EXHIBIT F - FORM OF PRELIMINARY OFFICIAL STATEMENT
EXHIBIT F
FORM OF PRELIMINARY OFFICIAL STATEMENT
Resolution 99-18
OFFICIAL STATEMENT
CITY OF CLEARWATER, FLORIDA
[^] REVENUE BONDS, SERIES 1999
(BEF, INC. PROJECT)
Consisting of
$ *
CITY OF CLEARWATER, FLORIDA
[^] REVENUE BONDS, SERIES 1999A
(BEF, INC. PROJECT)
$ - *
CITY OF CLEARWATER, FLORIDA
[^] REVENUE BONDS, SERIES 1999B
[^](BEF, INC. PROJECT),
EXTENDABLE RATE ADJUSTABLE
SECURITIESSM(EXTRASSM)
$ *
CITY OF CLEARWATER. FLORIDA
TAXABLE REVENUE BONDS. SERIES 1999C
(BEF. INC. PROJECT)
INTRODUCTION
The following introductory statement is subject in all respects to more complete information
contained elsewhere in this Official Statement The order and placement of materials in this Official
Statement, including the appendices, are not to be deemed to be a determination of relevance,
materiality or relative importance, and this Official Statement, including the cover page and
appendices, must be considered in its entirety. All capitalized terms used in this Official Statement
that are not otherwise defined herein shall have the meanings ascribed to them in APPENDIX D
hereto. See APPENDIX D - "Definitions and Summary of Principal Documents."
Purpose of the Official Statement
The purpose of this Official Statement, including the cover page hereof and the appendices
hereto, is to furnish certain information relating to (1) the City of Clearwater, Florida (the "Issuer"),
(2) the Issuer's Revenue Bonds, Series 1999A (BEF, Inc. Project), in the aggregate principal amount
of $ * (the "Series 1999A Bonds"), (3) the Issuer's [^] Revenue Bonds, Series 1999B
(BEF, Inc. Project) Extendable Rate Adiustable SecuritiesSM (EXTRASSM), in the aggregate principal
amount of$ * (the "Series 1999B [^] EXTRASSM"), (4) the Issuer's Taxable Revenue
Bonds, Series 1999C (BEF, Inc. Project) [^], in the aggregate principal amount of$ *
*Preliminary, subject to change
(the "Series 1999C [A] Bonds"), and (5) BEF, Inc., a Florida not-for-profit corporation (the
"Company"). The Series 1999ABonds, the Series 1999B [A] EXTRASSM, and the Series 1999C [A]
Bonds are collectively referred to herein as the" Series 1999 Bonds. "
The Issuer
The Issuer is a municipal corporation duly organized and existing under and pursuant to the
Florida Constitution, the Charter of the Issuer and laws of the State of Florida. The Issuer is
authorized pursuant to the provisions of the Florida Constitution, the Charter of the Issuer and
Chapter 154, Parts II and III of Chapter 159, and Chapter 166, Florida Statutes, as amended and
other applicable provisions oflaw (the "Act") to make and execute financing agreements, contracts
and other instruments necessary or convenient for the purpose of facilitating the financing of certain
projects, 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 health and safety of the
inhabitants of the Issuer, the people of Pinellas County and the State of Florida by increasing their
access to adequate medical care and health care facilities, and to accomplish such financings through
the issuance of revenue bonds.
The Company and the Facility
The Company was incorporated as a Florida not-for-profit corporation in 1975, as American
Baptist Estates of Clearwater, Inc. The Company changed its name to BEF, Inc. in March of 1999.
The Internal Revenue Service has determined that the Company is an organization described in
Section 501(c)(3) of the Internal Code of 1986, as amended (the "Code"), and is therefore exempt
from federal income taxation under the provisions of Section 501(a) of the Code. The Company
received its Determination Letter from the Internal Revenue Service in May, 1976.
The Company and The Oaks of Clearwater, Inc. (the "Oaks") own and operate retirement
facilities located in the City of Clearwater, Pinellas County, Florida, known as The Oaks of
Clearwater Retirement Community (collectively, the "Facility"). The Facility is currently comprised
of two high-rise buildings, Oak Bluffs, a IS-story building (the "Bluffs Building"), and Oak Cove, a
13-story building (the "Cove Building"), and four low-rise villa buildings (the "Villas") which contain
skilled nursing facilities owned and operated by the Company (the "Nursing Centers") and
independent and assisted living facilities which are owned and operated by the Oaks.
The Company provides three different levels of care to residents of the Facility: independent
living, assisted living and nursing care.
Residential areas within the Facility include 12 one-bedroom garden apartments located in the
Villas, 8 two-bedroom garden apartments and 391 one-room and two-room high-rise apartments (213
of which are currently unoccupied and located in the Cove Building and the remainder are located
in the Bluffs Building) (collectively, the [^] "Indeoendent Living Units"); [^] 53 assisted living units
[A] located in [A] the Bluffs Building (the "Assisted Living Units"); and the Nursing Centers, which
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are comprised ofa 60-bed skilled nursing facility located in the Bluffs Building (the "Bluffs Nursing
Center") and a 56-bed skilled nursing facility located in the Cove Building (the "Cove Nursing
Center").
The Facility is located on approximately 7 acres of land on the Intercoastal Waterway, with
views of the Gulf of Mexico, Clearwater and St. Petersburg, Florida.
The Project
The Facility was refinanced through a secondary loan from the City of Clearwater, Florida,
from certain proceeds ofa loan from the City of Gulf Breeze, Florida (the "Sponsor"), through the
Sponsor's Local Government Loan Program to the City of Clearwater, Florida, funded through the
proceeds of Sponsor's Local Government Loan Program Floating Rate Demand Revenue Bonds,
Series 1985C-1. The loan to the Company and Oaks was secured by two mortgage notes (the
"Company's 1989 Note" and the "Oaks 1989 Note" and collectively, the" 1989 Notes") guaranteed
as to payment by the Government National Mortgage Association, or GNMA, which is a part of the
United States Department of Housing and Urban Development ("HUD"). In 1996, each of the
Company and Oaks declared bankruptcy and defaulted on the 1989 Notes. In connection with the
plan of reorganization in bankruptcy and pursuant to their guarantee of the Notes, HUD purchased
the 1989 Notes and the outstanding bonds were extinguished. HUD then sold the defaulted 1989
Notes at auction to Beal Bank, S.S.B. ("Beal"). Immediately prior to the closing of the offering of
the Series 1999 Bonds, the outstanding principal and interest on the 1989 Notes was $
Beal has agreed to sell the 1989 Notes for Twenty Million Dollars ($20,000,000). Pursuant
to the terms of a Note Purchase Agreement between the Company and Beal, the Company will use
a portion of the proceeds of the Series 1999 Bonds to (i) purchase its 1989 Note from Beal for
$ , with the Company thereby receiving clear title to the Company portions of the Facility
(including the Nursing Centers and its portion of the common areas of the Facility), and (ii) purchase
the Oaks 1989 Note from Beal for $ , with the Company acquiring the remaining portions
of the Facility previously owned by Oaks by accepting a deed in lieu of foreclosure from Oaks with
respect to the remaining portions of the Facility. Accordingly, upon the completion of the offering
of the Series 1999 Bonds and the purchase of the 1989 Notes by the Company, the ownership of the
Facility will be consolidated in the Company.
The Company will use a portion of the proceeds from the Series 1999 Bonds to renovate the
Cove Building (the "Project"). Currently, the Cove Building is vacant except for the Cove Nursing
Center. The third floor of the Cove Building will be renovated into modern, skilled nursing units.
The residents of the Cove Nursing Center will be transferred to the new third-floor nursing facility
upon completion. The old Cove Nursing Center will then be renovated and rehabilitated to meet
current standards and the residents of the Bluffs Nursing Center will be transferred into such
renovated space upon completion. At the same time the remaining floors of the Cove Building will
be completely rehabilitated to provide for senior independent and assisted living units in order to
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replace the facilities at the Bluffs Building. Upon completion of such living space, the residents in
the Bluffs Building who have consented to move will transfer to the Cove Building. [^]
The Facility will be renovated and redeveloped pursuant to the terms of a Development
Services Agreement (the "Development Agreement") by and between the Company and Complete
Care Services of Florida, Inc. ("CCSFL") a Pennsylvania corporation and a subsidiary of Complete
Care Services, Inc. ("CCS"), which through its subsidiaries manages over 200 nursing homes and
assisted living facilities throughout the United States, primarily on the East Coast and in Ohio, Illinois
and Texas, and provides development services to owners of senior housing, assisted living and
long-term care facilities.
The Development Agreement provides for the payment to CCSFL of three percent (3%) of
the [^] renovation costs of the Project. Seventy-five percent (75%) of such fee is due upon the
issuance of the Series 1999 Bonds, with the remaining twenty-five percent (25%) payable over the
six-month projected construction period. Under the Development Agreement, CCSFL is required
to create a detailed development plan and time schedule, prepare development budgets, oversee
architectural and engineering planning, obtain all necessary regulatory consents and approvals,
identifY contractors and coordinate the construction bid process, oversee the construction, and
oversee the transition of the renovated Cove Building until opening.
The Management Company
Simultaneous with the issuance of the Series 1999 Bonds, the Company is terminating its
existing management contracts and is entering into a new management agreement with CCSFL. See
the description of CCSFL in the Section entitled "THE MANAGEMENT COMPANY" and the
section entitled "THE PROJECT - The Management Company" in APPENDIX A herein.
The Series 1999 Bonds
The Series 1999 Bonds will be issued pursuant to a Trust Indenture, dated as of [^] Julv 1,
1999 (the "Indenture"), between the Issuer and Sun Trust Bank, Central Florida, National Association,
as trustee (the "Trustee"). Pursuant to a Loan and Security Agreement, dated as of[^] Julv 1,1999
(the "Agreement"), between the Issuer and the Company, the Issuer will loan the proceeds of the
Series 1999 Bonds to the Company which, together with certain other funds available therefor, will
be used to (i) acquire the assets of the Oaks which primarily consist of independent and assisted living
facilities, (ii) finance the cost of renovations to the Facility, (iii) provide for working capital and/or
capitalized interest, (iv) fund a debt service reserve fund with respect to the Series 1999 Bonds and
(v) pay certain costs with respect to the issuance of the Series 1999 Bonds. Pursuant to the
Agreement, the Company is obligated to make payments which, together with other available funds,
will be sufficient to pay the principal of, redemption premium, if any, and interest on the Series 1999
Bonds as the same becomes due and payable.
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Security for the Series 1999 Bonds
The Series 1999 Bonds and the redemption premium, ifany, and interest payable thereon, are
special and limited obligations payable solely from (i) payments to be made by the Company under
the Agreement and the Series 1999 [^ ) Note hereinafter described and other income, revenues and
proceeds derived by the Issuer (or the Trustee acting on behalf of the Issuer) pursuant to the
Agreement or by reason of the disposition of the Mortgaged Property (defined below), (ii) certain
other moneys pledged under the Indenture, including certain proceeds of the Series 1999 Bonds,
moneys held in the Debt Service Reserve Fund, certain insurance proceeds and condemnation awards,
and income from the investment of certain funds held in trust under the Indenture, and (iii) net
amounts derived by recourse to a Mortgage and Security Agreement, dated as of [^) Julv 1, 1999
(the "Mortgage"), from the Company to the Issuer. Pursuant to the Agreement and as evidence of
the borrowing thereunder, the Company will execute ~ promissory [^) note in the principal [^)
- - -
amount equal to the aggregate principal amount of the Series 1999 Bonds (the "Series 1999 [^)
Note"). The payment of the Series 1999 [^) Note and the performance by the Company of its
obligations under the Agreement will be secured by the Mortgage. Pursuant to the Mortgage, the
Company will grant a mortgage lien upon and security interest in the Facility, including the land on
which it is located (the "Mortgaged Property"), to the Issuer, subject to Permitted Encumbrances (as
such term is defined in the Mortgage).
Pursuant[^) to the Agreement and the Mortgage, in order to secure the loan payments and
other payments due thereunder and the performance and observance of each covenant and agreement
of the Company contained in the Agreement, the Series 1999 [^) Note and the Mortgage, the
Company will grant a security interest in its Revenues (as defined in the Indenture and in APPENDIX
D hereto) and certain of its other property to the Issuer, to the extent such security interest can be
perfected under the Florida Uniform Commercial Code and, subject to the provisions of certain
accounts receivable financing loans. Pursuant to the Indenture, the Issuer will assign its rights (except
certain unassigned rights related to receipt of notices, granting of consents and rights of
indemnification) in and to the Agreement, the Series 1999 [^) Note, the Mortgage and the payments
to be made thereunder to the Trustee as security for the Series 1999 Bonds.
At the time of the issuance of the Series 1999 Bonds, the Debt Service Reserve Fund will be
funded with proceeds of the Series 1999 Bonds in an amount equal to the Debt Service Reserve
Requirement. In addition, the Agreement requires the Company to fix, charge and collect, or cause
to be fixed, charged and collected, fees, rentals, rates and charges for the use of the Mortgaged
Property and services provided or to be provided in connection therewith, that shall be at least
sufficient to produce in each full Fiscal Year following completion of the Project a Debt Service
Coverage Ratio for such Fiscal Year that is not less than 1.20.
See "SECURITY FOR THE SERIES 1999 BONDS" and APPENDIX D herein.
THE SERIES 1999 BONDS ARE LIMITED OBLIGATIONS AND WILL NOT
CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE ISSUER, THE STATE OF
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FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF. NEITHER THE
FAITH AND CREDIT NOR THE TAXING POWER OF THE ISSUER, THE STATE OF
FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF WILL BE PLEDGED
TO THE PAYMENT OF THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR
INTEREST ON THE SERIES 1999 BONDS, AND THE SERIES 1999 BONDS WILL NOT
DIRECTL Y, INDIRECTL Y OR CONTINGENTLY OBLIGATE THE ISSUER, THE STATE OF
FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF TO LEVY ANY
TAXES WHATEVER THEREFOR OR MAKE ANY APPROPRIATION FOR THEIR
PAYMENT.
Historical and Selected Financial Information
Historical and selected financial information regarding the Company and the Facility is
included in APPENDIX C to this Official Statement. Audited financial statements of the Company
for the fiscal years ended December 31, 1998 and 1997 are included in APPENDIX C - Part (i)
herein, and unaudited financial statements of the Company for the three-month periods ending
March 31, 1999 and 1998 in APPENDIX C - Part (ii) herein.
Historical Statement of Activities and Historical Pro Forma Debt Service Coverage and Cash
Investments and Related Ratios
[TO COME [^]]
Financial Feasibility Study
Feasibility Study. See APPENDIX B herein for a Financial Feasibility Study dated
, 1999, prepared by BDO Seidman, LLP, independent certified public accountants (the
"Financial Feasibility Study"). The Financial Feasibility Study includes management's financial
forecast of the Company for the four (4) years ending December 31, 2002. As stated in the
Financial Feasibility Study, there will be differences between the forecasted data and actual
results because events and circumstances frequently do not occur as expected, and those
differences may be material. The achievement of any financial forecast is dependent upon
future events, many of which are beyond the Company's control and the occurrence of which
cannot be assured. See "BONDHOLDERS' RISKS" herein. The Financial Feasibility Study
should be read in its entirety, including all notes and assumptions set forth therein.
Forecasted Financial Information for the Company. The table set forth below reflects the
forecasted debt service coverage ratio calculations for the Company and has been extracted from
management's financial forecast included in the Financial Feasibility Study. See APPENDIX B -
"Financial Feasibility Study" attached hereto.
Forecasted Schedule of Coverage Ratios
[TO COME FROM FINAL DRAFT OF FINANCIAL FEASIBILITY STUDY]
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The Series [A] 1999B EXTRASSM
The Series [A] 1999B EXTRASSM will bear interest at the rate of _% per annum to
November 15,20_, the initial Optional Tender Date. From and after the initial Optional Tender
Date and to, but not including, each subsequent Optional Tender Date for the Series [^] 1999B
EXTRASsM, the Series [A] 1999B EXTRASSM will bear interest at a rate and for a period (a "Rate
Period") determined in accordance with the Indenture. The applicable interest rate on the Series [A]
1999B EXTRASSM (the "Reset Rate") will be established for each Rate Period by the Remarketing
Agent in accordance with the Indenture and the Remarketing Agreement. Pursuant to the
Remarketing Agreement, the Company has named B. C. Ziegler and Company, as Remarketing Agent.
