Cleveland Clinic Health System Obligated Group - FMSbonds.com

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provided, however, that the indentures or other instruments creating or evidencing subordinated debt orpursuant to which any subordinated debt is issued shall provide: (i) that the foregoing provisions are solely for thepurpose of defining the relative rights of the holders of “Superior Indebtedness” (as defined therein) on the one handand the holders of the subordinated debt on the other hand, and that nothing therein shall impair, as between theissuer of the debentures and the holders of the subordinated debt, the obligation of the issuer of the debentures to payto the holders thereof the principal thereof, premium, if any, and interest thereon in accordance with its terms, norshall anything therein prevent the holders of the subordinated debt or any Trustee on their behalf from exercising allremedies otherwise permitted by applicable law or thereunder upon default thereunder, subject to the rights set forthabove of the holders of “Superior Indebtedness” to receive cash, property or securities otherwise payable ordeliverable to the holders of the subordinated debt, (ii) that upon any payment or distribution of assets of the issuerof the debentures of the character referred to in the fourth paragraph of the foregoing provisions, the Trustee underany indenture relating to subordinated debt shall be entitled to rely upon any order or decree of a court of competentjurisdiction in which such dissolution, winding-up, liquidation, reorganization or arrangement proceedings arepending, and upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other personmaking any such payment or distribution, delivered to said Trustee for the purpose of ascertaining the personsentitled to participate in such distribution, the holders of “Superior Indebtedness” and other indebtedness of theissuer of the debentures, the amount thereof or payable thereon, the amount or amounts paid or distributed thereonand all other facts pertinent thereto or to the foregoing provisions, and (iii) that the Trustee under any indenturerelating to subordinated debt and any paying agent therefor shall not be charged with knowledge of the existence ofany facts which would prohibit the making of any payment of moneys to or by such Trustee or such paying agent,unless and until such Trustee or such paying agent, as the case may be shall have received notice thereof from theissuer of the debentures or from one or more holders of “Superior Indebtedness”, or from the Master Trustee.EXCLUDED PROPERTYAs of the date of execution of the master indenture, the Obligated Issuers designated certain of theirProperty as Excluded Property. Additional Property may be designated as Excluded Property under the MasterIndenture, without consent of any holders of Master Notes, if: (a) such Property could have been transferred or soldby the Obligated Issuer pursuant to the terms of the Master Indenture summarized under “SUMMARY OF BASICDOCUMENTS — THE MASTER TRUST INDENTURE — TRANSFERS OF PROPERTY” above, (b) such Propertyconsists of additional real Property acquired by an Obligated Issuer subsequent to the effective date of the masterindenture and all improvements, fixtures, tangible personal Property and equipment located thereon and used inconnection therewith upon the receipt by the master trustee of an Officer’s Certificate of such Obligated Issuerstating that (1) such Property does not constitute an integral part of the operation of such Obligated Issuer’sactivities and (2) the total value of all such Property so added as Excluded Property does not exceed 10% of the totalvalue of Property of the Combined Group (calculated on the basis of the Book Value of the assets shown on theasset side of the balance sheet in the combined financial statements of the Combined Group for the most recentfiscal year next preceding the date of such addition for which combined financial statements reported on byindependent certified public accountants are available or, if the Obligated Issuer so elects, on the basis of currentvalue); or (c) such Property is unimproved real Property upon receipt by the master trustee of an officer’s certificateof such Obligated Issuer stating that such real Property is not an integral part of the operation of such ObligatedIssuer’s activities.THE BOND INDENTUREThe Bond Indenture contains various covenants, security provisions, terms and conditions, certain of whichare summarized below. Reference is made to the Bond Indenture for a full and complete statement of its provisions.CREATION OF TRUSTIn order to secure the payment of the Bond Service Charges on the Series 2008A Bonds and theperformance and observance by the State of all of the covenants and conditions contained in the Series 2008ABonds and in the Bond Indenture and to declare the terms and conditions upon and subject to which the Series2008A Bonds are issued, held, secured and enforced, the State has pledged and granted a lien on and in favor of theBond Trustee for the benefit of the Holders of the Series 2008A Bonds all of its right, title and interest in and tocertain property, including: (i) all of its right, title and interest in and to all Hospital Receipts, including withoutC-38
