Cleveland Clinic Health System Obligated Group - FMSbonds.com

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Under existing law, the remedies specified by the Bond Indenture and the State Financing Lease may notbe readily available or may be limited. A court may decide not to order the specific performance of the covenantscontained in these documents. The various legal opinions to be delivered concurrently with the delivery of theSeries 2008A Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposedby State and federal laws, rulings and decisions affecting remedies and by bankruptcy, reorganization or other lawsaffecting the enforcement of creditors’ rights or the application of general principles of equity.The enforceability of the State Financing Lease and the Bond Indenture may be subject to subordination orprior claims in certain instances other than bankruptcy proceedings. For a discussion of examples of possiblelimitations on enforceability and of possible subordination or prior claims, see “BONDHOLDERS’ RISKS –Enforcement of Remedies; Risks of Bankruptcy” and “- Risks Related to Obligated Group Financings”.THE SERIES 2008A BONDS DO NOT REPRESENT OR CONSTITUTE A DEBT OR PLEDGEOF THE FAITH AND CREDIT OF THE COMMISSION OR THE STATE, WILL NOT BE SECURED BYAN OBLIGATION OR PLEDGE OF ANY MONEY RAISED BY TAXATION, AND DO NOT GRANT TOTHE HOLDERS ANY RIGHTS TO HAVE THE STATE OR ANY POLITICAL SUBDIVISION THEREOFLEVY ANY TAXES OR APPROPRIATE ANY FUNDS FOR THE PAYMENT OF THE BOND SERVICECHARGES ON THE SERIES 2008A BONDS.GeneralThe Series 2008A Bonds will be issued under and pursuant to the Bond Indenture. The Cleveland Clinicand the Commission will enter into the State Financing Lease, under which the Commission will lease the LeasedPremises to the Cleveland Clinic. The terms of the State Financing Lease will require the Cleveland Clinic to make,or cause to be made, payments of Basic Rent that will be sufficient to pay the Bond Service Charges on theSeries 2008A Bonds and all other Bonds outstanding under the Bond Indenture, as and when due. To secure itsobligation to pay Basic Rent under the State Financing Lease, the Cleveland Clinic will deliver to the Commission,and the Commission will assign without recourse to the Bond Trustee, the Sixtieth Master Note, issued pursuant tothe Master Trust Indenture under which the Cleveland Clinic, CCHS - East Region, Fairview, Lutheran, Marymountand Florida Clinic will be, as of the date the Series 2008A Bonds are issued, the only Obligated Issuers. TheCleveland Clinic will also deliver to the Commission, and the Commission will assign without recourse to the BondTrustee, the Variable Rate Note to secure the Variable Rate Bonds to be issued concurrently with the issuance of theSeries 2008A Bonds under the Bond Indenture. The Cleveland Clinic has also issued several other Master Notes thatare currently outstanding and which secure bonds outstanding under the County Bond Indenture.The Series 2008A Bonds, the Variable Rate Bonds and any Additional Bonds issued pursuant to the BondIndenture will be secured on a parity by the Bond Indenture. The Series 2008A Bonds, the Variable Rate Bonds andany such Additional Bonds are referred to collectively as the “Bonds.”The Bond Service Charges on the Series 2008A Bonds will be payable solely from amounts payable by theCleveland Clinic as Basic Rent under the State Financing Lease, together with all other Hospital Receipts, allmoneys derived under the Sixtieth Master Note and all moneys and investments held by the Bond Trustee in theSpecial Funds established under the Bond Indenture. To secure the Series 2008A Bonds, the Commission haspledged and assigned without recourse all of its rights in Hospital Receipts and will assign without recourse all of itsinterest in the Sixtieth Master Note to, and will transfer and grant a lien on all of its right, title and interest in theSpecial Funds in favor of, the Bond Trustee. No revenues of the Commission or any Obligated Issuer are pledged tothe payment of the Series 2008A Bonds, and the Series 2008A Bonds are not secured by any mortgage on orsecurity interest in any assets of an Obligated Issuer (except to the extent that the State Financing Lease may bedeemed to constitute a security agreement under applicable Ohio law) other than the Gross Receipts of the ObligatedIssuers that are pledged under the Master Trust Indenture. See “Security Interest in Gross Receipts” below underthis caption. The Commission’s rights and interest in the Hospital Receipts and the Special Funds under the BondIndenture and the State Financing Lease have been assigned directly to the Bond Trustee. The remaining rights andinterest of the Commission under the State Financing Lease (except for Unassigned Rights) have been assigned tothe Master Trustee as security for the Master Notes.14