The Company has the right to terminate Ziegler Securities as Remarketing Agent on 30 days' written
notice, which termination will not be effective until a successor Remarketing Agent has accepted the
appointment as such. On each Optional Tender Date, any registered holder of the Series [^] 1999B
EXTRAS SM then outstanding will have the right to tender such Series [^] 1999B EXTRAS SM to the
Trustee for purchase at a price equal to the principal amount thereof. THERE CAN BE NO
ASSURANCE THAT SUFFICIENT FUNDS WILL BE A V AILABLE TO PURCHASE ANY
OR ALL SERIES [A] 1999B EXTRASSM TENDERED FOR PURCHASE ON ANY
OPTIONAL TENDER DATE. In the event sufficient funds are not available to purchase any or
all Series [^] 1999B EXTRAssM tendered for purchase on any Optional Tender Date, the registered
holders of the tendered but unpurchased Series [^] 1999B EXTRAS SM will be required to retain their
Series [A] 1999B EXTRASSM at the new interest rate determined by the Remarketing Agent. See
"BONDHOLDERS' RISKS - Purchase of Series [^] 1999B EXTRAssM" and "THE SERIES [^]
1999B EXTRASSM - General Description." The maximum rate payable on the Series [A] 1999B
EXTRAssM is 15% per annum.
Bondholders' Risks
AN INVESTMENT IN THE SERIES 1999 BONDS INVOLVES RISK. A
BONDHOLDER IS ADVISED TO READ "BONDHOLDERS' RISKS" HEREIN FOR A
DISCUSSION OF CERTAIN RISK FACTORS WHICH WOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE SERIES 1999 BONDS. Careful consideration
should be given to these risks and other risks described elsewhere in this Official Statement. Among
other things, since the Series 1999 Bonds are payable solely from the revenues ofo the Company and
other moneys pledged to such payment, careful evaluation should be made of certain factors that may
adversely affect the ability of the Company to generate sufficient revenues to pay expenses of
operation, and the principal of, premium, if any, and interest on the Series 1999 Bonds.
Definitions and Summaries of Legal Documents
This Official Statement contains descriptions of (among other matters) the Project, the
Facility, the Series 1999 Bonds, the Indenture, the Agreement, the Mortgage and the Company. Such
descriptions and information do not purport to be comprehensive or definitive. All references herein
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to the Indenture, the Mortgage and the Agreement are qualified in their entirety by reference to the
complete text of such documents and all references herein to the Series 1999 Bonds are qualified in
their entirety by the forms thereof included in the Indenture. Summaries of the Indenture, the
Agreement and the Mortgage referred to in this paragraph are attached hereto as APPENDIX D.
Complete copies of such documents are available from the Trustee.
BONDHOLDERS' RISKS
General
The paragraphs set forth below discuss certain risks associated with investment in the Series
1999 Bonds, but are not intended to be a complete enumeration of all risks associated with the
Project or the purchase of any of the Series 1999 Bonds. Other investment risks are discussed in
other sections of this Official Statement.
Except as otherwise noted herein, the Series 1999 Bonds will be payable solely from the
payments to be made by the Company under the Agreement and the Series 1999 [^] Note and from
certain other available moneys pledged therefor under the Agreement, the Indenture and the
Mortgage. No entity or person other than the Company is, or shall be, in any way liable or
responsible for any payments to be made under the Agreement. Except for certain restricted assets,
the Company will have no significant assets other than the Mortgaged Property and will have no
significant sources of income other than the Monthly Rental Fees, per diem charges from use of the
healthcare services and other moneys received from the operation of the Facility. Accordingly,
registered owners of the Series 1999 Bonds must look solely to the security provided under the
Indenture, the Agreement and the Mortgage for payment of the principal, redemption premium, if
any, and interest due on the Series 1999 Bonds.
General Uncertainty of Revenues
Certain risks are inherent in the successful operation of facilities such as the Facility. The
ability of the Company to generate sufficient revenues from the operation of the Facility to pay the
required amounts under the Agreement and the Series 1999 [^ ] Note will be dependent on the
achievement and maintenance of high future residency levels and turnover thereof at the Facility by
eligible residents who will be able to pay the Monthly Rental Fees which are expected to increase on
a regular basis in subsequent years, the maintenance of occupancy in the Facility and receipt of
adequate per diem charges from the use thereof and the hiring and retention of competent
administrative and operating personnel to conduct the day to day operations of the Facility. No
representation or assurance can be made that revenues will be realized by the Company in amounts
sufficient to make the required payments with respect to debt service on the Series 1999 Bonds. The
realization of future revenues and control of expenses is dependent upon, among other things,
successful marketing by the Company's personnel, future state and federal funding of certain health
8
care programs, and future economic and other conditions that are unpredictable. Any of these factors
may affect revenues and payment of debt service on the Series 1999 Bonds.
Failure to Achieve or to Maintain Occupancy
The successful operation of the Facility depends in large part upon the ability of the Company
to attract sufficient numbers of residents to the Facility and to maintain substantial occupancy at the
Facility throughout the term of the Series 1999 Bonds. The Company's ability to maintain high levels
of occupancy depends to some extent on factors outside their control, such as the residents' right to
terminate their Residency Agreements and to receive a refund as provided in the Residency
Agreements. If the Facility fails to achieve and maintain a high level of occupancy, there may be
insufficient funds to pay debt service on the Series 1999 Bonds. Moreover, if a substantial number
of residents live beyond their anticipated life expectancies or if their admissions or transfers to the
assisted living area or the skilled care nursing area are substantially less than anticipated by the
Company, or if market changes prevent an increase in the amount ofthe Monthly Rental Fees payable
by new residents of the Facility, the receipt of additional Monthly Rental Fees could be curtailed or
limited, with a consequent impairment of the Company's revenues. Such impairment would also
result if the Company is unable to remarket units becoming available when residents die, withdraw,
or are transferred to another facility.
No Assurance Forecasted Results Will Be Obtained
The financial forecast contained in the Financial Feasibility Study included in APPENDIX B
hereto is based upon assumptions made by the management ("Management") of the Company. As
stated in such financial forecast, there will be differences between the forecasted data and actual
results because events and circumstances frequently do not occur as expected, and those differences
may be material. In addition, the financial forecast is only for the four years ending
December 31, 2002 and consequently does not cover the entire period during which the Series 1999
Bonds may be outstanding. [^] Because there is no assurance that actual events will correspond
to the assumptions of Management, no guarantee can be made that the financial forecast
contained in the Financial feasibility Study will correspond with the results actually achieved
in the future. Actual operating results may be affected by many uncontrollable factors,
including but not limited to increased costs, lower than anticipated revenues, employee
relations, taxes, governmental controls, changes in applicable governmental regulations,
changes in demographic trends, changes in the retirement living and health care industries,
failure by Management to execute its plans as reflected in the Financial Feasibility Study and
general economic conditions. See the risk factors described in this section and the Financial
Feasibility Study attached hereto as APPENDIX B, all of which should be read in their entirety.
Malpractice Claims and Losses
The operations of the Company, and thereby of the Facility, may also be affected by increases
in the incidence of malpractice lawsuits against physicians and facilities such as the Facility, in general,
9
and increases in the dollar amount of patient damages and recoveries, resulting in increased insurance
premiums and an increased difficulty in obtaining malpractice insurance. The Company covenants
to maintain malpractice insurance with private insurance carriers. It is not possible at this time to
determine either the extent to which such malpractice coverage will continue to be available to the
Company, and thereby to the Facility, or the premiums at which such coverage can be obtained.
Regulation
Recent Legislation. On March 25, 1999, President Clinton signed into law the Nursing Home
Resident Protection Amendments of 1999 (the II 1999 Nursing Home Act"). Generally, a nursing
facility that participates in the Medicaid program may only transfer or discharge a resident under the
following circumstances: the transfer or discharge is necessary for the resident's welfare; the
resident's health has improved enough to leave the facility; the safety or health of others in the nursing
facility is endangered; for non-payment of services; or if the nursing facility ceases to operate. Prior
law did not extend any transfer or discharge protections to Medicaid residents if the nursing facility
withdrew from the Medicaid program. The 1999 Nursing Home Act sets forth the rights of residents
in a nursing facility in a case where the facility voluntarily withdraws from participation in the
medicaid program, but continues to provide nursing care services. The nursing facility may not
transfer or discharge any resident, whether or not Medicaid recipients, solely because of its
withdrawal from the Medicaid program. All medicaid participation agreement requirements continue
to apply to all individuals who were residents of the nursing facility on the day before the day the
facility withdrew from the Medicaid program, until such individuals no longer require care.
Proposed Legislation. During 1998, the Clinton Administration announced a number of
administrative and legislative steps designed to increase the oversight of the nation's nursing homes.
Many of the steps were aimed directly at the survey enforcement process and nursing homes that fail
to provide quality care to their residents. These actions included: ensuring swift and strong penalties
for nursing homes failing to comply with standards; strengthening the oversight of state enforcement
mechanisms; developing a registry to track and identify individuals with a history of abusing residents;
and the implementing of efforts to improve nutrition and prevention of bed sores. While most of
these legislative initiatives failed in Congress in 1998, the Clinton Administration has advanced a
number of Executive-branch administrative actions including assessing immediate civil monetary
penalties; tougher nursing home inspections; stronger federal oversight of state enforcement
mechanisms; publishing regulatory survey results on the Internet and the implementation of new
efforts to measure and monitor nursing home quality.
A number of other bills proposing to regulate or control, in some manner, health care costs
and revenues and a number of proposals for a national health insurance program have been submitted
to Congress. There are wide variations among these proposals and the effect on the health care
industry and the Company cannot be determined. There can be no assurance that the implementation
of any such bill or proposal or any future bill or proposal, or the implementation by the federal or
state administrative bodies of nursing care cost containment or revenue control programs, would not
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adversely affect the revenues of the Facility, and thus the revenues of the Company. See "PayorlMix
- Nursing Center" in APPENDIX A for information regarding the Comoany's current oayor mix [^]
While management of the Company believes that any changes to the Medicare and Medicaid
programs will not have a significant adverse effect upon the Facility combined resident service
revenue and net patient service revenue, circumstances could change in the future and changes in the
Medicare and Medicaid programs could have an adverse impact upon the combined resident service
revenue and net patient service revenue in the future.
Medicare. The federal Balanced Budget Act of 1997 (the "Budget Act"), enacted in August
1997, contains extensive changes to the Medicare and Medicaid programs intended to reduce
payments under those programs by over $100 billion over a five-year period. Virtually all spending
reductions will come from providers and changes in program components. The Budget Act affects
reimbursement systems relating to the Company. The Budget Act changed Medicare cost
reimbursement from a retrospective system to a prospective payment system ("PPS"). There is a
four-year phase-in period for implementing the new system. During the first year (federal fiscal year
1998), a facility's reimbursement rate comprised 75% of such facility's specific 1995 Medicare costs
(the "facility specific 1995 rate") and 25% of the national Medicare per-diem costs, adjusted for
acuity. During the second year of the phase-in (federal fiscal year 1999), the rate will comprise 50%
of the facility specific 1995 rate and 50% of the national average. During the third year, the rate will
consist of25% of the facility specific 1995 rate and 75% of the national average. In year four and
thereafter, 100% of the rate will be based on the national average. These amounts will be inflated
forward at a nursing home inflation rate (health care market basket rate, less 1 %).
The Federal Health Care Financing Administration ("HCF A") will collect data from skilled
nursing facilities (ISNFs") on each patient and assign the patient to a case-mix category based on an
algorithm employing the data. The system calls for assessing patients on days 5, 14, 30, 60 and 90
of their stays, using a multi-disciplinary form. The data collection tool is called the minimum data set,
or MDS 2.0 ("MDS"). The patient classification methodology is called Resource Utilization Group
Version III and the patient classifications and categories are referred to as RUG-III or simply RUGs.
Case-mix reimbursement systems systematically link the amount paid to the types of patients
treated: the more extensive the services and the greater the need, the higher the case-mix index
incorporated in the payment rate. The RUG-III system divides nursing home residents into 44 groups
using two major classification structures: A clinical (medical and mental) topology and a measure
of functionality represented by the Activities of Daily Living. The case-mix index will be used to
adjust patient care costs.
PPS is not a single rate that SNFs receive for the length ofa patient's stay. Periodically, SNFs
must resubmit the MDS data set to re-qualify the patient for a given level of reimbursement. Thus,
as a patient's condition improves during a SNF stay, the SNFs PPS reimbursement drops. PPS is a
rolling prospective system with data submitted at the milestones affecting going-forward
reimbursement. By linking case-mix measures, which identify and categorize nursing home patients
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by assessed need, to facility reimbursement, the Medicare payment system is expected to become
more responsive to both facility costs and patient care needs.
Florida Medicaid Program. The State of Florida Agency for Health Care Administration
("AHCA"), which administers the State ofFlorida Medicaid program, reimburses operators of nursing
facilities on a per diem rate set by the Medicaid Cost Reimbursement Office. The policies and
procedures for reimbursement under the Florida Medicaid program are set forth in Florida Title XIX
Long-Term Reimbursement Plan Version XIV (effective November 6, 1997) (the "Plan"). The per
diem rate is determined based on the size, location, an allowable costs of the nursing facility. The
federal government requires the state Medicaid rates be reasonable and adequate to meet costs
incurred by efficiently and economically operated nursing facilities to provide service in conformity
with state and federal laws, regulations, and quality and safety standards.
Under the current Medicaid reimbursement plan, rates in Florida are prospective, facility
specific, cost-based subject to ceilings and set for six-month periods beginning in January and July
of each year (the rate semesters). There are six peer groups (based on location and size) that are used
to determine the ceilings for reimbursement rates. There are three geographical regions: The
northern counties, the central counties and the southern counties. Size categories include small
nursing homes (100 or fewer beds) and large nursing homes (greater than 100 beds). The
reimbursement rate has three components: patient care, operating costs and property costs. An
additional reimbursement is available in the form of an incentive, called a Medicaid Adjustment Rate,
which can equal 4-1 /2% of the patient care component. Patient care costs include those costs directly
attributable to nursing services, dietary costs, activity costs, social services costs and all medically
ordered therapies. All other costs, exclusive of property costs, are considered operating costs.
Each provider participating in the Florida Medicaid Nursing Home Program is required to
submit a uniform cost report and related documents no later than three calendar months after the
close of its cost reporting year The cost report is used to determine the nursing home's allowable
Medicaid costs. The Medicaid program pays a single level of payment rate for all levels of nursing
care. The single per diem rate is based upon each provider's allowable Medicaid costs divided by the
Medicaid patient days from the most recent cost report - subject to the rate setting methodology in
the Plan. Reimbursement of patient care and operating costs are limited to class ceilings set forth in
the Plan, while property costs are paid under the Fair Rental Value System ("FRVS"). FRVS is based
on the indexed allowable asset cost and the provider specific interest rate plus actual costs of
insurance and real estate taxes.
A new provider is required to submit a budgeted cost report with Medicaid officer in order
to establish an interim rate for reimbursement during the initial period following a change of
ownership (the "Initial Period"). At the election of the new provider, the term of the Initial Period
can range from six months to eighteen months. At the conclusion of the Initial Period, an initial cost
report is filed by the new provider and a settlement will be made for the difference between actual
costs and the initial interim rate. After the Initial Period, Medicaid rates are set prospectively, based
on actual costs incurred in the prior period, adjusted for inflation.
12
Related Regulation. There also is an expanding and increasingly complex body of law,
regulation and policy (both federal and state) relating to the Medicare and Medicaid programs, which
is not directly related to payments under such programs. This includes reporting and other technical
rules as well as broadly stated prohibitions regarding improper inducements for referrals and payment
of kickbacks in connection with the purchase of goods and services. Violations of prohibitions
against improper inducements and payments may result in civil and criminal sanctions and penalties.
Civil penalties range from monetary fines which may be levied on a per-violation basis to exclusion
from the Medicaid and Medicare programs.
In addition, Congress, in an act commonly known as Stark II, has restricted the ability of
SNFs and other entities to bill Medicare for designated health services ordered by physicians with
whom the SNF s have a financial relationship. While SNF care is not itself a designated health service,
many ancillary services required by SNF patients are. There are many types of financial relationships
which are exempt from Stark II; however, failure to comply strictly with the terms of these
exemptions will make the SNF ineligible to receive Medicare payment for designated health services
ordered by the physician.
To the extent residents may utilize the Medicaid or Medicare programs for reimbursement of
payments made to the Company, changes to the Medicaid and Medicare programs may indirectly
affect the Company's revenues by affecting the ability of current residents to make payments to the
Company and the ability of the Company to market the Facility to prospective residents.
Florida Licensure and Certificate of Need
Nursing Home Facilities. Florida nursing home facilities are regulated and inspected by
AHCA. All nursing home facility licensees are subject to various requirements, including
requirements regarding a safe and sanitary physical plant, minimum dietary standards, record
maintenance and residency contracts.
AHCA may take action against a nursing home facility licensee for a number of reasons such
as: (a) intentional or negligent act materially affecting a facility patient's health or safety;
(b) misappropriation or conversion of patient property; or ( c) violation of any application statute or
regulation with respect to nursing home facilities. In addition, AHCA, as an alternative to or in
conjunction with an injunctive proceeding against a nursing home facility licensee, may petition a
court of competent jurisdiction for the appointment of a receiver if, among other things: (a) AHCA
determines that there exist in the facility conditions which present an imminent danger to facility
patients' health, safety or welfare or a substantial probability that death or serious physical harm
would result; or (b) the facility cannot meet its financial obligations to provide food, shelter, care and
utilities.