limitation, (A) the Special Funds and (B) the Basic Rent payable by the Cleveland Clinic under the Lease, whichBasic Rent is to be paid by the Cleveland Clinic pursuant to the Lease directly to the Bond Trustee at its DesignatedCorporate Trust Office, for the account of the State and deposited by the Bond Trustee in the Special Funds; (ii)subject to the provisions of the applicable Bond Legislation, all of its right, title and interest in and to the proceedsderived from the sale of the Series 2008A Bonds and (iii) any and all other real or personal property of every nameand nature from time to time pledged, assigned or transferred, as and for additional security under the BondIndenture, by the State or by anyone in its behalf, or with its written consent, to the Bond Trustee, for the benefit ofthe Holders of the Series 2008A Bonds.APPLICATION OF FUNDSThe Bond Indenture provides for the creation of, and the accounts in, the Debt Service Fund, the DebtService Reserve Fund, the Project Fund and the Rebate Fund, and permits and provides for the maintenance ofseparate accounts within those Funds.The Bond Indenture provides that, so long as there are any Outstanding Series 2008A Bonds, all paymentsunder the Lease or any other lease, instrument or document under which the Cleveland Clinic has charge of theoperation of the Leased Premises, including, without limitation, all Basic Rent, shall be in an amount that issufficient, and all other Hospital Receipts shall be used, to make the payments necessary to make required depositsinto the Debt Service Fund and the Debt Service Reserve Fund.Debt Service Fund. The Bond Indenture establishes separate accounts within the Debt Service Fund to beknown as the “Interest Payment Account” and the “Principal Payment Account.” The Debt Service Fund (and allaccounts therein for which provision is made in the Bond Indenture) and the moneys and Permitted Investmentstherein are to be used solely (A) to pay interest on the Series 2008A Bonds as the same becomes due; (B) to payprincipal of the Series 2008A Bonds as the Series 2008A Bonds mature or become due and upon mandatory sinkingfund redemption of the Series 2008A Bonds; and (C) to pay principal of and any redemption premium on Series2008A Bonds as the same becomes due upon redemption prior to maturity.Debt Service Reserve Fund. In the event that money in the Interest Payment Account or the PrincipalPayment Account of the Debt Service Fund is insufficient on the third day preceding any date on which BondService Charges on outstanding Bonds secured by the Debt Service Reserve Fund are due (whether at statedmaturity, by mandatory redemption or upon acceleration) to pay such interest or principal, respectively, the BondTrustee will withdraw from the Debt Service Reserve Fund on that day the money necessary to make up thedeficiency and will transfer that money to the Interest Payment Account or the Principal Payment Account of theDebt Service Fund, as the case may be.Project Fund. The Bond Indenture establishes separate accounts within the Project Fund to be known asthe “Project Account,” the “Funded Interest Payment Account” and the “Issuance Expense Account.” Uponsubmission of a Disbursement Request in accordance with Section 5.2 of the Lease, money in the Accounts of theProject Fund will be applied in accordance with such section as follows: money in the Project Account will beapplied to pay costs of the 2008 Project; money in the Issuance Expense Account will be applied to pay costs ofissuance of the Series 2008A Bonds; and money in the Funded Interest Payment Account will be transferred fromthat Account to the Interest Payment Account of the Debt Service Fund and will be applied to pay interest on theSeries 2008A Bonds.Proceeds of the sale of Additional Bonds to be used to pay costs of a Project are required to be deposited inthe Project Fund, as provided in or pursuant to the applicable Bond Legislation or Supplemental Bond Indenture.Rebate Fund. The accounts in the Rebate Fund are required to be administered, and the calculation ofamounts required to be paid into and from the Rebate Fund, and the payments of those amounts, are required to bemade in accordance with the provisions of the applicable Tax Agreement. Neither the Rebate Fund nor any moneyor investments therein are or will be subject to a lien under the Bond Indenture in favor of Bondholders, the BondTrustee or any other Person.C-39