County BondsThe Cleveland Clinic and the County have previously entered into the County Base Lease and the CountyFinancing Lease pursuant to which the Cleveland Clinic has leased portions of the Leased Premises to the County tosecure several series of revenue bonds (the “County Bonds”) issued under the County Bond Indenture. As of thedate the Series 2008A Bonds are issued, $758,980,000 in aggregate principal amount of the County Bonds willremain outstanding. The County has assigned substantially all of its rights under the County Base Lease and theCounty Financing Lease to the Master Trustee. As a result, except for the receipt of rental and other payments underthe County Financing Lease and certain rights retained by the County, including the rights to be indemnified andreimbursed for expenses, the Master Trustee possesses, and controls, subject to the direction of holders (or deemedholders), the exercise of, all of the rights of the County pursuant to the County Base Lease and County FinancingLease.Master Trust IndentureAs a result of their purchase of the Series 2008A Bonds, owners thereof will be deemed to have consentedto certain amendments to the Master Trust Indenture as described above under “INTRODUCTORYSTATEMENT — Consent to Certain Amendments.”The Master Trust Indenture authorizes each Obligated Issuer to issue Master Notes, which are entitled tothe benefit and security of the Master Trust Indenture. The Master Trust Indenture requires that certain financialtests be met prior to the incurrence of additional indebtedness, including indebtedness evidenced or secured byMaster Notes or indebtedness in the nature of guaranties. Each Obligated Issuer will be jointly and severallyobligated to make all payments of principal of and interest and any premium on all Master Notes, as and when due.Master Notes issued in the future may be secured or payable from sources or by property and instruments in additionto or other than those securing other outstanding Master Notes.The obligations of the Obligated Issuers under the Master Trust Indenture and the Master Notes are generalobligations and are not secured by any liens on real estate, equipment or other assets or any pledge of the revenuesof the Cleveland Clinic, CCHS-East Region, Fairview, Lutheran, Marymount or Florida Clinic or any futureObligated Issuer other than their Gross Receipts which are pledged under the Master Trust Indenture.The following table provides information relating to the Sixtieth Master Note and the Variable Rate Noteand all currently outstanding Master Notes that have been issued under the Master Trust Indenture and the amountthereof outstanding as of June 1, 2008, as adjusted to give effect to issuance of the Series 2008A Bonds and theVariable Rate Bonds and the application of the proceeds thereof to refund the Bonds to be Refunded. For eachMaster Note, the table indicates the bonds or other obligations to which such Master Note relates and, whereapplicable, the outstanding principal amount at June 1, 2008, as so adjusted.15
Page 1 and 2: NEW ISSUEBOOK ENTRY ONLYSee “RATI
Page 3 and 4: TABLE OF CONTENTSINTRODUCTORY STATE
Page 5 and 6: OFFERING CIRCULARRelating to$452,34
Page 7 and 8: Security and Sources of Payment for
Page 9 and 10: Upon issuance of the Series 2008A B
Page 11 and 12: (ii) acquisition of magnetic resona
Page 13 and 14: $147,200,000 Term Bonds Due January
Page 15 and 16: that the redemption is conditional
Page 17: Use of Certain Terms in Other Secti
Page 21 and 22: The Cleveland Clinic regularly revi
Page 23 and 24: ESTIMATED SOURCES AND USES OF FUNDS
Page 25 and 26: DEBT SERVICE COVERAGEThe following
Page 27 and 28: MedicareGeneralApproximately 29% of
Page 29 and 30: there is no assurance that the Obli
Page 31 and 32: Medicare Conditions of Participatio
Page 33 and 34: fiscal year’s budget that are in
Page 35 and 36: Federal Regulatory and Contractual
Page 37 and 38: Stark-type statutes have fewer exce
Page 39 and 40: party or for any services rendered
Page 41 and 42: typically in a position to refer pa
Page 43 and 44: OhioOhio Certificate of Need Progra
Page 45 and 46: performance demonstration programs
Page 47 and 48: manifest injustice would otherwise
Page 49 and 50: and properties owned or operated by
Page 51 and 52: plan of reorganization, with one ex
Page 53 and 54: percentage may be composed wholly o
Page 55 and 56: The Internal Revenue Service Form 9
Page 57 and 58: Charity Care, Underinsured and Unin
Page 59 and 60: • Proposals to eliminate the tax-
Page 61 and 62: acting in the capacity of underwrit
Page 63 and 64: Frederick R. Nance, Regional Managi
Page 65 and 66: FINANCIAL POSITION — D. BALANCE S
Page 67 and 68: The CommissionBecause the Series 20
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APPENDIX ACLEVELAND CLINIC HEALTH S
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TABLE OF CONTENTSPageINTRODUCTION .
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This Appendix to the Offering Circu
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A. ORIGINS AND FUNDAMENTAL MISSIONT
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C. GOVERNANCE OF THE CLEVELAND CLIN
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Voting Members of theBoard of Trust
