify such indemnifying party or parties of any such action shall reduce the liability of the indemnifying party or parties by the amount of damages attributable to the failure of the indemnified party to give such notice to the 4330x:10/23/87 3002-353 e Board of County Commissioners of Indian River County, Florida, et al. , 1987 Page 19 indemnifying party or parties but shall not otherwise relieve such indemnifying party or parties from any liability which its or they may have to the indemnified party. In case such notice of any such action shall be so given, such indemnifying party shall be entitled to participate at its own expense in the defense or, if it so elects, to assume (in conjunction with any other indemnifying party or parties and satisfactory to the indemnified party or parties who shall be defendant or defendants in such action, and such defendant or defendants shall bear the fees and expenses of any additional counsel retained by them; but if the indemnifying party shall elect not to assume the defense of such action, such indemnifying party will reimburse such indemnified party or parties for the reasonable fees and expenses of any counsel retained by them. In the event that the parties to any such action (including impleaded parties) include both the indemnified party or parties and the indemnifying party and any of the indemnified parties shall have been advised by counsel chosen by it that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party or parties and will reimburse the indemnified party or parties as aforesaid for the reasonable fees and expenses of. any counsel retained by such indemnified party or parties, it being understood that the indemnifying party shall not, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all such indemnified parties, which firm shall, in connection with indemnification provider: for in (a) above, be designated in writing by the Underwriter. (c) If the indemnification provided for in this Section is unavailable to an'indemnified party under subsection (a) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such, proportion as is appropriate to reflect the relative benefits received by the Borrower and NHC on the one hand and the Underwriter on the other from the offering of the Bonds. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (b) above, then each indemnifying party shall contribute to such amount_ paid or payable by such indemnified party in such proportion as is 4330x:10/23/87 3002-353 El Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 20 appropriate to reflect not only such relative benefits but also the relative fault of the Borrower and NHC on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Borrower and NHC on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as the total net proceeds from such offering (before deducting expenses) received by the Borrower bear to the total underwriting commissions received by the Underwriter. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to • information supplied by the Borrower or NHC or by the Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Borrower and NHC and the Underwriter agree that it would not be just and equitable if contribution pursuant to this subsection (c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (c). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Borrower and NHC under this paragraph (c) are joint and several. 13. Joint and Several Liability. The obligations of the Borrower and NHC to pay any amounts under this Bond Purchase Agreement (including, but not limited to, the obligation of the Borrower and NHC to pay the underwriting fee, to pay certain expenses, to pay damages and to indemnify the Issuer and the Underwriter) shall be joint and several. 14. Miscellaneous. (a) Any notice or other communication to be given under this Bond Purchase Agreement may be given by delivering the same in writing to (i) the addresses set forth above, in the case of any notice to the Issuer, the Borrower or NHC and (ii) in the case of any notice to the Underwriter, to Alex. Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention: John E. Cheney. 4330x:10/23/07 3002-353 L Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 21 (b) This Bond Purchase Agreement is solely for the benefit of the Issuer, the Borrower, NHC, the Underwriter and their respective successors, and no other person shall acquire or have any right under or by virtue of this Bond Purchase Agreement. The term "successors" as used in this Bond Purchase Agreement shall not include any purchaser of .the Bonds, as such purchaser, from the Underwriter. (c) All the representations and agreements of the Issuer, the Borrower and NHC in this Bond Purchase Agreement shall remain operative and in full force and effect and shall survive delivery of and payment for the Bonds hereunder, regardless of any investigation made by or on behalf of the Underwriter. (d) The term "business day" as used in this Bond Purchase Agreement shall mean any day on which the New York Stock Exchange is open for business. (e) This Bond Purchase Agreement shall be- governed by, and construed in accordance with, the laws of the State of Maryland. (f) This Bond Purchase Agreement may not be assigned by the Issuer, the Borrower, NHC or the Underwriter without the prior written consent of the other parties hereto. (g) Section headings have been inserted in this Bond Purchase Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Bond Purchase Agreement and will not be used in the interpretation of any provision of this Bond Purchase Agreement. (h) This Bond Purchase Agreement may be executed in any number of counterparts, 'each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 4330x:10/23/87 3002-353 do Board of County Commissioners of Indian River County, Florida, et al. 1997 Page 22 If the foregoing is acceptable to you, please sign below and this Bond Purchase Agreement will become a binding agreement between us. Very truly yours, ALEX. BROWN & SONS INCORPORATED By: Accepted and confirmed as of the date first above written: BOARD OF COUNTY COMMISSIONERS INDIAN RIVER COUNTY, FLORIDA By: Authorized Officer FLORIDA CONVALESENT CENTERS, INC. By Authorized Officer NATIONAL HEALTHCORP L.P. By: General Partner 4330x:10/23/67 3002353 • Board of County Commissioners of Indian River County, Florida, et al. 1987 Page 23 EXHIBIT A to the Bond Purchase Agreement DESCRIPTION OF BONDS 1. Issue: $4,800,000 Indian River County, Florida variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series 198_ 2. Due: January 1, 2011_ 3. Initial Interest Rate: 4. Enabling Legislation: Part II of Chapter 159, Florida Statutes, as amended. S. Authorizing Resolution: 4330x:10/23/07 3002-353 i EXHIBIT B [Letterhead of County Attorney or Issuer's Counsel] (PREAMBLE) I am of the following opinion: 1. The Issuer is a [public body corporate and politic and a public instrumentality] (body politic and a political subdivision] of the state of Florida, duly vested with all of the powers conferred upon it by the Act. 2. The officers of the Issuer have been duly elected. 3. The Issuer has lawful authority to lend funds to the Borrower for the refinancing of the acquisition, construction and equipment of the Project in accordance with the terms of the Loan Agreement. 4. The Issuer has the right, power and authority to issue and sell the Bonds; and the Bonds have been duly and validly authorized and issued in accordance with the laws of the State of Florida, including the Act. The Bonds are legal, valid and binding obligations of the Issuer enforceable in accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Indenture and the Act. The Bonds are a limited obligation of the Issuer payable solely from the Revenues. Neither the credit of the,Issuer nor the taxing power of the Issuer, the State of Florida or any political subdivision thereof is pledged for the payment of the principal of, premium, if any, or interest on, the Bonds. 