Cleveland Clinic Health System Obligated Group - FMSbonds.com

The Cleveland Clinic regularly reviews the relative amounts of its fixed and variable rate indebtedness.The Cleveland Clinic may consider entering into one or more interest rate swap agreements to adjust its mix ofindebtedness. It is anticipated that the Cleveland Clinic’s payment obligations under any such interest rate swapagreements would be secured by additional Master Notes issued pursuant to the Master Trust Indenture.Pursuant to the Master Trust Indenture, the Sixtieth Master Note and the Variable Rate Note will be issuedon a parity with the outstanding Master Notes.The revenues and expenses of all members of the Combined Group, that is, the Obligated Issuers and theGroup Affiliates, are combined for purposes of the financial tests set forth in the Master Trust Indenture. Theoperational and financial restrictions and contractual obligations of the Master Trust Indenture apply directly only toObligated Issuers. Each Obligated Issuer covenants to cause any Group Affiliate that it controls to abide by suchrestrictions and covenants. The Master Trust Indenture does not obligate any Group Affiliate on any Master Note.Rather, the Master Trust Indenture provides that each Master Note is a joint and several obligation of each ObligatedIssuer and the full faith, credit and revenues of the Obligated Group are committed for payment of each Master Noteincluding such moneys as may, in accordance with law, be realized by liquidation or other drawing on all of theassets and investments of the Combined Group, including such moneys as may be derived from Group Affiliates.See “APPENDIX C — SUMMARY OF BASIC DOCUMENTS — The Master Trust Indenture.” At present, thereare not any “Group Affiliates” under the Master Trust Indenture.In determining compliance with a number of provisions of the Master Trust Indenture, the ObligatedIssuers may assume that certain types of Indebtedness that bear interest at variable rates and which may not bepayable over an extended term on a level annual debt service basis will in fact bear interest over a long term and willbe amortized on a level debt service basis. The actual interest rates and payments on such Indebtedness will in alllikelihood vary from such assumptions, and such variance may be material. See “APPENDIX C — SUMMARYOF BASIC DOCUMENTS — The Master Trust Indenture — Negative Lien Covenant,” “— Transfers of Property,”“— Rate Covenant”, “— Permitted Indebtedness” and “— Merger and Consolidation.” The Master Trust Indentureprovides that certain tests must be met before Obligated Issuers and Group Affiliates may be added to, or withdrawnfrom, the Combined Group. See “APPENDIX C — SUMMARY OF BASIC DOCUMENTS — The Master TrustIndenture — The Combined Group.”Upon the issuance of the Series 2008A Bonds and the Variable Rate Bonds, the Cleveland Clinic, CCHS-East Region, Fairview, Lutheran, Marymount and Florida Clinic will be the only Obligated Issuers and the onlymembers of the Combined Group under the Master Trust Indenture. See “APPENDIX C — SUMMARY OFBASIC DOCUMENTS — The Master Trust Indenture – The Combined Group” for information regarding theability of an entity to be added as an Obligated Issuer or Obligated Issuers or the ability of Obligated Issuers towithdraw from the Obligated Group. The foregoing notwithstanding, the Cleveland Clinic has covenanted that itwill not withdraw from the Obligated Group as long as the Series 2008A Bonds are outstanding.Security Interest in Gross ReceiptsThe Obligated Issuers have granted a security interest to the Master Trustee in their Gross Receiptspursuant to the Master Trust Indenture as security for all of the Master Notes outstanding thereunder, including theSeries 2008 Master Notes. Gross Receipts are defined as all accounts and assignable general intangibles (other thanthose general intangibles that may not be assigned under the law) now owned or hereafter acquired by any Memberof the Obligated Group regardless of how generated and all proceeds therefrom, whether cash or non-cash, all asdefined in Article 9 of the Uniform Commercial Code (as amended) of the applicable jurisdictions, excluding,however, gifts, grants, bequests, donations, contributions and pledges to any Obligated Issuer heretofore or hereaftermade, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to aparticular purpose which is inconsistent with its use for payments required on the Master Notes. Accountsreceivable of the Obligated Issuers which constitute Gross Receipts may be sold or pledged if such sale or pledge ismade in accordance with the provisions of the Master Trust Indenture. Under the Master Trust Indenture, accountsreceivable may be sold or pledged despite the security interest of the Master Indenture. The lien created under theMaster Trust Indenture on Gross Receipts would terminate and be immediately released with respect to any accountsreceivable that are so sold or pledged. See the discussion below under “Additional Liens.”17