Assisted Living Facilities. Assisted living facilities are licensed facilities which undertake
through their ownership or management to provide, for a period exceeding 24 hours, housing, food
service, and one or more personal services for four or more adults, not related to the owner or the
13
administrator by blood or marriage, who require such services. In addition, assisted living facilities
may provide extended congregate care, limited nursing services or limited mental health services
when specifically licensed to do so. Assisted living facilities are subject to various licensure
requirements, including requirements regarding maintenance of facilities, preparation and annual
updating of a comprehensive emergency maintenance plan, number and qualification of personnel,
sanitary conditions and care and maintenance of patients.
AHCA may revoke or suspend an assisted living facility license for a number of reasons,
including ( a) an intentional or negligent act seriously affecting a facility resident's health, safety or
welfare; (b) misappropriation or conversion of resident property; (c) a determination by AHCA that
the facility owner lacks the financial ability to provide continuing adequate care to residents; or (d)
a licensee's failure during relicensure to meet minimum licensing standards or applicable rules. Also,
AHCA may seek the appointment of a receiver in the same circumstances as indicated above with
respect to nursing home facilities.
Certificate of Need. The Health Facilities and Health Services Planning Act of the State of
Florida provides for a certificate of need ("CON") program which applies to the offering or
development of new institutional health services, including skilled nursing facilities. The CON
program, administered by AHCA, requires AHCA's review and approval of proposed capital
expenditures in excess of threshold amounts, of the initiation of substantial changes in services or any
change in licensed bed capacity, including skilled nursing facility beds.
In Florida, nursing home beds are divided into two categories: sheltered beds and community
beds. Sheltered nursing home beds are located within a continuing care facility and usually are
utilized only by residents who live within the continuing care facility, as certified under Chapter 651,
Florida Statutes. Community nursing home beds are usually located outside of a continuing care
facility. For health planning purposes, sheltered beds are not considered when calculating bed
inventories of a district and are not considered when reviewing CONs for new or additional
community nursing home beds.
The current Florida nursing home bed need methodology is based on utilization patterns at
the local level. Bed need allocations are made on a subdistrict basis and are derived by established
utilization statistics. Proposed increases in nursing home beds are reviewed relative to the area's
population growth and the rate of occupancy experienced by existing nursing homes. Relaxation in
the standards or elimination of the CON program could be implemented in the future, which could
result in increased competition for the Company's Facility.
Management of the Facility believes that the Facility is, and will continue to be, in compliance
with Florida licensure and CON requirements. Any failure to maintain compliance with Florida
licensure and CON requirements could have a material adverse effect on the operations of the
Facility.
14
The Company is licensed by the State of Florida to operate the Cove Nursing Center and the
Bluffs Nursing Center. The Company has received approval to transfer the beds from the Bluffs
Nursing Center to the Cove Nursing Center and to operate under a single license. The licenses
consist of both the Oaks Nursing Center license and the Assisted Living Facility license. The
independent living units are exempt from State licensure. [^]
Possible Changes in Tax Status
The possible modification or repeal of certain existing federal income or state tax laws or
other loss by the Company of the present advantages of certain provisions of the federal income tax
or state tax laws could materially and adversely affect the status of the Company, and thereby the
revenues of the Facility. See "EXEMPTION" herein. The Company has obtained a letter from the
Internal Revenue Service determining that it is an exempt organization as defined under Section
501(c)(3) of the Code. As an exempt organization, the Company is subject to a number of
requirements affecting its operation. The failure of the Company to remain qualified as an exempt
organization would affect the funds available to the Company for payments under the Agreement.
The tax-exempt status of the Series 1999A Bonds also is based on the continued compliance by the
Company with certain covenants contained in the Indenture and the Agreement. These covenants
relate generally to ownership, use and operation of the Facility, arbitrage limitations, rebate of certain
excess investment earnings to the federal government, and restrictions on the amount of issuance
costs financed with the proceeds of the Series 1999 Bonds. Failure to comply with any of these
covenants may result in the treatment of interest on the Series 1999 Bonds as taxable retroactive to
the date of issuance.
Limited Use of Facility
The Facility is or will be constructed and equipped to provide residential retirement, assisted
care and healthcare services. As a result, in the event of default, the Issuer's and the Trustee's
remedies and the number of entities which would be interested in purchasing or leasing the Facility
might be limited, and the sales price or rentals generated by the Facility might thus be adversely
affected.
Possible Effect of Adverse Conditions in Housing Market
It is anticipated that a substantial number of prospective residents of the Facility will be
required to sell their current homes to pay the Monthly Rental Fees or to meet other financial
obligations relating to the Facility. If prospective residents encounter difficulties in selling their
current homes due to local or national economic conditions affecting the sale of residential real estate,
such prospective residents may not have sufficient funds to pay the fees and rents or to meet other
obligations relating to the Facility, thereby causing a delay in scheduled occupancy of the Facility or
remarketing of vacated units, which would have an adverse impact on the revenues of the Company.
15
Construction Risks
The ability of the Company to make payments of the principal of, redemption premium, if any,
and interest on the Series 1999 Bonds, when due, is in part dependent upon completion of the
construction of the Project within available resources and without delays due to strikes, shortages of
materials, adverse weather conditions as well as other factors. The Company will attempt to protect
itself against a portion of those risks by requiring the contractors for the Project to furnish
performance and material payment bonds prior to commencement of construction work on certain
portions of the Project. However, attempts to seek recourse against contractors or their sureties for
cost overruns may involve costly and time-consuming litigation. Further, the timely completion of
construction is dependent upon promptly obtaining approvals and permits from various regulatory
and governmental agencies. There can be no assurance that such approvals and permits will be
promptly obtained.
It is anticipated that the proceeds from the sale of the Series 1999 Bonds will be sufficient to
complete the acquisition and construction ofthe Project; however, cost overruns are not uncommon.
If the Project cannot be completed for its anticipated costs, the Company is obligated to complete the
same at its own expense, with available moneys, through the issuance of additional bonds, parity or
otherwise, or with financing obtained from other sources. The Company's financial resources are
limited. Accordingly, there can be no guarantee, if costs overruns are experienced, that the Project
will be completed, although the Company does not at this time have any reason to believe that
substantial cost overruns will be incurred.
A substantial portion of the Project involves the renovation of the Facility. Obtaining accurate
estimates of the renovation costs of buildings can be difficult, and often, the extent of the renovations
required to meet current codes is not known until that phase of the Project has begun. Therefore,
some costs may exceed, and some may be below, the original estimates. Additionally, the Company
may reduce in scope, or eliminate, certain phases of the Project and take on other renovation activities
not envisioned at the outset.
Enforceability of Remedies
In the event of a Default by the Company under the Agreement, the Trustee may not be able
to compel Medicare, Medicaid, Blue Cross, Blue Shield, or other third parties to make payments
directly to the Trustee. Under current law, such pledge may be further limited by the following: (i)
st~tutory liens; (ii) rights arising in favor of the United States of America or any agency thereof; (iii)
present or future prohibitions against assignment contained in any state or federal statutes or
regulations; (iv) constructive trusts, equitable liens, or other rights impressed or conferred by any
state or federal court in the exercise of its equitable jurisdiction; (v) federal bankruptcy laws affecting
assignments of revenues earned after any institution of bankruptcy proceedings by or against the
Issuer; and (vi) the requirement that appropriate continuation statements be filed pursuant to the UCC
as from time to time in effect.
16
Uncertainty of Investment Income
The investment earnings of, and accumulations in, certain funds established pursuant to the
Indenture have been estimated and are based on assumed earnings rates. While these assumptions
are believed to be reasonable in view of the rates of return presently and previously available on the
types of securities in which the Trustee is permitted to invest under the Indenture, there can be no
assurance that similar interest rates will be available on such securities in the future, nor can there be
any assurance that the estimated funds will actually be realized.
Bankruptcy
The ability of the Issuer and the Trustee to exercise certain rights and remedies under the
Agreement, the Indenture and the Mortgage may be limited by bankruptcy, insolvency,
reorganization, or other similar laws or equitable principles relating to or affecting the enforcement
of creditors' rights generally.
Rights of Residents
Although the Residence Agreement gives to each Resident a contractual right to use space
and not any ownership rights in the Company's property, in the event that the Trustee or the
registered holders of the Series 1999 Bonds seek to enforce any of the remedies provided by the
Indenture, the Agreement or the Mortgage upon the occurrence of a default under any or all of such
documents, it is impossible to predict the resolution that a court might make of competing claims
between the Trustee or the registered holders of the Series 1999 Bonds and a Resident of the Facility
who has fully complied with all the terms and conditions of the Residence Agreement.
Competition
The Company currently faces competition from other providers of existing retirement living
facilities, nursing facilities, and comparable facilities servicing the housing and health care needs of
the elderly in its primary market area. The Company may face additional competition in the future
from other providers of new, expanded, or renovated retirement living and nursing facilities servicing
the housing and health care needs of the elderly. See APPENDIX A - THE COMPANY AND THE
OAKS - Organization and Operations - Competition.
Investment Risks; Lack of Ratings
No application has been made for a credit rating for the Series 1999 Bonds. The absence of
such a rating could adversely affect the marketability of the Series 1999 Bonds. Although the
Underwriter expects to engage in the purchase and sale of the Series 1999 Bonds in the secondary
market, there can be no assurance that there will always be a secondary market for purchase or sale
of the Series 1999 Bonds, and from time to time there may be no market for them depending upon
prevailing market conditions, the financial condition or market position of firms who may make the
17
secondary market, and the financial condition and results of operations of the Company and the
Facility. The Series 1999 Bonds should therefore be considered long-term investments in which funds
are committed to maturity.
Purchase of Series [^] 1999B EXTRASSM
The registered holders of Series [^] 1999B EXTRAssM have the option to tender their Series
[^] 1999B EXTRAssM to the Trustee for purchase on each Optional Tender Date. The only sources
of moneys available to make payments of the purchase price of the Series [^] 1999B EXTRAssM on
each Optional Tender Date are (i) the proceeds of the remarketing thereof, (ii) moneys required to
be deposited in the Extendables Purchase Fund by the Company pursuant to the Agreement in an
amount not greater than the amount of cash held by the Company on such Optional Tender Date in
excess of [^]_ Days Cash on Hand, and (iii) any additional amounts deposited into the Extendables
Purchase Fund by the Company, at its sole option, from any available moneys of the Company.
Therefore, ifany of the Series [^] 1999B EXTRAssM tendered on any Optional Tender Date are not
remarketed at par, the Tender Agent may not have available funds with which to purchase such Series
[^] 1999B EXTRAssM. In the event sufficient funds are not available, the registered holders of the
tendered but unpurchased Series [^] 1999B EXTRASSM will be required to retain their Series [^]
1999B EXTRAssM at the new interest rate determined by the Remarketing Agent. THERE CAN
BE NO ASSURANCE THAT SUFFICIENT FUNDS WILL BE AVAILABLE TO PURCHASE
ANY OR ALL SERIES [^] 1999B EXTRAssM TENDERED FOR PURCHASE ON ANY
OPTIONAL TENDER DATE. Failure to purchase Series [^] 1999B EXTRAssM tendered for
purchase on any Optional Tender Date does not constitute an event of default under the Indenture
or the Agreement. See "THE SERIES [^] 1999B EXTRAssM - General Description - Purchase on
Optional Tender Dates" herein. In addition, there can be no assurance that any interest rate reset
with respect to the Series [^] 1999B EXTRAssM will not cause a material burden on the financial
condition of the Company.
Amendments to Documents
Certain amendments to the Indenture and the Agreement may be made without the consent
of the registered holders of the Series 1999 Bonds and other amendments may be made with the
consent of the registered holders of not less than 51 % in aggregate principal amount of all
outstanding Bonds including the Series 1999 Bonds and any Additional Bonds issued hereafter. Such
amendments could affect the security for the Series 1999 Bonds.
Year 2000 Compliance
Date sensitive computer applications that currently record years in two-digit, rather than
four-digit, format may be unable to properly categorize and process dates occurring after
December 31, 1999 (the "Year 2000" problem). If Year 2000 related failures were to occur in the
Company's computer and information systems, the Company could incur significant, unanticipated
liabilities and expenses which could adversely affect its creditworthiness, and could adversely affect
18
the timely payment of its indebtedness, including the payment of debt service on the Series 1999
Bonds. In addition, the Company may be adversely affected by the extent to which other companies
and governmental bodies with whom the Company does business are Year 2000 compliant. For
example, the Company's ability to be reimbursed by Medicaid or Medicare for skilled nursing facility
services may be affected by the extent to which the federal government is Year 2000 compliant. The
failure of any such company or governmental body to be Year 2000 compliant could have a material
adverse effect on the Company. The Company conducted an internal assessment of the potential
impact of the Year 2000 problem on its internal operations and systems between January and May,
1999. For a discussion of the Company's assessment and approach to Year 2000 compliance, see
APPENDIX A - [^]"ORGANIZATION AND OPERATIONS - Year 2000 Issues."
Transfer of Residents from the Bluffs Buildin!! to the Cove Buildin!! Upon Completion of
Renovations .
The plan offinance anticipates that the Company will gain title to both the Bluffs building and
the Cove Building. During the period of renovation of the Cove Building, the current residents of
the Cove Nursing Center will be transferred to the Bluffs Nursing Center. Upon completion of the
renovation of the Cove Building, residents of the Independent Living and Assisted Living units of the
Bluffs Building will have the opportunity to move to the newly renovated Cove Building.
Management has estimated the number of persons who may take advantage of such an opportunity
and has reflected that assumption in the financial forecast. Should the number of people who
ultimately decide to move from the Bluffs Building to the Cove Building, upon the completion of
renovations at the Cove Building, be less than has been assumed by Management then this could
materiallv impact the revenues available for debt service.
Other Risk Factors
The occurrence of any ofthe following events, or other unanticipated events, could adversely
affect the operations of the Company:
(1) establishment of mandatory governmental wage, rent, or price controls;
(2) inability of the Company to control increases in operating costs, including salaries,
wages and fringe benefits, supplies, and other expenses, without being able to obtain corresponding
increases in revenues from residents of the Facility whose incomes will largely be fixed;
(3) unionization, employee strikes, and other adverse labor actions which could result in
a substantial increase in expenditures without a corresponding increase in revenues;
(4) the occurrence of any natural disasters or other disruptions that impair the operations
of the Facility;
19
(5) adoption of federal, state or local legislation or regulations having an adverse effect
on the future operating or financial performance of the Company;
(6) a decline in the population, a change in the age composition of the population or a
decline in the economic conditions of the Company's market area other than those assumed by the
Company; and
(7) the ability of, and cost to, the Company to continue to insure or otherwise protect
itself against malpractice claims.
FLORIDA REGULA nON OF CONTINUING CARE FACILITIES
Continuing care facilities in Florida are regulated by the Department ofInsurance of the State
of Florida (the "DOl") under the provisions of Chapter 651, Florida Statutes, as amended ("Chapter
651 "). The Facility is exempt from regulation under Chapter 651 pursuant to certain agreements
between the DOl and the Company.
The Company voluntarily surrendered its continuing care retirement community ("CCRC")
certificate of authority for [Oak Bluffs] and [Oak Cove] pursuant to a consent order dated April 22,
1996 between the DOl and the Company. The consent order required the Company to give all CCRC
Residents notice of cancellation of their continuing care contracts by April 29, 1996 with an effective
cancellation date of May 31, 1996, unless such contracts were terminated earlier by the parties. As
part of the plan of cancellation, the Company was required to offer the following options to each
CCRC Resident regarding living choices: to remain at the Facilitv as a non-CCRC Resident or to
relocate to another residence of their choosimt or another CCRC. [^]
In addition, the Company was required to refund $5,000 from its minimum liquid reserve to
each non-bond holding or non-Medicaid Resident opting to relocate. The Company was also
required to immediately redeem any bond held by a CCRC Resident. The balance of the minimum
liquid reserve held by the State of Florida was to be placed into a trust account pursuant to a trust
agreement. In accordance with the consent order and trust agreement, the trust funds are to be
disbursed by the trustee to the provider, whether it is the Company or a new provider, in equal
monthly installments together with accrued interest over a term of five years beginning July 15, 1996.
The balance of the funds in the trust account are to be turned over to the provider as of the date the
last former CCRC Resident either moves out of the Facility or expires.
On July 18, 1996, a notice of voluntary dismissal without prejudice was filed by the DOl
pursuant to the Company's compliance with the consent order. According to the voluntary dismissal,
on or about June 12, 1996, the Company surrendered the certificate ofo authority to the DOl
pursuant to the terms of the consent order and the certificate of authority, the Company is no longer
an entity regulated by the DOl as defined in Chapter 651, Florida Statutes, and the DOl has no
further jurisdiction over the Company.
20
Approximately $361,542.40, representing the amount of the minimum liquid reserves held by
the State of Florida, was released by the DOl Bureau of Collateral Securities on January 23, 1998
to Douglas A. Wright of Holland & Knight LLP as the designated trustee under the trust agreement.