5. The Issuer has the right and power to adopt the Authorizing Resolution. The Authorizing Resolution has been duly adopted by the Issuer at a meeting duly called, noticed and held in accordance with the Constitution and laws of the State of Florida, has not been amended, modified or repealed since its adoption and from its effective date has at all times been, and as of the date hereof is, a valid resolution of the Issuer in full force and effect, and the Loan Agreement, the 9751a:10/22/87 3002-353 40 EXHIBIT B Indenture, the Bond Purchase Agreement and the official Statement are each substantially in the forms authorized in the Resolution. 6. The Bonds, the Loan Agreement, the Indenture and the Bond Purchase Agreement have been duly authorized, executed and delivered by the Issuer. 7. The Official Statement has been duly approved and executed by the Issuer and the distribution thereof has been duly approved by the Issuer. ' The distribution of the Preliminary Official Statement has been ratified by the Issuer. 8. The execution and delivery by the Issuer of the Bonds, the Loan Agreement, the Indenture, the Bond Purchase Agreement, the Official Statement and the other agreements contemplated thereby, and compliance with the provisions thereof, will not conflict with, or constitute on the part of the Issuer a breach of, or default under, any existing law, court order, or any provision of any legislative act, constitutional or other proceedings applicable to or establishing or relating to the establishment of the Issuer or its affairs or resolutions, or any agreement, indenture, mortgage, lease, or other instrument to which the Issuer is subject or by which it is bound. 9. There is no action, suit, proceeding, or investigation at law or in equity or before or by any court, public board, or body pending or, to the best of my knowledge, threatened against or affecting the Issuer, or any basis therefor, wherein an unfavorable decision, ruling, or finding would restrain or enjoin the issuance and sale of the Bonds, or which, in any way, would adversely affect the validity of the Bonds, the Loan Agreement, the Indenture, the Bond Purchase Agreement, or any other agreement or instrument to which the Issuer is a party and which is used or contemplated for use in consummation of the transactions contemplated by the Indenture or the Official Statement. [OPINIONS CUSTOMARILY RENDERED BY ISSUER'S COUNSEL OR COUNTY ATTORNEY IN CONNECTION WITH THE ISSUANCE OF INDUSTRIAL DEVELOPMENT REVENUE BONDS TO BE ADDED.] 9751a:10/22/87 3002-353 very truly yours, 40 EXHIBIT B [Letterhead of Co -Bond Counsel] Ladies and Gentlemen: We rendered legal advice and assistance in the preparation of the Official Statement dated- 198 , relating to the (INSERT NAME OF ISSUERS Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series (the "Bonds")]. Rendering such assistance involved, among other things, discussions and inquiries concerning various legal and related subjects and reviews of and reports on certain public records, documents and proceedings. We also corresponded with and participated in conferences with representatives of the (INSERT NAME OF ISSUER], Florida Convalescent Centers, Inc., National HealthCorp L.P., Alex. Brown 6 Sons Incorporated, The Toronto -Dominion Bank, and their respective counsel, through which correspondence and at which conferences the contents of portions of the Official Statement and related matters were discussed and revised. On the basis of the information that was developed in the course of the performance of the services referred to above, considered in the light of the experience we have gained in this field, but without having undertaken to determine independently the accuracy, or completeness of the statements contained in the Official Statement, nothing has come to our attention that would lead us to believe that the Official Statement (except for the financial and statistical data included in the Official Statement and the material contained in Appendix A to the Official Statement, as to which no view is expressed) contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not materially misleading. 9751a:10/22/87 3002-353 • EXHIBIT B The limitations inherent in the independent verification of factual matters and the character of determinations involved in the preparation of the Official Statement are such, however, that we do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement except as expressly provided herein. Based on the correspondence, discussions, inquiries and other matters outlined above, the portions of the Official Statement captioned as follows fairly summarize the legal matters therein referred to; "Introductory Statement" (only the second and third sentence of the first paragraph, the second, fifth, and sixth paragraphs and the second and third sentences of the eighth paragraph); "The Bonds"; "Security and Sources of Payment for the Bonds -- Limited obligations"; "Security and Sources of Payment for The Bonds -- Substitute Credit Facilities"; "Definitions of Certain Terms"; "Summary of Certain Provisions of the Indentures"; "Summary of Certain Provisions of the Loan Agreements"; "Tax Exemptions"; "Legal Matters" (only the first paragraph); "Miscellaneous" (only the last paragraph); Appendix B; Appendix C; and Appendix E (except for material under each subheading entitled 'The Project" or "Relationships"). We do not express any opinion or belief as to the financial and statistical data contained in the Official Statement or as to the material contained in Appendix A to the Official Statement. This letter is furnished by us to meet the requirement of Section 7(c)(i) of the Bond Purchase Agreement dated , 198_ pertaining to the Bonds, and is furnished solely for your benefit. 9751a:10/22/87 3002-353 very truly yours, 77 EXHIBIT B (Letterhead of Co -Bond Counsel) It is our opinion that: (a) The Issuer has full power and authority to issue the Bonds, to apply the proceeds from the sale of the Bonds as described in the Official Statement, to perform and observe the covenants and agreements on its part contained in the Bond Purchase Agreement and to carry out and consummate all transactions contemplated by the Bond Purchase Agreement and the Official Statement to be carried out or consummated by the Issuer. (b) The Bond Purchase Agreement has been duly authorized, executed and delivered by the Issuer and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes the valid and binding agreement of the Issuer in accordance with its terms. (c) The Bond Purchase Agreement is subject to applicable bankruptcy, insolvency, moratorium, reorganization and other state and federal laws affecting the enforcement of creditors' rights and to general principles of equity. Enforceability of the Bond Purchase Agreement may also be limited by applicable securities laws and public policy. (d) The Issuer has duly consented to the distribution of the Preliminary Official Statement dated 1 198 relating to the Bonds and has duly executed and approved the distribution of the Official Statement. (e) The Bonds are not required to be registered under the Securities Act of 1933, as amended, and the Indenture is not required to be .qualified under the Trust Indenture Act of 1939, as amended. 