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Voting Members of theBoard of Trust
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Principal Operating Officers. The d
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In addition to the broad range of o
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The main campus also includes a com
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GovernanceThe Cleveland Clinic is t
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E. UTILIZATIONThe following tables
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Statistical Information. The follow
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I. COLLABORATIVE PROGRAMSIn additio
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Clinic’s charity care policy, see
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statements filed with Digital Assur
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CLEVELAND CLINIC HEALTH SYSTEMConso
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OBLIGATED GROUPConsolidated Stateme
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PART IV.MANAGEMENT’S DISCUSSION A
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increase in minor equipment purchas
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The following table sets forth the
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pension plans’ funded status in t
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of funding to the pension plan offs
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portfolio. Offsetting the decrease
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• Clinic Care, Inc. (“Clinic Ca
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APPENDIX BCERTAIN FINANCIAL STATEME
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A UDITED C ONSOLIDATED F INANCIAL S
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• Ernst & Young LLPSuite 1300925
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Liabilities and net assetsCurrent l
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Changes in Net AssetsNet AssetsTemp
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Cleveland Clinic Health SystemNotes
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Other Financial Information
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• Ernst & Young LLPSuite 1300925
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Cleveland Clinic Health SystemConso
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Cleveland Clinic Health SystemConso
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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“Bond Indenture” means the Bond
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period of three months from the com
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PROPERTY”, and all improvements,
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direct, express or charitable trust
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Rate Hedge” for purposes of this
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Debt according to a fixed schedule
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“Officer’s Certificate” means
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provided, however, that Series 2008
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(t) liens on money or obligations d
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Project Administrator. In the event
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“Stated Maturity” means, when u
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(b) the Cleveland Clinic, or if the
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(d) the Master Trustee receives an
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(g) the loan of cash or other non-O
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under this caption shall be deemed
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Supplemental Indenture to which suc
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emedy thereunder, unless the Noteho
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purchase or other acquisition or re
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limitation, (A) the Special Funds a
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(b) Default in the payment of the p
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Fund Requirements, in the order of
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(g) to evidence the appointment of
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THE LEASEThe Lease contains various
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(a) Failure by the Cleveland Clinic
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APPENDIX DPROPOSED FORM OF OPINION
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PROPOSED TEXT OF LEGAL OPINION OFSQ
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October __, 2008Page 32008A Bonds c
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