THE ISSUER
The City of Clearwater, Florida is a municipal corporation, duly organized and existing under
and pursuant to the Constitution and laws of the State of Florida. The Act authorizes the Issuer to
promote the health and safety of the inhabitants of the Issuer, the people of Pine lias County and the
State of Florida by increasing their access to adequate medical care and health care facilities, and to
accomplish such financings through the issuance of revenue bonds.
The Issuer is located in the middle of the west coast of Florida on the Gulf ofMexic.o and has
a population of as of 1998. Its city limits comprise approximately 26.4 square miles of
land and 8.5 square miles of waterways and lakes. The Issuer is governed by a City Commission and
operates under a Commission-Manager form of government. The City Commission appoints a
full-time City Manager and a full-time City Attorney. A full-time Director of Finance has the
responsibility for all financial operations of the City, and is appointed by the City manager. Also, an
internal audit director is appointed by the City Manager and serves full time. The Issuer is primarily
a resort and residential community. The Issuer has many recreational facilities including tennis, golf,
boating, fishing, water sports, and recreational paths. During the winter months, the hotels, motels,
and restaurants fill with visiting tourists and winter residents. The Issuer offers over 42 acres of
public beach front.
THE COMPANY AND THE FACILITY
The Company was incorporated as a Florida not-for-profit corporation in 1975, as American
Baptist Estates of Clearwater, Inc. The Company changed its name to BEF, Inc. in March of 1999.
The Internal Revenue Service has determined that the Company is an organization described in
Section 501(c)(3) of the Code, and is therefore exempt from federal income taxation under the
provisions of Section 501(a) of the Code. The Company received its Determination Letter from the
Internal Revenue Service in May, 1976.
The Company and the Oaks own and operate the Facility in the City of Clearwater, Pinellas
County, Florida. The Facility is currently comprised of two high-rise buildings and four low-rise
buildings. These buildings contain the Nursing Centers, independent and assisted living facilities
which are owned and operated by the Company.
Jinsert merger descriotionl
21
The Company provides three different levels of care to residents of the Facility: independent
living, assisted living and nursing care.
Residential areas within the Facility include 12 one-bedroom garden apartments located in the
Villas, 8 two-bedroom garden apartments and 391 one-room and two-room high-rise apartments (of
which 213 are currently unoccupied and located in the Cove Building and the remainder are located
in the Bluffs Building); [^] 53 assisted living units [^] located in [^] the Bluffs Building; and the
Nursing Centers, which are comprised of a 60-bed skilled nursing facility located in the Bluffs
Building and a 56-bed skilled nursing facility located in the Cove Building.
The Facility is located on approximately 7 acres of land in the City of Clearwater, Pinellas
County, Florida, next to Tampa, Florida, and directly on the coastline on the Intercoastal Waterway,
with views of the Gulf of Mexico, Clearwater and St. Petersburg, Florida
Residence Agreements
The Company requires each resident of the Facility ("Resident") to execute a Residency
Agreement. The Company currently utilizes a single form of Residency Agreement (the "Residency
Agreement"), which agreement provides for selection of the level of care and type of
accommodations to be provided at the Facility.
All Residency Agreements require Residents to pay monthly rental fees (the "Monthly Rental
Fees") which differ based on the housing type, as well as the last month Monthly Rental Fee in
advance, and a security deposit (the "Security Deposit") which is held against the cost of any damages
to the unit, other than reasonable wear and tear, with the remainder of such Security Deposit to be
refunded, without interest, to the Resident or Resident's estate 45 days after receiving notice that such
Resident is not returning to their unit. Health assessments are performed with respect to all
prospective Residents. With respect to potential independent living Residents, each applicant meets
with the Facility's in-house nurse to determine whether such applicant is capable of functioning in the
independent living section of the Facility. Additionally, all Residents must meet the Company's
financial requirements, which require that each applicant have a monthly income that is at least thirty
percent (30%) greater than the applicable Monthly Rental Fee, or have a family member or other
individual willing to cosign for the Monthly Rental Fee, which individual meets such financial
requirements. The Monthly Rental Fees are reviewed annually by the Company and, if deemed
necessary, are increased. .see the section entitled "RESIDENCY AGREEMENTS" in APPENDIX
A herein. [^]
PLAN OF FINANCING
The proceeds from the sale of the Series 1999 Bonds, together with certain other available
funds, will be used to provide funds to (i) acquire the assets of the Oaks which primarily consist of
independent and assisted living facilities, (ii) finance the cost of renovations to the Facility, (iii)
22
provide for working capital and/or capitalized interest, (iv) fund a debt service reserve fund with
respect to the Series 1999 Bonds and (v) pay certain costs with respect to the issuance of the Series
1999 Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS."
THE PROJECT
In 1989, the Facility was refinanced through a secondary loan from the City of Clearwater,
Florida, from certain proceeds ofa loan from the Sponsor, through the Sponsor's Local Government
Loan Program to the City of Clearwater, Florida, funded through the proceeds of Sponsor's Local
Government Loan Program Floating Rate Demand Revenue Bonds, Series 1985C-l. The loan to the
Company and Oaks was secured by the 1989 Notes guaranteed as to payment by GNMA, which is
a part ofHUD. In 1996, each of the Company and Oaks declared bankruptcy and defaulted on the
1989 Notes. In connection with the plan of reorganization in bankruptcy and pursuant to their
guarantee of the Notes, HUD purchased the 1989 Notes and the outstanding bonds were
extinguished. HUD then sold the defaulted 1989 Notes at auction to Beal. Immediately prior to the
closing of the offering of the Series 1999 Bonds, the outstanding principal and interest on the 1989
Notes was $
Beal has agreed to sell the 1989 Notes for Twenty Million Dollars ($20,000,000). Pursuant
to the terms ofa Note Purchase Agreement between the Company and Beal, the Company will use
a portion of the proceeds of the Series 1999 Bonds to (i) purchase its 1989 Note from Beal for
$ , with the Company thereby receiving clear title to the Company portions of the Facility
(including the Nursing Centers and its portion of the common areas of the Facility), and (ii) purchase
the Oaks 1989 Note from Beal for $ , with the Company acquiring the remaining portions
of the Facility previously owned by Oaks by accepting a deed in lieu of foreclosure from Oaks with
respect to the remaining portions of the Facility. Accordingly, upon the completion of the offering
of the Series 1999 Bonds and the purchase of the 1989 Notes by the Company, the ownership of the
Facility will be consolidated in the Company.
The Company will use a portion of the proceeds from the Series 1999 Bonds to renovate the
Cove Building. Currently, the Cove Building is vacant except for the Cove Nursing Center. The
third floor of the Cove Building will be renovated into modem, skilled nursing units. The residents
of the Cove Nursing Center will be transferred to the new third-floor nursing facility upon
completion. The old Cove Nursing Center will then be renovated and rehabilitated to meet current
standards and the residents of the Bluffs Nursing Center will be transferred into such renovated space
upon completion. At the same time, the remaining floors of the Cove Building will be completely
rehabilitated to provide for senior independent and assisted living units in order to replace the
facilities at the Bluffs Building. Upon completion of such living space, the residents in the Bluffs
Building who have consented to move will transfer to the Cove Building. [^]
The Facility will be renovated and redeveloped pursuant to the terms of a
Development Agreement by and between the Company and CCSFL, which through its subsidiaries
23
manages over 200 nursing homes and assisted living facilities throughout the United States, primarily
on the East Coast and in Ohio, Illinois and Texas, and provides development services to owners of
senior housing, assisted living and long- term care facilities.
The Development Agreement provides for the payment to CCSFL of three percent (3%) of
the [A] renovation costs of the Project. Seventy-five percent (75%) of such fee is due upon the
issuance of the Series 1999 Bonds, with the remaining twenty-five percent (25%) payable over the
six-month projected construction period. Under the Development Agreement, CCSFL is required
to create a detailed development plan and time schedule, prepare development budgets, oversee
architectural and engineering planning, obtain all necessary regulatory consents and approvals,
identify contractors and coordinate the construction bid process, oversee the construction, and
oversee the transition of the renovated Cove Building until opening.
THE MANAGEMENT COMPANY
Simultaneous with the issuance of the Series 1999 Bonds, the Company is terminating its
existing management contracts and is entering into a new management agreement with CCSFL.
[Additional CCS and CCSFL information to come] See the section entitled "THE PROJECT - The
Management Company" in APPENDIX A herein.
FINANCIAL FEASffiILITY STUDY
Feasibility Study
See APPENDIX B herein for a Financial Feasibility Study dated , 1999, prepared
by BDO Seidman, LLP, independent certified public accountants (the "Financial Feasibility Study").
The Financial Feasibility Study includes management's financial forecast of the Company for the four
(4) years ending December 31,2002. As stated in the Financial Feasibility Study, there will be
differences between the forecasted data and actual results because events and circumstances
frequently do not occur as expected, and those differences may be material. The achievement
of any financial forecast is dependent upon future events, many of which are beyond the
Company's control and the occurrence of which cannot be assured. See "BONDHOLDERS'
RISKS" herein. The Financial Feasibility Study should be read in its entirety, including all
notes and assumptions set forth therein.
Forecasted Financial Information for the Company
The table set forth below reflects the forecasted debt service coverage ratio calculations for
the Company and has been extracted from management's financial forecast included in the Financial
Feasibility Study. See APPENDIX B - "Financial Feasibility Study" attached hereto.
24
[TO COME FROM FINAL DRAFT OF FINANCIAL FEASIBILITY STUDY]
THE SERIES 1999A BONDS
Mandatory and Optional Redemption
For information with respect to extraordinary redemption, notices of redemption and
exchanges in transfers of Series 1999A Bonds, see liTHE SERIES 1999 BONDS - ADDITIONAL
INFORMATION. II
Mandatory Sinking Fund Redemption. The Series 1999A Bonds maturing November 15,
20_ are subject to mandatory redemption prior to maturity in part, by lot, on November 15 of each
year, beginning November 15, 20_, at a redemption price equal to 100% of the principal amount of
such Series 1999A Bonds being redeemed plus accrued interest to the redemption date; without
premium, in the following principal amounts and in the following years:
Year
Amount
· Maturity
The principal amount of Series 1999 A Bonds required to be redeemed as set forth above shall
be reduced pro rata by amounts equal to such principal amount of the Series 1999 A Bonds of such
maturities which are purchased by the Tender Agent or Trustee for cancellation and retirement with
moneys provided by the Company.
Optional Redemption. The Series 1999A Bonds maturing on or prior to November 15, 20_
are not subject to redemption prior to maturity at the option of the Company. The Series 1999A
Bonds maturing on or after November 15, 20_ are subject to redemption prior to their maturity, at
the option of the Issuer, at the written request of the Company on or after November 15, 20_, at
any time in whole or in part, in order of maturities as shall be determined by the Company and by lot
within a maturity, on any Interest Payment Date, at the redemption prices (expressed as percentages
25
of principal amount of Series 1999A Bonds to be redeemed) set forth in the table below, plus accrued
interest thereon to the date fixed for redemption:
[^]
[^][^][^] Period of Redemption
(All dates inclusive)
November 15, 20_ to November 14,20_
November 15, 20_ to November 14, 20_
November 15, 20_ and thereafter
Redemption Prices
102%
101
100
THE SERIES [^] 1999B EXTRASSM
General Description
Interest. The Series [^] 1999B EXTRAssM will initially bear interest at the rate set forth on
the inside cover page hereof until, but not including, the initial Optional Tender Date and will mature
at the maturity date set forth on the inside cover page hereof. Thereafter, the applicable interest rate
on the Series [^] 1999B EXTRAssM (the "Reset Rate") will be established for each Rate Period (the
period commencing with an Optional Tender Date and ending on and including the day immediately
preceding the next Optional Tender Date or, if none, the maturity date of the Series [^] 1999B
EXTRASSM) by the Remarketing Agent under the Remarketing Agreement. The Remarketing
Agreement provides for the appointment of a successor Remarketing Agent by and at the option of
the Company.
Not less than seventy-five (75) days prior to each Optional Tender Date, the Company shall
deliver to the Trustee and the Remarketing Agent written notice of the Company's determination of
the next succeeding Optional Tender Date, which Optional Tender Date shall be a November 15, or
shall specify that the Series [^] 1999B EXTRAssM are to bear a Reset Rate to maturity, provided,
however, that if the Company fails to specify the next succeeding Optional Tender Date, such date
shall be a November 15 in such year as will enable the term between the current Optional Tender Date
and such next succeeding Optional Tender Date to equal the preceding term or the final maturity,
whichever is earlier.
Not less than sixty-five (65) days prior to the Optional Tender Date at the commencement of
each Rate Period for the Series [^] 1999B EXTRASSM, the Remarketing Agent shall determine the
Reset Rate for such Series [^] 1999B EXTRAssM which shall be the lowest rate that would, in the
judgment of the Remarketing Agent having due regard to the prevailing market conditions, enable
the registered holder of the Series [^] 1999B EXTRASSM, as of such Optional Tender Date, to sell
such EXTRASSM at a price equal to the principal amount of the Series [^] 1999B EXTRAssM,
provided that such rate may not exceed 15% per annum (the "Maximum Rate"). Upon such
determination of the Reset Rate, the Remarketing Agent shall promptly notify the Trustee and the
26
Company of the Reset Rate. Not less than sixty (60) days prior to the Optional Tender Date, the
Trustee shall promptly notify each registered holder of the Series [^] 1999B EXTRAssM in writing
by first class mail, postage prepaid, of the Reset Rate which will be applicable on and after the
Optional Tender Date and instructions for the procedure to be followed by any registered holder
wishing to tender Series [^] 1999B EXTRAssM for purchase. If for any reason the Reset Rate
cannot be determined by the Remarketing Agent in the manner specified above, the Reset Rate for
such period shall be equal to The Bond Buyer Revenue Bond Index (as published in The Bond Buyer
or any successor publication thereto) for the most recent period for which such information is
available prior to the giving of notice of the Reset Rate by the Trustee to the registered holders of the
Series [^] 1999B EXTRAssM, or if such index or its equivalent is no longer published, the interest
rate currently in effect, provided that such rate may not exceed the Maximum Rate.
The interest rate on the Series [^] 1999B EXTRAssM will not be reset on any Optional
Tender Date unless (a) at least seventy-five (75) days prior to such Optional Tender Date and (b) on
such Optional Tender Date, the Company shall cause to be delivered, at its expense, to the Trustee
and the Remarketing Agent an Opinion of Bond Counsel, to the effect that such reset in interest rate
and change in the Rate Period will not have an adverse effect on any exemption from federal income
taxation to which the interest on the Series [^] 1999B EXTRAssM would otherwise be entitled. In
the event such Opinion of Bond Counsel is not delivered, the interest rate on the Series [^] 1999B
EXTRASSM currently in effect shall remain in effect as the Reset Rate for the next Rate Period, which
shall be equal in duration to the preceding Rate Period but not shall not in any event extend beyond
the date of final maturity of the Series [^] 1999B EXTRAS SM
Optional Tender. The Series [^] 1999B EXTRAssM are subject to optional tender for
purchase by the Trustee on behalf of the Company on each applicable Optional Tender Date. THERE
CAN BE NO ASSURANCE THAT SUFFICIENT FUNDS WILL BE AVAILABLE TO
PURCHASE ANy OR ALL SERIES [^] 1999B EXTRAssM TENDERED FOR PURCHASE ON
ANY OPTIONAL TENDER DATE. SEE "BONDHOLDERS' RISKS--Purchase of Series [^]
1999B EXTRASSMlI The Trustee shall give written notice of the next applicable Optional Tender
Date to each registered holder of Series [^] 1999B EXTRAS SM when delivering notice of the new
Reset Rate. The registered holder of such Series [^] 1999B EXTRAssM may exercise such option,
and such Series [^] 1999B EXTRAssM shall be purchased by the Tender Agent in accordance with
and subject to the terms of the Indenture. In order to exercise this option, the registered holder shall
deliver a notice (the "Tender Notice") to the Trustee, as Tender Agent, not less than thirty (30) and
not more than sixty (60) calendar days prior to the applicable Optional Tender Date. The Tender
Notice must state the principal amount of the tendered Series [^] 1999B EXTRAssM (which amount
shall be $5,000 or an integral multiple thereot). The delivery of the Tender Notice by the registered
holder in connection with an Optional Tender Date shall be irrevocable and binding on the registered
holder and cannot be withdrawn.
Purchase on Optional Tender Dates. The Remarketing Agent shall offer for sale and use its
best efforts to remarket the tendered Series [^] 1999B EXTRAssM to third parties for purchase at
par on each Optional Tender Date. In the event that any tendered Series [^] 1999B EXTRAssM
27
cannot be remarketed, amounts on deposit in the Extendables Purchase Fund, if any, will be applied
to purchase such Series [^] 19998 EXTRAssM The only sources of moneys available to make
payments of the purchase price of the Series [^] 1999B EXTRAS SM on each Optional Tender Date
will be (i) the proceeds of the remarketing thereof (ii) moneys required to be deposited in the
Extendables Purchase Fund by the Company pursuant to the Agreement in an amount not greater
than the amount of cash held by the Company on such Optional Tender Date in excess of290 Days
Cash on Hand, and (iii) any additional amounts deposited into the Extendables Purchase Fund by the
Company, at its sole option, from any available moneys of the Company.