9751a:10/22/87 3002-353 EXHIBIT B This opinion is furnished by us to meet the requirement of Section 7(c)(i) of the Bond Purchase Agreement and is furnished solely for the benefit of the Underwriter. Very truly yours, 9751a:10/22/07 3002-353 • EXHIBIT B (LETTERHEAD OF PIPER & MARBURY] 198 Alex. Brown & Sons Incorporated Baltimore, Maryland Re: i Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project) Series 1987 Gentlemen: You have requested our opinion as to whether payment by the Trustee or the Registrar and Paying Agent (each defined herein) of the principal or redemption price of and interest on, or the purchase price of, the above -captioned bonds (the "Bonds") to the holders thereof from Available Moneys (defined herein) or with amounts realized from payments on Government Obligations (defined herein) purchased with Available Moneys would be avoidable under the preference avoiding powers of a trustee in bankruptcy of the Borrower (defined herein) or the Issuer (defined herein) under Section 547 of the United States Bankruptcy Code, 11 U.S.C. Section 101 et sec., as presently constituted (the "Bankruptcy Code"), in the event that the Borrower or the Issuer becomes the subject of a case under the Bankruptcy Code. In preparing this opinion, we have examined the Indenture of Trust dated as of 198_ (the "Indenture") between (the "Issuer") and Third National Bank in Nashville, as trustee (the "Trustee"), the Loan Agreement dated as of 1 198 (the "Loan Agreement"), between the Issuer and Florida Convalescent 4751a:10/22/87 3002-353 40 EXHIBIT B Centers, Inc. (the "Borrower"), the Promisory Note dated as of '198 (the "Note") issued by the Borrower and delivered to the Issuer in accordance with the Loan Agreement, the Remarketing Agreement dated as of , 198- among the Borrower, National HealthCorp, L.P. ("NHC") and Alex. Brown and Sons Incorporated (the "Remarketing Agent"), the Reimbursement Agreement dated as of , 198 (the "Credit Facility Agreement") between the Borrower and The Toronto -Dominion Bank, acting through its Chicago Branch (the "Credit Facility Provider"), the Letter of Credit of even date herewith (the "Credit Facility" )issued by the Credit Facility Provider, the Guaranty Agreement dated as of 198 (the "Guaranty Agreement") between NHC and theCredit Facility Provider, the Bankruptcy Code, and such other material as we deemed relevant to rendering this other material as we deemed relevant to rendering this opinion. Reference is made to our opinion of even date with respect to the Bonds, which has been delivered to you. Pursuant to the Loan Agreement, the proceeds of the Bonds will be deposited in accordance with the Indenture. The Loan Agreement provides that the Borrower shall have no legal or equitable interest in the proceeds of the Bonds or any proceeds of any investment thereof except to require their application in the manner and under the terms and conditions set forth in the Indenture. Pursuant to the Indenture, the proceeds of the Bonds have been pledged as security for the payment of the principal and redemption price of and interest on, and the purchase price of, the Bonds and, to the extent provided therein, the amounts due under the Credit Facility Agreement. The Indenture creates the Debt Service Fund, which includes the Interest Account, the Principal Account and the Purchase Account. Section 4.05 of the Indenture provides that, so long as the Credit Facility remains in effect, unless the Credit Facility Provider shall have wrongfully failed to honor a demand for funds under the Credit Facility, no moneys shall be deposited in the Debt, Service Fund except moneys that constitute Available Moneys. "Available Moneys" is defined in the Indenture to mean moneys held by or on behalf of the Trustee or the Registrar and Paying Agent (defined in the Indenture) (i) that constitute proceeds of Bonds; (ii) that were received by the Trustee or the Registrar and Paying Agent from the remarketing of the Bonds by the Remarketing Agent; (iii) that were realized by the Trustee or the Registrar and Paying Agent under the Credit Facility; (iv) that were received by the Trustee from or on behalf of the Issuer or the Borrower that have been on deposit with the Trustee for at least 124 days during which no 9751a:10/22/87 3002-353 EXHIBIT B proceeding by or against the Issuer or the Borrower (as the case may be) under any federal or state bankruptcy or insolvency law or any similar law in effect on the date of the Indenture or thereafter enacted shall have been commenced or be pending, unless such proceeding shall have been dismissed and such dismissal shall be final and not subject to appeal; (v) that constitute proceeds (including, without limitation, investment earnings) of any of the foregoing; and (vi) with respect to which there shall have been delivered to the Trustee an opinion of nationally -recognized counsel experienced in bankruptcy matters to the effect that the payment of such moneys to the holder of any Bond will not be avoidable under the preference avoidance powers of a trustee in bankruptcy of the Issuer or the Borrower, under Section 547 of the United States Bankruptcy Code (or any section amendatory of, supplemental to or replacing such Section) in the event that the Issuer or the Borrower becomes the subject of a case thereunder. For the purposes of this definition, moneys shall be deemed to have been received by or deposited with the Trustee only when cash or its equivalent is so received or deposited (as the case may be) or, in the case of checks or drafts, when final payment thereof has been made to the Trustee by the payor bank. The Bonds provide that the Issuer will purchase or cause to be purchased the Bonds on certain dates set forth therein (each, a "Tender Date") at a purchase price equal to the principal amount thereof plus accrued interest thereon. Section 3.04 of the Indenture provides that the purchase price of Bonds tendered for purchase on each Tender Date shall be paid from the following sources and in the following order of priority: first, from certain amounts on deposit in the Purchase Account; second, from proceeds of the remarketing of Bonds received by the Registrar and Paying Agent; third, from any other amount on deposit in the Purchase Account; fourth, from moneys realized by the Registar and Paying Agent under the Credit Facility; and fifth, from any other moneys made available by the Trustee to the Registrar and Paying Agent for such purposes. Section 4.07 of the Indenture provides that the Trustee or the Registrar and Paying Agent (acting as agent of the Trustee) in the case of paragraphs (i) and (iv) below and the Registrar and Paying Agent (acting as agent for the Trustee) in the case of paragraphs (ii) and (iii) below shall draw a draft under the Credit Facility (or take such other steps as shall be necessary to realize funds thereunder) on each of the following dates and in the following amounts, which drawings shall be made or steps taken in sufficient time, as indicated in the Credit Facility, 9751a:10/22/87 3002-353 r, EXHIBIT B to permit the Trustee or the Registrar and Paying Agent (acting as agent for the Trustee) to realize such amounts on such dates: (i) on each Interest Payment Date (as defined in the Indenture), on the maturity or redemption date of any Bonds, and on any date on which the due date for the payment of the principal amount of the Bonds is accelerated in accordance with the Indenture, an amount calculated by the Trustee or Registrar and Paying Agent (acting as its agent) to be equal to the interest due on the Bonds (other that. Credit Facility Bonds (as defined in the Indenture)) on such date, less the amount of Available Moneys on deposit in the Interest Account available at the time of the drawing or the taking of such other steps for the payment of such interest on such date, which amount shall be deposited in the Interest Account; (ii) on each Tender Date, an amount calculated by the Registrar and Paying Agent to be equal to the purchase price of Bonds (other than Credit Facility Bonds) to be purchased on such Tender Date, less the amount of Available Moneys on deposit in the Purchase Account available at the time of the drawing or the taking of such other steps for the payment of the purchase price of Bonds due on such date, which amount shall be deposited in the Purchase Account; (iii) on each redemption date of the Bonds, an amount calculated by the Registrar and Paying Agent to be equal to the redemption price of the Bonds (other than Credit Facility Bonds) due on such date, less the amount of Available Moneys on deposit in the Principal Account available at the time of the drawing or the taking of such other steps for the payment of such redemption price on such date, which amount shall be deposited in the Principal Account; and 9751a:10/22/87 