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NEW ISSUEBOOK ENTRY ONLYSee “RATI
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TABLE OF CONTENTSINTRODUCTORY STATE
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OFFERING CIRCULARRelating to$452,34
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Security and Sources of Payment for
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Upon issuance of the Series 2008A B
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(ii) acquisition of magnetic resona
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$147,200,000 Term Bonds Due January
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that the redemption is conditional
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Use of Certain Terms in Other Secti
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County BondsThe Cleveland Clinic an
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The Cleveland Clinic regularly revi
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ESTIMATED SOURCES AND USES OF FUNDS
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DEBT SERVICE COVERAGEThe following
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MedicareGeneralApproximately 29% of
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there is no assurance that the Obli
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Medicare Conditions of Participatio
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fiscal year’s budget that are in
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Federal Regulatory and Contractual
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Stark-type statutes have fewer exce
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party or for any services rendered
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typically in a position to refer pa
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OhioOhio Certificate of Need Progra
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performance demonstration programs
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manifest injustice would otherwise
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and properties owned or operated by
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plan of reorganization, with one ex
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percentage may be composed wholly o
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The Internal Revenue Service Form 9
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Charity Care, Underinsured and Unin
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• Proposals to eliminate the tax-
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acting in the capacity of underwrit
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Frederick R. Nance, Regional Managi
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FINANCIAL POSITION — D. BALANCE S
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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
Page 161 and 162: • Ernst & Young LLPSuite 1300925
Page 163 and 164: Liabilities and net assetsCurrent l
Page 165 and 166: Liabilities and net assetsCurrent l
Page 167 and 168: Cleveland Clinic Health SystemConso
Page 169 and 170: Cleveland Clinic Health SystemConso
Page 171 and 172: Cleveland Clinic Health SystemNotes
Page 173 and 174: APPENDIX CSUMMARY OF BASIC DOCUMENT
Page 175 and 176: APPENDIX CSUMMARY OF BASIC DOCUMENT
Page 177 and 178: “Bond Indenture” means the Bond
Page 179 and 180: period of three months from the com
Page 181 and 182: PROPERTY”, and all improvements,
Page 183 and 184: direct, express or charitable trust
Page 185 and 186: Rate Hedge” for purposes of this
Page 187 and 188: Debt according to a fixed schedule
Page 189 and 190: “Officer’s Certificate” means
Page 191 and 192: provided, however, that Series 2008
Page 193 and 194: (t) liens on money or obligations d
Page 195 and 196: Project Administrator. In the event
Page 197 and 198: “Stated Maturity” means, when u
Page 199 and 200: (b) the Cleveland Clinic, or if the
Page 201 and 202: (d) the Master Trustee receives an
Page 203 and 204: (g) the loan of cash or other non-O
Page 205 and 206: under this caption shall be deemed
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Page 209 and 210: emedy thereunder, unless the Noteho
Page 211: purchase or other acquisition or re
Page 215 and 216: (b) Default in the payment of the p
Page 217 and 218: Fund Requirements, in the order of
Page 219 and 220: (g) to evidence the appointment of
Page 221 and 222: THE LEASEThe Lease contains various
Page 223 and 224: (a) Failure by the Cleveland Clinic
Page 225 and 226: APPENDIX DPROPOSED FORM OF OPINION
Page 227 and 228: PROPOSED TEXT OF LEGAL OPINION OFSQ
Page 229 and 230: October __, 2008Page 32008A Bonds c
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