Prior to 10: 3 0 A.M., Chicago Time, on each Optional Tender Date, the registered holders of
the Series [^] 1999B EXTRASSM to be tendered for purchase on such date must deliver to the
Tender Agent the Series [^] 1999B EXTRASSM to be tendered for purchase on such date
accompanied by a written instrument or instruments of assignment or transfer in the form satisfactory
to the Trustee transferring such Series [^] 1999B EXTRAssM to such person or persons as the
Remarketing Agent in its sole discretion shall designate, or if the Remarketing Agent shall not have
made any such designation, then to the Tender Agent to be held and registered in accordance with
the provisions of the Indenture. If a registered holder files the requisite Tender Notice but fails to
deliver the Series [^] 1999B EXTRAssM so tendered, such Series [^] 1999B EXTRAssM, upon
deposit with the Tender Agent on the Optional Tender Date of the Tender Purchase Price, shall be
deemed purchased and no longer outstanding, and the registered holder of such Series [^] 1999B
EXTRAssM shall thereafter look solely to the Tender Purchase Price held by the Tender Agent
without interest.
In the event there are not sufficient moneys available to pay the principal of the Series [^]
1999B EXTRAssM tendered for purchase on the Optional Tender Date, the Trustee, after notification
in writing from the Tender Agent, will determine by lot the Series [^] 1999B EXTRASSM or portions
thereof to be purchased on such Optional Tender Date. The registered holders of tendered but
unpurchased Series [^] 1999B EXTRAssM shall continue to hold such Series [^] 1999B EXTRAssM
from and after the Optional Tender Date; however, such Series [^] 1999B EXTRAssM shall be given
priority for redemption on each succeeding redemption date including mandatory sinking fund
redemption dates, over any untendered Series [^] 1999B EXTRAS SM. Series [^] 1999B EXTRAS SM
that are not purchased on an Optional Tender Date shall bear interest from and after the Optional
Tender Date at the Reset Rate determined by the Remarketing Agent as described above. Failure to
purchase all Series [^] 1999B EXTRASSM tendered for purchase on a particular Optional Tender
Date because of an insufficiency of money to effect such purpose shall not constitute an Event of
Default under the Indenture.
TIIERECANBENOASSURANCE THAT SUFFICIENT FUNDS WILLBEAV All..ABLE
TO PURCHASE ANY OR ALL SERIES [^] 1999B EXTRAssM TENDERED FOR PURCHASE
ON ANY OPTIONAL TENDER DATE. THE FAILURE OF TIIE COMPANY TO PURCHASE
ALL SERIES [^] 1999B EXTRASSM TENDERED FOR PURCHASE ON AN OPTIONAL
TENDER DATE BECAUSE OF THE UNAVAILABILITY OF SUFFICIENT FUNDS IN THE
28
EXTENDABLES PURCHASE FUND SHALL NOT CONSTITUTE AN EVENT OF DEF AUL T
UNDER THE AGREEMENT OR THE INDENTURE.
Preceding each Optional Tender Date, the Remarketing Agent will attempt to remarket the
Series [A] 1999B EXTRASSM duly tendered for purchase. On or before each Optional Tender Date,
the Remarketing Agent shall deliver to the Trustee the proceeds ofthe remarketing of such Series [^]
1999B EXTRASSM. Based on information supplied by the Remarketing Agent and otherwise
available to it, the Trustee shall authenticate and deliver new Series [A] 1999B EXTRASSM to the
registered holders thereof. The Remarketing Agent, as a condition of serving in that capacity, will
contract with the Company to, among other things, use its best efforts to remarket all Series [^]
1999B EXTRASSM tendered for purchase at a price equal to 100% of the principal amount thereof,
in accordance with the provisions of the Indenture. THERE CAN BE NO ASSURANCE THAT
THE REMARKETING AGENT WILL BE ABLE TO SUCCESSFULLY REMARKET ANY
TENDERED SERIES [A] 1999B EXTRAS SM.
Mandatory and Optional Redemption
For information with respect to extraordinary redemption, notices of redemption, partial
redemption and exchanges and transfers of Series [A] 1999B EXTRAssM Bonds, see "THE SERIES
1999 BONDS - ADDITIONAL INFORMATION."
Mandatory Sinking Fund Redemption. The Series [^] 1999B EXTRAssM are subject to
mandatory redemption prior to maturity in part, by lot (except that Series [^] 1999B EXTRAssM that
have been tendered for purchase on any Optional Purchase Date but were no so purchased shall be
redeemed prior to any other Series [^] 1999B EXTRASSM), on November 15 of each year, beginning
November 15, 20_, at a redemption price of 100% of the principal amount thereof, plus accrued
interest thereon to the redemption date, without premium, in the following principal amounts in the
following years:
[A]
Year
Amount
· Maturity
The principal amount of Series [^] 1999B EXTRASSM required to be redeemed as set forth
above shall be reduced pro rata by amounts equal to such principal amount of the Series [^] 1999B
29
EXTRASSM of such maturities which are purchased by the Tender Agent or Trustee for cancellation'
and retirement with moneys provided by the Company.
Optional Redemption. The Series [^] 1999B EXTRASSM may be redeemed in whole or in
part on any date occurring within the redemption periods, as set forth below, by the Issuer upon the
direction of the Company. The redemption price for any such redemption shall be at a redemption
price equal to 100% of the principal amount of the Series [^] 1999B EXTRASSM or portion thereof
so redeemed on the applicable redemption date, plus accrued interest to the redemption date.
(i) During the period between the issuance of the Series [^] 1999B EXTRASSM
and the initial Rate Change, the Series [^] 1999B EXTRASSM are subject to optional
redemption on or after November 15, 20_.
(ii) During any Rate Period of three years in length, the Series [^] 1999B
EXTRASSM are subject to optional redemption commencing on the 18-month anniversary of
the first day of such Rate Period.
(iii) During any Rate Period of five years in length, the Series [^] 1999B
EXTRAssM are subject to optional redemption commencing on the 24-month anniversary of
the first day of such Rate Period.
(iv) During any Rate Period of seven years in length, the Series [^] 1999B
EXTRASSM are subject to optional redemption commencing on the 30-month anniversary of
the first day of such Rate Period.
(v) During any Rate Period often or more years in length, the Series [^] 1999B
EXTRASSM are subject to optional redemption commencing on the fifth anniversary of the
first day of such Rate Period.
The Series [^] 1999B EXTRASSM tendered for purchase on any Rate Change Date but not
so purchased shall be given priority for redemption on each succeeding optional or extraordinary
redemption date until redeemed prior to the optional or extraordinary redemption of any other Series
[^] 1999B EXTRAS SM. Series 1999 Bonds so given priority shall be selected by the Trustee, by lot
or in such other equitable manner as the Trustee shall deem appropriate, in the event of insufficient
funds to redeem all such Series 1999 Bonds on any particular redemption date.
Remarketing Agent
B.C: Ziegler and Company has been appointed the initial "Remarketing Agent" for the Series
[^] 1999B EXTRAS SM. As a condition precedent to serving as Remarketing Agent, the Remarketing
Agent will deliver to the Trustee and the Company a written agreement signifying its acceptance of
the duties and obligations imposed upon it under the Indenture pursuant to the provisions of which,
the Remarketing Agent will: (a) designate the office or offices in which it intends to conduct
30
activities as Remarketing Agent and to which Series [A] .1999B EXTRASSM, moneys, notices and
communications are to be delivered and sent; and (b) use its best efforts in accordance with the
Remarketing Agreement to remarket Series [A] 1999B EXTRAssM delivered to it at par; and keep
such books and records as shall be consistent with the prudent industry practice and make such books
and records available for inspection by the Issuer, the Trustee and the Company at all reasonable
times.
The Remarketing Agent must be a member of the National Association of Securities Dealers,
Inc. and will be authorized by law to perform all duties imposed upon it by the Indenture. The
Remarketing Agent may at any time resign and be discharged of the duties and obligations cre~ted
by the Indenture by giving at least thirty (30) days' written notice to the Issuer, the Trustee and the
Company; provided, however, no such resignation shall be effective during the period commencing
one hundred twenty (120) days prior to an Optional Tender Date and ending thirty (30) days after
an Optional Tender Date. In no event shall the resignation or removal of the Remarketing Agent be
effective until a qualified successor has accepted appointment as such.
In the event of the resignation or removal of the Remarketing Agent, the Remarketing Agent
will pay over, assign and deliver any moneys and Series [A] 1999B EXTRAssM held by it in such
capacity to its successor. The Company has the right, from time to time, to remove the Remarketing
Agent and appoint a successor Remarketing Agent by giving written notice to the person or persons
then serving as Remarketing Agent, to the Issuer and to the Trustee of such appointment; provided,
however, the Remarketing Agent may not be changed during the period commencing one hundred
twenty (120) days prior to an Optional Tender Date and ending thirty (30) days after an Optional
Tender Date.
THE SERIES 1999C BONDS
Mandatory and ODtional RedemDtion
For information with respect to extraordinary redemption. notices of redemption and
exchanges in transfers of Series 1999C Bonds. see "THE SERIES 1999 BONDS - ADDITIONAL
INFORMATION. "
Mandatory SinkinJ! Fund Redemotion. The Series 1999C Bonds maturing November 15.
20 are subiect to mandatory redemption prior to maturity in part. by lot. on November 15 of each
year. beginning November 15. 20 . at a redemPtion price eaual to 100% of the principal amount of
31
such Series 1999C Bonds being redeemed olus accrued interest to the redemotion date; without
oremium. in the following orincioal amounts and in the following years:
Year
Amount
* Maturity
The orincioal amount of Series 1999C Bonds required to be redeemed as set forth aboye shall
be reduced oro rata by amounts equal to such orincioal amount of the Series 1999C Bonds of such
maturities which are ourchased by the Tender Agent or Trustee for cancellation and retirement with
moneys orovided by the Comoany.
Ovtional Redemvtion. The Series 1999C Bonds maturing on or orior to November 15, 20
are not subiect to redemotion orior to maturity at the ootion of the Comoany. The Series 1999C
Bonds maturing on or after November 15. 20)) are subiect to redemotion orior to their maturity. at
the ootion of the Issuer. at the written request of the Comoany on or after November 15. 20 . at
any time in whole or in oart. in order of maturities as shall be determined by the Comoany and by lot
within a maturity. on any Interest Payment Date. at the redemotion orices (exoressed as oercentages
of orincioal amount of Series 1999C Bonds to be redeemed) set forth in the table below. olus accrued
interest thereon to the date fixed for redemotion:
Period of Red emotion
(All dates inclusive)
November 15. 20 to November 14, 20
November 15. 20 to November 14. 20
November 15. 20 and thereafter
Redemotion Prices
102%
101
100
THE SERIES 1999 BONDS - ADDITIONAL INFORMATION
Extraordinary Redemption
The Series 1999 Bonds are subject to extraordinary optional redemption at the direction of
the Company on behalf of the Issuer, in whole at any time or in part on any Interest Payment Date
32
in Authorized Denominations from the proceeds of insurance or condemnation payments received
in excess of $250,000 as a result of damage or destruction or taking under the power of eminent
domain of all or a portion of the Mortgaged Property, in either case at a redemption price of 100
percent of the principal amount redeemed plus interest accrued to the redemption date.
[A]
Partial Redemption
Ifless than all of the Series 1999 Bonds shall be called for redemption, the particular Series
1999 Bonds or portions thereof to be redeemed shall be designated by the Company and, if not
designated, the Series 1999 Bonds to be redeemed shall be redeemed in the inverse order of maturity;
provided, that Unremarketed Bonds shall be redeemed prior to any other Bonds. If less than all
Outstanding Series 1999 Bonds of a single maturity are to be redeemed, the selection of Series 1999
Bonds within such maturity, or portions thereof in Authorized Denominations, to be redeemed shall
be made by lot by the Trustee in any manner which the Trustee may determine The Trustee shall,
to the extent practicable, select Series 1999 Bonds for redemption as to avoid redeeming any
particular Series 1999 Bond in part.
Notice of Redemption
The notice of any redemption of Series 1999 Bonds shall be given by mailing, postage
prepaid, a copy of the redemption notice at least 30 days and not more than 60 days prior to the date
fixed for redemption to the registered holder of each such Series 1999 Bond to be redeemed at the
address shown on the registration books; provided, however, that failure to mail any such notice to
any such registered holders shall not affect the validity of the proceedings for the redemption of Series
1999 Bonds.
Such notice shall state: (i) the CUSIP numbers of all Series 1999 Bonds being redeemed, (ii)
the original issue date of such Series 1999 Bonds, (iii) the maturity date and rate of interest borne by
each Series 1999 Bond being redeemed, (iv) the redemption date, (v) the redemption price, (vi) the
date on which such notice is mailed, (vii) ifless than all Outstanding Series 1999 Bonds are to be
redeemed, the Series 1999 Bond number (and, in the case of a partial redemption of any Series 1999
Bond, the principal amount) of each Series 1999 Bond to be redeemed, (viii) that on such redemption
date there shall become due and payable upon each Series 1999 Bond to be redeemed the redemption
price thereof, or the redemption price of the specified portions of the principal thereof in the case of
Series 1999 Bonds to be redeemed in part only, together with interest accrued thereof shall cease to
accrue and be payable and (ix) that the Series 1999 Bonds to be redeemed, whether as a whole or in
part, are to be surrendered for payment of the redemption price at the designated corporate trust
office of the Trustee at an address specified.
33
SECURITY FOR THE SERIES 1999 BONDS
THE SERIES 1999 BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT,
LIABILITY OR OBLIGATION OF THE ISSUER, THE STATE OF FLORIDA, OR ANY
POLITICAL SUBDIVISION OR AGENCY THEREOF, AND NEITHER THE FAITH AND
CREDIT,NOR THE TAXING POWER OF THE ISSUER, THE ST ATE OF FLORIDA, OR ANY
POLITICAL SUBDIVISION OR AGENCY THEREOF IS PLEDGED TO THE PAYMENT OF
THE PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR THE INTEREST ON THE
SERIES 1999 BONDS. THE ISSUANCE OF THE SERIES 1999 BONDS SHALL NOT
DIRECTL Y, INDIRECTLY, OR CONTINGENTLY OBLIGATE THE ISSUER, THE STATE OF
FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF TO LEVY OR TO
PLEDGE ANY FORM OF TAXATION WHATEVER THEREFOR OR TO MAKE ANY
APPROPRIATION FOR THEP A YMENT OF THEPRINCIP AL OF, REDEMPTION PREMIUM,
IF ANY, OR INTEREST ON THE SERIES 1999 BONDS.
The Agreement provides, among other things, for the payment by the Company directly to
the Trustee on behalf of the Issuer of payments in amounts sufficient to pay the principal of,
redemption premium, if any, and interest on the Series 1999 Bonds as the same shall become due and
payable. Payments under the Agreement, when deposited with the Trustee, shall be deposited in a
special fund designated the "Bond Fund," which is pledged under the Indenture to the payment of the
principal of, redemption premium, if any, and interest on the Series 1999 Bonds. The Indenture
provides, among other things, for a pledge and assignment by the Issuer to the Trustee of (i) all of
the Issuer's rights and interests under the Agreement and the Mortgage (except for certain rights of
the Issuer to indemnification and to reimbursement for its expenses), (ii) all of the Issuer's right, title,
and interest in and to the funds and property held by the Trustee under the Indenture (other than the
Rebate Fund).
The Series 1999 Bonds and the redemption premium, if any, and interest payable thereon, are
special and limited obligations payable solely from (i) payments to be made by the Company under
the Agreement and the Series 1999 [^] Note hereinafter described and other income, revenues and
proceeds derived by the Issuer (or Trustee acting on behalf of the Issuer) pursuant to the Agreement
or by reason of the disposition of the Mortgaged Property (defined below), (ii) certain other moneys
pledged under the Indenture, including certain proceeds of the Series 1999 Bonds, moneys held in
the Debt Service Reserve Fund, certain insurance proceeds and condemnation awards, and income
from the investment of certain funds held in trust under the Indenture, and (iii) net amounts derived
by recourse to the Mortgage. Pursuant to the Agreement and as evidence of the borrowing
thereunder, the Company will execute ~ promissory [^] note in the principal [^] amount equal to the
aggregate principal amount of the Series 1999 Bonds. The payment of the Series 1999 [^] Note and
the performance by the Company of its obligations under the Agreement will be secured by the
Mortgage. Pursuant to the Mortgage, the Company will grant a mortgage lien upon and security
interest in the Facility, including the land on which it is located, to the Issuer, subject to Permitted
Encumbrances (as defined in the Mortgage).