3002-353 (iv) on the maturity date of the Bonds and on any date on which the due date for the payment of the principal amount of the bonds is accelerated in accordance with the Indenture, an amount calculated by the Trustee or the Registrar and Paying Agent (acting as the agent of the Trustee) to be equal to the principal amount of the Bonds (other than Credit Facility Bonds) due on ,such date, less the amount of Available Moneys on deposit in the Principal Account available at the time of the drawing or the taking of such other steps for the payment of such principal on such date, which amount shall be deposited in the Principal Account. • 'EMIBIT B Pursuant to Section 4.05 of the Indenture: (i) on each Interest Payment Date, on the redemption or maturity date of any Bonds, and on any date on which the due date for the payment of the principai amount of the Bonds is accelerated in accordan'6e with the Indenture, the Registrar and Paying Agent shall pay the interest due on the Bonds (other than Credit Facility Bonds) on such date from amounts on deposit in the Interest Account; (ii) on each Tender Date, the Registrar and Paying Agent shall pay the purchase price of Bonds (other than Credit Facility Bonds) required to be purchased on such date from amounts on deposit in the Purchase Account; (iii) on each date on which the principal or redemption price of any Bonds (other than Credit Facility Bonds) becomes due and payable, the Registrar and Paying Agent shall pay such principal or redemption price from amounts on deposit in the Principal Account. In the event that Bonds required to be purchased on any Tender Date are not delivered to the Registrar and Paying Agent in accordance with the terms of such Bonds, the Registrar and Paying Agent is required, subject to certain conditions, to retain amounts available to pay the purchase price of such Bonds in the Purchase Account, separate and apart from all such amounts on deposit therein, which amounts are to be held for the payment of such purchase price. Section 9.01 of the Indenture provides that Bonds may be deemed to be paid if (i) sufficient money for the payment of the principal or redemption price of and interest on such Bond shall then be held by the Trustee (through deposit by the Issuer of moneys for such .payment or otherwise, regardless of the source of such moneys), whether at or prior to the maturity or the redemption date of such Bonds, or (ii) if the maturity or redemption date of such Bonds shall not then have arrived, provision shall have been made for the payment of the principal or redemption price of and interest on, and the purchase price of, such Bond on the due dates for such payments, by deposit with the Trustee (or other method satisfactory to the Trustee) of Government obligations (defined in the Indenture), the principal of and the interest on which when due will provide sufficient moneys for such payment and the Issuer shall have made provision, satisfactory to the Trustee, for one publication in a daily newspaper or a financial journal printed 9751a:10/22/e7 3002-353 • EXHIBIT B in the English language and having a general circulation in the Borough of Manhattan, City and State of New York, that such moneys are so available for such payment; provided, however, that (A) if the Credit Facility is then in effect, such moneys shall constitute Available Moneys and such Government Obligations shall have been purchased with Available Moneys and (B) if any such Bond is to be redeemed prior to the maturity thereof, provisions satisfactory to the Trustee shall have been made for the giving of notice of such redemption. Section• 11.5 of the Credit Facility Agreement provides that upon the occurrence and during the continuance of any Event of Default under the Credit Facility Agreement, the Credit Facility Provider may at any time and from time to time, set off and apply any and all deposits (general or special time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Credit Facility Provider to or for the credit or the account of the Borrower against any of the obligations of the Borrower existing under the Credit Facility Agreement, or any of the other Related Documents (as defined in the Credit Facility Agreement) irrespective of whether the Credit Facility Provider shall have made any demand thereunder and although such obligations may be unmatured; provided, however, that in the event the Borrower becomes insolvent or unable to pay debts as, they mature, or admits in writing to such effect, makes a conveyance fraudulent as to creditors under any state or federal law or makes an assignment for the benefit of creditors, or a proceeding is instituted by or against the Borrower alleging any of the foregoing, including any proceeding under Title 11 of -the United States Code, the Credit Facility Provider agrees to waive its right of setoff set forth above; provided, however, that such agreement shall terminate and be of no force and effect if the Credit Facility Provider shall have received prior written notice from Moody's that the absence of such waiver would not result in the lowering or withdrawal by Moody's of its ratings.of the Bonds. The Credit Facility .Provider further agrees in such Section 11.5 that it will not at any time accept any collateral as security for the payment of the reimbursement obligations of the Borrower set forth in the Credit Facility Agreement (other than pursuant to the Pledge Agreement [defined in the Credit Facility Agreement]) unless provision is made prior to or simultaneously with the taking of such collateral security by the Credit Facility Provider for an equal and ratable security interest in such collateral security to be granted to the Trustee for the benefit of the owners from time to time of the Bonds; provided, that if the Credit Facility Provider shall have received prior written notice from Moody's Investors Service, Inc. ("Moody's") that its ratings of the Bonds would 9751a:10/22/87 3002-353 40 EXHIBIT B not be lowered or withdrawn thereby, such agreement shall terminate and be of no force and effect as and when and to the extent that the acceptance of such collateral would not result in the Credit Facility Provider being released, prevented or restrained from or delayed in fulfilling its obligation under the Credit Facility. Section 5.07 of the Indenture and Section 3.03 of the Loan Agreement provide that the Borrower, with the written consent of NHC, may provide for the delivery of a substitute credit facility, which may be a letter of credit, bond insurance policy, bond purchase agreement, guaranty, line of credit, surety bond or similar credit or liquidity facility. However, in connection with the delivery of any such substitute credit facility, either (i) there shall first be delivered to the Trustee, among other things, written evidence from each Rating Agency (as defined in the Indenture) that such Rating Agency has reviewed such credit facility and that the substitution or replacement of such credit facility for the credit facility then in effect will not result in a reduction or withdrawal of its ratings on the Bonds or (ii) the Bonds will be subject to mandatory tender prior to the expiration of the Credit Facility then in effect. In rendering this opinion, we have assumed that neither the Borrower nor the issuer is insclvent (within the meaning of the Bankruptcy Code) on the date hereof. Based upon the foregoing, and subject to the limitations set forth in the following paragraph, it is our opinion that payments of the principal or redemption price of and interest on, or the purchase price of, the Bonds by the Trustee or the Registrar and Paying Agent from Available Moneys or from amounts realized from payments on Government Obligations purchased with Available Moneys would not be avoidable under Section 547 of the Bankruptcy Code by a trustee in bankruptcy of the Borrower or the Issuer if the Borrower or the Issuer became the subject of a case under the Bankruptcy Code. We express no opinion regarding any payments of the principal or redemption price of or interest on, or the purchase price of, the Bonds that are made (i) to "insiders" within the meaning of Section 101(30) of the Bankruptcy Code, (ii) from sources other than Available Moneys or amounts realized from payments on Government Obligations purchased with Available Moneys, (iii) from amounts realized under any substitute credit facility delivered in accordance with the Indenture, (iv) after moneys other than Available Moneys have been deposited in the Debt Service Fund as a result of the Credit Facility Provider having wrongfully failed to honor a 9751a:10/22/87 3002-353 r-. EXHIBIT B demand for funds under the Credit Facility, (v) after any Bonds have been defeased as provided in Section 9.01 of the Indenture through the deposit with the Trustee of moneys that do not constitute Available Moneys or Government Obligations that were not purchased with Available Moneys, or (vi) from any moneys referred to in item (vi) of the definition of "Available Moneys" set forth above. This opinion is furnished by us to meet the requirement of paragraph 7(c)(i) of the Bond Purchase Agreement. You are authorized to furnish copies of this opinion to Moody's Investors Service, Inc. which may rely upon this opinion, but no one other than the addressee and Moody's Investors Service, Inc. may rely upon this opinion. 9751a:10/22/87 3002-353 Very truly yours, EXHIBIT C It is our opinion that: (a) The Borrower is a corporation duly organized and existing and in good standing under the laws of the state of Florida, has full power and authority to own its property and to conduct its business and possesses all material licenses and approvals necessary for the conduct of its business, including the ownership and operation of the Project. (b) The Borrower has full power and authority to take all actions' required to be taken by it by or under, and to perform and observe the covenants and ag,aements on its part contained in, the Bond Purchase Agreement, the Remarketing Agreement, the Loan Agreement, the Mortgage, the Reimbursement Agreement and the Tax Certificate and Agreement (collectively, the "Borrower Documents"). The Borrower has taken all action necessary to be taken by it for the execution, delivery of and performance under the Borrower Documents. (c) The Borrower Documents have been duly authorized, executed and delivered by the Borrower and constitute legal, valid and binding agreements of the Borrower, enforceable against the Borrower in accordance with their respective terms. Enforceability of the Borrower Documents is subject to (i) general principles of equity and (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws heretofore or hereafter in effect affecting the enforcement of creditors' rights generally, to the extent constitutionally applicable. Enforceability of the indemnification provisions contained in the Bond Purchase Agreement may also be limited by applicable securities laws and public policy. (d) The execution and delivery of the Borrower Documents by the Borrower, the compliance with the terms, conditions and provisions thereof and the consummation of the transactions therein contemplated by the Borrower do not and will not violate any law. or any regulation, order, writ, injunction or decree of any court, governmental body, agency or other public instrumentality, or result in a breach in any of the terms, conditionA!shde.of*,.any .,ptovisions of, or constitute a default under or result in teation.or imposition of any mortgage, lien, charge or enc nature whatsoever upon any of the properties or 'a§;qets of the Borrower pursuant to the terms of, the Borrower's articles of incorporation or by-laws or any mortgage, indenture, agreement or instrument to which the Borrower is a party or - by which the Borrower or any of its properties is bound other than as contemplated by the Borrower Documents. -0- 9752a:10/22/87 3002-353 40 EXHIBIT C (e) All authorizations, consents and approvals of, notices to, registrations and filings with, and actions in respect of any governmental body, agency or other public instrumentality or court required in connection with the execution, delivery and performance by the Borrower of or under the Borrower Documents have been obtained, given or taken and all are in full force and effect, provided that no representation is made with respect to compliance with the securities or "blue sky" laws of any state. (f) There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to our knowledge, threatened against or affecting Borrower or any of its properties. (g) The Borrower has duly and properly approved the Preliminary Official Statement and approved and executed the Official Statement and authorized their distribution. (h) We have rendered legal advice and assistance to the Borrower in connection with the preparation of the Official Statement. Rendering such legal advice and assistance involved, among. other things, discussions and inquiries concerning various legal and related subjects and reviews of certain records, documents and proceedings. We also corresponded with, held telephone conversations with, and participated in conferences and meetings with, various officers, employees and representatives of the Issuer, the Borrower, NHC, the Trustee, the Bank and the Underwriters and their respective counsel. In the course of such conversations, meetings, and conferences, the contents of portions of the Official Statement and related matters were discussed and revised. Based on our participation in the transaction as counsel to the Borrower, and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to our attention that would lead us to believe that the Official Statement (except for the material included in Appendix A as to which no view is expressed) contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (i) The statements and information contained in the Official Statement under the, headings "Introductory Statement" (the second and third paragraphs only), "Application of Proceeds", "The Company", "Miscellaneous", and in Appendix E to the Official Statement under each subheading entitled "The 9752a:10/22/87 3002-353 EXHIBIT C Project" and the descriptions in the Official Statement of all documents and agreements to which the Borrower is a party and litigation to which the Borrower is a party are true, correct and complete in all material respects; and, with respect to such statements and information, the Official Statement does not contain any untrue statement of a material fact and does not omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading in any material respect. -2- 9752a:10/22/87 3002353 very truly yours, r - VOMIT D It is our opinion that: (a) NHC is a limited partnership duly organized and existing and in good standing under the laws of the State of Delaware, is qualified to do business in the State of Florida, has full power and authority to own its property and to conduct its business and possesses all material licenses and approvals necessary for the conduct of its business, including the operation of the Project. (b) NHC has full power and authority to take all actions required to be taken by it by or under, and to perform and observe the covenants and agreements on its part contained in, the Bond Purchase Agreement, the Remarketing Agreement and the Guaranty Agreement (collectively, the "NHC Documents"). NHC has taken all action necessary to be taken by it for the execution, delivery of and performance under the NHC Documents. (c) The NHC Documents have been duly authorized, executed and delivered by NHC and constitute legal, valid and binding agreements of NHC, enforceable against NHC in accordance with their respective terms. Enforceability of the NHC Documents is subject to (i) general principles of equity and (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws heretofore or hereafter in effect affecting the enforcement of creditors' rights generally, to the extent constitutionally applicable. Enforceability of the indemnification provisions contained in the Bond Purchase Agreement may also be limited by applicable securities laws and public policy. (d) The execution and delivery of the NHC Documents by NHC, the compliance with the terms, conditions and provisions thereof and the consummation of the transactions therein contemplated by NHC do not and will not'violate any law or any regulation, order, writ, injunction or decree of any court, governmental body, agency or other public instrumentality, or result in a breach in any of the terms, conditions or provisions of, or constitute a default under or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of NHC pursuant to the terms of, NRC's partnership agreement or any mortgage, indenture, agreement or instrument to which NHC is a party or by which NHC or any of its properties is bound. 