34
Pursuant[^] to the Agreement and the Mortgage, in order to secure the loan payments and
other payments due thereunder and the performance and observance of each covenant and agreement
of the Company contained in the Agreement, the Series 1999 [^] Note and the Mortgage, the
Company will grant a security interest in its Revenues (as defined in the Indenture and in APPENDIX
D hereto) and certain of its other property to the Issuer, to the extent such security interest can be
perfected under the Florida Uniform Commercial Code and, subject to the provisions of certain
accounts receivable financing loans. Pursuant to the Indenture, the Issuer will assign its rights (except
certain unassigned rights related to receipt of notices, granting of consents and rights of
indemnification) in and to the Agreement, the Series 1999 [^] Note, the Mortgage and the payments
to be made thereunder to the Trustee as security for the Series 1999 Bonds.
The Agreement requires the Company to fix, charge and collect, or cause to be fixed, charged
and collected, fees, rentals, rates and charges for the use of the Mortgaged Property and services
provided or to be provided in connection therewith, that shall be at least sufficient to produce in each
full Fiscal Year following completion of the Project a Debt Service Coverage Ratio for such Fiscal
Year that is not less than 1.20. If the Debt Service Coverage Ratio, as calculated for any Fiscal Year,
is less than 1.20, the Company (i) shall notify the Trustee of the Company's failure to achieve the
Debt Service Coverage Ratio, (ii) take all action necessary to cause the fees, rentals, rates and
charges imposed and collected by it in connection with its operations of the Mortgaged Property to
produce the amount required by such paragraph and (iii) employ a Consultant to submit to the
Trustee a written report and recommendation with respect to the fees, rentals, rates and charges
imposed and collected by the Company and other items of Revenues in connection with its operation
of the Mortgaged Property and with respect to improvements or changes in the operations or
management of or the services rendered by the Company. See APPENDIX D - "Definitions and
Summary of Principal Documents - Loan Agreement" herein for a further description, including such
further actions as are required to be taken if this covenant is not met.
At the time ofthe issuance ofthe Series 1999 Bonds, the Debt Service Reserve Fund securing
the Series 1999 Bonds will be funded from proceeds of the Series 1999 Bonds in an amount equal
to the Debt Service Reserve Requirement. "Debt Service Reserve Requirement" means with respect
to the Series 1999 Bonds, as of the date of any calculation, an amount equal to $ . In the
event Additional Bonds are issued, the Debt Service Reserve Requirement, if any, with respect to
such Additional Bonds shall be the lesser of (i) 10% of the proceeds of such Additional Bonds, (ii)
the Maximum Principal and Interest Requirements on such Additional Bonds or (iii) 125% of the
average Principal and Interest Requirements on such Additional Bonds. No such Additional Bonds
shall be secured by the Debt Service Reserve Fund established for the Series 1999 Bonds. See the
section entitled "The Indenture" in APPENDIX D herein.
Additional Bonds may be issued under the Indenture and the Company may incur Parity Debt
in accordance with and subject to the conditions set forth in the Indenture and the Agreement. Any
Additional Bonds and any Parity Debt, if issued, will be secured by the Mortgaged Property and the
Revenues equally, ratably and on a parity with the Series 1999 Bonds. See the sections entitled "The
35
Indenture-Issuance and Delivery of Additional Bonds" and "The Agreement - Permitted Debt" in
APPENDIX D herein.
HISTORICAL AND SELECTED FINANCIAL INFORMATION
Historical and selected financial information regarding the Company and the Facility is
included in APPENDIX A to this Official Statement. Audited financial statements of the Company
for the fiscal years ended December 31, 1998 and 1997 are included in APPENDIX C - Part (i)
herein, and unaudited financial statements of the Company for the three-month periods ending
March 31, 1999 and 1998 in APPENDIX C - Part (ii) herein.
36
ESTIMA TED SOURCES AND USES OF FUNDS
The total costs estimated to be incurred in connection with the financing of the Project and
the issuance of the Series 1999 Bonds, and the anticipated sources of funds to pay such costs, are
summarized in the following table. The footnotes following the table are an integral part of the table
and should be read in conjunction therewith.
SOURCES OF FUNDS:
USES OF FUNDS:
[To Come]
37
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38
LITIGATION
Upon delivery of the Series 1999 Bonds to the Underwriter, a certificate of no litigation will
be provided by the Issuer and will state that there is no litigation pending against the Issuer, nor, to
the knowledge of the official executing such certificate, threatened, to restrain or enjoin the issuance
or delivery of the Series 1999 Bonds, to contest the authority for, or validity of, the Series 1999
Bonds, or to contest the corporate existence or powers of the Issuer.
Th[ ^] ere is no litigation pending or, to the knowledge of the Company, threatened against
the Company which is not adequately covered by the Company's insurance policies, or which, in the
opinion of the Company, could have a material adverse effect on the Company's business or financial
position.
UN[^] DERWRITING
B.[^] C. Ziegler and Company (the "Underwriter"), has agreed to be the underwriter of the
Series 1999 Bonds under a Bond Purchase Agreement entered into by and among the Issuer, the
Company and said Underwriter. The price and other terms regarding underwriting of the Series 1999
Bonds were established through negotiations rather than through a public bidding process. The
Underwriter has agreed to purchase the Series 1999 Bonds at an aggregate discount of$
or _% of the proceeds thereof.[^] The Bond Purchase Agreement provides that the Underwriter
will purchase all ofthe Series 1999 Bonds if any are purchased, the obligation to make such purchase
being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval
of certain legal matters by counsel and certain other conditions. The Underwriter intends to offer the
Series 1999 Bonds to the public initially at the offering prices shown on the inside cover page hereof,
which prices may subsequently change without any requirement of prior notice. The Underwriter
reserves the right to join with other dealers and underwriters in offering the Series 1999 Bonds to the
public. The Underwriter may offer and sell the Series 1999 Bonds to certain dealers at prices lower
than the public offering prices.
LEGAL MATTERS
Legal matters incident to the issuance of the Series 1999 Bonds and with regard to the
t~-exempt status of the interest on the Series 1999ABonds and the Series [^] 1999B EXTRAssM
(see "TAX EXEMPTION") are subject to the legal opinion of Bryant, Miller and Olive, P.A.,
Tallahassee, Florida, whose legal services as Bond Counsel have been retained by the Issuer and the
Company. The signed legal opinion, dated and premised on law in effect as of the date of original
delivery of the Series 1999 Bonds, will be delivered to the Issuer and the Underwriter at the time of
original delivery, and the text of the opinion will be printed on the Series 1999 Bonds.
39
The proposed text of the legal opinion is set forth in APPENDIX F. The actual legal opinion
to be delivered may vary from thattext if necessary to reflect facts and law on the date of delivery.
The opinion will speak only as of its date, and subsequent distribution of it by recirculation of the
Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or
expresses any opinion concerning any of the matters referenced in the opinion subsequent to its date.
Bond Counsel has not been engaged to, nor has it undertaken to, review the accuracy,
completeness or sufficiency of this Official Statement or any other offering material relating to the
Series 1999 Bonds; provided, however, that Bond Counsel shall render an opinion to the Underwriter
of the Series 1999 Bonds (upon which opinion only the Underwriter may rely) relating to the
accuracy of certain statements contained herein.
Certain other legal matters are subject to approval by Pamela K. Akin, City Attorney, by
Baker & Hostetler LLP, Orlando, Florida, as counsel to the Company, and by Nabors, Giblin &
Nickerson, P.A., Tampa, Florida, as counsel to the Underwriter. First Union Capital Markets Corp.,
S1. Petersburg, Florida has acted as Financial Advisor to the Issuer in connection with the issuance
of the Series 1999 Bonds.
TAX EXEMPTION
The Code establishes certain requirements which must be met subsequent to the issuance and
delivery of the Series 1999A Bonds in order that interest on the Series 1999A Bonds be and remain
excluded from gross income for purposes of federal income taxation. Non-compliance may cause
interest on the Series 1999A Bonds to be included in federal gross income retroactive to the date of
issuance of the Series 1999A Bonds, regardless of the date on which such non-compliance occurs or
is ascertained. These requirements include, but are not limited to, provisions which prescribe yield
and other limits within which the proceeds of the Series 1999 A Bonds and the other amounts are to
be invested and require that certain investment earnings on the foregoing must be rebated on a
periodic basis to the Treasury Department of the United States. The Issuer and the Company have
covenanted in the Trust Indenture and the Agreement to comply with such requirements in order to
maintain the exclusion from federal gross income of the interest on the Series 1999 A Bonds.
In the opinion of bond counsel, assuming compliance with the aforementioned covenants,
under existing laws, regulations, judicial decisions and rulings, interest on the Series 1999A Bonds
is excluded from gross income for purposes of federal income taxation. Interest on the Series 1999 A
Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed
on individuals or corporations; however, interest on the Series 1999A Bonds may be subject to the
alternative minimum tax when any Series 1999A Bond is held by a corporation. The alternative
minimum taxable income of a corporation must be increased by 75% of the excess of such
corporation's adjusted current earnings over its alternative minimum taxable income (before this
adjustment and the alternative tax net operating loss deduction). "Adjusted Current Earning" will
40
include interest on the Series 1999A Bonds. The Bonds are exempt from all present intangible
personal property taxes imposed pursuant to Chapter 199, Florida Statutes.
Except as described above, Bond Counsel will express no opinion regarding the federal
income tax consequences resulting from the ownership of, receipt or accrual of interest on, or
disposition of Series 1999 A Bonds. Prospective purchasers of Series 1999 A Bonds should be aware
that the ownership of Series 1999 A Bonds may result in collateral federal income tax consequences,
including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase
or carry Series 1999A Bonds, (ii) the reduction of the loss reserve deduction for property and
casualty insurance companies by 15% of certain items, including interest on the Series 1999 A Bonds,
(iii) the inclusion of interest on the Series 1999A Bonds in earning of certain foreign corporatipns
doing business in the United States for purposes ofa branch profits tax, (iv) the inclusion of interest
on Series 1999A Bonds in passive income subject to federal income taxation of certain Subchapter
S corporations with Subchapter C earnings and profits at the close of the taxable year, and (v) the
inclusion of interest on the Series 1999A Bonds in "modified adjusted gross income" by recipients
of certain Social Security and Railroad Retirement benefits for purposes of determining whether such
benefits are included in gross income for federal income tax purposes.
PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE SERIES 1999ABONDS
AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HA VB ADVERSE
FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL AND CORPORATE
BONDHOLDERS. PROSPECTIVE SERIES 1999A BONDHOLDERS SHOULD CONSULT
WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD.
During recent years legislative proposals have been introduced in Congress, and in some cases
enacted, that altered certain federal tax consequences resulting from the ownership of obligations that
are similar to the Series 1999 A Bonds. In some cases these proposals have contained provisions that
altered these consequences on a retroactive basis. Such alteration of federal tax consequences may
have affected the market value of obligations similar to the Series 1999A Bonds. From time to time,
legislative proposals are pending which could have an effect on both the federal tax consequences
resulting from ownership of Series 1999A Bonds and their market value. No assurance can be given
that legislative proposals will not be introduced or enacted that would or might apply to, or have an
adverse effect upon, the Series 1999A Bonds.
Tax Treatment of Original Issue Discount
Under the Code, the difference between the maturity amounts of the Series 1999A Bonds
maturing in [--.J[the years _ through --.J and the initial offering price to the public, excluding
bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or
wholesalers, at which price a substantial amount of Series 1999 A Bonds of the same maturity was
sold is "original issue discount." Original issue discount will accrue over the term of the such Series
1999A Bonds at a constant interest rate compounded periodically. A purchaser who acquires such
Series 1999A Bonds in the initial offering at a price equal to the initial offering price thereof to the
41
public will be treated as receiving an amount of interest excludable from gross income for federal
income tax purposes equal to the original issue discount accruing during the period he holds such
Series 1999 A Bonds, and will increase his adjusted basis in such Series 1999 A Bonds by the amount
of such accruing discount for purposes of determining taxable gain or loss on the sale or other
disposition of such Series 1999A Bonds. The federal income tax consequences of the purchase,
ownership and redemption, sale or other disposition of Series 1999A Bonds which are not purchased
in the initial offering at the initial offering price may be determined according to rules which differ
from those above. Owners of such Series 1999 A Bonds should consult their own tax advisors with
respect to the precise determination for federal income tax purposes of interest accrued upon sale,
redemption or other disposition of Series 1999A Bonds and with respect to the state and local tax
consequences of owning and disposing of Series 1999 A Bonds.
,ruodate to include B EXTRAS Series 19991-
FINANCIAL ADVISOR
The Issuer has retained First Union Capital Markets Corp., St. Petersburg, Florida, as financial
advisor in connection with the issuance of the Series 1999 Bonds. Although First Union Capital
Markets Corp. has assisted in the preparation of the Official Statement, First Union Capital Markets
Corp. is not obligated to undertake, and has not undertaken to make, an independent verification or
to assume responsibility for the accuracy, completeness or fairness of the information contained in
the Official Statement.
DISCLOSURE MATTERS
Disclosure Required by Florida Blue Sky Regulations
Section 517.051, Florida Statutes, as amended, provides for the exemption from registration
of certain governmental securities, provided that, if an issuer of governmental securities has been in
default any time after December 31, 1975 as to principal and interest on any obligation, its securities
may not be offered or sold in Florida pursuant to the exemption, except by means of an offering
document containing full and fair disclosure, as prescribed by rules of the Florida Department of
Banking and Finance (the "Department"). Under the rules of the Department, the prescribed
disclosure is not required if the information is not an appropriate disclosure because the information
would not be considered material by a reasonable investor.
The Issuer has the power to and has issued bonds for the purpose of financing projects for
other facilities which are payable from the revenues of the applicable loan. Revenue bonds issued by
the Issuer for other projects may have been, or may be, in default as to principal and interest. The
source of payment, however, for any such defaulted bonds is separate and distinct from the source
of payment for the Series 1999 Bonds, and therefore, any default on such bonds is not considered a
material fact with respect to the payment of the Series 1999 Bonds offered hereby.
42
The Company has not been in default as to principal or interest at any time after December 3 1,
1975 on bonds, notes or other debt obligations issued or guaranteed by the Company.
Continuing Disclosure
No financial or operating data concerning the Issuer is material for an evaluation of the
offering of the Series 1999 Bonds or to any decision to purchase, hold or sell the Series 1999 Bonds
and, therefore, the Issuer will not provide any such information. The Company has undertaken all
responsibility for any continuing disclosure to the registered or beneficial owners of the Series 1999
Bonds as described below, and the Issuer shall have no liability to the registered and beneficial owners
of the Series 1999 Bonds or any other person with respect to Securities and Exchange Commission
Rule 15c2-12 (the "Rule").
The Company has covenanted for the benefit of the registered and beneficial owners of the
Series 1999 Bonds to provide certain annual financial information and operating data relating to the
Company by not later than 120 days following the end of the Company's fiscal year (the "Annual
Report"), commencing with the report for the fiscal year ending , 1999, and to provide
notice of certain enumerated events, if material. The Annual Report will be filed with each nationally
recognized municipal securities information repository, the applicable state repository, if any, and the
Trustee. See APPENDIX E - "Form of Continuing Disclosure Certificate" herein. The covenants
set forth in the Continuing Disclosure Certificate have been made in order to assist the Underwriter
in complying with the Rule.
Authorization of and Certification Concerning Official Statement
This Official Statement has been authorized by the Issuer and the Company. Concurrently
with the delivery of the Series 1999 Bonds, the Company and, to a limited extent described below,
the Issuer, will furnish their certificates to the effect that, to the best of their knowledge, this Official
Statement did not as of its date, and does not as of the date of the delivery of the Series 1999 Bonds,
contain any untrue statement of a material fact or omit to state a material fact which should be
included therein for the purposes for which this Official statement is to be used, or which is necessary
in order to make the statements contained herein, in the light of the circumstances in which they were
made, not misleading. Any such representation by the Issuer will address only the statements
contained herein under the heading "THE ISSUER" and statements relating to the Issuer included
above under "Disclosure Required by Florida Blue Sky Regulation" under this heading.
MISCELLANEOUS
This Official Statement does not constitute an offer to sell the Series 1999 Bonds in any
jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer,
salesman or other person has been authorized to give any information other than that contained in this
Official Statement or to make any other representations concerning the Series 1999 Bonds and, if
43
given or made, such other information or representations must not be relied upon as having been
authorized by the Issuer, the Company or any other person mentioned herein. Certain information
contained in this Official Statement has been obtained from the Issuer, the Company and other
sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and
nothing in this Official Statement (except the matters under the caption "UNDERWRITING") is to
be construed as a representation of the Underwriter. The information and expressions of opinion
herein are subject to change without notice, and neither the delivery of this Official Statement nor any
sale made hereunder shall, under any circumstances, create any implication that there has been no
change in the affairs of the Issuer or any other person mentioned herein, or in the other matters
described in the Official Statement, since the date hereof Neither this Official Statement, nor any
statements which may have been made orally or in writing, are to be construed as a contract with the
registered holders of any of the Series 1999 Bonds. All estimates, whether or not so stated, are not
to be construed as representations that they will be realized. Any statements in this Official Statement
involving matters of opinion, whether or not expressly so stated, are intended as such and not as
representations of facts.