9753a:10/22/07 _Z_ • EXHIBIT (e) All authorizations, consents and approvals of, notices to, registrations and filings with, and actions in respect of any governmental body, agency or other public instrumentality or court required in connection with the execution, delivery and performance by NHC of or under the NHC Documents have been obtained, given or taken and all are in full force and effect, provided that no representation is made with respect to compliance with the securities or "blue sky" laws of any state. (f) There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to our knowledge, threatened against or affecting NHC or any of its properties. (g) *IHC has duly and properly approved the Preliminary Official Statement and the Official Statement and authorized their distribution. (h) We have rendered legal advice and assistance to NHC in conneciton with the preparation of the Official Statement. Rendering such legal advice and assistance involved, among other things, discussions and inquiries concerning various legal and related subjects and reviews of certain records, documents and proceedings. We also corresponded with, held telephone conversations with, and participated in conferences and meetings with, various officers, employees and representatives of the Issuer, the Borrower, NHC, the Trustee, the Bank and the Underwriters and their respective counsel. In the course of such conversations, meetings, and conferences, the contents 'of portions of the Official Statement and related matters were discussed and revised. Based on our participation in the transaction as counsel to NHC, and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to our attention that would lead us to believe that the Official Statement (except for the material included in Appendix A, as to which no view is expressed) contains any untrue statement of a 'rdaterial fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (i) The statements and information contained in the Official Statement under the headings "Introductory Statement" (the second and third paragraphs only), "Application of Proceeds", "Miscellaneous", and in Appendix E to the Official Statement under each subheading entitled "The Project" and the 9753a:10/22/B7 -2- 40 EXHIBIT D descriptions in the official Statement of all documents and agreements to which NHC is a party are true, correct and complete in all material respects; and, with respect to such statements and information, the Official Statement does not contain any untrue statement of a material fact and does not omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not.misleading in any material respect. 9753&:10/22/67 -3- Very truly yours, r u 198v To Bach of the Parties Listed on Annex A hereto Dear Sirss axdi bid' E We have acted as special counsel to Thle Toronto -Dominion Dank (the "Hank") in connection with the Reimbursement Agreement dated as of October 1, 1987 (the "Reimbursejent Agreement") between the Bank and Florida Convalescent Centers, Inc. (the "Borrower'), pursuant to which the Hank has: agreed, inter AS, to issue through its Chicago, Illinois Branlch its Irrevocable Letter of Credit T -D Chicago No. (the'"Latter of Credit") in support of the principal or purchase price'of, and up to 55 days of accrued interest on, the $ in ;aggregate principal amount of Varidble Rate Demand/Fixed Rate Industr al Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Serie 198 ACB) (the "Bonds"). 1. You have requested our advice as lo whether it is necessary, in connection with the issuance'and sale of the Bonds, to register the Letter of Credit under the!Securities Act of 1933, as amended (the "Act"). In this regrd, we have been advised and assume for purposes of this op nion that the Bonds are exempt from the reg istration requireme is of the Act by virtue of Section 3(a)(2) thereof. To the extent the offer and sale of ti}a Bonds involves the offer and sale of the obligation of the Baddddk (i.e. the Letter of Credit), such obligation may be deemed to 4onstitute a security issued by the Bank. Section 3(a)(2) of thO Act exempts any security issued or guaranteed by any national bank or banking institution organized under the laws of an state the business of which is substantially confined to banking and is supervised by the state banking commission. Although th Bank is a bank whose business is substantially confined to bankng and whose Chicago Branch is supervised by the Commissioner o Banks and Trust Companies of the State of Illinois, a stat) banking commission • To Each of the Parties Listed on Annex A hereto i 196_ Page within the meaning of the Act, it is techn cally not organized under the laws of any state. Consequently the exemption provided by Section 3(a)(2) for obligation issued and guaranteed Y certain banks may not be literally appl cable to the offer and sale of the Honda insofar as such offer an sale may involve the sale of an obligation of the Hank. We not, however, that in a number of situations involving domestic br nches or agencies of foreign banks under comparable circumstanc s, the staff of the Securities and Exchange Commission (the "C mmission") has stated that it would not recommend taking any act on if no registration under the Act is affected. The Commission has previously issued such a "no -action" letter, dated October 3 , 1964, in favor of the Bank with respect to the issuance of a letter of credit under circumstances comparable to those relating!to the issuance of the Letter of Credit described above. Pursuant to an interpretation of Sect on 3(a)(2) of the Act effective on September 23, 1986 (Release N . 33-6661), the Commission indicated that it would no long r issue "no -action" letters with respect to the exemption of a curities issued or guaranteed by U.S. branches or agencies of foreign banks from registration under the Act, but outlined t e criteria which would be used by the Commission in applying the ection 3(a)(2) exemption to such securities. Specifically according to that interpretation: " for purposes of the exemption rom registration provided by Section 3(a)(2) of the . . Act, the Commission deems a branch or agency of a foreign bank located in the United States to be a 'national bank, + or a 'banking institution organized under the laws f any State, Territory, or the District of Columbi ,' provided the nature and extent of federal and/or state re ulation and supervision of the particular. branch r agency is substantially equivalent to that appl cable to federal and state chartered domestic banks doing usiness in the same jurisdiction . . and provided the business of the branch or.agency in question is substantially confined to banking. We believe that, under the circumstan es at hand, the Hank would be treated by the Commission as a "n tional bank" or a "banking institution organized under the 1 ws of any State, Territory, or the District of Columbia" fo purposes of determining whether the Letter of Credit i exemppt from registration under the provisions of Secti n 3(a)(2) of the Act, and that it is therefore reasonable to pro Had with the offer and • To tach of the Parties Listed on Annex A hereto 19B_ Page 3 sale of the 75onds without the registration 'of the Letter of Credit as a security under the Act. Insofar as the foregqoing opinion relates to matters of Illinois law, we have, with your permissio , relied on the opinion of even date herewith addressed to us of Mayer, Brown L Platt, Chicago, Illinois, as Illinois counei to the Bank. a. We have reviewed the information lontained in the Official Statement of the issuer dated , 198_•(the "Official Statement") pursuant to which t Bonds are to be offered for sale, in the seventh paragraph o a sect on captioned "INTRODUCTORY STATEMENT" and andr the captions, ar� "SBCURITY AND SOURCES OF PAYMENT FOR THE B;NDS--Letters of ram Credit" and "SUMMARY OF CERTAIN PROVISIONS:OF THL BANK SECURITY DOCUMENTS" in Appendix D to the Official S atement, and believe that such information, to the extent that uch information constitutes a summary of the Letters of Cre it, the Reimbursement it P��„fh Agreement, the Guaranty Agreement and the rtgage and Security Agreement encumbering the facility finance by the Bonds, presents in all material respects an occur to summary of the documents so summarized. ( Ob -5 LANGUAGE INSERTED LATER, SUBJECT TO PGF&M AND PIPER G MARBURY APPROVAL.j cavC�RNM No one other than the addressees list d on Annex A hereto Arm - shall be entitled to rely on this opinion iithout our prior written authorization. This opinion is limited to the matter expressly set forth above, and no opinion is implied or may be inferred beyond the matters expressly so stated. Very truly yours, POWELL, GOLDSTEIN FRAZER i MURPHY 40 Eri.►.4 F 61 69 69 69 69 69 69 69 69 71 [FORM OF PGFGM LETTER OF CREDIT ENFORCEABILITY OPINION] 72 73 74 - 1967 '] 5 75 75 75 75 75 77 To Each of the Parties 78 Listed on Annex A hereto 79 80 Dear Sirs: 81 83 We have acted as special counsel to The Toronto -Dominion 84 Bank (the "Bank") in connection with the Reimbursement Agreement 85 dated as of 1, 1987 (the "Reimbursement Agreement") 06 between the Bank and Florida Convalescent Centers, Inc. (the 87 "Borrower") pursuant to which the Bank has agreed, inter alia, to 88 issue through its Chicago, Illinois branch its Irrevocable Letter 89 of Credit TD -Chicago No. (the "Letter of Credit") in 90 support of the principal or purchase price of, and up to 54 days 91 of accrued interest on, the S_ aggregate principal 92 amount Variable Rate Demand/Fixed 93 Rate Industrial Development Revenue Refunding Bonds (Florida 94 Convalescent Centers, Inc. Project), Series 1987A(0]. 95 96 In rendering this opinion, we have examined the original, 97 certified, conformed or photographic copies of such records, 98 agreements, instruments, certificates and other documents as we 99 have deemed necessary or appropriate to enable us to render the 100 opinions set forth below. In all such examinations, we have 101 assumed the genuineness of all signatures and the authenticity of 102 all documents submitted to us as originals, conformity to such 103 original documents of all copies submitted to us as certified, 104 conformed or photographic copies, and as to certificates given by 105 public officials, we have assumed the same to have been properly 106 given and to be accurate. 107 108 Based upon the foregoing and subject to the qualifications 109 set forth below, it is our opinion that under the laws of the 110 State of Illinois and the federal laws of the United States: 111 111 63 To Each of the Parties 64 Listed on Annex A hereto 65 1987 66 Page 2 67 68 112 1. The Bank has been duly licensed by the Commissioner of 113 Banks and Trust Companies of the State of Illinois to carry on a 114 business in the State of Illinois through its Chicago, Illinois 115 branch. 116 117 2. The Bank has full power and authority to execute, 118 deliver and perform its obligations under the Letter of Credit, 119 and the Letter of Credit has been duly authorized, executed and 120 delivered by the Bank and constitutes the valid and legally 121 binding obligation of the Bank enforceable against the Bank in 122 accordance with its terms, subject, as to enforcement, to 123 bankruptcy, insolvency, reorganization, liquidation, moratorium 124 and other laws of general applicability relating to, or affecting 125 generally, the enforcement of creditors' rights and remedies .126 against the Bank, as the same may be applied in the event of the 127 bankruptcy, insolvency, reorganization or liquidation of, or 128 other similar occurrence with respect to, the Bank or any 129 moratorium or similar occurrence affecting the Bank. 130 131 3. No authorizations, approvals or consents from any 132 governmental authorities in the United States are required in 133 connection with the issuance of the Letter of Credit. 134 135 In connection with the opinion set forth in paragraph 2 136 above, we express no opinion as to whether a court, in the 137 exercise of its equitable powers, may temporarily restrain 138 payment of a draft drawn under the Letter of Credit; however, we 139 are of the opinion that a court would not permanently enjoin or 140 restrain such payment in the event of the bankruptcy, insolvency, 141 reorganization or liquidation of, or other similar occurrence 142 with respect to, the Borrower or any moratorium or similar 143 occurrence affecting the Borrower. In connection with the 144 opinion set forth in paragraph 3 above, we express no opinion as 145 to any consents, approvals, authorizations, registrations or 146 qualifications as may be required under federal or state 147 securities or Blue Sky laws in connection with the issuance of 148 the Letter of Credit. 149 150 Insofar as the foregoing opinion relates to matters of 151 Canadian law, we have, with your consent, relied on the opinion 152 of even date addressed to you and to us of McCarthy & McCarthy, 153 Canadian counsel to the Bank. Furthermore, insofar as the 154 foregoing opinion relates to matters of Illinois law, we have, 155 with your consent, relied on the opinion of even date addressed 156 to us of Mayer, Brown 6 Platt, Chicago, Illinois, special 157 Illinois counsel to the Bank. 158 158 e 63 64 65 66 67 69 159 160 161 163 164 165 165 1.65 166 167 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 169 To Each of the Parties Listed on Annex A hereto 1997 Page 3 No one other than the addressees listed on Annex A hereto shall be entitled to rely on this opinion with our prior written authorization. Very truly yours, POWELL , GOLDSTEIN, FR.AZER & MURPHY • 62 69 69 69 69 69 69 69 69 71 72 73 74 75 76 76 76 76 76 76 78 79 80 81 82 83 84 85 86 87 88 88 89 90 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 (FORM OF LETTER OF CREDIT ENFORCEABILITY OPINION TO BE GIV£N'BY ILLINOIS COUNSEL FOR BANK] 1987 Powell, Goldstein, Frazer & Murphy 1100 The Citizens and Southern National Bank Building 35 Broad Street, N.W. Atlanta, Georgia 30335 McCarthy & McCarthy Toronto Dominion Bank Tower Toronto -Dominion Centre Toronto, CANADA M5K 1E6 Dear Sirs: (r A le,c - B•t w,s G S "s 77 er pe.el rcf! We have acted as Illinois counsel to The Toronto --Dominion Bank (the "Bank") in connection with the Reimbursement Agreement dated as of 1, 1987 (the "Reimbursement Agreement") between the Bank and Florida Convalescent Centers, Inc. (the "Company") pursuant to which the Bank has agreed, inter alia, to issue through its Chicago, Illinois branch its Irrevocable Letter of Credit TD -Chicago No. (the "Letter of Credit") in support of the principal or purchase price of, and up to 54 days of accrued interest on, the $ aggregate principal amount Variable Rate Demand/Fixed Rate Industrial Development Revenue Refunding Bonds (Florida Convalescent Centers, Inc. Project), Series 1987A(B]. In rendering this opinion, we have examined the original, certified, conformed or photographic copies of such records, agreements, instruments, certificates and other documents as we have deemed necessary or appropriate to enable us to render the opinions set forth below. In all such examinations, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, conformity to such 40 64 Powell, Goldstein, Frazer & Murphy 65 1987 66 Page 2 67 68 112 original documents of all copies submitted to us as certified, 113 conformed or photographic copies, and as to certificates given by 114 public officials, we have assumed the same to have been properly 115 given and to be accurate. 