This Official Statement was approved, and the execution and delivery of this Official
Statement authorized, by the Company.
BEF, INe.
By:mPresident
44
APPENDIX A
[^] REF. INe. - Organization and Operations
.
APPENDIX B
Financial Feasibility Study
~
APPENDIX C
Financial Statements
APPENDIX D
Definitions and Summary of Principal Documents
~
.~
APPENDIX E
Form of Continuing Disclosure Certificate
~
.~
APPENDIX F
Form of Bond Counsel Opinion
!
"'.
,.'
DRAFT #[^] 4: 6/8/99
07310.B[^]
NEW ISSUES
UNRATED
In the opinion of Bond Counsel, assuming compliance with certain covenants in the Indenture and
the Agreement (as hereinafter defined), interest on the Series 1999 A Bonds and the Series 1999 Bonds
is excluded from gross income for purposes of federal income taxation and the Series 1999 A Bonds and
the Series 1999 Bonds are exempt from all present intangible personal property taxes imposed pursuant
to Chapter 199, Florida Statutes. See, however "TAX EXEMPTION" herein for a description of certain
federal minimum and other special taxes that may affect the tax treatment of interest on the Series 1999 A
Bonds and the Series 1999 Bonds.
CITY OF CLEARWATER, FLORIDA
[^] REVENUE BONDS, SERIES 1999
(BEF, INe. PROJECT)
Consisting of
$ '"
CITY OF CLEARWATER, FLORIDA
[^] REVENUE BONDS, SERIES 1999A
(BEF, INC. PROJECT)
$ '"
CITY OF CLEARWATER, FLORIDA
[^] REVENUE BONDS, SERIES 1999B
[^](BEF, INC. PROJECT),
EXTENDABLE RA TE ADJUSTABLE
SECURITIESSM(EXTRASSM)
$ '"
CITY OF CLEARWATER. FLORIDA
TAXABLE REVENUE BONDS. SERIES 1999C
CBEF. INC. PROJECT)
Dates, Interest Rates, Prices and Yields and Maturities
as Shown on Inside Front Cover and the Initial Facing Page
The Series 1999 A Bonds, the Series 1999B Bonds and the Series 1999C Bonds (collectively, the
"Series 1999 Bonds") will be issued by the City of Clearwater, Florida (the "Issuer") pursuant to a Trust
Indenture, dated as of [^] Julv 1, 1999 (the "Indenture"), between the Issuer and SunTrust Bank, Central
Florida, National Association, [Orlando, Florida], as trustee (the "Trustee"). The Series 1999 Bonds are
issuable as fully registered bonds in the denominations of $100,000 and multiples of $5,000 above
$100,000. Interest on the Series 1999 Bonds will be payable semiannually on May 15 and November 15
of each year, commencing November 15, 1999, by check or draft mailed to the registered holder thereof
as of the Regular Record Date; provided that, at the written request by and expense of any registered
holder of$I,OOO,OOO or more in aggregate principal amount of Series 1999 Bonds, by bank wire transfer
or direct deposit to the designated account of such registered holder. Principal of all Series 1999 Bonds
:-.'
will be payable at the designated corporate trust office of the Trustee, presently located in [Orlando,
Florida] upon surrender of the Series 1999 Bonds.
The Series 1999 Bonds are being issued to provide funds which, together with certain other
funds available therefor, will be used to (i) finance or refinance the cost of [A] acquiring the
indeoendent living and assisted livimz units of the Oaks (as further described herein) and construction
of various capital improvements to certain independent, assisted living and skilled nursing facilities
(collectively, the "Facility") owned or to be owned by BEF, Inc., a Florida not-for-profit corporation
(the "Company") and located in the City of Clearwater, Florida, (ii) provide for working capital
and/or capitalized interest, (iii) fund a debt service reserve fund with respect to the Series 1999
Bonds, and (iv) pay certain costs with respect to the issuance of the Series 1999 Bonds.
In connection with the issuance of the Series 1999 Bonds, the Issuer and the Company will
enter into a Loan and Security Agreement, dated as of [A] Julv 1, 1999 (the "Agreement") and the
Company will execute and deliver to the Issuer ~ non-negotiable promissory [^] note of the
Company in the aggregate principal amount of the Series 1999 Bonds [^]~the "Series 1999 [A]
Note"). The Company will be obligated under the Agreement and the Series 1999 [A] Note to make
payments sufficient, together with other available funds, to pay the principal of, redemption premium,
if any, and interest on the Series 1999 Bonds as the same becomes due and payable.
The Series 1999 Bonds and the redemption premium, if any, and interest payable thereon, are
special and limited obligations payable solely from (i) payments to be made by the Company under
the Agreement and the Series 1999 [^] Note and other income, revenues and proceeds derived by
the Issuer (or the Trustee acting on behalf of the Issuer) pursuant to the Agreement or by reason of
the disposition of the Mortgaged Property (defined below), (ii) certain other moneys pledged under
the Indenture, including certain proceeds of the Series 1999 Bonds, moneys held in a Debt Service
Reserve Fund, certain insurance proceeds and condemnation awards, and income from the investment
of certain funds held in trust under the Indenture, and (iii) net amounts derived by recourse to a
Mortgage and Security Agreement, dated as off ^] July 1, 1999 (the "Mortgage"), from the Company
to the Issuer. The payment of the Series 1999 [A] Note and the performance by the Company of its
obligations under the Agreement will be secured by the Mortgage. Pursuant to the Mortgage, the
Company will grant a mortgage lien upon and security interest in the Facility, including the land on
which it is located (the "Mortgaged Property"), to the Issuer, subject to Permitted Encumbrances
(as such term is defined in the Mortgage). [^] In addition, pursuant to the Agreement and the
Mortgage, in order to secure the loan payments and other payments due thereunder and the
performance and observance of each covenant and agreement of the Company contained in the
Agreement, the Series 1999 [A] Note and the Mortgage, the Company will grant a security interest
in its Revenues (as defined in the Indenture and in APPENDIX D hereto) and certain of its other
property to the Issuer, to the extent such security interest can be perfected under the Florida Uniform
Commercial Code. Pursuant to the Indenture, the Issuer will assign its rights (except certain
unassigned rights related to receipt of notices, granting of consents and rights of indemnification) in
and to the Agreement, the Series 1999 [A] Note, the Mortgage and the payments to be made
thereunder to the Trustee as security for the Series 1999 Bonds.
THE SERIES 1999 BONDS Wll..L BE LIMlTED OBLIGATIONS PAYABLE SOLELY
FROM THE REVENUES PROVIDED AND PLEDGED THEREFOR IN ACCORDANCE WITH
THE INDENTURE, THE AGREEMENT AND THE MORTGAGE. THE SERIES 1999 BONDS
Wll..L NOT CONSTITUTE A DEBT, LIABll..ITY OR OBLIGATION OF THE ISSUER, THE
STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF, AND
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE ISSUER, THE
STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF, IS
PLEDGED TO THE PAYMENT OF THE PRINCIP AL OF, REDEMPTION PREMIUM, IF ANY,
OR INTEREST ON THE SERIES 1996 BONDS.
The Series 1999A Bonds and the Series [^] 1999C Bonds are subject to mandatory,
extraordinary and optional redemption as more fully described herein. The Series [^] 1999B
EXTRASSM are subject to optional tender on November 15, 2004, and thereafter at various dates
deoending on the length of the Rate Period as described herein. [^]
Prospective investors should be aware of certain risks, anyone of which, if it
materialized to a sufficient degree, could delay or prevent payment of debt service on the Series
1999 Bonds. This Official Statement, including all Appendices, should be read in its entirety.
See "BONDHOLDERS' RISKS" herein for a summary of certain of these risks.
The Underwriter intends to engage in secondary market trading in the Series 1999 Bonds,
subject to applicable securities laws. However, the Underwriter is not obligated to repurchase any
of the Series 1999 Bonds at the request of any registered holder thereof For details of the
Underwriter's compensation, see "UNDERWRITING" herein.
The Series 1999 Bonds are offered, subject to prior sale, when, as, and ifissued and received
by the Underwriter, and subject to the approving legal opinion of Bryant, Miller and Olive, P.A.,
Tallahassee, Florida, as Bond Counsel. Certain other legal matters are subject to approval by
Pamela K. Akin, City Attorney, by Baker & Hostetler LLP, Orlando, Florida, as counsel to the
Company, and by Nabors, Giblin & Nickerson, P.A., Tampa, Florida, as counsel to the Underwriter.
First Union Capital Markets Corp., St. Petersburg, Florida has acted as Financial Advisor to the
Issuer in connection with the issuance of the Series 1999 Bonds. It is expected that the Series 1999
Bonds will be available for delivery on or about , 1999, in , Florida.
B.C. ZIEGLER AND COMPANY
The date of this Official Statement is
, 1999.
*Preliminary, subject to change.
Legend for Cover Page:
This Preliminary Official Statement and the information contained herein are subject to completion
or amendment. These securities may not be sold, nor may an offer to buy be accepted prior to the
time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary
Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any jurisdiction in which said offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of such jurisdiction.
MATURITY SCHEDULE
$ *
CITY OF CLEARWATER, FLORIDA
[A] REVENUE BONDS, SERIES 1999A
(BEF, INe. PROJECT)
Dated:
,1999
Due: November 15, as shown below
Maturity
November 15
Principal
Amount
Interest
Rate
Price
Maturitv
November 15
Principal
Amount
Interest
Rate
Price
[To Come]
(plus accrued interest, if any)
$ *
CITY OF CLEARWATER, FLORIDA
[A] REVENUE BONDS, SERIES 1999B
(BEF. INe. PROJECT).
EXTENUAHLt; KA I t; AUJ usT ABLE
St;CUKlllt;SliM(t;X I KAs::iM)
Dated:
. 1999
Due: November 15. 20
$
CITY OF CLt;AKWAI t;R. FLORIDA
TAXAHLt; IU:Vt;NUt; HUN us. St;Klt;S 1999C
(Ht;I', INL. YKUJt;L I)
Dated:
,1999
Due: November 15, as shown below
Maturitv
November 15
Principal
Amount
Interest
Rate
Price
Maturity
November 15
Principal
Amount
Interest
Rate
Price
[To Come]
(plus accrued interest, if any)
[^) THE SERIES 1999 BONDS HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1993, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS
CONTAINED IN SUCH ACTS. IN MAKING AN INVESTMENT DECISION INVESTORS
MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF
THE OFFERING INCLUDING THE MERITS AND RISKS INVOLVED. THE SERIES 1999
BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF TInS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY MAY
BE A CRIMINAL OFFENSE.
If and when a registered holder of Series 1999 Bonds elects to sell a Series 1999 Bond prior
to its maturity, there can be no assurance that a market will have been established, maintained, and
in existence for the purchase and sale of the Series 1999 Bonds. The Underwriter of the Series 1999
Bonds assumes no obligation to establish or maintain such a market and is not obligated to repurchase
any of the Series 1999 Bonds at the request of the holder thereof. See "UNDERWRITING."
No dealer, salesman, or any other penon has been authorized to give any information
or to make any representation other than those contained in this Official Statement, in
connection with the offering of the Series 1999 Bonds and, if given or made, such other
information or representation must not be relied upon. This Official Statement does not
constitute an offer to sell or a solicitation of an offer to buy any securities, other than the
securities offered hereby, or an offer or a solicitation of an offer of the securities offered hereby
to any penon in any jurisdiction where such offer or solicitation of such offer would be
unlawful. The information set forth herein has been obtained from the Issuer and the
Company and other sources which are believed to be reliable, but is not guaranteed as to
accuracy or completeness by, and is not to be construed as a representation of, the
Underwriter. The information and expressions of opinion stated herein are subject to change
without notice, and neither the delivery of this Official Statement nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no change in the
affain of the Company since the date hereof.
IN CONNECTION WITH TIllS OFFERING, THE UNDERWRITERMA Y OVER-ALLOT
OR EFFECT TRANSACTIONS WInCH STABILIZE ORMAINT AIN THE MARKET PRICE OF
THE SERIES 1999 BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WInCH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
[INSERT AERIAL PHOTO OF FACILITYl
SUMMARY STATEMENT
The information set forth in this Summary Statement is subject in all respects to more
complete information set forth elsewhere in this Official Statement, which should be read in its
entirety. The offering of the Series 1999 Bonds to potential investors is made only be means of this
entire Official Statement. No person is authorized to detach this Summary Statement from this
Official Statement or otherwise to use it without this entire Official Statement. For the definitions
of certain words and terms used in this Summary Statement, see APPENDIX D - "Definitions and
Summary of Principal Documents" herein.
The Issuer
The City of Clearwater, Florida (the "Issuer") is a municipal corporation duly organized and
existing under and pursuant to the Florida Constitution, the Charter of the Issuer and laws of the
State of Florida. The Issuer is authorized to make and execute financing agreements, contracts and
other instruments necessary or convenient for the purpose of facilitating the financing of certain
projects, 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 health and safety of the
inhabitants of the Issuer, the people of Pinellas County and the State of Florida by increasing their
access to adequate medical care and health care facilities, and to accomplish such financings through
the issuance of revenue bonds.
The Series 1999 Bonds
The Issuer proposes to issue its [^] Revenue Bonds, Series 1999A (BEF, Inc. Project), in
the aggregate principal amount of$ (the "Series 1999A Bonds"), the Issuer's [A]
Revenue Bonds, Series 1999B (BEF, Inc. Project)[^] Extendable Rate Adiustable SecuritiesSM
(EXTRASSM) in the aggregate principal amount of [A] $ (the "Series 1999B Bonds")
and the Issuer's Taxable [A] Revenue Bonds, Series 1999C (BEF, Inc. Project) [A]: in the aggregate
principal amount of[^] $ (the "Series 1999C Bonds"). The Series 1999ABonds,
the Series 1999B Bonds and the Series 1999C Bonds are collectively referred to as the" Series 1999
Bonds. "
Proceeds derived from the sale of the Series 1999 Bonds will be loaned to BEF, Inc., a Florida
not-for-profit corporation (the "Company"), and applied to (1) acquire the assets of The Oaks of
Clearwater, Inc. (the "Oaks") which primarily consist of independent and assisted living facilities; (2)
finance the cost of renovations to the Facility (defined below); (3) provide for working capital and/or
capitalized interest; (4) fund a debt service reserve equivalent to the maximum annual debt service
on the Series 1999 Bonds; and (5) pay costs of issuance associated with the transaction.
THE SERIES 1999 BONDS WILL BE LIMITED OBLIGA nONS PAYABLE SOLELY
FROM THE REVENUES PROVIDED AND PLEDGED THEREFOR IN ACCORDANCE WITH
THE INDENTURE, THE AGREEMENT AND THE MORTGAGE. THE SERIES 1999 BONDS
Wll..L NOT CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE ISSUER, THE
STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF, AND
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE ISSUER, THE
STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF, IS
PLEDGED TO THE PAYMENT OF THE PRINCIP AL OF, REDEMPTION PREMIUM, IF ANY,
OR INTEREST ON THE SERIES 1999 BONDS.
The Company and the Facility
The Company was incorporated as a Florida not-for-profit corporation in 1975, as American
Baptist Estates of Clearwater, Inc. The Company changed its name to BEF, Inc. in March of 1999.
The Internal Revenue Service has determined that the Company is an organization described in
Section 501(c)(3) of the Internal Code of 1986, as amended (the "Code"), and is therefore exempt
from federal income taxation under the provisions of Section 501(a) of the Code. The Company
received its Determination Letter from the Internal Revenue Service in May, 1976.
The Company and the Oaks own and operate retirement facilities located in the City of
Clearwater, Pinellas County, Florida, known as The Oaks of Clearwater Retirement Community
(collectively, the "Facility"). The Facility is currently comprised of two high-rise buildings, Oak
Bluffs, a 15-story building (the "Bluffs Building"), and Oak Cove, a 13-story building (the "Cove
Building"), and four low-rise villa buildings (the "Villas") which contain skilled nursing facilities
owned and operated by the Company (the "Nursing Centers"), and independent and assisted living
facilities which are owned and operated by the Oaks.
!insert merger descriotion\
The Company provides three different levels of care to residents of the Facility: independent
living, assisted living and nursing care.
Residential areas within the Facility include 12 one-bedroom garden apartments located in the
Villas, 8 two-bedroom garden apartments and 391 one-room and two-room high-rise apartments (213
of which are currently unoccupied and located in the Cove Building and the remainder are located
in the Bluffs Building) (collectively, the [^] "Indeoendent Living Units"); [^] 53 assisted living units
(the "Assisted Living Units") [^] located in [^] the Bluffs Building; and the Nursing Centers, which
are comprised ofa 60-bed skilled nursing facility located in the Bluffs Building (the "Bluffs Nursing
Center") and a 56-bed skilled nursing facility located in the Cove Building (the "Cove Nursing
Center").
The Facility is located on approximately 7 acres ofland on the Intercoastal Waterway, with
views of the Gulf of Mexico, Clearwater and St. Petersburg, Florida.