116 117 Based upon the foregoing and subject to the qualifications 118•set forth below, it• is our opinion that under the laws of the 119 State of Illinois: 120 121 1. The Bank has been duly licensed by the Commissioner of 122 Banks and Trust Companies of the State of Illinois to carry on a 123 business in the State of Illinois through its Chicago, Illinois 124 branch. 125 126 2. The Bank has full power and authority to.execute, 127 deliver and perform its obligations under the Letter of Credit, 128 and the Letter of Credit has been duly authorized, executed and 129 delivered by the Bank and constitutes the valid and legally 130 binding obligation of the Bank enforceable against the Bank in 131 accordance with its terms, subject, as to enforcement, to 132 bankruptcy, insolvency, reorganization, liquidation, moratorium 133 and other laws of general applicability relating to, or affecting 134 generally, the enforcement of creditors' rights and remedies 135 against the Bank, as the same may be applied in the event of the 136 bankruptcy, insolvency, reorganization or liquidation of, or 137 other similar occurrence with respect to, the Bank or any 138 moratorium or similar occurrence affecting the Bank. 139 140 3. No authorizations, approvals or consents from any 141 governmental authorities in the State of Illinois are required in 142 connection with the issuance of the Letter of Credit. 143 144 In connection with the opinion set forth in paragraph 2 145 above, we express no opinion as to whether a court, in the 146 exercise of its equitable powers, may restrain payment of a draft 1,47 drawn under the Letter of Credit. In connection with the opinion 1,18 set forth in paragraph 3 above, we express no opinion as to any 149 consents, approvals, authorizations, registrations or 150 qualifications as may be required under federal or state 151 securities or Blue Sky laws in connection with the issuance of 152 the Letter of Credit. 153 154 Insofar as the foregoing opinion relates to matters of 155 Canadian law, we have, with your consent, relied on the opinion 156 of even date addressed to you and to us of McCarthy & McCarthy, 157 Canadian counsel to the Bank. 158 158 158 40 64 Powell, Goldstein, Frazer 4 Murphy 65 �, 1987 66 Page 3 67 68 159 We understand that you may furnish a copy of this opinion to 160 Moody's Investors Service Inc., which shall be entitled to rely 161 thereon as though addressed thereto. No one other than you and 162 Moody's Investors Service Inc. shall be entitled to rely on this 163 opinion without our prior written authorization. 165 166 Very truly yours, 167 167 167 168 MAY£R, BROWN G PLATT 170 170 170 170 170 170 170 170 170' 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 170 • ` 0A. LA 14 (Letterhead of McCarthy a Powell, 0oldstain, Framer a Murphy suits 800 000 Circle 75 Parkway Atlanta, Oeorgia 30339 Mayer, grown a Platt 231 South LaSalle Street Chicago, Illinois 60504 Florida Convalescent Centers, Inc. 1111 Mockingbird Lane 8uita 1111 Dallas, Texas 78247 Dear Sirsr m, 1987. Ala. 8...,, S S'..5l...,...4d We have acted as Canadian counsel to Te Toronto - Dominion Hank (the "Bank") in connection with th Reimbursement Agreement dated as of ©, 1907 between the Bank aid Florida Convalescent Centers, :no. pursuant to which the Bank has agreed, inter aria, to issue through its Chicago Branch otters of credit substantially in the form of Exhibit a thereto, ind in connection with the letter of credit (the "Letter of Credit ) dated j, 1987 issued by the Bank through its Chicago Branch in favour o 0. We have examined the Bank Act (which c natitutee the charter of the Bank) and certified copies of the by-laws of the Bank. We have Rlso examined such certificates o public Officials and of officers of the Bank, corporate records and other documents and have considered such questio s of law as we have deemed relevant or necessary as a basis for the opinion expressed below. In our examination of the foregoing documents, we have e0sumed the genuineness of all signatures, the a thenticity of all documents submitted to us as originals and t e conformity to authentic original documents of all documents eu mitted tq us as certified or conformed copies or laceimilea. -2 - The Letter of Credit states that, oxcebt as otherwise expressly stated therein, it is subject to the V iform Customs and Practice for Documentary Credits (1983 R:vis on) International Chamber of Commerce, Publication N 400 (the "Vniform Customs") and that otherwise it shall b governed by the laws of the State of Illinois. We express no op nion with respect to the Vniform Customs nor the laws of t s State of Illinois. Based and r:lying upon the foregoing, We ars of the opinion, subject to the Qualifications set out below, that: (i) the Bank is a bank to which the Bank Act applies and validly exists thereunder; (ii) the Bank has the power and capacity to execute, deliver and perform its obligations under the Attar of Credit; (iii) all eotion required to'ba token by the board of directors and shareholders of the Baht to authorize the execution, delivery and performance of the Letter of Credit has been duly taken; (iv) no authorization, cone:nt or approval f, or registra- tion or filing with, any governmental Ir public body or authority in Canada or the Province of Ontario is a prerequisite to the execution, deiiven and performance of the Letter of Credit by the Bank; (v) the Letter of Credit, when executed =4 delivered by an authorized officer of the Bank, will o nstitute a legal, valid and binding obligation of lthe Bank, enforceable in accordance with its terns; (vi) ©, of the Dank, is authorized to •xeou a and deliver the Letter of Credit on behalf of the ank, and the execution and delivery thereof by a ein�gIs officer of the Bank are sufficient to bind the Bank; (vii) a final judgment issued by a court of c mpetent juris- diction in the United States in respect of any sum payable by tho Bank under the Letter of Credit would be recognized and enforced by the oourts othe Province of Ontario; and If (viii) in the event of the insolvency of thenk, the obligations of the Bank under the Lett:a of Credit would rank against the unencumbered age is of the Bank on a parity with all deposit liabilitis of the Bank. C_ i The opinion expressed herein are subject to the following Qualificationst (i) enforceability of the Letter of Credit may be limited by the insolvency provisions of the Bank Act, the Winding -Up Act and by laws of general application affecting creditors' rights and the enforcement of saourity as the same would pa applied to the Hank; the availability of the rsmedy of specific perfor- mance or injunctive reli*! to one seeking to enforoe the Letter of Credit is subject to the discretion of the court before which proefedings tharefor may be brought; a court in the Province of 9ntarto will not enforce a foreign judgment which is not final or conclusive, or was obtained by fraud or through proceedings contrary to natural justice; and (iv) the Currency Act precludes a court in Canad■ from giving a judgment in any currency other then Canadian currency. Insofar as this opinion reiataa to waters of law of the state of Georgia or the Federal laws of the United States, we have, with your consent, relied on the opinion of even dots of Mayer, Brown 0 Platt, special Illinois counsel for the Bank. We understand that you may furnish a copy of this opinion to Moody'■ Investors service Inc. which shall be entitled to rely thereon as though addressed thereto. No one other than you, Moody'• investors Service Ino. and the beneficiaries of the Letter of Credit shall be entitled to rely on this opinion. Thin opinion is not intended to be employed in any transaction other than the one described above. Youss wry truly,