11
The Project
The Facility was refinanced through a secondary loan from the City of Clearwater, Florida,
from certain proceeds of a loan from the City of Gulf Breeze, Florida (the "Sponsor"), through the
Sponsor's Local Government Loan Program to the City of Clearwater, Florida, funded through the
proceeds of Sponsor's Local Government Loan Program Floating Rate Demand Revenue Bonds,
Series 1985C-1. The loan to the Company and Oaks was secured by two mortgage notes (the
"Company's 1989 Note" and the "Oaks 1989 Note" and collectively, the" 1989 Notes") guaranteed
as to payment by the Government National Mortgage Association, or GNMA, which is a part of the
United States Department of Housing and Urban Development ("HUD"). In 1996, each of the
Company and Oaks declared bankruptcy and defaulted on the 1989 Notes. In connection with the
plan of reorganization in bankruptcy and pursuant to their guarantee of the Notes, HUD purchased
the 1989 Notes and the outstanding bonds were extinguished. HUD then sold the defaulted 1989
Notes at auction to Beal Bank, S.S.B. ("Beal"). Immediately prior to the closing of the offering of
the Series 1999 Bonds, the outstanding principal and interest on the 1989 Notes was $
Beal has agreed to sell the 1989 Notes for Twenty Million Dollars ($20,000,000). Pursuant
to the terms of a Note Purchase Agreement between the Company and Beal, the Company will use
a portion of the proceeds of the Series 1999 Bonds to (i) purchase its 1989 Note from Beal for
$ , with the Company thereby receiving clear title to the Company portions of the Facility
(including the Nursing Centers and its portion of the common areas of the Facility), and (ii) purchase
the Oaks 1989 Note from Beal for $ , with the Company acquiring the remaining portions
of the Facility previously owned by Oaks by accepting a deed in lieu of foreclosure from Oaks with
respect to the remaining portions of the Facility. Accordingly, upon the completion of the offering
of the Series 1999 Bonds and the purchase of the 1989 Notes by the Company, the ownership of the
Facility will be consolidated in the Company.
The Company will use a portion of the proceeds from the Series 1999 Bonds to renovate the
Cove Building (the "Project"). Currently, the Cove Building is vacant except for the Cove Nursing
Center. The third floor of the Cove Building will be renovated into modem, skilled nursing units.
The residents of the Cove Nursing Center will be transferred to the new third-floor nursing facility
upon completion. The old Cove Nursing Center will then be renovated and rehabilitated to current
standards and the residents of the Bluffs Nursing Center will be transferred into such renovated space
upon completion. At the same time, the remaining floors of the Cove Building will be completely
rehabilitated to provide for senior independent and assisted living units in order to replace the
fa~ilities at the Bluffs Building. Upon completion of such living space, the residents in the Bluffs
Building who have consented to move will transfer to the Cove Building. [^]
The Facility will be renovated and redeveloped pursuant to the terms of a Development
Services Agreement (the "Development Agreement") by and between the Company and Complete
Care Services of Florida, Inc. ("CCSFL") a Pennsylvania corporation and a subsidiary of Complete
Care Services, Inc. ("CCS"), which through its subsidiaries manages over 200 nursing homes and
assisted living facilities throughout the United States, primarily on the East Coast and in Ohio, Illinois
111
and Texas, and provides development services to owners of senior housing, assisted living and
long-term care facilities.
The Development Agreement provides for the payment to CCSFL of three percent (3%) of
the [A] renovation costs of the Project. Seventy-five percent (75%) of such fee is due upon the
issuance of the Series 1999 Bonds, with the remaining twenty-five percent (25%) payable over the
six-month projected construction period. Under the Development Agreement, CCSFL is required
to create a detailed development plan and time schedule, prepare development budgets, oversee
architectural and engineering planning, obtain all necessary regulatory consents and approvals,
identify contractors and coordinate the construction bid process, oversee the construction, and
oversee the transition of the renovated Cove Building until opening.
The Management Company
Simultaneous with the issuance of the Series 1999 Bonds, the Company is terminating its
existing management contracts and is entering into a new management agreement with CCSFL. See
the description of CCSFL in the section entitled "THE MANAGEMENT CaMP ANY"and the
section entitled "THE PROJECT - The Management Company" in APPENDIX A herein.
Security for the Series 1999 Bonds
In connection with the issuance of the Series 1999 Bonds, the Issuer and the Company will
enter into a Loan and Security Agreement, dated as of [^] Julv 1, 1999 (the" Agreement") and the
Company will execute and deliver to the Issuer ~ non-negotiable promissory [^] note of the Company
in the aggregate principal amount of the Series 1999 Bonds (the "Series 1999 [A] Note"). The
Company will be obligated under the Agreement and the Series 1999 [^ ] Note to make payments
sufficient, together with other available funds, to pay the principal of, redemption premium, if any,
and interest on the Series 1999 Bonds as the same becomes due and payable.
The Series 1999 Bonds and the redemption premium, ifany, and interest payable thereon, are
special and limited obligations payable solely from (i) payments to be made by the Company under
the Agreement and the Series 1999 [A] Note and other income, revenues and proceeds derived by
the Issuer (or the Trustee acting on behalf of the Issuer) pursuant to the Agreement or by reason of
the disposition of the Mortgaged Property (defined below), (ii) certain other moneys pledged under
the Indenture, including certain proceeds of the Series 1999 Bonds, moneys held in a Debt Service
Reserve Fund, certain insurance proceeds and condemnation awards, and income from the investment
of certain funds held in trust under the Indenture, and (iii) net amounts derived by recourse to a
Mortgage and Security Agreement, dated as of[^] Julv 1, 1999 (the "Mortgage"), from the Company
to the Issuer. The payment of the Series 1999 [^ ] Note and the performance by the Company of its
obligations under the Agreement will be secured by the Mortgage. Pursuant to the Mortgage, the
Company will grant a mortgage lien upon and security interest in the Facility, including the land on
which it is located (the "Mortgaged Property"), to the Issuer, subject to Permitted Encumbrances (as
such term is defined in the Mortgage).
IV
Pursuant[^) to the Agreement and the Mortgage, in order to secure the loan payments and
other payments due thereunder and the performance and observance of each covenant and agreement
of the Company contained in the Agreement, the Series 1999 [^) Note and the Mortgage, the
Company will grant a security interest in its Revenues (as defined in the Indenture and in APPEND IX
D hereto) and certain of its other property to the Issuer, to the extent such security interest can be
perfected under the Florida Uniform Commercial Code and, subject to the provisions of certain
accounts receivable financing loans. Pursuant to the Indenture, the Issuer will assign its rights (except
certain unassigned rights related to receipt of notices, granting of consents and rights of
indemnification) in and to the Agreement, the Series 1999 [^) Note, the Mortgage and the payments
to be made thereunder to the Trustee as security for the Series 1999 Bonds. For more information,
see "SECURITY FOR THE SERIES 1999 BONDS" herein.
Certain Covenants of the Company
Debt Service Coverage Ratio. The Agreement requires the Company to fix, charge and
collect, or cause to be fixed, charged and collected, fees, rentals, rates and charges for the use of the
Mortgaged Property and services provided or to be provided in connection therewith, that shall be
at least sufficient to produce in each full Fiscal Year following completion of the Project a Debt
Service Coverage Ratio for such Fiscal Year that is not less than 1.20. If the Debt Service Coverage
Ratio, as calculated for any Fiscal Year, is less than 1.20, the Company (i) shall notify the Trustee of
the Company's failure to achieve the Debt Service Coverage Ratio, (ii) take all action necessary to
cause the fees, rentals, rates and charges imposed and collected by it in connection with its operations
of the Mortgaged Property to produce the amount required by such paragraph, and (iii) employ a
Consultant to submit to the Trustee a written report and recommendation with respect to the fees,
rentals, rates and charges imposed and collected by the Company and 'other items of Revenues in
connection with its operation of the Mortgaged Property and with respect to improvements or
changes in the operations or management of or the services rendered by the Company. See
APPENDIX D - "Definitions and Summary of Principal Document - Loan Agreement" herein for a
further description, including such further actions as are required to be taken if this covenant is not
met.
Other Covenants. The Agreement also contains covenants which impose limitations on the
issuance of additional debt, on transfers of assets and transfers of cash and investments, and on
consolidation, merger, sale or conveyance. For more information, see APPENDIX D - "Definitions
and Summary of the Principal Documents - Loan Agreement" herein.
Purchase of Series [^) 1999B EXTRASSM
The registered holders of Series [^) 1999B EXTRAssM have the option to tender their Series
[^) 1999B EXTRAssM to the Trustee for purchase on each Optional Tender Date. The only sources
of moneys available to make payments of the purchase price of the Series [^) 1999B EXTRAssM on
each Optional Tender Date are (i) the proceeds of the remarketing thereof, (ii) moneys required to
be deposited in the Extendables Purchase Fund by the Company pursuant to the Agreement in an
v
amount not greater than the amount of cash held by the Company on such Optional Tender Date in
excess of [^]_ Days Cash on Hand, and (iii) any additional amounts deposited into the Extendables
Purchase Fund by the Company, at its sole option, from any available moneys of the Company.
Therefore, ifany of the Series [A] 1999B EXTRASSM tendered on any Optional Tender Date are not
remarketed at par, the Tender Agent may not have available funds with which to purchase such Series
[^] 1999B EXTRAS SM. In the event sufficient funds are not available, the registered holders of the
tendered but unpurchased Series [^] 1999B EXTRAS SM will be required to retain their Series [^]
1999B EXTRAssM at the new interest rate determined by the Remarketing Agent. THERE CAN
BE NO ASSURANCE THAT SUFFICIENT FUNDS WllL BE AVAILABLE TO PURCHASE
ANY OR ALL SERIES [A] 1999B EXTRAssM TENDERED FOR PURCHASE ON ANY
OPTIONAL TENDER DATE. Failure to purchase Series [A] 1999B-EXTRAssM tendered for
purchase on any Optional Tender Date does not constitute an event of default under the Indenture
or the Agreement. See "THE SERIES [^] 1999B EXTRASSM [^] ;; General Description - Purchase
on Optional Tender Dates" herein. In addition, there can be no assurance that any interest rate
adjustment with respect to the Series [^] 1999B EXTRASSM will not cause a material burden on the
financial condition of the Company. See "BONDHOLDERS' RISKS - Purchase of Series [^] 1999B
ExtrasSM" herein.
Historical and Selected Financial Information
Historical and selected financial information regarding the Company and the Facility is
included in APPENDIX A to this Official Statement. Audited financial statements of the Company
for the fiscal years ended December 31, 1998 and 1997 are included in APPENDIX C - Part (i)
herein, and unaudited financial statements of the Company for the three-month periods ending March
31, 1999 and 1998 in APPENDIX C - Part (ii) herein.
Historical Statement of Activities and Historical Pro Forma Debt Service Coverage and Cash
Investments and Related Ratios
[TO COME [A]]
Financial Feasibility Study
Feasibility Study. See APPENDIX B herein for a Financial Feasibility Study dated
, 1999, prepared by BDO Seidman, LLP, independent certified public accountants (the
"Financial Feasibility Study"). The Financial Feasibility Study includes management's financial
forecast of the Company for the four (4) years ending December 31, 2002. As stated in the
Financial Feasibility Study, there will be differences between the forecasted data and actual
VI
results because events and circumstances frequently do not occur as expected, and those
differences may be material. The achievement of any financial forecast is dependent upon
future events, many of which are beyond the Company's control and the occurrence of which
cannot be assured. See "BONDHOLDERS' RISKS" herein. The Financial Feasibility Study
should be read in its entirety, including all notes and assumptions set forth therein.
Forecasted Financial Information for the Company. The table set forth below reflects the
forecasted debt service coverage ratio calculations for the Company and has been extracted from
management's financial forecast included in the Financial Feasibility Study. See APPENDIX B -
"Financial Feasibility Study" attached hereto.
Forecasted Schedule of Coverage Ratios
[TO COME FROM FINAL DRAFT OF FINANCIAL FEASmILITY STUDY]
VB
Bondholders' Risks
AN INVESTMENT IN THE SERIES 1999 BONDS INVOL YES RISK. A
BONDHOLDER IS ADVISED TO READ "BONDHOLDERS' RISKS" HEREIN FOR A
DISCUSSION OF CERTAIN RISK FACTORS WHICH WOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE SERIES 1999 BONDS. Careful consideration
should be given to these risks and other risks described elsewhere in this Official Statement. Among
other things, since the Series 1999 Bonds are payable solely from the revenues of the Company and
other moneys pledged to such payment, careful evaluation should be made of certain factors that may
adversely affect the ability of the Company to generate sufficient revenues to pay expenses of
operation, and the principal of, premium, if any, and interest on the Series 1999 Bonds.
The Principal Documents
Definitions of certain words and terms used in this Official Statement and summaries of the
Indenture, the Agreement, the Mortgage and other principal documents are included in this Official
Statement in APPENDIX D hereto. Such definitions and summaries do not purport to be
comprehensive or definitive. All references herein to the specified documents are qualified in their
entirety by reference to the definitive forms of such documents, copies of which may be viewed at the
offices ofB.C. Ziegler and Company, 1 South Wacker Drive, Chicago, Illinois, or will be provided
to any prospective purchaser requesting the same, upon payment by such prospective purchaser of
the costs of complying with such request.
Vlll
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose of the Official Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company and the Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Project .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Management Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Series 1999 Bonds .......................................................... 4
Security for the Series 1999 Bonds .............................................. [ ^] ~
Historical and Selected Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Historical Statement of Activities and Historical Pro Forma Debt Service Coverage and [A] Cash:
Investments and Related Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Financial Feasibility Study. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Series [A] 1999B EXTRASSM ................................................. 7
Bondholders'Risks ............................................................. 7
Definitions and Summaries of Legal Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] l
BONDHOLDERS' RISKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General Uncertainty of Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Failure to Achieve or to Maintain Occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
No Assurance Forecasted Results Will Be Obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Malpractice Claims and Losses ................................................. [^] 2
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10
Florida Licensure and Certificate of Need ........................................ [A] 11
Possible Changes in Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Limited Use of Facility ................................ . . . . . . . . . . . . . . . . .. [ ^] 15
Possible Effect of Adverse Conditions in Housing Market ....... . . . . . . . . . . . . . . .. [^] 15
Construction Risks ......................................................... [^] 15
Enforceability of Remedies ................................................... [^] 16
Uncertainty of Investment Income .............................................. [^] 1.2
Bankruptcy .., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Rights of Residents ............................................................ I 7
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .. [^] 17
Investment Risks; Lack of Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] 11
Purchase of Series [A] 1999B EXTRASSM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
. Amendments to Documents ................................................... [^] 18
Year 2000 Compliance ...................................................... [A] ll.
Transfer of Residents from the Bluffs Building to the Cove Building Uoon Comoletion of -
Renovations .............................................................. 19
Other Risk Factors ............................................................ 19
FLORIDA REGULATION OF CONTINUING CARE FACILITIES ......................... 20
THE ISSUER ................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 21
IX
THE COMPANY AND THE FACILITY.......... ...... .......... ......... . ..... .....21
Residence Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PLAN OF FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] 22
THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
[^] THE MANAGEMENT COMPANY ............................................... 24
FINANCIAL FEASIBILITY STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Feasibility Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Forecasted Financial Information for the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] 24
THE SERIES 1999A BONDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Mandatory and Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
THE SERIES 1999B EXTRAssM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 [^]
General Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] 26
Mandatory and Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] 29
Remarketing Agent ......................................................... [^] 30
THE SERIES 1999C BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Mandatorv and Ootional Redemotion . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
THE SERIES 1999 BONDS - ADDITIONAL INFORMATION ......................... [^] 32
Extraordinary Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [^] 32
Partial Redemption ............................................................ 33
Notice of Redemption .......................................................... 33
SECURITY FOR THE SERIES 1999 BONDS .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
HISTORICAL AND SELECTED FINANCIAL INFORMATION ........................... 36
ESTIMATED SOURCES AND USES OF FUNDS. ........... . .. . .. .... ............... . . 37
ANNUAL DEBT SERVICE REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
LITIGATION ....................... ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
UNDERWRITING ............................................................... 39
LEGAL MA TIERS .............................................................. 39
TAX EXEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Tax Treatment of Original Issue Discount ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
DISCLOSURE MA TIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Disclosure Required by Florida Blue Sky Regulations .................................. 42
Continuing Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Authorization of and Certification Concerning Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 43
MISCELLANEOUS .............................................................. 43
APPENDIX A -
APPENDIX B -
APPENDIX C -
APPENDIX D-
APPENDIX E-
APPENDIX F-
[^] BEF. INe. - Organization and Operations
Financial Feasibility Study
Financial Statements:
(i) Audited financial statements of the Company for the fiscal year ending
December 31, 1998 compared to the audited financial statements of the
Company for the fiscal year ending December 31, 1997; and
(ii) Unaudited financial statements of the Company for the three-month periods
ending March 31, 1999 and 1998.
Definitions and Summary of Principal Documents
Form of Continuing Disclosure Certificate
Form of Bond Counsel Opinion
x